Depending on the structure of your business, business decisions are ordinarily governed by your company’s constitution, owner agreements such as a shareholders agreement, unitholders agreement or partnership agreement and, where relevant, statute and common corporations law.
Where your business is owned and operated as a corporate structure, the key decision makers will be the directors and shareholders of the company.
The Directors are responsible for the overall strategy, direction, management and control of the company and the business.
Directors make a number of decisions. Unless there is agreement otherwise, they are ordinarily responsible for and able to make decisions about:
- Dividend policies
- Directors’ remuneration
- Day-to-day operations and management of the business
- Changing accountant or auditor
- Establishing the strategy, business plan and financial budget
- Creating or granting any security interests
- Entering into, terminating or varying contracts in the ordinary course of business
Where a multi-director company, directors will often make decisions by calling board meetings or otherwise making resolutions (say, via a circular email). Once decisions are approved, they can then be implemented through management of the business for example, a general manager may have delegated authority of the board of directors to implement decisions made by the directors.
The Shareholders are the owners of the company. An owner’s interest may be held as a natural person, through another corporate entity or trust structure. There may be one shareholder in a company, or multiple.
You become a shareholder where the company issues shares to you or where there is a transfer of shares from an existing shareholder in the company.
As a shareholder, you generally have the right to attend shareholder meetings and vote on certain issues (depending on the nature of the shares held by you and assuming that you have voting rights).
Unless there is agreement otherwise, shareholder decisions often include the following:
- Issuing of further shares or a change in the share capital of the company
- A material change in the nature of the business activities
- Winding up the company
- The acquisition of any shares or securities in any other entity, or the business and assets of any other entity
- Selling, transferring, leasing or otherwise dealing with a material part of the undertaking, property or assets of the business, other than in the ordinary course of business
- Incurring debt over a specified threshold
- Selling the business or acquiring another business
- Amending the company’s constitution
- Providing capital to the company
The system and set of rules by which companies operate, and are directed and controlled, is often referred to as corporate governance. This is a structural framework that defines key relationships and decision-making powers as between the board of directors, shareholders and management.
Good corporate governance is important to ensure efficient processes, risk mitigation, smooth running of operations, regulatory compliance and achieving a business’ strategic goals.
Whether a director or shareholder, it is important to understand the corporate governance framework and your role, rights and obligations within it. At Burke Lawyers we empower our clients so that the choices we create with our clients are informed, and successful outcomes are achieved. Every time.
Contact us today on +61 3 9822 8588 to find out how our experienced Commercial lawyers can help you.