Ship Ahoy!
The captain of a ship is tasked with the day-to-day operation of the vessel. They will use their experience and skills to safely navigate whatever challenges arise, and act responsibly to provide a safe and productive environment for the crew, and thus deliver safe passage to the passengers. They also have responsibilities to the owners of the ship, which may include a list of shareholders.
The shipping company, while not involved in the everyday operations, must also abide by established rules of management, and will collectively decide upon overall business direction, fleet planning and operational direction. The captain will regularly attend meetings with the shipping company managers to provide them with valuable insight, and likewise, receive instructions on overall method and direction.
Let’s return to shore
When it comes to the daily operation of a company, the Chief Executive Officer (CEO) takes on the role of ship’s captain, making decisions and running the ship by managing the senior crew members, and then through the ranks so that everything runs smoothly from bridge to engine room. Not only must it all run smoothly, but it must also operate as required by the Board of Directors.
Directors may be Executive Directors who work for the company – as with the CEO – or they may be Non-executive Directors, who do not work for the company but serve on the Board, having been selected for their industry knowledge, management experience, or other relevant skills that they bring to the table.
The Corporations Act provides clear oversight for the requirements and conduct of company boards. While the Act indicates a one-size-fits-all set of rules, it also enables individual boards to have their own constitutions, by which the board is legally bound to operate.
Board obligations
The constitution will specify such things as:
- How many meetings will be held each year
- How many meetings individual board members are required to attend
- What number of directors constitutes a quorum
- The recording and retention of minutes
These requirements are not optional, but legally demanded, and the board, and therefore individual directors are required to comply.
Board meetings should be controlled by the Chair, such that company business is properly researched, discussed and addressed, and that Board resolutions are representative of the majority view. Minutes should adequately record the intent of the meeting, be signed, and placed on record within the required timeframe.
Director obligations
From late 2022, current and future Directors are required to register for a Director Identification Number (DIN).
Various resources are available to provide guidance to company directors, and while appointment as a Director attracts a degree of accolade, it carries serious obligation and requires considerable commitment.
Directors are required to:
- Always act in good faith for the best interests of the company
- Apply care and due diligence in performing their duties
- Avoid any conflict of interest
- Not use their position of authority and access to privileged information for personal gain
They are required to conduct their own research in order to be fully informed on issues being discussed. Likewise, they should refer to the minutes of previous meetings, and the agenda for current meetings. Just turning up for the cheese and biscuits is not an option.
ASIC takes board and director compliance seriously. Breaches of rules and flagrant disregard of responsibilities can result in:
- Fines
- Compensation
- Disqualification
In the worst cases where deliberate fraud is ascertained, criminal charges may be laid.
It is vitally important to be aware of Board obligations – ignorance is not an acceptable excuse.
In the event that you find yourself in need of assistance, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.