"payment" means a payment by way of pension or lump sum and includes a superannuation, retiring allowance, superannuation gratuity or similar payment.

200H Benefits required by law

Subsection 200B(1) does not apply to a benefit given by a person if failure to give the benefit would constitute a contravention of a law in force in Australia or elsewhere (otherwise than because of breach of contract or breach of trust).

200J Benefits to be held in trust for company

(1)

If giving a benefit to a person contravenes section 200B, then:

(a)

if the benefit is a payment—the amount of the payment; or

(b)

otherwise—the money value of the prescribed benefit;

is taken to be received by the person in trust for the company concerned.

(2)

Subsection (1) applies to the whole of the amount of a payment or of the money value of the benefit even though giving the benefit would not have contravened section 200B if that amount or value of the benefit had been less.

Part 2D.3—Appointment, remuneration and cessation of appointment of directors
Division 1—Appointment of directors
201A Minimum number of directors

Proprietary companies

(1)

A proprietary company must have at least 1 director. That director must ordinarily reside in Australia.

Public companies

(2)

A public company must have at least 3 directors (not counting alternate directors). At least 2 directors must ordinarily reside in Australia.

201B Who can be a director

(1)

Only an individual who is at least 18 may be appointed as a director of a company.

(2)

A person who is disqualified from managing corporations under Part 2D.6 may only be appointed as director of a company if the appointment is made with permission granted by ASIC under section 206F or leave granted by the Court under section 206G.

201C Directors of public companies, or subsidiaries, over 72

(1)

A person who has turned 72 may only be appointed or act as a director of:

(a)

a public company; or

(b)

a company that is a subsidiary of a public company;

if authorised to do so under this section.

(2)

A person may act as a director of a company during the period that:

(a)

starts on the day on which they turn 72; and

(b)

ends at the conclusion of the AGM beginning next after that day.

(3)

The office of a director of a public company, or of a subsidiary of a public company, becomes vacant at the conclusion of the AGM of the public company, or the subsidiary, beginning next after the director turns 72.

(4)

If a proprietary company is a subsidiary of a public company:

(a)

subsection (3) does not apply to it; and

(b)

a person may continue to act as a director of the proprietary company until the next AGM of the public company after the person turns 72; and

(c)

the person's office of director becomes vacant at the end of that meeting.

Note: Proprietary companies do not need to hold annual general meetings (see section 250N).

(5)

An act done by a person as a director is valid even if it is afterwards discovered that they had turned 72 at the time when they were appointed or that their appointment had terminated under subsection (3) or (4).

(6)

If the office of a director has become vacant under subsection (3) or (4), no provision for the automatic re-appointment of retiring directors in default of another appointment applies in relation to that director.

(7)

If a vacancy created under subsection (3) or (4) is not filled at the meeting at which the office became vacant, the office may be filled as a casual vacancy.

(8)

Subject to subsections (9) and (10), a person who has turned 72 may by special resolution be appointed or re-appointed as a director of that company to hold office until the conclusion of the company's next AGM company if:

(a)

the resolution states the person's age; and

(b)

the notice of meeting states that the person is a candidate for election who has turned 72 and states the person's age.

(9)

If the company is a subsidiary of a public company, the appointment or re-appointment referred to in subsection (8) does not have effect unless:

(a)

the person appointed or re-appointed is a director of the public company; or

(b)

the appointment or re-appointment of the person as a director of the company has been approved by a special resolution of the public company and the notice of meeting states that the person is a candidate for election as a director of the company who has turned 72 and states the person's age.

(10)

If the subsidiary is a proprietary company:

(a)

the person may be appointed or re-appointed as a director of the subsidiary until the end of the next AGM of the holding company; and

(b)

the appointment does not need a resolution under subsection (8); and

(c)

the appointment must satisfy either paragraph (9)(a) or (b).

(11)

If:

(a)

the constitution of a company limited by guarantee provides for the holding of postal ballots for the election of a director or directors; and

(b)

a postal ballot for the election of a director or directors is held and in the ballot:

(i)

the members entitled to vote have been given notice in writing by the company stating that a candidate for election has turned 72 and stating the age of the candidate; and

(ii)

that candidate is elected by a majority of not less than 75% of the members who, being entitled to vote, vote in the ballot;

that candidate may be appointed or re-appointed as a director to hold office until the conclusion of the next AGM of the company.

(12)

If:

(a)

the constitution of a company limited by guarantee provides for the election or appointment of a director or directors otherwise than by members at a general meeting or by postal ballot of members; and

(b)

ASIC declares in writing that this section does not apply to the company or its directors;

then, subject to the conditions (if any) that ASIC specifies in the declaration, this section does not so apply.

(13)

A vacancy in the office of a director occurring under subsection (3) or

(4)

is not to be taken into account in determining when other directors are to retire.

(14)

Nothing in this section limits, or affects the operation of, any provision of a company's constitution that prevents any person from being appointed as a director or requiring any director to vacate their office at any age less than 72 years.

201D Consent to act as director

(1)

A company contravenes this subsection if a person does not give the company a signed consent to act as a director of the company before being appointed.

(2)

The company must keep the consent.

201E Special rules for the appointment of public company directors

(1)

A resolution passed at a general meeting of a public company appointing or confirming the appointment of 2 or more directors is void unless:

(a)

the meeting has resolved that the appointments or confirmations may be voted on together; and

(b)

no votes were cast against the resolution.

(2)

This section does not affect:

(a)

a resolution to appoint directors by an amendment to the company's constitution (if any); or

(b)

a ballot or poll to elect 2 or more directors if the ballot or poll does not require members voting for 1 candidate to vote for another candidate.

(3)

For the purposes of paragraph (2)(b), a ballot or poll does not require a member to vote for a candidate merely because the member is required to express a preference among individual candidates in order to cast a valid vote.

201F Special rules for the appointment of directors for single director/single shareholder proprietary companies

(1)

The director of a proprietary company who is its only director and only shareholder may appoint another director by recording the appointment and signing the record.

Appointment of new director on death, mental incapacity or bankruptcy

(2)

If a person who is the only director and the only shareholder of a proprietary company:

(a)

dies; or

(b)

cannot manage the company because of the person's mental incapacity;

and a personal representative or trustee is appointed to administer the person's estate or property, the personal representative or trustee may appoint a person as the director of the company.

(3)

If:

(a)

the office of the director of a proprietary company is vacated under subsection 206B(3) or (4) because of the bankruptcy of the director; and

(b)

the person is the only director and the only shareholder of the company; and

(c)

a trustee in bankruptcy is appointed to the person's property;

the trustee may appoint a person as the director of the company.

(4)

A person who has a power of appointment under subsection (2) or (3) may appoint themselves as director.

(5)

A person appointed as a director of a company under subsection (2), (3) or

(4)

holds office as if they had been appointed in the usual way.

201G Company may appoint a director (replaceable rule—see section 135)

A company may appoint a person as a director by resolution passed in general meeting.

201H Directors may appoint other directors (replaceable rule—see section 135)

Appointment by other directors

(1)

The directors of a company may appoint a person as a director. A person can be appointed as a director in order to make up a quorum for a directors' meeting even if the total number of directors of the company is not enough to make up that quorum.

Proprietary company—confirmation by meeting within 2 months

(2)

If a person is appointed under this section as a director of a proprietary company, the company must confirm the appointment by resolution within 2 months after the appointment is made. If the appointment is not confirmed, the person ceases to be a director of the company at the end of those 2 months.

