Article by: Michelle Wibisono, Senior Legal Writer, LexisNexis® Practical Guidance – Corporations
Directors are responsible for the general oversight of the company. There are different types of directors, including de facto and shadow directors, nominee directors, independent directors, and non-executive directors.
The law concerning the holding of office for directors is primarily contained in the Corporations Act 2001 (Cth) (Corporations Act), which also outlines specific eligibility requirements for a person to become a director. The Corporations Act also outlines the processes that need to be followed and notifications that need to be made when appointing a director.
Conducting background checks of a proposed director is an essential part of the appointment process, particularly for ASX-listed companies (and those seeking new listings) and charities. Although the requirement for background checks is squarely relevant to listed companies and charities, best practice indicates that all companies, including unlisted companies, undertake background checks on new and proposed directors.
Background checks are also relevant outside the context of boards, for example, financial services licence applicants must perform background checks on their proposed responsible managers and “fit and proper persons”.
Depending on the circumstances, the company should consider which checks should be undertaken personally and which should be outsourced to a third-party service provider.
Once testing of the new Director Identification Number regime in Schedule 2 of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 (Cth) has completed, the background checks should also include a person’s Director Identification Number.
Download: Checklist of background checks for company directors
In this time-saving checklist you will find clear guidance on how to conduct the types of checks for establishing a baseline for a person’s suitability for appointment as a company director. This includes meeting the requirement of “good fame and character” in ASX Listing Rule 1.1.
For example:
- Banning or disqualification
- Bankruptcy
- Criminal history
- Material interests
- Litigation history
There may be additional factors which may need to be considered as part of determining whether the person is suitable for appointment as a company director.
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About Michelle Wibisono
Michelle has more than 12 years of corporate law experience at leading firms in Australia, including Herbert Smith Freehills and Addisons. Michelle has acted in a broad range of corporate transactions and advisory matters, as well as in debt financing and stamp duty.
Before joining LexisNexis, Michelle practised as a senior associate at Addisons. Prior to that, she was a senior associate at Herbert Smith Freehills and a Principal Lawyer at the Independent Pricing and Regulatory Tribunal.
Michelle has also been a tipstaff to the Hon. Justice Richard White in the Supreme Court of NSW (Equity Division).
Michelle's work on the history of corporations has also been published as 'Corporations', in Gleeson, Watson and Higgins (eds), Historical Foundations of Australian Law, Vol II (Federation Press, 2013).
Michelle is a regular commentator for LexisNexis on Corporations Law issues. Learn more here.