A chair of the board, sometimes still called a chairman, is the director who leads the board's meetings and keeps its decision-making on track. The chair does not run the business day to day; that is the job of management, led by the chief executive officer (CEO) or managing director. If you are a founder, director or early investor in an Australian company, this is one of the first governance roles you will encounter, and one of the most misunderstood.
This article explains what the chair of the board actually does, how the role is created under the Corporations Act 2001 (Cth) (the Act), what a casting vote is, the duties that come with the position, and the mistakes small companies most often make when they set the role up.
What a chair of the board is
A chair leads the board, not the company. In practical terms the chair:
- Sets the agenda and runs meetings: agreeing what the board will discuss, making sure directors get the papers in advance, and keeping discussion focused on decisions rather than drifting into management matters
- Manages board dynamics: drawing out quieter directors, managing dominant voices, and making sure conflicts of interest are declared and handled properly
- Keeps oversight honest: helping the board genuinely review strategy, risk and performance instead of rubber-stamping management's proposals
- Links the board and management: acting as the main point of contact between the directors and the CEO, including on sensitive issues such as CEO performance and remuneration
None of this makes the chair the boss. The board makes decisions collectively, and the chair is one director among the others. In small companies the role can look like extra administration, but it earns its keep the moment the board has to make a hard decision: a capital raise, a founder dispute, a major contract, or a difficult conversation with a CEO.
Small proprietary companies are not required to have a formal board or a standing chair. A company with one director does not need any of this machinery. But once a second director is appointed, someone has to chair meetings, and the law has default rules about how that works.
How the role is created under the Corporations Act
There is no office of "chairman" created by the Corporations Act. What the Act regulates is who chairs directors' meetings, and how votes at those meetings are counted.
The default position is in s 248E of the Corporations Act 2001 (Cth), which is a replaceable rule. It says the directors may elect a director to chair their meetings, and may decide how long that person holds the role. If no chair has been elected, or the elected chair is not available for a meeting, the directors must elect a director present to chair that meeting or the relevant part of it.
Two consequences follow. First, under the default rule the chair must be a director. A company can change that in its constitution, but unless it does, the person chairing directors' meetings is one of the directors. Second, because these are replaceable rules, a company's constitution can displace or modify them under s 135 of the Act. That is why two companies can handle the chair role completely differently: one might leave everything to the default rules, another might give the chair special powers or remove the casting vote.
The replaceable rules do not apply at all while a company has a single director who is also its sole shareholder. A solo-founder company can therefore ignore all of this until a second director is appointed, which is typically when investors or external directors arrive.
The casting vote
Decisions at directors' meetings are made by majority vote. Under s 248G of the Act (also a replaceable rule), a resolution is passed by a majority of the votes cast by directors entitled to vote on it, and the chair has a casting vote if necessary, in addition to any vote they have in their capacity as a director.
The casting vote is easy to misunderstand. It does not give the chair two votes on every question. The chair votes once like everyone else, and only if the votes are tied does the chair get a second, deciding vote. The Act itself notes that the chair may be precluded from voting altogether, for example by a conflict of interest. And because this is a replaceable rule, a constitution can remove the casting vote entirely. Whether it exists at all depends on the company's own rules, which is one reason the constitution matters more than the title on the business card.
The chair carries the duties of a director
Because the chair is almost always a director, the title does not add a special set of duties, and it does not subtract any either. A chair who is a director owes the same duties as every other director, including the core obligations in Chapter 2D of the Act: to act with care and diligence under s 180, in good faith and for a proper purpose, and to avoid conflicts of interest. "Chair" is not a shield and not a promotion to a different legal category.
The courts have made clear that the chair cannot treat the role as ceremonial. In ASIC v Healey [2011] FCA 717 (the Centro case), the Federal Court found that non-executive directors, including the chair, breached their duty of care and diligence when they approved financial statements that contained significant errors. The directors had relied on management and the auditors, but the court held that directors must read and understand the company's financial statements themselves. The lesson for a small company is the same as for a listed one: the chair cannot outsource the board's oversight to management, and a director who signs off without understanding the papers is exposed.
The chair also has a practical role in record-keeping. Under s 251A of the Act, a company must keep minutes of directors' meetings within one month, and the minutes must be signed within a reasonable time by the chair of the meeting or the chair of the next meeting. Signed minutes are evidence of what was decided. A chair who lets minutes slide is storing up problems for the next capital raise, dispute or sale, when someone needs to prove what the board actually approved.
Conflicts of interest land on the chair's desk
Conflicts are common in small companies: founders who are also shareholders, investor nominees on the board, directors with side businesses or personal relationships that touch company decisions. The law's starting point is s 191 of the Act, which requires a director who has a material personal interest in a matter relating to the company's affairs to give the other directors notice of the interest.
