Companies must have a minimum number of directors or secretaries that act as officeholders. These obligations are found under the Corporations Act 2001(Cth). This article will explain what your corporate obligations are when it comes to appointing officeholders.
What is an officeholder?
An officeholder can either be a director or secretary and are defined as follows:
A director of a company is an officer of your company that is in charge of managing the company’s business activities. Every decision your director makes has to be in the best interests of the company. A director can also be a member (shareholder) and make decisions on the board, however this isn’t always the case.
A director in your company will have a varying degree of authority. For example, a director can sign a contract on behalf of your company, but may not have any explicit authority to tender any contracts on behalf of your company.
Directors have to comply with strict duties and will face penalties or expulsion if they breach them.
A company secretary is responsible for monitoring and administering the company. They also need to make sure that the company is complying with regulations and keeping accurate records. Further, a company secretary has to implement resolutions of the board and manage company affairs. They have many of the same duties as directors which include acting in good faith and to act with care and diligence amongst other things.
How Many Officeholders Do You Need?
If your business name has the suffix ‘Pty’ or Pty Ltd’ then it is a private company. This form of company is smaller than a public company. You can have more than one director, but the minimum requirement is one director that needs to live in Australia. There is also no need for your company to have a secretary, but you may have one or more that lives in Australia.
If you own a public company then you will have a company that ends with the suffix ‘Ltd’. This type of company tends to have stricter obligations in disclosing information to stakeholders. In terms of officeholders, a public company has to have at least three directors, with two that live in Australia. There must also be at least one secretary that lives in Australia.
If you don’t have the requisite number of officeholders
If your company does not have enough directors or secretaries then you may have breached legal obligations under the Corporations Act 2001. This can lead to you receiving a penalty notice from ASIC. This can also lead to prosecution for failing to comply with the relevant legislation.
A director may appoint an alternative person as a solution to not meeting the minimum number of directors. You must lodge this with ASIC within 28 days of appointment. You can appoint a different person to be a director afterwards. To appoint an alternate director, you must lodge a form with the following information:
- The person’s name and any previous names
- Birth date and residential address
- The date of appointment and the expiry date (if applicable)
- The name of the former director
- The terms and conditions the alternate director will need to comply with
If you require further information relating to the number of directors or secretaries you require for your company, it is recommended you contact a Commercial Lawyer.
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