The rise of shareholder activism and the fall of the company board
In recent months we’ve seen a sharp rise in shareholder activism and, in particular, shareholders requesting a public company convene meetings to remove members of the board of directors.
Public company boards must be aware of their obligations in responding to and, critically (where able), resisting such requests to comply with the Corporations Act.
This process is multi-faceted. We will be outlining and discussing the process for you across a three-part series to provide a practical guide to dealing with these requests, in the following parts:
Under section 203D of the Corporations Act, members have an avenue to remove directors of a public company.
This section is not a replaceable rule and exists regardless of any:
To do so, the notice of the intention to move the resolution must be given to the company at least two months before the meeting is held.
This can be two months prior to a company meeting, including:
A 203D Notice is separate from a meeting requested under sections 249D or 249F and should be given at least one business day prior to the meeting requests, to ensure at least two months’ notice is given1.
It is open to a company to waive the two month notice period required under section 203D and may pass the resolution even though the meeting is held less than two months after the notice of intention is given. However, under section 249H(3) of the Corporations Act, at least 21 days’ notice must be given to remove a director under section 203D or to appoint a director in place of a director removed under section 203D.
The company must give the director a copy of the notice as soon as practicable after it is received.
Section 203D provides that the director who is the subject of the removal resolution is entitled to put their case to members by:
It is open to the director to speak to the resolution at the Meeting held by Shareholders or the Meeting held by the Company.
While this will be discussed in more detail in part two, the constitution of the company generally provides for the procedure in holding a meeting and for dealing with:
Where a director was appointed to represent the interests of a particular shareholder (including a majority shareholder), the resolution to remove that particular director does not take effect until a replacement to represent their interests has been appointed.
For more information on how to prepare, respond to, or defend a section 203D Notice, please contact HopgoodGanim Lawyers’ Corporate Advisory and Governance team.
1. Burnett-Smith v Boer Goat Breeders’ Association of Australia Limited ACN 067 659 081  FCA 1635.