Public company—confirmation by next AGM

(3)

If a person is appointed by the other directors as a director of a public company, the company must confirm the appointment by resolution at the company's next AGM. If the appointment is not confirmed, the person ceases to be a director of the company at the end of the AGM.

201J Appointment of managing directors (replaceable rule—see section 135)

The directors of a company may appoint 1 or more of themselves to the office of managing director of the company for the period, and on the terms (including as to remuneration), as the directors see fit.

201K Alternate directors (replaceable rule—see section 135)

(1)

With the other directors' approval, a director may appoint an alternate to exercise some or all of the director's powers for a specified period.

(2)

If the appointing director requests the company to give the alternate notice of directors' meetings, the company must do so.

(3)

When an alternate exercises the director's powers, the exercise of the powers is just as effective as if the powers were exercised by the director.

(4)

The appointing director may terminate the alternate's appointment at any time.

(5)

An appointment or its termination must be in writing. A copy must be given to the company.

Note: ASIC must be given notice of the appointment and termination of appointment of an alternate (see subsections 205B(2) and (5)).

201L Signpost—ASIC to be notified of appointment

Under section 205B, a company must notify ASIC within 14 days if a person is appointed as a director or as an alternate director.

201M Effectiveness of acts by directors

(1)

An act done by a director is effective even if their appointment, or the continuance of their appointment, is invalid because the company or director did not comply with the company's constitution (if any) or any provision of this Law.

(2)

Subsection (1) does not deal with the question whether an effective act by a director:

(a)

binds the company in its dealings with other people; or

(b)

makes the company liable to another person.

Note: The kinds of acts that this section validates are those that are only legally effective if the person doing them is a director (for example, calling a meeting of the company's members or signing a document to be lodged with ASIC or minutes of a meeting). Sections 128-130 contain rules about the assumptions people are entitled to make when dealing with a company and its officers.

Division 2—Remuneration of directors
202A Remuneration of directors (replaceable rule—see section 135)

(1)

The directors of a company are to be paid the remuneration that the company determines by resolution.

Note: Chapter 2E makes special provision for the payment of remuneration to the directors of public companies.

(2)

The company may also pay the directors' travelling and other expenses that they properly incur:

(a)

in attending directors' meetings or any meetings of committees of directors; and

(b)

in attending any general meetings of the company; and

(c)

in connection with the company's business.

202B Members may obtain information about directors' remuneration

(1)

A company must disclose the remuneration paid to each director of the company or a subsidiary (if any) by the company or by an entity controlled by the company if the company is directed to disclose the information by:

(a)

members with at least 5% of the votes that may be cast at a general meeting of the company; or

(b)

at least 100 members who are entitled to vote at a general meeting of the company.

The company must disclose all remuneration paid to the director, regardless of whether it is paid to the director in relation to their capacity as director or another capacity.

(2)

The company must comply with the direction as soon as practicable by:

(a)

preparing a statement of the remuneration of each director of the company or subsidiary for the last financial year before the direction was given; and

(b)

having the statement audited; and

(c)

sending a copy of the audited statement to each person entitled to receive notice of general meetings of the company.

202C Special rule for single director/single shareholder proprietary companies

A person who is the only director and the only shareholder of a proprietary company is to be paid any remuneration for being a director that the company determines by resolution. The company may also pay the director's travelling and other expenses properly incurred by the director in connection with the company's business.

Division 3—Resignation, retirement or removal of directors
203A Director may resign by giving written notice to company (replaceable rule—see section 135)

A director of a company may resign as a director of the company by giving a written notice of resignation to the company at its registered office.

203B Signpost to consequences of disqualification from managing corporations

A person ceases to be a director of a company if the person becomes disqualified from managing corporations under Part 2D.6 (see subsection 206A(2)) unless ASIC or the Court allows them to manage the company (see sections 206F and 206G).

203C Removal by members—proprietary companies (replaceable rule—see section 135)

A proprietary company:

(a)

may by resolution remove a director from office; and

(b)

may by resolution appoint another person as a director instead.

203D Removal by members—public companies

Resolution for removal of director

(1)

A public company may by resolution remove a director from office despite anything in:

(a)

the company's constitution (if any); or

(b)

an agreement between the company and the director; or

(c)

an agreement between any or all members of the company and the director.

If the director was appointed to represent the interests of particular shareholders or debenture holders, the resolution to remove the director does not take effect until a replacement to represent their interests has been appointed.

Note: See sections 249C to 249G for the rules on who may call meetings, sections 249H to 249M on how to call meetings and sections 249N to 249Q for rules on members' resolutions.

Notice of intention to move resolution for removal of director

(2)

Notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held. However, if the company calls a meeting after the notice of intention is given under this subsection, the meeting may pass the resolution even though the meeting is held less than 2 months after the notice of intention is given.

Note: Short notice of the meeting cannot be given for this resolution (see subsection 249H(3)).

Director to be informed

(3)

The company must give the director a copy of the notice as soon as practicable after it is received.

Director's right to put case to members

(4)

The director is entitled to put their case to members by:

(a)

giving the company a written statement for circulation to members (see subsections (5) and (6)); and

(b)

speaking to the motion at the meeting (whether or not the director is a member of the company).

(5)

The written statement is to be circulated by the company to members by:

(a)

sending a copy to everyone to whom notice of the meeting is sent if there is time to do so; or

(b)

if there is not time to comply with paragraph (a)—having the statement distributed to members attending the meeting and read out at the meeting before the resolution is voted on.

(6)

The director's statement does not have to be circulated to members if it is more than 1,000 words long or defamatory.

Time of retirement

(7)

If a person is appointed to replace a director removed under this section, the time at which:

(a)

the replacement director; or

(b)

any other director;

is to retire is to be worked out as if the replacement director had become director on the day on which the replaced director was last appointed a director.

203E Director cannot be removed by other directors—public companies

A resolution, request or notice of any or all of the directors of a public company is void to the extent that it purports to:

(a)

remove a director from their office; or

(b)

require a director to vacate their office.

203F Termination of appointment of managing director (replaceable rule—see section 135)

(1)

A person ceases to be managing director if they cease to be a director.

(2)

The directors may revoke or vary an appointment of a managing director.

Part 2D.4—Appointment of secretaries

204A Minimum number of secretaries

Proprietary companies

(1)

A proprietary company is not required to have a secretary but, if it does have 1 or more secretaries, at least 1 of them must ordinarily reside in Australia.

Public companies

(2)

A public company must have at least 1 secretary. At least 1 of them must ordinarily reside in Australia.

204B Who can be a secretary

(1)

Only an individual who is at least 18 may be appointed as a secretary of a company.

(2)

A person who is disqualified from managing corporations under Part 2D.6 may only be appointed as a secretary of a company if the appointment is made with permission granted by ASIC under section 206F or leave granted by the Court under section 206G.

204C Consent to act as secretary

(1)

A company contravenes this subsection if a person does not give the company a signed consent to act as secretary of the company before being appointed.

(2)

The company must keep the consent.

204D How a secretary is appointed

A secretary is to be appointed by the directors.

Note 1: The company must notify ASIC of the appointment within 14 days (see subsection 205B(1)).

Note 2: Section 188 deals with the responsibilities of secretaries for contraventions by the company.

204E Effectiveness of acts by secretaries

(1)

An act done by a secretary is effective even if their appointment, or the continuance of their appointment, is invalid because the company or secretary did not comply with the company's constitution (if any) or any provision of this Law.

(2)

Subsection (1) does not deal with the question whether an effective act by a secretary:

(a)

binds the company in its dealings with other people; or

(b)

makes the company liable to another person.

