Periodically a company will have to appoint a new director. In public companies, directors are appointed by shareholders. This information guide will focus on the basic legal requirements for appointing a new director for companies with shareholders operating under the Corporations Act 2001 (the Act).
The board’s role in appointing new directors is to present suitable candidates to shareholders for election. In larger companies, this task may be delegated to the nomination committee.
Generally, once a new director has been selected, he or she gives formal signed consent to the company. The company then confirms the appointment with a letter of appointment and disclosure to the Australian Securities and Investments Commission (ASIC). Basic appointment procedures are explained in the Act and/or the company’s constitution. The Act deals with consent and disclosure to the regulators. The company’s constitution will deal with the minimum and maximum size of the board, terms of appointment to the board and any shareholding qualifications for directors. Note that listed companies must abide by additional requirements (see below).
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