Responding to unsolicited director nominations

  • Boards can expect an increase in incidences of unsolicited director nomination proposals.
  • Boards need to take a proactive approach to assessing the candidate's nominations and have a well set-out procedure for the nominations, appointment, and re-election of directors.
  • This article contains tips for responding to unsolicited requests for a board seat and a guide on the key assessment process.

How does your board respond to a shareholder or unsolicited request for a board seat?

There have been recent prominent examples of a shareholder and other candidates seeking a seat on the board. Often, a shareholder with 15 per cent or greater ownership will get a seat on the board. However, a shareholder or a member of the public can nominate themselves for a director role.

It is considered good governance for the board of directors to regularly assess the composition and effectiveness of the board as a whole, as well as any upcoming need for new directors, which will include a review of the required mix of skills, experience and other qualities of directors.

The company’s constitution and the ASX Listing Rules 3.13.1, sets out processes for the nomination of directors. In addition to adhering to these requirements, the board will regularly, but at least annually, review the size and composition of the board to ensure that it continues to have diversity and the right mix of experience, competencies and skills to fulfil its responsibilities effectively.

Recent changes to ASX Listing Rule 3.13.1, which now requires listed companies to notify the market of the closing date for receipt of director nominations, this is likely to lead to an increase in incidences of unsolicited director nomination proposals.

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