Class 15 – Statutory Disclosure Obligations; Related Party Transactions

Corporations Act Chapter 2D Division 2 – Disclosure of, and voting on matters involving, material personal interests

S 191 – Material personal interest – director’s duty to disclose

Director’s duty to notify other directors of material personal interest (MPI) when conflict arises

1. A director of a company with an MPI in a matter relating to affairs of the company must give other directors notice of the interest unless (2) says otherwise

(1A) Offence based on (1) is SL as applying to the circumstance that he has an MPI

2. The director does not need to give notice under (1) if

   1. The interest

      1. Arises because they are a member of the company and is held in common with other members

      2. Arises in relation to their remuneration as director of the company

      3. Relates to a contract the company proposes to enter into that is subject to approval by members and won’t impose obligations unless approved by the members

      4. Arises because the director is a guarantor or gives an indemnity/security for a (/proposed) loan to the co.

      5. Arises because the director has a right of subrogation in relation to a iv. Guarantee/indemnity

      6. Relates to a contract that insures/would insure the director against liabilities the director incurs as an officer of the company (IFF the contract doesn’t make the company/related body a corporate insurer)

      7. Relates to any payment by the company/related body corporate in respect of an indemnity permitted under s 199A or any contract relating to such an indemnity

      8. Is in a contract or proposed contract with/for the benefit of/on behalf of a related body corporate and arises merely because the director is a director of the related body corporate; or

   2. The company is a proprietary company and the other directors are aware of the nature/extent of the interest IRT the affairs of the company; or

      1. The director already gave notice of the nature and extent of the interest and its relation to the affairs of the company under (1)

      2. If a person who wasn’t a director at the time the notice was given under (1) was given appointment – the notice is given to that person

      3. The nature or extent hasn’t materially increased above that disclosure; or

   3. The director gave standing notice of the nature and extent under s 192 and that notice is still effective

3. Content of notice; Notice required must

   1. Give details of

      1. The nature and extent of the interest; and

      2. The relation of the interest to the affairs of the company; and

   2. Be given at a directors meeting ASARP after the director becomes aware of their interest in the matters

And these details must be recorded in the meeting minutes

Effect of contravention

4. A contravention of this section by a director doesn’t affect the validity of any act/transaction/agreement/instrument etc.

5. The section doesn’t apply to a proprietary company with only one member

S 192 – The director may give other directors standing notice about an interest

The power to give notice

1. A director of a company who has an interest in a matter can give the others standing notice of the nature/extent of the interest in the matter in accordance with (2) at any time w/o/n it relates to affairs of the company when given

2. [Content] The notice under (1) must

   1. Give details of the nature/extent of the interest and

   2. Be given

      1. At a directors’ meeting (either orally or in writing); or

      2. To the others individually or in writing

The standing notice is given under (b)(ii) when it has been given to every director

Standing notice must be tabled at meeting if given to directors individually

3. If the standing notice is given to the others individually in writing, it must be tabled at the next meeting after given

Nature and extent of interest must be recorded in the minutes

4. The director must ensure that the nature/extent of the disclosed interest in the standing notice be recorded in the minutes at which it is given or tabled

Dates of effect and expiry of standing notice

5. The standing notice:

   1. Takes effect as soon as it is given; and

   2. Ceases to have effect if a person who was not a director at the time given is appointed as director

As standing notice that ceases to have effect under (b) commences again if given to that person

Effect of material increase in nature or extent of interest

6. The standing notice ceases to have effect IRT a particular interest if the nature/extent materially increases above that disclosed

7. Effect of contravention - Doesn’t affect the validity of any act/transaction….

S 193 – Interact6ion of sections 191 and 192 with other laws etc.

Sections 191-2 have effect in addition to and not in derogation of:

1. Any general law rule about conflicts of interest

2. Any provision in a company’s constitution (if any) restricting [can’t make it laxer] a director from

   1. Having a material personal interest in a matter or

   2. Holding an office or possessing property

Involving duties or interests conflicting with their duties or interests as directors

**S 194 – Voting and completion of transactions – directors of proprietary companies

If a director of a prop company has an MPI in a matter relating to the affairs of the company and:

1. Under s 191 the director discloses the nature/extent and relation to the company at a meeting of the directors; or

2. The interest is one that doesn’t need to be disclosed under s 191

Then:

3. The director may vote on matters that relate to the interest; and

4. Any transactions that relate to the interest may proceed; and

5. The director may retain benefits under the transaction even though the director has the interest; and

6. The company cannot avoid the transaction merely because of the existence of the interest

If disclosure is required under s 191, (e) and (f) apply only if the disclosure is made before the transaction is entered into-

S 195 – Restrictions on voting- directors of public companies only

Restrictions on voting and being present

1. A director of a public company who has an MPI in a matter...

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