Statutory Disclosure Obligations Related Party Transactions Notes

Class 15 Statutory disclosure obligations; related party transactions

Corporations Act: Disclosure of board not GM. Applies to proprietary and public companies. Material personal interest? McGellin v Mt King Mining- something that would have the capacity to influence a director on a decision to be made. Disclosure must be detailed, and sufficient to allow board to understand the scope of the benefit or potential benefit that the director or officer is going to take- Camelot resources v McDonald. Does it include conflicting directorships? Contravention does not invalidate transactions but is an offence. But what do the articles say?

Related party transactions with public companies and their controlled entities- s208 and 217-227 of CA. Public co or controlled entitity- 228 and s50AA. Giving financial benefit- 229. To a related party s228. Get GM approval 217-227. Unless an exempt transaction s210-216. Related parties and associates cannot vote on the resolution 224. Consequences of contravention. Not invalid but will be an offence under 208 and 209(2).

Don’t have to have a related party transaction meeting to pay a director fee but if outside the company you need authorisation from GM. Related parties cannot vote.

1317E is a civil provision section. S199 prohibits the giving of certain indemnities to officers and directors where it requires to put directors in a position as if the liability for directors breach of duties had never occurred. It extends to a related body corporate of a public company extending that indemnity as well. A company may not indemnify a person by making a payment against liabilities incurred like a liability owed to the company or a compensation order or pecuniary payment or a liability owed to someone out of conduct not in good faith but you can seek indemnity for legal costs of defending yourself but cannot be indemnified for liabilities for breach of duties. But 199(3) says you must win in order to get this indemnity.

A mirror image limit of a company paying of insurance premiums for paying off breaches of duty. Companies can pay insurance premiums for negligence liability and for breach of the duty to act in the best interests of the company and for proper purpose they cant pay insurance premiums for wilful breach of duty or breach of 182 or 183. You can insure officers in regards to negligence and breach of duty to act in best interest of company and proper purpose but not for criminal conduct, breach of 182 or 183. The insurance premium that a company can pay for negligence defence or breach of duty to act in proper interest is available if you win or lose for defence costs. Insurance is not as limited as direct indemnity is. S 300(8) requires to disclose all indemnities and insurances in directors report. Exempt from disclosure under 191-195CA. Exempt from GM approval under s208.

ss 191-195 (disclosure obligations).

CORPORATIONS ACT 2001 - SECT 191

Material personal interest--director's duty to disclose

Director's duty to notify other directors of material personal interest when conflict arises

(1) A director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest unless subsection(2) says otherwise.

(1A) For an offence based on subsection(1), strict liability applies to the circumstance, that the director of a company has a material personal interest in a matter that relates to the affairs of the company.

Note: For strict liability , see section6.1 of the Criminal Code .

(2) The director does not need to give notice of an interest under subsection(1) if:

(a) the interest:

(i) arises because the director is a member of the company and is held in common with the other members of the company; or

(ii) arises in relation to the director's remuneration as a director of the company; or

(iii) relates to a contract the company is proposing to enter into that is subject to approval by the members and will not impose any obligation on the company if it is not approved by the members; or

(iv) arises merely because the director is a guarantor or has given an indemnity or security for all or part of a loan (or proposed loan) to the company; or

(v) arises merely because the director has a right of subrogation in relation to a guarantee or indemnity referred to in subparagraph(iv); or

(vi) relates to a contract that insures, or would insure, the director against liabilities the director incurs as an officer of the company (but only if the contract does not make the company or a related body corporate the insurer); or

(vii) relates to any payment by the company or a related body corporate in respect of an indemnity permitted under section199A or any contract relating to such an indemnity; or

(viii) is in a contract, or proposed contract, with, or for the benefit of, or on behalf of, a related body corporate and arises merely because the director is a director of the related body corporate; or

(b) the company is a proprietary company and the other directors are aware of the nature and extent of the interest and its relation to the affairs of the company; or

(c) all the following conditions are satisfied:

(i) the director has already given notice of the nature and extent of the interest and its relation to the affairs of the company under subsection(1);

(ii) if a person who was not a director of the company at the time when the notice under subsection(1) was given is appointed as a director of the company--the notice is given to that person;

(iii) the nature or extent of the interest has not materially increased above that disclosed in the notice; or

(d) the director has given a standing notice of the nature and extent of the interest under section192 and the notice is still effective in relation to the interest.

Note: Subparagraph(c)(ii)--the notice may be given to the person referred to in this subparagraph by someone other than the director to whose...

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