Note: The kinds of acts that this section validates are those that are only legally effective if the person doing them is a secretary (for example, signing and sending out a notice of a meeting of directors if the company's constitution authorises the secretary to do so or signing a document to be lodged with ASIC). Sections 128-130 contain rules about the assumptions people are entitled to make when dealing with a company and its officers.

204F Terms and conditions of office for secretaries (replaceable rule—see section 135)

A secretary holds office on the terms and conditions (including as to remuneration) that the directors determine.

204G Signpost to consequences of disqualification from managing corporations

A person ceases to be a secretary of a company if the person becomes disqualified from managing corporations under Part 2D.6 (see subsection 206A(2)) unless ASIC or the Court allows them to manage the company (see sections 206F and 206G).

Part 2D.5—Public information about directors and secretaries

205A Director, secretary or alternate director may notify ASIC of resignation or retirement

(1)

If a director, secretary or alternate director retires or resigns, they may give ASIC written notice of the retirement or resignation. The notice must be in the prescribed form.

(2)

To be effective, a notice of resignation must be accompanied by a copy of the letter of resignation given to the company.

(3)

Nothing in this section affects the company's obligations to notify ASIC of the resignation or retirement.

205B Notice of name and address of directors and secretaries to ASIC

New directors or secretaries

(1)

A company must lodge with ASIC a notice of the personal details of a director or secretary within 14 days after they are appointed. The notice must be in the prescribed form.

Note 1: If a person becomes a director under subsection 120(1) there is no appointment and no notice is required under this subsection.

Note 2: If a person who was appointed as an alternate director becomes a director under the terms of their appointment as an alternate director, there is no appointment as a director and no notice is required under this subsection.

New alternate directors

(2)

A company must lodge with ASIC a notice of:

(a)

the personal details of a person who is appointed as an alternate director; and

(b)

the terms of their appointment (including terms about when the alternate director is to act as a director);

within 14 days after their appointment as an alternate director. The notice must be in the prescribed form.

Personal details

(3)

The personal details of a director, alternate director, or secretary are:

(a)

their given and family names; and

(b)

all of their former given and family names; and

(c)

their date and place of birth; and

(d)

their address.

Note: For address see section 205D.

Changes in details

(4)

The company must lodge with ASIC notice of any change in the personal details of a director, alternate director or secretary within 14 days after the change. The notice must be in the prescribed form.

Notice required if person stops being a director or secretary

(5)

If a person stops being a director, alternate director or secretary of the company, the company must lodge with ASIC notice of the fact within 14 days. The notice must be in the prescribed form. However, the company does not need to lodge a notice if the person was an alternate director who stopped being a director in accordance with the terms of their appointment as an alternate director.

205C Director and secretary must give information to company

(1)

A director, alternate director or secretary must give the company any information the company needs to comply with subsection 205B(1) or (2) within 7 days after their initial appointment unless they have previously given the information to the company.

(2)

A director, alternate director or secretary must give the company any information the company needs to comply with subsection 205B(4) within 7 days after any change in their personal details.

205D Address for officers

Address is normally residential address

(1)

A person's address for the purposes of a notice or application under subsection 205B(1), (2), (3) or (5) or 117(2) or 601BC(2) must be their usual residential address unless they are entitled to have an alternative address substituted for their usual residential address under subsection (2).

Entitlement to have alternative address

(2)

The person is entitled to have an alternative address substituted for their usual residential address if:

(a)

their name, but not their residential address, is on an electoral roll under the Commonwealth Electoral Act 1918 because of section 104 of that Act; or

(b)

their name is not on an electoral roll under that Act and ASIC determines, in writing, that including their residential address in the notice or application would put at risk their personal safety or the personal safety of members of their family.

This alternative address must be in Australia and be one at which documents can be served on the person. At any particular time, a person is entitled to have only 1 alternative address under this section.

Note: See subsection 109X(2) on the status of the alternative address as an address for service.

(3)

A person who takes advantage of subsection (2) must:

(a)

before or at the same time as the alternative address is first included in a notice or application, lodge with ASIC notice of the person's usual residential address; and

(b)

lodge with ASIC notice of any change in the person's usual residential address within 14 days after the change.

A notice under this subsection must be in the prescribed form.

(4)

If a court gives a judgment for payment of a sum of money against a person who is taking advantage of subsection (2), ASIC may give details of the person's usual residential address to an officer of the court for the purposes of enforcing the judgment debt.

205E ASIC's power to ask for information about person's position as director or secretary

(1)

ASIC may ask a person, in writing, to inform ASIC:

(a)

whether the person is a director or secretary of a particular company; and

(b)

if the person is no longer a director or secretary of the company—the date on which the person stopped being a director or secretary.

(2)

The person must give the information to ASIC in writing by the date specified in the request.

205F Director must give information to company

A director must give the company any information affecting or relating to the director that the company needs, or will need, to comply with Chapter 6. The director must give the information to the company as soon as practicable after becoming aware that the company needs, or will need, the information. The company must give the information to each of the other directors of the company within 7 days of receiving it.

205G Listed company—director to notify securities exchange of shareholdings etc.

Notifiable interests

(1)

A director of a listed public company must notify the relevant securities exchange under subsections (3) and (4) of the following interests of the director:

(a)

relevant interests in securities of the company or a related body corporate

(b)

contracts:

(i)

to which the director is a party or under which the director is entitled to a benefit; and

(ii)

that confer a right to call for or deliver shares in, debentures of, or interests in a collective investment scheme made available by, the company or a related body corporate.

(2)

A notice of a relevant interest in securities under paragraph (1)(a) must give details of:

(a)

the number of securities; and

(b)

the circumstances giving rise to the relevant interest.

Occasions for initial notification

(3)

The director must notify the exchange within 14 days after each of the following occasions:

(a)

appointment as a director of the company

(b)

the listing of the company.

Paragraph (a) does not apply to a director who retires and is then reappointed at the same meeting.

Updating notices

(4)

The director must notify the exchange within 14 days after any change in the director's interests.

(5)

The director need not give the information to the exchange under this section if the director has already given the information to the exchange.

ASIC's power to make class orders

(6)

ASIC may make an order in writing relieving a director of the obligation to notify the relevant securities exchange of an interest in a security or contract. The order may be made in respect of a specified class of companies, directors, securities or contracts.

(7)

The order may be expressed to be subject to conditions.

(8)

Notice of the making, revocation or suspension of the order must be published in the Gazette .

Part 2D.6—Disqualification from managing corporations

206A Disqualified person not to manage corporations

(1)

A person who is disqualified from managing corporations under this Part commits an offence if:

(a)

they make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(b)

they exercise the capacity to affect significantly the corporation's financial standing; or

(c)

they communicate instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation) to the directors of the corporation:

(i)

knowing that the directors are accustomed to act in accordance with the person's instructions or wishes; or

(ii)

intending that the directors will act in accordance with those instructions or wishes.

It is a defence to the contravention if the person had permission to manage the corporation under either section 206F or 206G and their conduct was within the terms of that permission.

Note: Under section 1274AA, ASIC is required to keep a record of persons disqualified from managing corporations.

(2)

A person ceases to be a director, alternate director or a secretary of a company if:

(a)

the person becomes disqualified from managing corporations under this Part; and

(b)

they are not given permission to manage the corporation under section 206F or 206G.

Note: If a person ceases to be a director, alternate director or a secretary under subsection (2) the company must notify ASIC (see subsection 205B(1)).

