Introduction to corporate governance

Corporate governance includes a set of relationships between a company’s management, its board, shareholders and other stakeholders. 

Corporate governance provides the structure through which the objectives of the company are set, and the means of attaining those objectives.   Monitoring performance metrics are determined by the objectives set.


1. Sources of corporate governance requirements and guidelines 

The corporate governance framework extends in compliance with regulatory requirements and includes a mix of prescriptive and voluntary elements. 

Sources include:

    • The Corporations Act 2001 (Cth) (CA 2001) and Corporations Regulations 2001 (Cth) (CR 2001), administered by the Australian Securities and Investments Commission (ASIC); and
    • Internal management rules, being the constitution adopted by the company, the replaceable rules in the CA 2001, or a combination of both (section 134, CA 2001).

The replaceable rules will still apply to the company to the extent they are not displace or modified by the constitution (section 135(2), CA 2001).

The laws, rules and guidelines outlined above, together with market and investor expectations, form a framework for corporate governance spanning the systems and structures adopted by Australian companies, the duties imposed on Australian directors, internal company processes and policies, board and committee composition, internal and external audit processes, continuous disclosure and periodic reporting to shareholders.

Other rules may exist where the company is any of the following:

    • a public company listed on the Australian Stock Exchange (ASX);
    • a financial services company regulated by the Australian Prudential Regulatory Authority (APRA); or
    • a not-for-profit company regulated by the Australian Charities and Not-for-profits Commission (ACNC).


2. Additional governance requirements for certain types of company

Under Listing Rule 4.10.3, ASX listed entities are required to benchmark their corporate governance practices against the Council’s recommendations and, where they do not conform, to disclose that fact and the reasons why. The rule effectively encourages listed entities to adopt the Council’s recommended practices but does not force them to do so. This gives a listed entity flexibility to adopt alternative corporate governance practices.   A board may consider those alternatives to be more suitable to its particular circumstances subject to the requirement for the board to explain its reasons for adopting those alternative practices.

    • Financial services companies – overseen by Australian Prudential Regulation Authority (APRA). APRA provides prudential standards which set minimum standards, requirements and rules as to how APRA regulated entities must operate. 
    • Not-for-profit companies – Australian Charities and Not-for-Profits Commissions Act 2012 (Cth) (ACNC Act); Australian Charities and Not-for-profits Commission Regulation 2013 (Cth) (ACNC Regulations); and Charities Act 2013 (Cth).


3. Role of the board, board committees, directors and company secretary

A public company is required to have at least three directors at all times.   Two of the directors must reside in Australia. No limit exists on the maximum number of directors a public company may appoint under the Corporations Act or ASX Listing Rules, although it is common for a company’s constitution to set a maximum number.

Board structure – The board needs to be of sufficient size so that the requirements of the business can be met and changes to the composition of the board and its committees can be managed without undue disruption. A balance needs to be struck of having a sufficiently sized board that meets the requirements, has the experience and skill set yet not be unwieldy. The board should be structured to ensure it has an appropriate balance of skills, knowledge, experience and independence.

CA 2001 minimum requirements:

    • proprietary companies must have at least one director who must ordinarily reside in Australia (section 201A(1), CA 2001); and
    • public companies must have at least three directors, of which two must ordinarily reside in Australia (section 201A(2), CA 2001).

Board committees – CA 2001 allows directors to delegate any of their powers to a sub-committee that comprises a smaller number of directors (section 198D(1)(a), CA 2001).

Audit committee – responsible for reviewing the integrity of the company’s financial reporting framework; and required for certain large listed companies (ASX Listing Rule 12.7).

Remuneration committee –  responsible for establishing the company’s policy in relation to remuneration of executive and non-executive directors; and required for certain large listed companies (ASX Listing Rule 12.8).

Nomination committee – is responsible for assessing the competencies of board members, reviewing board succession policy, evaluating board performance.

Risk committee – is responsible for the review of risk management processes the company should implement.  

Some companies are also establishing a culture committee to oversee corporate culture. 


    • Executive director –  a director who is also an employee of the company or a subsidiary of the company.
    • Non-executive director –  a director who is not an employee of the company.

Chair of the board – The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity.

