Directors play a crucial role in the way a company runs. Generally, we hear about directors meetings, discussions and votes, but what happens when there’s only one director in a company? 

Sole directors board resolutions work a little differently compared to resolutions involving multiple directors. However, the same expectations, responsibilities and duties still apply to the singular director of a company. 

Let’s go through how this works in a little more detail – read on to learn more. 

What Is A Board Resolution?

A board resolution is document that records important decision regarding a company that is made with the approval of the board of directors. Board resolutions can involve matters regarding:

  • The appointment of a new director 
  • Important financial decisions
  • Voting company officers out 
  • Commercial strategies 

The matters that require approval of the board are generally set out in a company’s constitution or in its shareholders’ agreement.

How To Pass A Resolution At A Board Meeting

A board resolution is passed by gathering the directors of the company and having them vote on the relevant matter. Typically, companies will pass two types of resolutions:

  • Ordinary resolutions, which usually handle more administrative matters, and generally require a lower percentage of votes by directors (e.g. 50%).
  • Special resolutions, which deal with matters of a more serious nature, and generally require a higher percentage of votes by directors (e.g. 75%). 

In addition to securing votes, a company will need to adhere to the following requirements so that their resolution can be considered valid: 

  • A meeting must be held where the minimum number of people are all in attendance 
  • The minutes of the meeting must be recoded, signed by the chair of the meeting or the chair of the next meeting
  • The resolution of the meeting should be added to the companies records, no later than one month of the meeting being held 

Certain changes to the company will require notifying the Australian Securities and Investments Commission (ASIC) after the resolution has been passed. These can range from a change in shareholders to altering the company address – either way, ASIC will need to be notified through certain forms. To find out which changes ASIC requires to be alerted of and how to go about it, talk to one of our legal experts today. 

Can I Be A Sole Director?

Any person aged over 18 may be a director of an Australian company, provided they have not been disqualified from being a director by ASIC.

It is perfectly fine to set up a company with a single, sole director and there no legal requirement that an Australian company have more than one director. However, the Corporations Act requires that at least one of a company’s directors reside in Australia – so, if you are a sole director you must reside in Australia in order to be the sole director.

How Does A Sole Director Resolution Work?

As there is only one director, the requirement to vote no longer exists.  There is no one else who possesses the right to vote on the resolution. 

Rather, the director of the company will be the only one with the powers to pass the resolution. In order to pass a resolution, the sole director of a company will need to create a document that details the changes before signing it. 

What Does The Corporations Act Say?

Section 248B of the Corporations Act 2001 states that when there is only one director of a company, that sole director may pass a resolution by recording it and then signing the record. 

Example
Ben is the sole director of a manufacturing company. In order for the business to progress, the company will need to purchase some additional equipment. 

However, under the company’s constitution, spending a significant amount of the company’s capital requires approval from the board of directors. As Ben is the only director, he creates a document outlining the new purchases and then signs it himself. In doing this, he has created and passed a directors resolution for the company. 

Can A Company Secretary Sign A Board Resolution?

The simple answer here is no. A company secretary usually cannot sign a board resolution. Company secretaries possess an entirely different role, obligation and duty to that of a company director. They are usually responsible for looking over financial matters, overseeing legal issues and making sure the company is consistently meeting compliance standards. 

However, a company secretary can simultaneously be a director of the same company. In these cases, an exception applies and the company secretary will possess the power to sign or vote on a board resolution. However, note that this is vested in their power as a director rather than a secretary. 

What Else Do I Need To Know?

A director possesses the powers to make important decisions for the company, often ones that can impact all stakeholders. As a result, directors are held to a very high standard. 

The directors duties, outlined in the Corporations Act 2001, details the kinds of behavior and conduct that is expected of a company director. For instance, a director must: 

  • Act in good faith with the best interests of the company in mind
  • Take reasonable steps to prevent conflicts of interest and insolvent trading
  • Never use their position or the information they know in harmful ways 
  • Ensure their actions are guided with care and conscientiousness  

Therefore, a sole director can pass board resolutions on their own by recording and signing it. Despite this authority, the usual expectations and obligations of a director are still required of sole directors in the way they carry out their directors duties. 

Next Steps

A sole company director will need to thoroughly understand their directors duties and rights particularly, if they are to be the only one in their position. As many major decisions will depend on the recording and signing of a document, having the counsel of legal experts can go a long way in having a successful run as director. 

Our legal experts can provide advice regarding passing resolutions as a sole director, clarifying legal obligations and any other queries you may have. Reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

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