CORPORATIONS ACT 2001 - SECT 201U Consequences of setting board limit in breach of section 201P

CORPORATIONS ACT 2001 - SECT 201U

Application

  (1)   This section applies if the directors of the company set a board limit in contravention of subsection   201P(1).

Board limit etc. ineffective

  (2)   The board limit and anything done in reliance on it have no effect for the purposes of:

  (a)   the company's constitution; or

  (b)   this Act, except this section.

Note:   If a board limit resolution is not passed, the number of directors of a company that can be appointed (for example by a general meeting) depends on the maximum number of directors specified by the company's constitution. This is so even if the directors purport to set a board limit despite the fact the board limit resolution was not passed.

  (3)   If:

  (a)   one or more directors are appointed by one or more resolutions passed at a particular general meeting of the company; and

  (b)   because of the board limit, the general meeting was not given the opportunity to pass one or more resolutions appointing a number of directors such that the number of directors of the company would (if those resolutions had been passed) have exceeded the board limit;

every appointment of director made by a resolution passed at the general meeting is invalid.

Note:   This subsection does not apply if a shortage of persons consenting to be appointed director was the reason the general meeting was not given the opportunity to pass one or more resolutions appointing a number of directors such that the number of directors of the company would (if those resolutions had been passed) have exceeded the board limit.

  (4)   Subsections   (2) and (3) have effect despite anything else in the company's constitution or in this Act, except sections   128, 129 and 201M.

Note:   Sections   128 and 129 deal with assumptions a person dealing with the company may make, including assumptions about the due appointment of directors. Section   201M deals with effectiveness of acts by a director in circumstances where the director's appointment is invalid for certain reasons.

Company and candidates for directors may seek compensation

  (5)   Subsection   (6) applies if either of the following (the suffering party ) suffers loss or damage because of the setting of the board limit in contravention of subsection   201P(1):

  (a)   the company;

  (b)   a person for whom both the following conditions are met:

  (i)   the person had given the company a written indication that he or she would be a candidate to be appointed director at a general meeting;

  (ii)   because of the board limit, the general meeting was not given the opportunity to consider passing a resolution to appoint the person as director.

  (6)   The suffering party may institute a proceeding in the Court for the contravention.

Note:   Section   1325 deals with the orders the Court may make to compensate the suffering party for the loss.

Contravention does not give rise to an offence

  (7)   A person is not guilty of an offence because of the contravention.