206B Automatic disqualification

Convictions

(1)

A person becomes disqualified from managing corporations if the person:

(a)

is convicted on indictment of an offence that:

(i)

concerns the making, or participation in making, of decisions that affect the whole or a substantial part of the business of the corporation; or

(ii)

concerns an act that has the capacity to affect significantly the corporation's financial standing; or

(b)

is convicted of an offence that:

(i)

is a contravention of the Corporations Law and is punishable by imprisonment for a period greater than 12 months; or

(ii)

involves dishonesty and is punishable by imprisonment for at least 3 months; or

(c)

is convicted of an offence against the law of a foreign country that is punishable by imprisonment for a period greater than 12 months.

The offences covered by paragraph (a) and subparagraph (b)(ii) include offences against the law of a foreign country.

(2)

The period of disqualification under subsection (1) starts on the day the person is convicted and lasts for:

(a)

if the person does not serve a term of imprisonment—5 years after the day on which they are convicted; or

(b)

if the person serves a term of imprisonment—5 years after the day on which they are released from prison.

Bankruptcy, deed of arrangement or composition with creditors

(3)

A person is disqualified from managing corporations if the person is an undischarged bankrupt under the law of Australia, its external territories or another country.

(4)

A person is disqualified from managing corporations if:

(a)

the person has executed a deed of arrangement under Part X of the Bankruptcy Act 1966 (or a similar law of an external territory or another country) and the terms of the deed have not been fully complied with; or

(b)

the person's creditors have accepted a composition under Part X of the Bankruptcy Act 1966 (or a similar law of an external territory or another country) and final payment has not been made under the composition.

206C Court power of disqualification—contravention of civil penalty provision

(1)

On application by ASIC, the Court may disqualify a person from managing corporations for a period that the Court considers appropriate if:

(a)

a declaration is made under section 1317E (civil penalty provision) that the person has contravened a civil penalty provision; and

(b)

the Court is satisfied that the disqualification is justified.

Note: The civil penalty provisions are subsection 180(1) and (2), 181(1) and (2), 182(1) and (2), 183(1) and (2), 209(2), 254L(2), 256D(3), 259F(2), 260D(2) or 344(1) or section 588G.

(2)

In determining whether the disqualification is justified, the Court may have regard to:

(a)

the person's conduct in relation to the management, business or property of any corporation; and

(b)

any other matters that the Court considers appropriate.

206D Court power of disqualification—insolvency and non-payment of debts

(1)

On application by ASIC, the Court may disqualify a person from managing corporations for up to 10 years if:

(a)

within the last 7 years, the person has been an officer of 2 or more corporations when they have failed; and

(b)

the Court is satisfied that:

(i)

the manner in which the corporation was managed was wholly or partly responsible for the corporation failing; and

(ii)

the disqualification is justified.

(2)

For the purposes of subsection (1), a corporation fails if:

(a)

a Court orders the corporation to be wound up under section 459B because the Court is satisfied that the corporation is insolvent; or

(b)

the corporation enters into voluntary liquidation and creditors are not fully paid or are unlikely to be fully paid; or

(c)

the corporation executes a deed of company arrangement and creditors are not fully paid or are unlikely to be fully paid; or

(d)

the corporation ceases to carry on business and creditors are not fully paid or are unlikely to be fully paid; or

(e)

a levy of execution against the corporation is not satisfied; or

(f)

a receiver, receiver and manager, or provisional liquidator is appointed in relation to the corporation; or

(g)

the corporation enters into a compromise or arrangement with its creditors under Part 5.1; or

(h)

the corporation is wound up and a liquidator lodges a report under subsection 533(1) about the corporation's inability to pay its debts.

Note: To satisfy paragraph (h), a corporation must begin to be wound up while the person is an officer or within 12 months after the person ceases to be an officer. However, the report under subsection 533(1) may be lodged by the liquidator at a time that is more than 12 months after the person ceases to be an officer. Sections 513A to 513D contain rules about when a company begins to be wound up.

(3)

In determining whether the disqualification is justified, the Court may have regard to:

(a)

the person's conduct in relation to the management, business or property of any corporation; and

(b)

any other matters that the Court considers appropriate.

206E Court power of disqualification—repeated contraventions of Law

(1)

On application by ASIC, the Court may disqualify a person from managing corporations for the period that the Court considers appropriate if:

(a)

the person:

(i)

has at least twice been an officer of a body corporate that has contravened this Law while they were an officer of the body corporate and each time the person has failed to take reasonable steps to prevent the contravention; or

(ii)

has at least twice contravened this Law while they were an officer of a body corporate; or

(iii)

has been an officer of a body corporate and has done something that would have contravened subsection 180(1) or section 181 if the body corporate had been a corporation; and

(b)

the Court is satisfied that the disqualification is justified.

(2)

In determining whether the disqualification is justified, the Court may have regard to:

(a)

the person's conduct in relation to the management, business or property of any corporation; and

(b)

any other matters that the Court considers appropriate.

206F ASIC's power of disqualification

Power to disqualify

(1)

ASIC may disqualify a person from managing corporations for up to 5 years if:

(a)

within 7 years immediately before ASIC gives a notice under paragraph (b)(i):

(i)

the person has been an officer of 2 or more corporations; and

(ii)

while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) about the corporation's inability to pay its debts; and

(b)

ASIC has given the person:

(i)

a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and

(ii)

an opportunity to be heard on the question; and

(c)

ASIC is satisfied that the disqualification is justified.

Grounds for disqualification

(2)

In determining whether disqualification is justified, ASIC:

(a)

must have regard to whether any of the corporations mentioned in subsection (1) were related to one another; and

(b)

may have regard to:

(i)

the person's conduct in relation to the management, business or property of any corporation; and

(ii)

any other matters that ASIC considers appropriate.

Notice of disqualification

(3)

If ASIC disqualifies a person from managing corporations under this section, ASIC must serve a notice on the person advising them of the disqualification. The notice must be in the prescribed form.

Start of disqualification

(4)

The disqualification takes effect from the time when a notice referred to in subsection (3) is served on the person.

ASIC power to grant leave

(5)

ASIC may give a person who it has disqualified from managing corporations under this Part written permission to manage a particular corporation or corporations. The permission may be expressed to be subject to conditions and exceptions determined by ASIC.

206G Court power to grant leave

(1)

A person who is disqualified from managing corporations may apply to the Court for leave to manage:

(a)

corporations; or

(b)

a particular class of corporations; or

(c)

a particular corporation;

if the person was not disqualified by ASIC.

(2)

The person must lodge a notice with ASIC at least 21 days before commencing the proceedings. The notice must be in the prescribed form.

(3)

The order granting leave may be expressed to be subject to exceptions and conditions determined by the Court.

Note: If the Court grants the person leave to manage the corporation, the person may be appointed as a director (see section 201B) or secretary (see section 204B) of a company.

(4)

The person must lodge with ASIC a copy of any order granting leave within 14 days after the order is made.

(5)

On application by ASIC, the Court may revoke the leave. The order revoking leave does not take effect until it is served on the person.

206H Territorial application of this Part

Part 2D.6 does not apply in respect of an act or omission by a person while they are managing a corporation that is a foreign company unless the act or omission occurred in connection with:

(a)

the foreign company carrying on business in Australia; or

(b)

an act that the foreign company does, or proposes to do, in Australia; or

(c)

a decision by the foreign company whether or not to do, or refrain from doing, an act in Australia.

Chapter 2E—Related party transactions

207 Purpose

The rules in this Chapter are designed to protect the interests of a public company's members as a whole, by requiring member approval for giving financial benefits to related parties that could endanger those interests.

