Non-statutory directors include nominee director

HA3021: CORPORATIONS LAW

•Controlling the members and assets of the company •Gaining personal benefits
•Making favorable directors transactions
•Transferring assets of the company to others

A director is always entrusted to act in good faith of the company and when he makes use of the finances of the company for his personal benefit, he is said to breach his duties as laid down under s. 181 (1) of Corporations Act 2001.

In the present situation, as a director, on receiving such an information, Polyester was expected to act in the interest of the company and to improve its financial position. However, she misused such an information and breached her duty as a director by making transfers of the assets of the company.

Situation 3

be a shareholder in the company until such a person surrenders his or her shares in such a company.

For becoming a member of a company, it is necessary to be listed as a member at the time of

Restrictions can be imposed upon membership in a company under the internal rules of an unlisted company.

In the present case, Sergey can be regarded as a statutory director since he did not had any expertise and was appointed only for personal development being Zviad’s brother.

Nominee directors are the ones who represent each of the participant in a joint venture. It further includes a particular class of shareholders, major creditors, holding companies, employees, etc.

Further a director can also be removed by a court order.

In the present case, Ilyych can be removed from the position of the director since he has not acted in the interest of the company and has contracted with canweafixdat?PtyLtd. by paying a commission of 10% for every cubby house sold and placed on their board.

Under s 256B of Corporations Act, a company requires approval of its shareholders to undergo either selective reduction or equal reduction. For an equal reduction, an ordinary resolution shall be passed under s 256C (1). Ordinary resolution shall be necessary only if it exceeds 10/12 limit.

On the other hand, under a selective reduction, a special resolution or a unanimous ordinary resolution shall be necessary. Selective buy back under s 257D can be made in accordance to the internal management rules. S. 257A of the Corporations Act requires that there should be no material prejudice in the ability of a company to pay its creditors. Further, the consent of the holders of the shares which are bought back is also necessary. Lastly, shareholdings cannot be bought back unless an approval is granted by the shareholders for the same.

Under capital reduction, it is necessary to give a notice of meeting and statement of material information and in case of share buy-back, information requirements shall include notice of meeting and statement of the material information.

The effect on share capital will be that the shares cancelled following reduction and in case of buying back of shares, the effect on share capital shall be that the shares which are bought back shall be cancelled.

It is the obligation of the company to issue a prospectus i.e. a basic disclosure document i.e. a short term prospectus under s 712 which comparatively easier to prepare than a full
disclosure prospectus under s 713.

As provided under s. 710, all the information which is required by investors and professional advisers for making an informed assessment, should be included in the disclosure document. The onus of proof is on the company to make a full and accurate disclosure under the general disclosure test which also includes forecast which is not misleading or deceptive.

Ebrahimi v Westbourne Galleries

Re Smith & Fawcett