Company secretary:

    • Public companies must appoint at least one company secretary who must ordinarily reside in Australia (section 204A(2), CA 2001).
    • Proprietary companies do not have to appoint a company secretary but may elect to do so (section 204A(1), CA 2001).
    • Must ensure all company filings with ASIC are made and that all financial returns are prepared and lodged in a timely manner.


4. Role of shareholders

CA 2001 attributes powers to the shareholders of a company which are:

    • the right to elect and dismiss directors (section 201G, CA 2001 which applies as a replaceable rule);
    • the changing of the constitution (section 136(2), CA 2001); and
    • the changing of the company’s type (section 162(1), CA 2001).

An annual general meeting (AGM) provides shareholders with the opportunity to communicate directly with the board of directors; and hold directors accountable for company performance.

(Ahead of the AGM, public companies, large proprietary companies, registered schemes and other disclosing entities must give their members an annual reports package comprising the financial report for the year, the director’s report and the independent audit report on the financial report (section 314, CA 2001).)


5. Corporate groups

  • Holding companies – must exercise appropriate oversight over its subsidiaries to ensure sound corporate governance measures are used, while avoiding liability for the actions of the subsidiaries. 
  • Wholly owned subsidiaries – directors must act independently and at arm’s length from the holding company’s board. 

The constitution of a wholly owned subsidiary will usually expressly authorise the directors to act in the best interests of the holding company.


6. Corporate culture

Corporate culture is a set of shared values maintained within a company that affect employee’s attitudes and actions towards compliance. This is often articulated through a code of ethics and conduct. Risk culture is a set of values and behaviours present throughout a company that influence risk decisions. 

Remuneration structures, procedures for handling conflicts of interest and complaints, treatment of whistleblowers and timeliness of breach reporting to the regulators are among the elements that efficiently support and drive sound risk culture within a company.

Directors should consider how emerging risks, for example, cybersecurity and climate change risk, may impact the company.


7. Financial reporting and record-keeping

Public listed companies are subject to annual, half-yearly and, in certain circumstances, quarterly reporting requirements under the Corporations Act and ASX Listing Rules which focus on financial results and integrity.

Requirements under the CA 2001 

  • Section 292(2) states that small proprietary companies are not required to prepare a financial report and a director’s report unless:
    • they are foreign-controlled;
    • they are directed to do so by ASIC;
    • they are directed by shareholders holding 5% or more of the voting shares in the company; or
    • they have one or more Crowd-Sourced Funding (CSF) shareholders at any time during the reporting year. 
  • Section 292(1)(c) states that large proprietary companies and public companies must prepare a financial report for each financial year. 
  • Under Section 294(4)(c) it says that regardless of company size, directors must make a declaration as to the solvency of the company. 
  • Section 301(1): large companies must have their financial reports audited.
  • Section 319(3)(b): large proprietary companies, public companies and certain small proprietary companies that are required to prepare a financial report, a directors’ report and procure preparation of an auditor’s report must lodge those reports with ASIC within four months after the end of the company’s financial year.
  • Section 286(1): companies, regardless of their size, must keep written financial records that correctly record and explain their transactions, financial position and performance and that would assist in preparing and auditing true and fair financial statement.

The primary role of the Council is to develop and issue principles-based recommendations on the corporate governance practices to be adopted by ASX listed entities. The recommendations are intended to promote investor confidence and to assist listed entities to meet stakeholder expectations in relation to their governance.


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Ant Bekker Founder | MD

Ant launched his corporate legal career spending a decade covering ecommerce, technology, finance and litigation at Mallesons Stephen Jaques, followed by in-house stints at global behemoth BT and for the UK competition and consumer regulator (the OFT). An MBA at INSEAD led to a change in direction spending time at a top global strategy consulting business (Booz & Co), and projects in the Netherlands, Singapore and the US.

Ant then got his feet wet in startups, joining marketing technology business Rokt as inaugural General Counsel and Head of Operations, building both divisions from the ground up. A few funding rounds and 10x growth later, this quickly turned into a global scale-up valued at US$250m+ and 175 staff.

Ant founded Biztech Lawyers in 2018.   Biztech Lawyers is a tech-centric law firm.  We serve tech clients and use an array of legal technology to make legal processes more efficient, allowing clients to grow as painlessly as possible.  Our role is to act as a decision-making partner, rather than a legal-blocker.

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