Company Meetings – Tips and Insights:
The Role of the Chair
Date
: 12 March 2015
Author/s : David Ferguson, Chuanchan Ma
In this article we look at the essential role that the chair 1
plays in the context of company meetings and the legal
principles that apply to that role.
Introduction
The constitutions of most companies divide the corporate
powers between the board of directors, which is usually
given the power to manage the company’s business, and
the members, who usually have the power to appoint and
remove directors and change the constitution. The
powers of the board and members are usually exercised
through resolutions passed at a meeting.
This article considers the role of the chair in the context of
meetings as well as the broad corporate governance role
allocated to an individual director appointed to the role of
chair of a public company. This reveals the increased
expectations of the role while noting the limited formal
powers of the chair.
The chair’s role in meetings
Courts have taken the view that, generally, a meeting can
only take place with more than one participant.2 This
reflects the fact that “according to the ordinary usage of
the English language” that it is not possible for a person to
have a meeting with themselves. This is the case even
though the one person present holds proxies for others.3
While exceptions to this general position have been
identified to enable a meeting of a single holder of a class
of shares4 , the general concept of a meeting contemplates
discussion between the participants and, for this reason,
courts have also held that a meeting of directors or
shareholders cannot proceed without a chair.
This indispensable element of any meeting was
recognized in Colorado Constructions Pty Ltd v Platus5
where Street J identified that the chair’s role included the
setting of the order of business, nomination of the person
entitled to speak, putting questions to the meeting,
declaring resolutions carried or not carried and declaring
the meeting closed. As noted in a subsequent case, “the
essence of chairmanship is actually exercising procedural
control over the meeting”.6
In carrying out this role, the chair is required to act
impartially to ensure that the meeting operates in a fair
manner. As observed by Young J in NAB v Market
Holdings Pty Ltd (in liq)7, citing National Dwelling
Society v Sykes8:
1418644_1
It is the duty of the chairman, and his functions, to
preserve order, and to take care that the
proceedings are conducted in a proper manner,
that the sense of the meeting is properly ascertained
with regard to any question which is properly
before the meeting.
The chair’s role in corporate governance
Most public company constitutions provide that the board
of directors will elect one of their number to act as chair
and that the person elected also acts as chair of general
meetings. While the position of chair could be filled on an
ad hoc basis, there is a broader corporate governance
significance to the role that the chair of a public company
plays. This is reflected in the following excerpt from
commentary to Recommendation 2.5 of the ASX
Corporate Governance Principles and Recommendations:
The chair of the board is responsible for leading the
board, facilitating the effective contribution of all
directors and promoting constructive and
respectful relations between directors and between
the board and management. The chair is also
responsible for setting the board’s agenda and
ensuring that adequate time is available for
discussion of all agenda items, in particular
strategic issues.
Accordingly, the role of chair in a public company is
usually attributed special status and additional
remuneration. Although the position can be carried out in
different individual styles, the chair often acts as
spokesperson for the company on high level matters and
usually plays an important link between the board and
management of the company. It is worth noting that the
ASX Corporate Governance Principles and
Recommendations also express the view that the chair
should be a non-executive role so as to separate the chair’s
role from that of the chief executive officer and the
executive management team. This article has been
formulated on the assumption that the chair is a nonexecutive director, but a fuller discussion of this issue is
beyond its scope.
The allocation of a broader corporate governance role has
been recognised as potentially giving rise to a more
extensive duty of care and diligence on the part of the
chair. As noted by Austin J in reflecting on the duties of
the chair of the board of One.Tel Limited:9
1
The court’s role, in determining liability of a
defendant for his conduct as company chairman, is
to articulate and apply a standard of care that
reflects contemporary community expectations.
Austin J further noted that it is now commonplace to
observe that the standard of care expected of company
directors, both by the common law (including equity) and
under statutory provisions, has been raised over the last
century or so, and that “[o]ne might correspondingly
expect that the standard for company chairmen has also
been raised”.10
The individual requirements of the standard of care owed
by the chair of a public company will depend on the
allocation of corporate governance roles and
responsibilities within the company and the skills and
experience of the individual person carrying out the role
of chair.11 In this respect, the responsibilities of the chair
are not limited to delegated tasks but include the
responsibilities with which the chair is entrusted by
reason of his or her expertise and experience.12
has a duty to maintain impartiality, a casting vote should
be used to maintain the status quo so as to allow further
discussion of the relevant matter, it is doubtful that this
general proposition exists.17
A number of provisions of the Corporations Act 2001
(Cth) also recognize the special status of the chair’s role in
meetings. For example, the Corporations Act
acknowledges that the chair often receives multiple proxy
appointments and therefore imposes an obligation on the
chair to vote as proxy on a poll.18 It also gives greater
scope for the chair, as compared to other directors, to vote
proxies in connection with directors’ remuneration.19
David Ferguson, Partner
Telephone
+61 2 8915 1o53
Email david.ferguson@addisonslawyers.com.au
The authority of the chair
Despite the essential nature of the chair’s role in the
context of meetings and the elevated duty of care and
diligence that may be attributed to the chair’s role within
public companies, a person appointed to that role does
not have authority, merely by virtue of that office, to make
decisions binding on the company or to give binding
directions.13 The board makes its decisions by resolutions
which are carried or lost depending on a majority vote.
