Section 201B of the Corporations Act 2001 (Act)
provides that a director must:
- be an individual, not a body corporate;
- be at least 18 years of age; and
- not be disqualified from managing corporations
under Part 2D.6 unless the appointment is made
with ASIC’s permission as provided for under s 206F
of the Act or leave is granted by the Court under
s 206G of the Act.
There is no upper age limit specified in the Act for a
director. However, a company's constitution may have
age and other restrictions which impact on the general
principles discussed below.
Does a director need to hold shares in the company?
There is no requirement in the Act that a director must
hold shares in his or her company. The constitution of a
company however may specify that a person has to hold a
certain number of shares before being appointed a director.
Other constitutions may require the new director to buy
shares within a certain time frame of being appointed.
A failure to meet these conditions is likely to void any
appointment as a director.
How many directors are needed?
Directors are usually appointed at a general meeting
of members or shareholders such as an annual general
In public companies, there needs to be at least three
directors, two of whom ordinarily reside in Australia.
If a person is appointed as a director by the other directors
of a public company (and not at an AGM as noted above),
the appointment must be confirmed by ordinary resolution
at the company’s next AGM or that person will cease
to be a director at the end of the AGM (s 201H(3) of the
Similarly, where a person is appointed as a director of a
proprietary company (not by members at an AGM), the
company must confirm the appointment by resolution
within two months after the appointment is made or that
person will cease to be a director (s 201H(2) of the Act).
A proprietary company must have at least one director,
who must ordinarily reside in Australia (s 201A of the
Act). For single director/single shareholder proprietary
companies, a second director can be appointed by the
original director recording the appointment and signing
the record (s 201F).
A person may occupy the position of both director and
secretary of a public or proprietary company
Is written consent required?
A person must give the company their written consent
to act as a director of the company before being appointed
and the company has to keep the consent (s 201D of the
Act). A failure to do so constitutes an offence under the Act.
The company, provided it is not a charity registered with
the Australian Charities and Not-for-profits Commission,
must notify ASIC of appointments, retirements and
resignations of directors from office. The notifications must
include certain personal details (for example address and
date of birth) (s 205B). Currently, this can be achieved
by informing ASIC within the prescribed 28 day period. If
the company is registered as a charity with the Australian
Charities and Not-for-profits Commission these details will
be notified to the Australian Charities and
Situations where directors can be disqualified
Corporations Act 2001
The Act provides for the removal of directors by
shareholders provided certain conditions are met (s 203D
(public company), s 203C (proprietary company)).
The Act also provides that automatic disqualification from
a position of director occurs when a director:
- is convicted on indictment of certain serious offences (for
example an offence relating to the business or financial
standing of the company) (s 206B(1));
- is an undischarged bankrupt or has failed to comply with
any prescribed insolvency procedures (s 206B(3),(4));
- is convicted of certain offences against the Act and
is punishable for a period of imprisonment for a period
of greater than 12 months (s 206B(1)(b)(i));
- is convicted by an offence that involved dishonesty and
is punishable by imprisonment for at least three months
There is an automatic disqualification for a director
who is convicted on indictment under s 206B(1) of Act
(see s 206B(2)) with the possibility of extending the
disqualification by up to 15 years on the application
of ASIC (s 206BA).
Both ASIC and the courts can also disqualify a person
from acting as a director (ss 206C–206G). Please note that
there are other ways in which a director of a company
incorporated under the Act may be disqualified or removed.
For example, the Australian Charities and Not‑for‑profits
Commission Act 2012 provides for its own regime
to disqualify or remove.
A person who is disqualified from managing a corporation
commits an offence if that person:
- makes, or participates in the making, decisions that affect
the whole, or a substantial part, of the business of the
- exercises the capacity to significantly affect the
corporation's financial standing; or
- communicates instructions or wishes (other than advice
given by the person in the proper performance of
functions attaching to the person's professional capacity
or their business relationship with the directors or the
corporation) to the directors of the corporation:
- knowing that the directors are accustomed to act in
accordance with the person's instructions or wishes; or
- intending that the directors will act in accordance with
those instructions or wishes.
A company’s constitution may also have provisions for
removal from office. These can include if the director:
- Resigns in writing
- Becomes of unsound mind
- Is absent from meetings of the directors held during a
certain period of time (commonly three to six months)
without the consent of the other directors
- Fails to declare an interest in a contract or proposed
contract with the company.
It should be noted that for the purpose of public
companies, the directors cannot remove another director
by resolution (s 203E of the Act).
This document is part of a Director Tools series prepared by the Australian Institute of Company Directors. This series has been designed to provide general background information and as a
starting point for undertaking a board-related activity. It is not designed to replace legal advice or a detailed review of the subject matter. The material in this document does not constitute
legal, accounting or other professional advice. While reasonable care has been taken in its preparation, the Australian Institute of Company Directors does not make any express or implied
representations or warranties as to the completeness, currency, reliability or accuracy of the material in this document. This document should not be used or relied upon as a substitute for
professional advice or as a basis for formulating business decisions. To the extent permitted by law, the Australian Institute of Company Directors excludes all liability for any loss or damage
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