Lecture 3- Decision making in companies Flashcards Preview

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1

What are the two decision-making organs in a company?

1.company in general meeting
2.the board of directors (and the senior management)

2

What is the section 198 about?

-the distribution of power in the company
-the power of directors and the boundaries of their powers

3

What does s 198 A (1) state?

-directors have general power of management
-the business of the company is to be directed or managed by the directors

4

What does s 198 A (2) state?

- the directors may exercise all the powers of directors except for those specified under the CA 2001 (ie RRs) or the company's constitution as the ones reserved to the members in general meeting

5

Who runs the company day to day?

- the directors ie the board
-their responsibility is to manage, or direct the management of (or supervise), the company

6

What does executive mean?

-only means someone who works at the company every day, actively working day to day job

7

Who is the managing director?

-also called the chief executive officer
-CEO
-executive director
-day to day job

8

What is a non-executive director?

-once a month type of director, don't get paid a salary,
-involvement is confined to the board meeting gets honorarium
have to read board documents and make decisions in board meetings

9

What is a board committee?

-the board can delegate powers to groups of people that form committeess
-e.g. renumeration committees= decide pay to employees
-the committee decides things and then presents it to the board and they agree or disagree

10

Who is the chairman of the board?

- is voted on by the board, runs the directors meetings, often different person to CEO, = so there is a balance of power

11

Who is the secretary?

- chief legal officer of the company, responsibility with paperwork, reporting etc.
-in small companies it won't be as separated

12

What does section 9 do?

-general definition section, defines terms in the act

13

Who is a director?

-person appointed to the position of director or
-is appointed to the position of an alternate director and is acting in that capacity

14

Who is an officer?

-director or a person (not the director) who makes decisions about the company
-must be decision that significantly affect the business of the company
-or a person who has the capacity to affect the financial standing of the company
-not appointed , still makes important decisions
-can be the director
-always director and secretary

15

What do directors do?

-depends on the size of the company
-in a small company may run the business
-in a larger company, more of a supervisory, policy centered role

16

ASIC v Healey facts?

--concerned CENTRO shopping centre, expanded to US, the company borrowed heavily, lot of the finance had to be paid back= GFC
-they put 2 billion as non-current liability
-should have been current
= because the director both executive and non-executive directors should have read it! they breached their duty of care
-important as it said that directors have to know what is going on!

17

What does s 198 D say?

1. -unless constitution provides otherwise the directors of a company can delegate to directors or committees, director, an employee or any other person
-RR so can change it in a constitution
-these would be the board committees (auditing etc.)

2: the delegates must exercise the powers in accordance with any directions from the directors

3. the exercise of power by the delegates is the same as if it were done by the directors!

18

Why is there the s198D (delegation)?

-the board can't make all the decisions that are within their power as there are too many, so they can delegate to others (the constitution can limits this)
-what makes company workable
-the delegation must be recorded in the company's minute book

19

What does generally happen in power delegation in companies?

- Generally delegate day-to-day management to the CEO / managing director and he/she then delegates further (RR 198 C)

20

What does the s198 C do?

-delegating powers to the managing director
1. the directors of a company can delegate any of the powers the directors can exercise onto the managing director

2. the directors can revoke or vary a conferral of powers on the managing director

21

What do directors do?

-depends on the size of the company
-in a small company may run the business
-in a larger company, more of a supervisory, policy centered role

22

ASIC v Healey facts?

--concerned CENTRO shopping centre, expanded to US, the company borrowed heavily, lot of the finance had to be paid back= GFC
-they put 2 billion as non-current liability
-should have been current
= because the director both executive and non-executive directors should have read it! they breached their duty of care
-important as it said that directors have to know what is going on!

23

What does s 198 D say?

1. -unless constitution provides otherwise the directors of a company can delegate to directors or committees, director, an employee or any other person
-RR so can change it in a constitution
-these would be the board committees (auditing etc.)

2: the delegates must exercise the powers in accordance with any directions from the directors

3. the exercise of power by the delegates is the same as if it were done by the directors!

24

Why is there the s198D (delegation)?

-the board can't make all the decisions that are within their power as there are too many, so they can delegate to others (the constitution can limits this)
-what makes company workable
-the delegation must be recorded in the company's minute book

25

What does generally happen in power delegation in companies?

- Generally delegate day-to-day management to the CEO / managing director and he/she then delegates further (RR 198 C)

26

What does the s198 C do?

-delegating powers to the managing director
1. the directors of a company can delegate any of the powers the directors can exercise onto the managing director

2. the directors can revoke or vary a conferral of powers on the managing director

27

What are the rules for calling a board meeting?

-all directors must receive "reasonable notice"
-may have a quorum requirement
-voting disqualifications may apply (if material interest in the outcome)

28

What is a quorum requirement?

-when need a certain number of people for the board meeting to be valid (usually 2 members 248F) but it is a replaceable rule so can change it.

29

What does s248C deal with?

-reasonable notice
-have to give reasonable notice to all directors to call a meeting
-this period may vary depending on the situation, if a crisis then may be quite quick

30

What does s248F deal with?

-unless this rule is replaced the quorum for a board meeting to be valid is 2 directors and they have to be present throughout the duration of the meeting