Produced by Julie Garland-McLellan, Consultant at AltoPartners Australia and non-executive director and board consultant based in Sydney, Australia.

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The Director’s Dilemma - February 2025

This month we consider what to do when a chair seems to believe AGMs are optional and that they can appoint and remove directors.

Una is a corporate communications professional. Six months ago she was invited to join the board of a local charitable corporation and, being keen to help improve the outcomes for local people, she quickly accepted.

She had not previously served on a board and spent a lot of time reading about boards on the internet and checking free resources from her local governance institutions and corporate regulator. She asked for, and was given, a copy of the constitution. This made it clear that directors could be appointed to casual vacancies and must stand for election at the next AGM. It also specified that at least one third of directors should stand for re-election at each AGM so that the members could change the board composition if they wanted.

However, when she asked about the date of the next AGM, she was told that they didn’t need to have one because the rules changed during Covid. There has not been an AGM or director election since 2019. She is the first new director in six years. Her concern is that, as the directors who voted her into her board seat have now all exceeded the terms for which they were elected and have not been voted back onto the board, her position might not have been validly appointed. When she shared this concern with the Chair, he told her that she was dismissed from the board and that he had the power to do this without consulting the other directors and without giving her anything in writing.

Should she just leave, and if she does, is she off the hook or is she at risk of being considered a shadow director?

Julie’s Answer

Oh dear, what a sad introduction to directorship!

Una is right; this is not how a board is supposed to operate.

Una should leave this board with as much speed as she can muster. Unless she can convince the board to hold an AGM and get herself - and the remaining directors - validly appointed, she has been rendered powerless. The Chair will simply exclude her from all decisions and meetings.

Any director can oblige the board to call an AGM or EGM by requisitioning it via a legal letter (and likely then following up through the corporate (ASIC) or charities (ACNC) regulator to prevent the board from simply ignoring her request). The problem is that, absent any evidence of her being voted into office, the board can simply say that she is not a director. This could turn into a lengthy and emotionally draining pursuit.

Una must ensure that she is validly removed from this board. The best way to do this is visit the corporate regulator’s website and check that her name is no longer listed as a director or ‘responsible’ person. If she is still on the website, she is still potentially liable for the actions of the board.

If she is still listed on the website, then it is up to Una to ensure she is clear. She should write a letter of cessation to the board confirming that she has ceased as a director. She should also write to the regulator:

• Attaching copies of relevant board minutes and communications about her appointment

• Explaining her inquiry about an AGM, and the chair’s false information (AGMs are still required) and ‘dismissal’ of her from the board

• Attaching a copy of the letter confirming her cessation as a director from the date of that conversation

Right is on Una’s side, but there are boards where she can make a valued contribution, and she shouldn’t waste her time with these buffoons.