1. Chapter 15 Members’ Rights
Corporate Governance

2. Members’ Voting Rights
Issues on which members have a vote under the Corporations Act:
Structural and constitutional: S136: Changes to a company’s internal governance
rules after registration require a special resolution of members. This includes:
S136(1): The choice to adopt a constitution.
S136(2): Modifying or repealing the constitution or a provision thereof. If the constitution has further restrictions these must also be met.
Selecting board: the members’ power to determine the composition of the board
depends on the type of company and the internal governance rules.

3. Voting Rights Continued
Proprietary Companies: power to appoint or remove directors. Unlisted public companies: the same as propriety with the addition that members may vote to dismiss. Listed Companies: directors are appointed by ordinary resolution of members. Directors also retire and offer themselves for reappointment every three years. Appointing auditors: the registered auditor required for public companies must be appointed and removed by members.. Approving certain corporate actions: usually involving shares.

4. Voting Rights Continued
Financial benefits to related parties of public companies: members must approve. A related party includes:
An entity that controls the company.
Directors and relatives.
Entities controlled by directors.
Entities related within the last six months.
Entities who will become related parties.
Entities acting in concert with a related party.

5. Voting Rights Continued
Approving certain transactions of listed companies
Approving certain takeovers and reconstructions
Members’ residual decision-making powers:
Where the board is unable to act because of quorum deadlock.
To commence legal proceedings against those who control the company.
To ratify ‘honest’ breaches by directors.

6. Restrictions on Members’ Decision Making
Power is split between directors and members. Members cannot override decisions made by directors which are within directorial power. If members disagree with a decision made by the board, they may:
Alter the internal rules to restrict directors power.
Remove a director.
Appoint a new director.

7. Remedies of Shareholders
Shareholders of all types of company have remedies which exist to protect minority members from directors and majority shareholders.
Statutory Remedies
1. Restriction on majority voting.
2. Oppression remedy.
The court must find that the actions are:
Contrary to the interests of the members
Discriminate against a member or members
Actions that can give rise to a remedy:
The conduct of the company’s affairs.
An act or omission by or on behalf of the company.
A resolution of members of the company.

8. Remedies of Shareholders Continued
3. Winding Up A member may apply for a winding up of the company if: The directors have acted in their own interests The affairs of the company are being conducted in an oppressive manner The court is of the opinion that it is just and equitable for the company to be wound up 4. Injunction A member may apply for an injunction to stop a person from contravening the Corporations Act 5. Inspection of Books A member is able to seek to inspect the books of a company.

9. Derivative Action
Action taken on behalf of the company. Under S236, 237 (2) a member can initiate a derivative action. This could be used in respect of a breach of a directors’ duty.

10. General Law Remedies
Personal Action – a member may have a personal right of action under a statutory contract under the replaceable rules of constitution or under other personal rights under express contract.
Taking legal action because the majority of members exercised their power inappropriately.

11. Inspection of Company Books
A member may apply to the court for an order authorising any person to inspect company books. S247A. Members’ Voting Rights Limited to matters expressly provided in the Corporations Act and internal governance. Issues on which members have a right to vote: Structural and Constitutional: S136 – changes to a company’s internal governance. Selecting Board: The composition of the board.