Section 249D we need to exit this board, page-13

the section 249D notice proposes resolutions for the removal of all or certain directors, the requirements of section 203D Corporations Act 2001 also need to be kept in mind.

Section 203D(2) requires shareholders who want to remove a director at a general meeting, to give notice of their intention at least 2 months before the meeting is to be held. The second part of section 203D(2) provides that if the company calls a meeting after that notice of intention is given, the director can be removed at the meeting even if the meeting is held less than 2 months after the notice of intention is given.It is the structure of section 203D and the interplay between sections 203D and 249D that tends to cause grief for requisitioning shareholders.

Common mistakesBecause section 249D does not explicitly refer to section 203D it is sometimes overlooked. If a section 203D notice has not been given, or it is given after the section 249D notice, a proposed resolution in the section 249D notice to remove a director is ineffective and there would be a question whether the company had to call the meeting at all.

Other issues we sometimes see are the two notices being combined into one, or being issued on the same day. The two notices cannot be combined. That is, the section 249D notice cannot also serve as the shareholder giving notice of their intention under section 203D. There are at least a couple of reasons for this.Firstly, the legislation is drafted in a way that contemplates two separate notices being given. They have different functions, different formal requirements, and can be given in different ways.

In drafting sections 203D and 249D, Parliament could have but did not expressly dispense with the need for notice under section 203D when a section 249D notice is being given.Secondly, it is not conceptually possible for a shareholder to give notice of their intention to remove a director at a meeting to be held in at least 2 months’ time, if the shareholder is on the same day by a section 249D notice compelling the company to call that meeting in no more than 2 months’ time. The shareholder cannot have the required ‘intention’ at the time of giving the section 203D notice.

As well as being separate notices, the section 203D notice should be given to the company before the section 249D notice is delivered; not on the same day.

That is the only way sections 203D and 249D can operate harmoniously and with full effect.The section 203D notice can and should be given in such a way that it is possible for the meeting to be held after the 2 month period required by section 203D (although the company may then make its own decision to bring the meeting forward as foreshadowed by the second part of section 203D).

This can only happen if the section 249D notice is given to the company at least a day after the section 203D notice is given; preferably longer (out of an abundance of caution). The exact timing will depend on the circumstances in each case.

https://www.whlaw.com.au/blog/board-spills-getting-notice-right