In Queensland Police Credit Union Ltd [2013] QSC 273 the Supreme Court of Queensland decided that payments made in 2010 and 2012 to 3 retiring directors without member approval under deeds made in September 2009 did not breach section 200B of the Corporations Act. Section 200B of the Corporations Act commenced on 24 November 2009.
Section 200B limits retirement benefits for directors and managers to their “average annual base salary”, unless members approve.
But Judge McMurdo left open the question of whether the Board had the power under the Credit Union’s Constitution to agree to pay retirement benefits (in recognition of past services) without member approval.
Judge McMurdo observed:
” The applicant’s Constitution contains no provision by which the directors were authorised specifically to approve remuneration of a kind which could not be approved under cl 17 or, if it be different, a termination benefit. The board is given a general power, by cl 14.1, to manage the applicant’s business and to exercise all of the powers of the applicant except any powers that the Corporations Law or the Constitution expressly allocates to the general meeting. Although that provision was not discussed in the course of the applicant’s submissions, it may be the applicant’s position that this was the source of the power of the directors to cause the applicant to contract in terms of the Deeds. But that is not an obvious source of such a power. It is far from clear that the Constitution should be read as providing for some of the directors’ emoluments to be decided by a general meeting whilst leaving others, such as these termination benefits, to the board. The better view is that the Constitution permits the remuneration of directors but only by cl 17. If that is correct, then the provisions for termination benefits, within these Deeds, were made without the applicant’s authority and the recipients of the payments, who secured the benefit of these Deeds whilst themselves directors, would be obliged to repay the moneys. …
Ultimately, it is unnecessary for me to express a concluded view upon whether the agreements for these termination payments were made with the authority of the applicant. That question was not fully argued and the declaration which is sought is in relation to a different issue, which is whether the payments contravened s 200B of the Act. That issue can be determined without a conclusion that the payments were otherwise duly made.”
Comment: Directors and managers need to decide whether, under their Constitution, member approval is required for payment of retirement benefits unless such a payment can be made from the annual remuneration that has already been approved by members.
