06. Companies: ownership and management.

Question 1

T/F: The duties owed by a de facto director are the same as those of a properly appointed director.

Answer 1

TRUE

A director is any person acting in the capacity of a director, by whatever name called.

Question 2

The duties of a de facto director …

Answer 2

are the same as those of a properly appointed one.

Question 3

T/F: If a director’s appointment is subsequently found to be invalid, their actions no longer bind the company nor do they owe any fiduciary duty.

Answer 3

FALSE

see Morris v Kanssen

Question 4

T/F: A sole director may also act as a company secretary.

Answer 4

TRUE

Question 5

T/F: A sole director may also act as auditor.

Answer 5

FALSE

Question 6

The ususal minimum age for a company director is …

Answer 6

16 years

Question 7

The removal of a director by members in general meeting requires …

Answer 7

an ordinary resolution with special notice of 28 days.

Question 8

T/F: The removal of a director automatically discharges any separate contract of service that the director has with the company.

Answer 8

FALSE

a director’s service contract as an employee is separate from their statutory role as a director of the company.

Question 9

T/F: A company’s articles can contain provision for weighted voting rights.

Answer 9

TRUE

see Bushell v Faith

Question 10

T/F: A company must state its objects within its articles of association in order that directors can be held accountable for any ultra vires acts.

Answer 10

FALSE

An objects clause is no longer requried.

Question 11

T/F: Directors are agents of the members of the company for the purposes of managing the company’s business.

Answer 11

FALSE

directors are agents of the company, not of its members.

Question 12

Directors are agents of …

Answer 12

the company.

Question 13

T/F: As part of their duty to promote the success of the company, a director is required to consider the impact of the company’s operations on the community and the environment.

Answer 13

TRUE

Question 14

As part of their duty to promote the success of the company, a director is required to consider the impact of the company’s operations on the C&E*

Answer 14

community and environment

Question 15

T/F: As part of their duty to promote the success of the company, a director is required to consider the desirability of maintaing a reputation of high standards of business conduct.

Answer 15

TRUE

Question 16

As part of their duty to promote the success of the company, a director is required to consider the desirability of maintaing a reputation of high standards of …

Answer 16

business conduct.

Question 17

A ‘managing director’ who has not been appointed but has not been prevented from acting as such has … authority.

Answer 17

ostensible or apparent

Question 18

A ‘managing director’ who has been properly appointed has … authority.

Answer 18

implied usual

Question 19

T/F: Directors’ statutory duties do not apply to shadow or former directors.

Answer 19

FALSE

Question 20

A director may only exercise their powers for the …

Answer 20

purrpose for which they were conferred.

Question 21

An allotment of shares purely to create or destroy a voting majority …

Answer 21

will be deemed invalid by the court unless subsequently ratified by the company.

see Howard Smith v Ampol and Bamford v Bamford

Question 22

T/F: The directors (as a whole) of a private company may authorise a ‘conflict of interest’ relating to a director.

Answer 22

TRUE

provided that the company’s constitution does not prohibit it.

Question 23

T/F: The directors (as a whole) of a public company may authorise a ‘conflict of interest’ relating to a director.

Answer 23

TRUE

provided that express provision for such an authorisation exists within the company’s articles.

Question 24

The default position for a … company is that a ‘conflict of interest’ may be authorised by the directors as a whole provided that no express provision to the contrary is made within its articles.

Answer 24

private

Question 25

The default position for a private company is that a 'conflict of interest' may be authorised by the ... provided that no express provision to the contrary is made within its articles.

Answer 25

directors as a whole

Question 26

The default position for a private company is that a 'conflict of interest' may be authorised by the directors as a whole provided that ...

Answer 26

no express provision to the contrary is made within its articles.

Question 27

The default position for a ... company is that a 'conflict of interest' may be authorised by the directors as a whole provided that express provision is made to that effect within its articles.

Answer 27

public

Question 28

The default position for a public company is that a 'conflict of interest' may be authorised by the directors as a whole provided that ...

Answer 28

express provision is made to that effect within its articles.

Question 29

The default position for a public company is that a 'conflict of interest' may be authorised by the ... provided that express provision is made to that effect within its articles.

Answer 29

directors as a whole

Question 30

T/F: The level of personal skill and experience of a director is relevant in determining the standard of care required to satisfy their statutory duties.

Answer 30

TRUE

Question 31

T/F: A director not playing an active role in the running of the company can never be found in breach of directors' duties since they haven't taken any positive action.

Answer 31

FALSE passivity can of itself be deemed a breach of directors' duties. see Lexi Holdings

Question 32

The statutory duty of a director regarding potential 'conflicts of interest' is to ...

Answer 32

disclose them to the board.

Question 33

T/F: A director's statutory duty regarding conflicts of interest is only to disclose them to the board.

Answer 33

TRUE

Question 34

T/F: A director involved in a potential conflict of interest needs approval of the board before proceeding.

Answer 34

FALSE they need only disclose it to the board

Question 35

T/F: A potential conflict of interest of a director needs to be disclosed to members in general meeting.

Answer 35

FALSE it need only be disclosed to the board.

Question 36

A directors' statutory duties regarding ... endure even after they have vacated the office of director.

Answer 36

benefits and conflicts of interest

Question 37

If a director enters into a contract with a company in breach of their statutory duties ...

Answer 37

then the contract is voidable at the option of the company.

Question 38

T/F: If a director enters into a contract with a company in breach of their statutory duties then the contract is voidable at the option of the company.

Answer 38

TRUE

Question 39

T/F: The acts of one director are binding upon another.

Answer 39

FALSE they are only binding on the company.

Question 40

T/F: A group of directors in breach of statutory duties are jointly and severally liable to make good any loss suffered by the company.

Answer 40

TRUE however 'innocent' directors are not so liable.

Question 41

T/F: If a group of directors are in breach of statutory duties, the remaining directors may automatically avoid any contracts entered into by them.

Answer 41

FALSE only the company can avoid a contract.