Accordingly, unless the board has delegated powers, the
chair has no more power to carry out matters on behalf of
a company than any other individual non-executive
director.
The chair’s authority in the context of meetings is more
robust. Constitutions typically provide that the chair is
elected by the board of directors and, in some cases,
provide that the chair has a casting vote at meetings of
directors and members. Consistent with his or her role in
regulating meetings, constitutions also usually provide
that the chair of a general meeting can require a vote to be
taken by way of a poll and empower the chair to make
certain rulings at the meeting.14 Where a company’s
constitution provides that rulings by the chair on certain
matters are final and the chair makes a ruling on those
matters in good faith, there is no right in the meeting to
challenge the ruling, although it could be overturned by a
court in appropriate circumstances. Even if a decision is
made by the chair in connection with the proper conduct
of a meeting that does not have the protection of an
express constitutional provision, courts have indicated
that the decision should be regarded as correct unless the
contrary is proved by a person objecting to it.15
If the chair has a casting vote at a meeting, that right must
be exercised “honestly and in accordance with what (the
chair) believes to be the best interests of those who may
be affected by the vote”. Subject to this, the chair is
entitled to exercise the casting vote as he or she thinks
fit.16 While there has been a view that, because the chair
1418644_1
Chuanchan Ma, Solicitor
Telephone
+61 2 8915 1o03
Email Chuanchan.ma@addisonslawyers.com.au
© ADDISONS. No part of this document may in any form or by any means be
reproduced, stored in a retrieval system or transmitted without prior written
consent. This document is for general information only and cannot be relied upon
as legal advice.
1
We have adopted the term “chair”, rather than chairman or chairperson.
Sharp v Dawes [1876] 2 QB 26.
Re Sanitary Carbon Co [1877] WN 223.
4
Re Hastings Deering Pty Ltd (1985) 9 ACLR 755. It should also be noted
that in the case of a single-member company, section 249B of the
Corporations Act 2001 (Cth) (Act) provides that a resolution may be
passed without a meeting by the member recording it and signing the
record. However, as explained by Barrett J in CIC Insurance (prov liq
apptd) v Hannan & Co Pty Ltd (2001) 38 ACSR 245;246, this provision
may not be able to be used where the Act itself imposes some special
requirement relating to a meeting, which indicates that an actual meeting
is required. For example, section 203D(4)(b) which gives a director of a
public company to whom a resolution for removal is directed a right to
speak to the resolution at the meeting. Barrett J observed that in cases of
this kind, it may be that an actual meeting is required as a necessary part
of the statutory machinery so that, in the case of a company having one
single member, not only can section 249B not be used, but the normal
meaning of “meeting” as a plurality of persons is displaced and the
legislature countenances a meeting of one.
5
[1966] 2 NSWLR 598 at 600.
6
Woonda Nominees Pty Ltd v Chng (2000) 34 ACSR 558 at [35] per
Owen J.
2
3
7
8
(2001) 37 ACSR 629 at [88].
[1894] 3 Ch 159 at 162
ASIC v Rich and Ors (2003) 44 ACSR 341 at [71].
It should be noted that this case involved preliminary proceedings in
which the chair of One.Tel, Mr Greaves, sought to strike out proceedings
by ASIC against him, on the basis that the extra duties that ASIC
contended he was subject to were not known at law. Austin J dismissed
the application and found that a reasonable cause of action had been
disclosed against Mr Greaves, on the basis that a chair may have a higher
duty of care and due diligence arising from the chair’s responsibilities.
However, ASIC and Mr Greaves had reached a settlement before the final
proceedings.
9
10
2
11
ASIC v Rich at [49]: see also Shafron v ASIC (2012) 247 CLR 465 for
similar discussions in relation to a person holding the office of company
secretary and general counsel.
12
ASIC v Rich at [50].
13
Galipienzo v Solution 6 Holdings Ltd (1998) 28 ACSR 139 at 149.
14
See replaceable rules in sections 250G(b) (“Objections to right to vote”),
250J(2) (“Show of hands conclusive”), 250L(1)(c) (“When a poll is
effectively demanded”) and 250M(1) (“Where poll may be demanded”) of
the Corporations Act 2001 (Cth).
15
In re Indian Zoedone Company [1884] 26 Ch 70; Corpique (No 20) Pty
Ltd v Eastcourt Ltd (1989) 15 ACLR 586.
16
R v Bradford Metropolitan City Council; Ex parte Corris [1989] 3 All ER
150 at 160.
17
Cresvale Far East v Cresvale Securities (2001) 19 ACLC 659 at 677.
18
Corporations Act 2001 (Cth), section 250BB(1)(c).
19
Corporations Act 2001 (Cth), sections 250BD(2) and 250R(5)(b).
1418644_1
3