Section 198a of the Corporation Act 2001
Any company registered in Australia is governed by the provisions laid down in the Corporation Act 2001 and they are applied to these companies as ‘replaceable rules’ either by the Corporation or the constitution or both. It applies basically to companies which are formed after section 135(1) commenced. Further companies that do not have a constitution of their own fall automatically under the category of replaceable rules. Provisions that apply to the powers and duties of a director fall under replaceable rules of section 135 of the Act. It falls under section 198A (Australian Institute of Company Directors, 2006).
Section 198A deals with the powers of the board of directors of a company which is listed in the Australian Stock Exchange. The said section is divided into two sub sections. Section 198 A(1) which enumerates the fact that it is the duty of the directors to manage the business of an entity. They are the employees of the company who are appointed by the shareholders of a company to manage the daily business. They are responsible creating value for the money invested by the shareholders. Section 198A(2) deals with the powers that the directors are conferred with to exercise apart from any such powers with the said Act or the company’s constitution defines to be exercised in the general meeting of a company exclusively (Tomasic et.al. 2002). The powers of the directors are wide enough to cover almost all the areas except for some crucial stances which only the owners are capable to exercise. Thus the following section was a necessity to guide the directors what powers they possess for conducting the business of a company effectively.
Section 191 of the Corporation Act 2001
In this commercial world it was found that there are many instances where directors may end up entering into a contract with a company where in he has conflicts of interest which is not in line with the common law such as in the case of Transvaal Lands Co v New Belgium (Transvaal) Land and Development Co  2 Ch. 488. This lead to the introduction of statutory disclosure rule in the form of section 191 introduced in the Corporation Act 2001 by the CLERP Act (Commonwealth Consolidated Acts, 2001).
The said section requires the directors to disclose their ‘material personal interest’ if any, while entering into a contract on behalf of the company. He is required to give a written notice about his interest detailing the intricacy of the situation to the other directors of the board. However it does not apply if he is just receiving remuneration from the other company or has just provided a guarantee for repayment. The interest should be made a part of the minutes of the meeting of the company (Cassidy, 2006). The main reason for the inclusion of this disclosure section was to safeguard the interest of the company and that a decision can be tken with regards a contract without prejudice.
Thus since in the history there has been issues wherein due to non-disclosure of interest of the directors in a particular contract the company’s profits or reputation or decision has affected. Thus to safeguard the same and impose self-regulation over the acts of the directors the said section was introduced in the Corporation Act 2001 (Legal Services Commission, 2012).
Section 250r(2) & (3) of the Corporation Act 2001
Section 250R (2) of the Corporations Act 2011 was introduced in the year 2011 by an amendment in the Corporation Amendment (Improving Accountability n Director and Executive Remuneration) Act 2011. It specifies that if in two meetings continuously more than a quarter of the shareholders vote against the remuneration package offered to a director then the said director will have to stand for the elections again within three months or to be precise within 90 days. The said section became effective from 01st of July 2004.
It basically confers to the fact that at any AGM one of the four compulsory businesses to be conducted includes remuneration of the directors as well. Thus the said report should be put to vote by all the shareholders before the remuneration of the directors are fixed. This protects the interest of the company and deters it to pay extra or abnormally high to the directors of the company (CCH, 2011). The said section generally enables strengthening of the relationship between the directors and the shareholders of the company. However many critics have voted against this section as it dilutes the power of the directors to some extent. Further it also affects the performance of the executives in both negative as well as positive manner.
Section 250R (3) was also introduced along with the said section 250R(2) on 01st of July 2004 which states that the votes casted for the said resolution is advisory in nature and not binding upon the directors or the company per se. Thus the said section clearly specifies that the directors are not bound to adhere to the said resolution and is only used as an advisory. Thus the two sections are inter-related to each other. The resolution with regards the remuneration is advisory as there are circumstances wherein the shareholders appoint proxies who do not have much idea about the company and ay end up casting a vote which is not right in its true sense. Further, Australian Contracts are generally of a shorter time gap and hence it may also affect the remuneration amount being decided by the shareholders at the AGM. There voting at times may lead to casting or taking decisions which are not right thus the said section was included so as to safeguard the directors from bearing the brunt of any such decision which would be conflicting with regards the duties they perform.
Australian Institute of Company Directors, (2006), Chairman of the Board – A Role in the Spotlight, Southwood Press Pty Ltd: Australia
Cassidy, J., (2006), Concise Corporations Law, 5th eds, The Federation Press: Australia
CCH, (2011), Australian Corporations & Securities Legislation, Volume 1, McPheson’s Printing Group: Australia
Commonwealth Consolidated Acts, (2001), Corporations Act 2001- Section 191, Available at (Accessed 06th September 2016)
Legal Services Commission, (2012), General Duties of Directors- Corporations Act 2001 (Ctth), Available at (Accessed 06th Septmber 2016)
Tomasic, R., Bottomley, S., & McQueen, R., (2002), Corporation Law in Australia, The Federation Press: NSW