Part 2E.1—Member approval needed for related party benefit
Division 1—Need for member approval
208 Need for member approval for financial benefit

(1)

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company:

(a)

the public company or entity must:

(i)

obtain the approval of the public company's members in the way set out in sections 217 to 227; and

(ii)

give the benefit within 15 months after the approval; or

(b)

the giving of the benefit must fall within an exception set out in sections 210 to 216.

Note: Section 228 defines related party , section 9 defines entity , section 55AA defines control and section 229 affects the meaning of giving a financial benefit .

(2)

If:

(a)

the giving of the benefit is required by a contract; and

(b)

the making of the contract was approved in accordance with subparagraph (1)(a)(i) as a financial benefit given to the related party; and

(c)

the contract was made:

(i)

within 15 months after that approval; or

(ii)

before that approval, if the contract was conditional on the approval being obtained;

member approval for the giving of the benefit is taken to have been given and the benefit need not be given within the 15 months.

209 Consequences of breach

(1)

If the public company or entity contravenes section 208:

(a)

the contravention does not affect the validity of any contract or transaction connected with the giving of the benefit; and

(b)

the public company or entity is not guilty of an offence.

Note: A Court may order an injunction to stop the company or entity giving the benefit to the related party (see section 1324).

(2)

A person contravenes this subsection if they are involved in a contravention of section 208 by a public company or entity.

Note 1: This subsection is a civil penalty provision.

Note 2: Section 79 defines involved .

(3)

A person commits an offence if they are involved in a contravention of section 208 by a public company or entity and the involvement is dishonest.

Division 2—Exceptions to the requirement for member approval
210 Arm's length terms

Member approval is not needed to give a financial benefit on terms that:

(a)

would be reasonable in the circumstances if the public company or entity and the related party were dealing at arm's length; or

(b)

are less favourable to the related party than the terms referred to in paragraph (a).

211 Remuneration and reimbursement for officer or employee

Benefits that are reasonable remuneration

(1)

Member approval is not needed to give a financial benefit if:

(a)

the benefit is remuneration to a related party as an officer or employee of the following:

(i)

the public company

(ii)

an entity that the public company controls

(iii)

an entity that controls the public company

(iv) an entity that is controlled by an entity that controls the public company; and

(b)

to give the remuneration would be reasonable given:

(i)

the circumstances of the public company or entity giving the remuneration; and

(ii)

the related party's circumstances (including the responsibilities involved in the office or employment).

Benefits that are payments of expenses incurred

(2)

Member approval is not needed to give a financial benefit if:

(a)

the benefit is payment of expenses incurred or to be incurred, or reimbursement for expenses incurred, by a related party in performing duties as an officer or employee of the following:

(i)

the public company

(ii)

an entity that the public company controls

(iii)

an entity that controls the public company

(iv) an entity that is controlled by an entity that controls the public company; and

(b)

to give the benefit would be reasonable in the circumstances of the public company or entity giving the remuneration.

(3)

For the purposes of this section:

(a)

a contribution made by a body corporate to a fund for the purpose of making provision for, or obtaining, superannuation benefits for an officer of the body, or for dependants of an officer of the body, is remuneration provided by the body to the officer of the body; and

(b)

a financial benefit given to a person because of the person ceasing to hold an office or employment as an officer or employee of a body corporate is remuneration paid or provided to the person in a capacity as an officer of the body.

212 Indemnities, exemptions, insurance premiums and payment for legal costs for officers

Indemnities, exemptions and insurance premiums

(1)

Member approval is not needed to give a financial benefit if:

(a)

the benefit is for a related party who is an officer of the public company or entity; and

(b)

the benefit is:

(i)

an indemnity, exemption or insurance premium in respect of a liability incurred as an officer of the public company or entity; or

(ii)

an agreement to give an indemnity or exemption, or to pay an insurance premium, of that kind; and

(c)

to give the benefit would be reasonable in the circumstances of the public company or entity giving the benefit.

Note: Sections 199A to 199C may prohibit giving an indemnity or exemption or paying an insurance premium for an officer.

Payments in respect of legal costs

(2)

Member approval is not needed to give a financial benefit if:

(a)

the benefit is for a related party who is an officer of the public company or entity; and

(b)

the benefit is the making of, or an agreement to make, a payment (whether by way of advance, loan or otherwise) in respect of legal costs incurred by the officer in defending an action for a liability incurred as an officer of the public company or entity; and

(c)

either:

(i)

section 199A does not apply to the costs; or

(ii)

if section 199A applies to the costs—the officer must repay the amount paid if the costs become costs for which the company must not give the officer an indemnity under that section; and

(d)

to give the benefit would be reasonable in the circumstances of the public company or entity giving the benefit.

(3)

In working out for the purposes of subsection (1) or (2) whether giving the benefit is reasonable in the circumstances:

(a)

assess whether it would be reasonable on the basis of the circumstances existing:

(i)

if the benefit is given under an agreement—at the time when the agreement is or was made; or

(ii)

if the benefit is not given under an agreement—at the time when the benefit is or was given; and

(b)

disregard any other financial benefit given or payable to the officer by the public company or entity.

213 Small amounts given to director or spouse

(1)

Member approval is not needed to give a financial benefit that is an amount of money for a director of the public company or their spouse or de facto spouse if the amount does not exceed $2,000 or a greater amount as prescribed by the regulations.

(2)

In working out the amount given:

(a)

add in all amounts previously given by the public company and any entities controlled by the public company to:

(i)

the director; or

(ii)

their spouse; or

(iii)

their de facto spouse; and

(b)

disregard:

(i)

amounts that have been repaid; and

(ii)

amounts that fall under any other exception in this Part or a corresponding previous law.

For the purposes of this subsection, the time at which the entity must be controlled by the public company is the time at which the amount is given.

214 Benefit to or by closely-held subsidiary

(1)

Member approval is not needed to give a financial benefit if the benefit is given:

(a)

by a body corporate to a closely-held subsidiary of the body; or

(b)

by a closely-held subsidiary of a body corporate to the body or an entity it controls.

(2)

For the purposes of this section, a body corporate is a closely-held subsidiary of another body corporate if, and only if, no member of the first-mentioned body is a person other than:

(a)

the other body; or

(b)

a nominee of the other body; or

(c)

a body corporate that is a closely-held subsidiary of the other body because of any other application or applications of this subsection; or

(d)

a nominee of a body referred to in paragraph (c).

(3)

For the purposes of subsection (2), disregard shares that are not voting shares.

215 Benefits to members that do not discriminate unfairly

Member approval is not needed to give a financial benefit if:

(a)

the benefit is given to the related party in their capacity as a member of the public company; and

(b)

giving the benefit does not discriminate unfairly against the other members of the public company.

216 Court order

Member approval is not needed to give a financial benefit under an order of a court.

Division 3—Procedure for obtaining member approval
217 Resolution may specify matters by class or kind

A resolution under this Division may specify anything either in particular or by reference to class or kind.

218 Company must lodge material that will be put to members with ASIC

(1)

At least 14 days before the notice convening the relevant meeting is given, the public company must lodge:

(a)

a proposed notice of meeting setting out the text of the proposed resolution; and

(b)

a proposed explanatory statement satisfying section 219; and

(c)

any other document that is proposed to accompany the notice convening the meeting and that relates to the proposed resolution; and

(d)

any other document that any of the following proposes to give to members of the public company before or at the meeting:

(i)

the company;

(ii)

a related party of the company to whom the proposed resolution would permit a financial benefit to be given;

(iii)

an associate of the company or of such a related party;

and can reasonably be expected to be material to a member in deciding how to vote on the proposed resolution.

