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Director Appointment by Shareholders

You have spoken to me about Mr A________ joining the board and I note the

Company has actually already indicated this possibility to the market and via an ASX announcement which said, in part: “The Board has also invited Mr A_______,

principal of _______________ to join as an additional Director. Mr A________ has

indicated his intention to do so and is expected to join the Board before the AGM scheduled for the 26 October 200X.”

I was advised the other day that the intention is to appoint him at the scheduled 25 October 200X board meeting. If this is to occur, for example, for commercial reasons, I need to point out to you the duplication of regulatory requirements if a new director is appointed between the despatch of the AGM Notice and the actual meeting.

So, my suggestion is to either appoint Mr A_______ no later than the date of the

AGM Notice (to be 24 September 200X at the latest) – and hence include him in the Notice for AGM ratification – or hold a brief board meeting straight after the AGM and appoint him then.

You have also indicated that perhaps Mr A________ can just be appointed at the

AGM by the shareholders. Yes, our Constitution and the Corporations Act (see sec.201G Replaceable Rule which states: “A company may appoint a person as a director by resolution passed in general meeting.”) does allow shareholders to votefor a new director without him first having been appointed by the board. But, in my experience, that is most unusual where the board has in fact invited him to be a director. From my experience, this provision is usually only used where the proposed new director is nominating himself and/or certain shareholders want to put forward a candidate and/or the person does not have board support. Normally, if the board wants a new director they appoint him and then that appointment is just ratified at the next AGM – if nothing else, that makes it harder for shareholders to remove him simply because he is an incumbent director.

If you want we can certainly do it that way and I will include a resolution for Mr A_______’s appointment in the AGM Notice (draft to be circulated to the board later

today). We will, however, need his written consent no later than the Notice date (ie, 24 September) and a nomination (either from a director, “the board”, or shareholder(s) with 5% of votes). If it is “the board” nominating then that can simply be included in the agenda of the board meeting where the AGM Notice will be formally approved – on or just before 24 September. Also, we will need to put a brief biography of Mr A________ in the Notice [explanatory notes] so shareholders know who they are being asked to vote for (normally shareholders can read about directors in the Annual Report or, if a more recent appointment, in the ASX announcement).

If we go this way – and include his appointment as an AGM resolution, have you got a brief bio – or should I email him for that and explain what is happening – or do you want to sort that part out yourself – plus who will arrange an appropriate consent letter from him?

I hope this assists. Although in my opinion the easiest is to just appoint Mr A______

now (or by say 24 September, the AGM Notice day) – or straight after the AGM.

*Originally written by Company Secretary, an Australian virtual company secretary service.

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