The chair does not have a separate legal obligation beyond this, but in practice the chair is the person who makes sure the process works: that the interest is declared, that the minutes record it, and that the board follows whatever its constitution says about voting and participation. The default rules do not automatically stop a conflicted director from voting, so the constitution or a board policy is what typically requires the director to abstain or leave the room. A chair who ignores a declared conflict, or who fails to notice one, is exposing the whole board to risk, and the minutes are the record that will show whether the process was followed.
The chair is not the CEO
Directors, including the chair, govern the company; management runs it. The chair of the board is usually a director who leads the board's processes, while the CEO or managing director implements the strategy day to day. The two roles pull in different directions: the chair is accountable for how well the board oversees the company, while the CEO is accountable for how well the company executes.
In many startups the founder occupies both seats. That can work, but it blurs the two roles, because the same person sets the board's agenda and is accountable to the board for execution. Some boards handle this by appointing an external or independent chair once investors come in, so that the CEO's performance is genuinely reviewed rather than self-reviewed. There is no legal requirement to do this, but it is one of the decisions the board faces as it grows, and investors will often raise it themselves.
A worked example
Consider Bluepeak, a Melbourne software startup with three directors: two founders, Priya and Dan, and Mei, who was appointed under the investor's rights in the shareholders agreement. At the first board meeting after Mei joins, the directors elect Priya to chair their meetings under s 248E. The minutes record the election and are signed by Priya within a reasonable time, as s 251A requires.
Priya's job now is process, not operations. Before each monthly meeting she agrees the agenda with Dan, who is the CEO, and makes sure the financials and metrics go out in advance so the directors can actually review them. At one meeting the board considers a services contract with a company in which Mei owns a 30% stake. Mei declares her material personal interest under s 191, and under the constitution she abstains from voting and leaves the room while the contract is discussed. Priya makes sure the declaration, and the way it was handled, are recorded in the minutes.
Later in the same meeting the board is split on a hiring decision: Priya votes for it, Dan votes against, and Mei cannot vote because she is conflicted on the related matter. The votes are tied, so under s 248G Priya uses her casting vote to pass the resolution. The minutes record that the resolution was passed by majority with the chair's casting vote. Nothing about this required a grand governance overhaul. It required a chair who runs the process, a constitution that deals with conflicts, and records that show what happened and why. Without Priya in the chair, the meeting would likely have drifted, the conflict might have gone unmanaged, and the tied vote would have stalled the company.
Common misconceptions
Misconceptions about the chair tend to cluster around the chair's power, the weight of the title, and how far the role lets a director rely on others. The four that follow are the ones that come up most often:
- "The chair is the boss of the company": Wrong. The board decides collectively. The chair has one vote, plus a casting vote only if the rules allow one and only when the votes are tied. The chair has no power to direct the CEO or override the board, and no authority to make decisions the board has not made.
- "Calling someone the chairman makes them the chair": No. What matters is who the directors have elected to chair their meetings, and whether that person is a director. "Chairman", "chair" and "chairperson" are just words; the legal position comes from the election, the constitution and the replaceable rules. A title on a letterhead does not create the office, and an informal arrangement where one person just runs the meetings is exactly what the election requirement in s 248E is designed to replace.
- "A chair who is not a director has no obligations": Risky. If someone chairs an advisory board but acts in the position of a director, or the directors act on their instructions or wishes, they can be treated as a director under the definition in s 9AC of the Act, with the same duties and potential liability. An advisory chair who drifts from advice into governance can find themselves on the hook for decisions they thought they were only commenting on.
- "The chair can rely on management and the advisers": The Centro case shows otherwise. Directors, including non-executive directors and the chair, must understand what they approve. Delegation is not absolution, and "the auditors signed off" was not a defence the court accepted.
When to get professional help
The chair role usually needs a lawyer's input at three points. First, when the company is set up or raises capital: a lawyer can review whether the constitution deals with how the chair is elected, whether a casting vote exists, and how conflicts are handled, and can draft the board resolution and minutes that record the appointment. Second, when someone chairs without being a director: a lawyer can assess whether that person risks being treated as a de facto director, and can document the role so the line between advice and governance stays clear. Third, when investors want a say in who chairs: a shareholders agreement can set out who appoints the chair and on what terms, so the question does not become a fight at the first board meeting.
A practitioner's real job here is to make the role unambiguous. After a short review of the constitution and the meeting records, a lawyer can tell you who currently has the power to chair, what happens on a tied vote, whether conflicts are being managed properly, and what the minutes need to say to hold up in a dispute, an audit or a sale. That kind of review is inexpensive compared with the cost of discovering, mid-dispute, that the board never validly elected a chair or never recorded a critical decision.
The question to answer before your next board meeting
If you are a director of a company with more than one director, you should be able to answer two questions from your records: who have the directors actually elected to chair their meetings, and what do the company's rules say happens when the votes are tied or a director has a conflict? If the minutes do not show an election, the default rules in the Corporations Act fill the gap meeting by meeting, and nobody may have noticed. That is the gap to close before the next meeting, not after the first dispute over a decision that was never properly made.