(2)

If, when the notice convening the meeting is given, ASIC:

(a)

has approved in writing a period of less than 14 days for the purposes of subsection (1); and

(b)

has not revoked the approval by written notice to the public company;

subsection (1) applies as if the reference to 14 days were a reference to the approved period.

(3)

ASIC may give and revoke approvals for the purposes of subsection (2).

219 Requirements for explanatory statement to members

(1)

The proposed explanatory statement lodged under section 218 must be in writing and set out:

(a)

the related parties to whom the proposed resolution would permit financial benefits to be given; and

(b)

the nature of the financial benefits; and

(c)

in relation to each director of the company:

(i)

if the director wanted to make a recommendation to members about the proposed resolution—the recommendation and his or her reasons for it; or

(ii)

if not—why not; or

(iii)

if the director was not available to consider the proposed resolution—why not; and

(d)

in relation to each such director:

(i)

whether the director had an interest in the outcome of the proposed resolution; and

(ii)

if so—what it was; and

(e)

all other information that:

(i)

is reasonably required by members in order to decide whether or not it is in the company's interests to pass the proposed resolution; and

(ii)

is known to the company or to any of its directors.

(2)

An example of the kind of information referred to in paragraph (1)(d) is information about what, from an economic and commercial point of view, are the true potential costs and detriments of, or resulting from, giving financial benefits as permitted by the proposed resolution, including (without limitation):

(a)

opportunity costs; and

(b)

taxation consequences (such as liability to fringe benefits tax); and

(c)

benefits forgone by whoever would give the benefits.

Note: Sections 180 and 181 require an officer of a corporation to act honestly and to exercise care and diligence. These duties extend to preparing an explanatory statement under this section. Section 1309 creates offences where false and misleading material relating to a corporation's affairs is made available or furnished to members.

220 ASIC may comment on proposed resolution

(1)

Within 14 days after a public company lodges documents under section 218, ASIC may give to the company written comments on those documents (other than comments about whether the proposed resolution is in the company's best interests).

(2)

ASIC may consult with the Exchange for the purposes of giving comments to a company that is included in the official list of the Exchange.

(3)

Subsection (2) does not limit the persons with whom ASIC may consult.

(4)

ASIC must keep a copy of the written comments it gives to a company under subsection (1), and subsections 1274(2) and (5) apply to the copy as if it were a document lodged with ASIC.

(5)

The fact that ASIC has given particular comments, or has declined to give comments, under subsection (1) does not in any way affect the performance or exercise of any of ASIC's functions and powers.

221 Requirements for notice of meeting

The notice convening the meeting:

(a)

must be the same, in all material respects, as the proposed notice lodged under section 218; and

(b)

must be accompanied by an explanatory statement that is the same, in all material respects, as the proposed explanatory statement lodged under that section; and

(c)

must be accompanied by a document that is, or documents that are, the same, in all material respects, as the document or documents (if any) lodged under paragraph 218(1)(c); and

(d)

if ASIC has given to the public company, under section 220, comments on the documents lodged under section 218—must be accompanied by a copy of those comments; and

(e)

must not be accompanied by any other documents.

222 Other material put to members

Each document (if any) that:

(a)

did not accompany the notice convening the meeting; and

(b)

was given to members of the public company before or at the meeting by:

(i)

the public company; or

(ii)

a related party of the public company to whom the proposed resolution would permit a financial benefit to be given; or

(iii)

an associate of the public company or of such a related party; and

(c)

can reasonably be expected to have been material to a member in deciding how to vote on the proposed resolution;

must be the same, in all material respects, as a document lodged under paragraph 218(1)(d).

223 Proposed resolution cannot be varied

The resolution must be the same as the proposed resolution set out in the proposed notice lodged under section 218.

224 Voting by or on behalf of related party interested in proposed resolution

(1)

At a general meeting, a vote on a proposed resolution under this Division must not be cast (in any capacity) by or on behalf of:

(a)

a related party of the public company to whom the resolution would permit a financial benefit to be given; or

(b)

an associate of such a related party.

(2)

Subsection (1) does not prevent the casting of a vote if:

(a)

it is cast by a person as a proxy appointed by writing that specifies how the proxy is to vote on the proposed resolution; and

(b)

it is not cast on behalf of a related party or associate of a kind referred to in subsection (1).

(3)

The regulations may prescribe cases where subsection (1) does not apply.

(4)

ASIC may by writing declare that:

(a)

subsection (1) does not apply to a specified proposed resolution; or

(b)

subsection (1) does not prevent the casting of a vote, on a specified proposed resolution, by a specified entity, or on behalf of a specified entity;

but may only do so if satisfied that the declaration will not cause unfair prejudice to the interests of any member of the public company.

(5)

A declaration in force under subsection (4) has effect accordingly.

(6)

If a vote is cast in contravention of subsection (1), the related party or associate, as the case may be, contravenes this subsection, whether or not the proposed resolution is passed.

(7)

For the purposes of this section, a vote is cast on behalf of an entity if, and only if, it is cast:

(a)

as proxy for the entity; or

(b)

otherwise on behalf of the entity; or

(c)

in respect of a share in respect of which the entity has:

(i)

power to vote; or

(ii)

power to exercise, or control the exercise of, a right to vote.

(8)

Subject to subsection 225(1), a contravention of this section does not affect the validity of a resolution.

(9)

This section has effect despite:

(a)

anything else in this Law or in any other law of this jurisdiction (including the general law); or

(b)

anything in a body corporate's constitution.

225 Voting on the resolution

(1)

If any votes on the resolution are cast in contravention of subsection 224(1), it must be the case that the resolution would still be passed even if those votes were disregarded.

(2)

If a poll was duly demanded on the question that the resolution be passed, subsections (3) and (4) apply in relation to voting on the poll.

(3)

In relation to each member of the public company who voted on the resolution in person, the public company must record in writing:

(a)

the member's name; and

(b)

how many votes the member cast for the resolution and how many against.

(4)

In relation to each member of the public company who voted on the resolution by proxy, or by a representative authorised under section 250D, the public company must record in writing:

(a)

the member's name; and

(b)

in relation to each person who voted as proxy, or as such a representative, for the member:

(i)

the person's name; and

(ii)

how many votes the person cast on the resolution as proxy, or as such a representative, for the member; and

(iii)

how many of those votes the person cast for the resolution and how many against.

(5)

For 7 years after the day when a resolution under this Division is passed, the public company must retain the records it made under this section in relation to the resolution.

226 Notice of resolution to be lodged

The public company must lodge a notice setting out the text of the resolution within 14 days after the resolution is passed.

227 Declaration by court of substantial compliance

(1)

The Court may declare that the conditions prescribed by this Division have been satisfied if it finds that they have been substantially satisfied.

(2)

A declaration may be made only on the application of an interested person.

Part 2E.2—Related parties and financial benefits

228 Related parties

Controlling entities

(1)

An entity that controls a public company is a related party of the public company.

Directors and their spouses

(2)

The following persons are related parties of a public company:

(a)

directors of the public company

(b)

directors (if any) of an entity that controls the public company

(c)

if the public company is controlled by an entity that is not a body corporate—each of the persons making up the controlling entity

(d)

spouses and de facto spouses of the persons referred to in paragraphs (a),

(b)

and (c).

Relatives of directors and spouses

(3) The following relatives of persons referred to in subsection

(2)

are related parties of the public company:

(a)

parents

(b)

children.

