Somewhere between seed and Series A, most Australian startups acquire a board chair. Sometimes it’s deliberate — an investor insists on an independent chair as a condition of the round. More often it just happens: the founder-CEO has been signing minutes as “Chairperson” since incorporation because the template said so. Either way, few founders could tell you what the role legally is, where its powers come from, or that a chair who takes on responsibilities beyond the other directors will be judged against those responsibilities under section 180 of the Corporations Act. All three are worth knowing before you take the title — or hand it to someone else.
There Is No Statutory Office of “Chair”
Start with what surprises most founders: the Corporations Act 2001 (Cth) doesn’t create the office of chairperson or hand it a defined set of duties. The chair is a creature of the company’s own documents — the constitution, the shareholders’ agreement — layered on top of a handful of replaceable rules:
- Section 248E (a replaceable rule) lets the directors elect one of their number to chair board meetings, and to decide how long they hold the role. If no chair has been elected, or the elected chair isn’t available, the directors present simply elect someone for that meeting.
- Section 249U (also replaceable) does the same for members’ meetings: the directors may elect the chair, and the members elect one if the directors haven’t. It also obliges the chair to adjourn if members present holding a majority of the votes at the meeting agree or direct it.
- Section 250J (also replaceable) lets a resolution be decided on a show of hands unless a poll is demanded, and makes the chair’s declaration of the result conclusive provided it reflects the show of hands and the proxies received. A genuinely contested vote, though, can always be forced to a poll — by the chair, or by five members or members with at least 5% of the votes (section 250L).
Because these are replaceable rules, your constitution can — and usually does — override them. Which means the first answer to “what can our chair actually do?” is always: read the constitution, not the Act.
One thing the title does not confer is executive authority. A chair has no general power to bind the company, hire or fire the CEO unilaterally, or act between meetings. The board acts collectively; the chair’s formal power is procedural — convening and running meetings, settling the agenda, signing the minutes.
The Casting Vote: Where the Real Power Hides
The procedural picture changes at the moment it matters most — a split board. Under section 248G (replaceable), board resolutions pass by majority, and the chair has a casting vote in addition to their ordinary vote as a director. Section 250E(3) — also a replaceable rule — gives the chair the same tiebreaker at members’ meetings.
On a four-director board split two-two, a casting vote is control. That’s why it is one of the most quietly negotiated points in startup governance documents:
- Venture investors routinely strip it. Most Australian VC-standard constitutions and shareholders’ agreements expressly remove the chair’s casting vote, precisely so a founder-chair can’t outvote an evenly split board. If your documents are silent, the replaceable rule may still apply — worth checking before your next contested resolution.
- Removing it creates deadlock risk. No casting vote plus an even board means a tied resolution simply fails. That’s tolerable if your shareholders’ agreement has a deadlock mechanism; it’s a governance trap if it doesn’t.
- Reserved matters sit above all of it. A casting vote can’t carry anything your shareholders’ agreement reserves for investor consent.
The Legal Standard: Same Duties, Higher Bar
A chair who is a director owes exactly the same statutory duties as every other director — care and diligence (section 180), good faith (section 181), no improper use of position or information (sections 182–183). There’s no separate “chairperson’s duty” in the Act.
But section 180(1) has a sting in its tail: the standard is that of a reasonable person in the company’s circumstances who occupied the same office and had the same responsibilities. The duty calibrates to the role — and courts have used that language to hold chairs to more than their fellow non-executives.
In ASIC v Rich (2003) 44 ACSR 341 — the One.Tel litigation — the chairman applied to strike out the “special responsibilities” ASIC pleaded against him as unknown to law. Austin J refused: responsibilities a chair has in practice assumed — oversight of the company’s financial position, communication between board and management, ensuring the board gets the information it needs — can inform the standard section 180 demands of them. The chairman later settled by consent, so the point was never tested at a full trial, but the reasoning has shaped how chair liability is analysed ever since. Eleven years earlier, in AWA Ltd v Daniels (1992) 7 ACSR 759, Rogers CJ had already observed that the chairman bears more responsibility than any other director for the performance of the board as a whole. The through-line for founders: the chair’s exposure tracks what the chair actually does, not the title. A hands-on executive chair who runs fundraising and signs off the model carries materially more section 180 risk than a figurehead — and “I was only chairing the meetings” won’t rewind responsibilities you’d assumed in practice.
For listed companies, the ASX Corporate Governance Principles add soft-law expectations — an independent chair who isn’t the CEO. They don’t bind proprietary companies, but sophisticated investors import the same instincts into private deals, which is why “independent chair” appears in term sheets from Series A onwards.
Who Should Chair Your Startup Board?
Pre-seed, the founder-CEO chairing a board of one or two is unremarkable. The question gets real once the board grows past the founders — typically after your first priced round reshapes the boardroom. A few practical rules:
Think hard before combining CEO and chair post-Series A. The chair’s core job — making sure the board properly supervises management — is awkward when the chair is management. An investor-director chair is common but concentrates power in one shareholder; a genuinely independent chair is often the cleanest answer, documented properly through a non-executive director appointment that spells out the chair role, time commitment and fees.
Document the role, not just the person. Your constitution and shareholders’ agreement should answer: who appoints and removes the chair, is there a casting vote at board and member level, and what happens to the role on a deadlock or the chair’s departure. Startups inherit template answers to all of these without reading them — usually discovered mid-dispute, which is the most expensive possible moment.
Don’t use the title as a consolation prize. Moving a stepped-back co-founder to “chair” without thinking through the casting vote, information rights and section 180 exposure creates a director with heightened duties and residual power in exactly the seat you were trying to defuse.
Getting the chair arrangements right is standard work in any properly run financing — it’s part of what our venture capital practice covers when settling constitutions and shareholders’ agreements, and as startup lawyers in Sydney we’ve seen more than one funding round held up by a casting vote nobody remembered granting.
This article is general information only, not legal advice — the chair’s powers and exposure depend on your constitution, shareholders’ agreement and what the chair actually does in practice. Viridian Lawyers advises Australian startups, founders and investors on board structure and governance documents. If you’re about to appoint a chair — or become one — get in touch.