Entities controlled by other related parties

(4)

An entity controlled by a related party referred to in subsection (1), (2) or (3) is a related party of the public company unless the entity is also controlled by the public company.

Related party in previous 6 months

(5) An entity is a related party of a public company at a particular time if the entity was a related party of the public company of a kind referred to in subsection (1), (2), (3) or (4) at any time within the previous 6 months.

Entity has reasonable grounds to believe it will become related party in future

(6) An entity is a related party of a public company at a particular time if the entity believes or has reasonable grounds to believe that it is likely to become a related party of the public company of a kind referred to in subsection (1), (2), (3) or (4) at any time in the future.

Acting in concert with related party

(7)

An entity is a related party of a public company if the entity acts in concert with a related party of the public company on the understanding that the related party will receive a financial benefit if the public company gives the entity a financial benefit.

229 Giving a financial benefit

(1)

In determining whether a financial benefit is given for the purposes of this Chapter:

(a)

give a broad interpretation to financial benefits being given, even if criminal or civil penalties may be involved; and

(b)

the economic and commercial substance of conduct is to prevail over its legal form; and

(c)

disregard any consideration that is or may be given for the benefit, even if the consideration is adequate.

(2)

Giving a financial benefit includes the following:

(a)

giving a financial benefit indirectly, for example, through 1 or more interposed entities

(b)

giving a financial benefit by making an informal agreement, oral agreement or an agreement that has no binding force

(c)

giving a financial benefit that does not involve paying money (for example by conferring a financial advantage).

(3)

The following are examples of giving a financial benefit to a related party:

(a)

giving or providing the related party finance or property

(b)

buying an asset from or selling an asset to the related party

(c)

leasing an asset from or to the related party

(d)

supplying services to or receiving services from the related party

(e)

issuing securities or granting an option to the related party

(f)

taking up or releasing an obligation of the related party.

Part 2E.3—Interaction with other rules

230 General duties still apply

A director is not relieved from any of their duties under this Law (including sections 180 and 184), or their fiduciary duties, in connection with a transaction merely because the transaction is authorised by a provision of this Chapter or is approved by a resolution of members under a provision of this Chapter.

2 Section 246A

Renumber as section 231.

3 Part 2F.1

Repeal the Part, substitute:

Part 2F.1—Oppressive conduct of affairs

232 Grounds for Court order

The Court may make an order under section 233 if:

(a)

the conduct of a company's affairs; or

(b)

an actual or proposed act or omission by or on behalf of a company; or

(c)

a resolution, or a proposed resolution, of members or a class of members of a company;

is either:

(d)

contrary to the interests of the members as a whole; or

(e)

oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.

Note: For affairs , see section 53.

233 Orders the Court can make

(1)

The Court can make any order under this section that it considers appropriate in relation to the company, including an order:

(a)

that the company be wound up

(b)

that the company's existing constitution be modified or repealed

(c)

regulating the conduct of the company's affairs in the future

(d)

for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law

(e)

for the purchase of shares with an appropriate reduction of the company's share capital

(f)

for the company to institute, prosecute, defend or discontinue specified proceedings

(g)

authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company

(h)

appointing a receiver or a receiver and manager of any or all of the company's property

(i)

restraining a person from engaging in specified conduct or from doing a specified act

(j)

requiring a person to do a specified act.

Order that the company be wound up

(2)

If an order that a company be wound up is made under this section, the provisions of this Law relating to the winding up of companies apply:

(a)

as if the order were made under section 461; and

(b)

with such changes as are necessary.

Order altering constitution

(3)

If an order made under this section repeals or modifies a company's constitution, or requires the company to adopt a constitution, the company does not have the power under section 136 to change or repeal the constitution if that change or repeal would be inconsistent with the provisions of the order, unless:

(a)

the order states that the company does have the power to make such a change or repeal; or

(b)

the company first obtains the leave of the Court.

234 Who can apply for order

An application for an order under section 233 in relation to a company may be made by:

(a)

a member of the company, even if the application relates to an act or omission that is against:

(i)

the member in a capacity other than as a member; or

(ii)

another member in their capacity as a member; or

(b)

a person who has been removed from the register of members because of a selective reduction; or

(c)

a person who has ceased to be a member of the company if the application relates to the circumstances in which they ceased to be a member; or

(d)

a person to whom a share in the company has been transmitted by will or by operation of law; or

(e)

a person whom ASIC thinks appropriate having regard to investigations it is conducting or has conducted into:

(i)

the company's affairs; or

(ii)

matters connected with the company's affairs.

Note 1: If an application is made under this section, in certain cases the court may order that the company be wound up in insolvency (see section 459B).

Note 2: For selective reduction , see subsection 256B(2).

235 Requirement for person to lodge order

If an order is made under section 233, the applicant must lodge a copy of the order with ASIC within 14 days after it is made.

Part 2F.1A—Proceedings on behalf of a company by members and others

236 Bringing, or intervening in, proceedings on behalf of a company

(1)

A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:

(a)

the person is:

(i)

a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or

(ii)

an officer or former officer of the company; and

(b)

the person is acting with leave granted under section 237.

(2)

Proceedings brought on behalf of a company must be brought in the company's name.

(3)

The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.

Note 1: For the right to inspect company books, see subsections 247A(3) to (6).

Note 2: For the requirements to disclose proceedings and leave applications in the annual directors' report, see subsections 300(14) and (15).

Note 3: This section does not prevent a person bringing, or intervening in, proceedings on their own behalf in respect of a personal right.

237 Applying for and granting leave

(1)

A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.

(2)

The Court must grant the application if it is satisfied that:

(a)

it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and

(b)

the applicant is acting in good faith; and

(c)

it is in the best interests of the company that the applicant be granted leave; and

(d)

if the applicant is applying for leave to bring proceedings—there is a serious question to be tried; and

(e)

either:

(i)

at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or

(ii)

it is appropriate to grant leave even though subparagraph (i) is not satisfied.

(3)

A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:

(a)

the proceedings are:

(i)

by the company against a third party; or

(ii)

by a third party against the company; and

(b)

the company has decided:

(i)

not to bring the proceedings; or

(ii)

not to defend the proceedings; or

(iii)

to discontinue, settle or compromise the proceedings; and

(c)

all of the directors who participated in that decision:

(i)

acted in good faith for a proper purpose; and

(ii)

did not have a material personal interest in the decision; and

(iii)

informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and

(iv)

rationally believed that the decision was in the best interests of the company.

The director's belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold.

(4)

For the purposes of subsection (3):

(a)

a person is a third party if:

(i)

the company is a public company and the person is not a related party of the company; or

(ii)

the company is not a public company and the person would not be a related party of the company if the company were a public company; and

(b)

proceedings by or against the company include any appeal from a decision made in proceedings by or against the company.

Note: Related party is defined in section 228.

238 Substitution of another person for the person granted leave

(1)

Any of the following persons may apply to the Court for an order that they be substituted for a person to whom leave has been granted under section 237:

(a)

a member, former member, or a person entitled to be registered as a member, of the company or of a related body corporate

(b)

an officer, or former officer, of the company.

(2)

The Court may make the order if it is satisfied that:

(a)

the applicant is acting in good faith; and

(b)

it is appropriate to make the order in all the circumstances.

(3)

An order substituting one person for another has the effect that:

(a)

the grant of leave is taken to have been made in favour of the substituted person; and

(b)

if the other person has already brought the proceedings or intervened—the substituted person is taken to have brought those proceedings or to have made that intervention.

239 Effect of ratification by members

(1)

If the members of a company ratify or approve conduct, the ratification or approval:

(a)

does not prevent a person from bringing or intervening in proceedings with leave under section 237 or from applying for leave under that section; and

(b)

does not have the effect that proceedings brought or intervened in with leave under section 237 must be determined in favour of the defendant, or that an application for leave under that section must be refused.

(2)

If members of a company ratify or approve conduct, the Court may take the ratification or approval into account in deciding what order or judgment (including as to damages) to make in proceedings brought or intervened in with leave under section 237 or in relation to an application for leave under that section. In doing this, it must have regard to:

(a)

how well-informed about the conduct the members were when deciding whether to ratify or approve the conduct; and

(b)

whether the members who ratified or approved the conduct were acting for proper purposes.

240 Leave to discontinue, compromise or settle proceedings brought, or intervened in, with leave

Proceedings brought or intervened in with leave must not be discontinued, compromised or settled without the leave of the Court.

241 General powers of the Court

(1)

The Court may make any orders, and give any directions, that it considers appropriate in relation to proceedings brought or intervened in with leave, or an application for leave, including:

(a)

interim orders; and

(b)

directions about the conduct of the proceedings, including requiring mediation; and

(c)

an order directing the company, or an officer of the company, to do, or not to do, any act; and

(d)

an order appointing an independent person to investigate, and report to the Court on:

(i)

the financial affairs of the company; or

(ii)

the facts or circumstances which gave rise to the cause of action the subject of the proceedings; or

(iii)

the costs incurred in the proceedings by the parties to the proceedings and the person granted leave.

(2)

A person appointed by the Court under paragraph (1)(d) is entitled, on giving reasonable notice to the company, to inspect any books of the company for any purpose connected with their appointment.

(3)

If the Court appoints a person under paragraph (1)(d):

(a)

the Court must also make an order stating who is liable for the remuneration and expenses of the person appointed; and

(b)

the Court may vary the order at any time; and

(c)

the persons who may be made liable under the order, or the order as varied, are:

(i)

all or any of the parties to the proceedings or application; and

(ii)

the company; and

(d)

if the order, or the order as varied, makes 2 or more persons liable, the order may also determine the nature and extent of the liability of each of those persons.

(4)

Subsection (3) does not affect the powers of the Court as to costs.

242 Power of the Court to make costs orders

The Court may at any time make any orders it considers appropriate about the costs of the following persons in relation to proceedings brought or intervened in with leave under section 237 or an application for leave under that section:

(a)

the person who applied for or was granted leave

(b)

the company

(c)

any other party to the proceedings or application.

An order under this section may require indemnification for costs.

4 After Chapter 2K

Insert:

Chapter 2L—Debentures
Part 2L.1—Requirement for trust deed and trustee

260FA Requirement for trust deed and trustee

(1)

Before a body:

(a)

makes an offer of debentures in this jurisdiction that needs disclosure to investors under Chapter 6D, or does not need disclosure to investors under Chapter 6D because of subsection 708(14) (disclosure document exclusion for debenture roll overs); or

(b)

makes an offer of debentures in this jurisdiction or elsewhere as consideration for the acquisition of securities under an off-market takeover bid; or

(c)

issues debentures in this jurisdiction or elsewhere under a compromise or arrangement under Part 5.1 approved at a meeting held as a result of an order under subsection 411(1) or (1A);

regardless of where any resulting issue, sale or transfer occurs, the body must enter into a trust deed that complies with section 260FB and appoint a trustee that complies with section 260FC.

Note: For rules about when an offer of debentures will need disclosure to investors under Chapter 6D, see sections 706, 707 and 708.

(2)

The body may revoke the trust deed after it has repaid all amounts payable under the debentures in accordance with the debentures' terms and the trust deed.

(3)

The body must comply with this Chapter.

Note: Sections 168 and 601CZB require a register of debenture holders to be set up and kept.

260FB Trust deed

The trust deed must provide that the following are held in trust by the trustee for the benefit of the debenture holders:

(a)

the right to enforce the borrower's duty to repay

(b)

any charge or security for repayment

(c)

the right to enforce any other duties that the borrower and any guarantor have under:

(i)

the terms of the debentures; or

(ii)

the provisions of the trust deed or this Chapter.

Note: For information about the duties that the borrower and any guarantor body have under this Chapter, see sections 260GB to 260HE.

260FC Who can be a trustee

Who can be trustee

(1)

The trustee must be:

(a)

the Public Trustee of any State or Territory; or

(b)

a body corporate authorised by a law of any State or Territory to take in its own name a grant of probate of the will, or letters of administration of the estate, of a deceased person; or

(c)

a body corporate registered under the Life Insurance Act 1995 ; or

(d)

an Australian ADI; or

(e)

a body corporate, all of whose shares are held beneficially by a body corporate or bodies corporate of the kind referred to in paragraph (b), (c) or

(d)

if that body or those bodies:

(i)

are liable for all of the liabilities incurred, or to be incurred, by the trustee as trustee; or

(ii)

have subscribed for and beneficially hold shares in the trustee and there is an uncalled liability of at least $500,000 in respect of those shares that can only be called up if the trustee becomes an externally-administered body corporate (see section 254N); or

(f)

a body corporate approved by ASIC (see section 260MB).

Note: Section 260GD provides that if the borrower becomes aware that the trustee cannot be a trustee, the trustee must be replaced.

Circumstances in which a person cannot be trustee

(2)

A person may only be appointed or act as trustee (except to the extent provided for by section 260FD) if the appointment or acting will not result in a conflict of interest or duty. This subsection is not intended to affect any rule of law or equity.

260FD Existing trustee continues to act until new trustee takes office

An existing trustee continues to act as the trustee until a new trustee is appointed and has taken office as trustee, despite any rule of law or equity to the contrary.

Note: This section applies even if the existing trustee resigns.

260FE Replacement of trustee

Related party of existing trustee may be appointed as a new trustee

(1)

In addition to any other powers of appointment under the terms of the debentures or provisions of the trust deed, the borrower may appoint a body corporate that is related to the existing trustee as trustee in place of the existing trustee if:

(a)

the body corporate can be a trustee under section 260FC; and

(b)

the existing trustee consents in writing to the appointment .

The appointment has effect despite any terms of the debentures or provisions of the trust deed.

Appointment by Court

(2)

The Court may:

(a)

appoint a person who may be a trustee under section 260FC as trustee on the application of the borrower, a debenture holder or ASIC if:

(i)

a trustee has not been validly appointed; or

(ii)

the trustee has ceased to exist; or

(b)

terminate the existing trustee's appointment and appoint a person who may be a trustee under section 260FC as trustee in the existing trustee's place on the application of the borrower, the existing trustee, a debenture holder or ASIC if:

(i)

the existing trustee cannot be trustee under section 260FC; or

(ii)

the existing trustee fails, or refuses, to act.

Part 2L.2—Duties of borrower

260GA Duties of borrower

A borrower that is required to enter into a trust deed under section 260FA has the duties imposed by this Part.

260GB General duties

The borrower must:

(a)

carry on and conduct its business in a proper and efficient manner; and

(b)

provide a copy of the trust deed to:

(i)

a debenture holder; or

(ii)

the trustee;

if they request a copy; and

(c)

make all of its financial and other records available for inspection by:

(i)

the trustee; or

(ii)

an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

(iii)

a registered company auditor appointed by the trustee to carry out the inspection;

and give them any information, explanations or other assistance that they require about matters relating to those records.

Note: The borrower also has a duty to call a meeting of debenture holders in certain circumstances (see section 260KA).

260GC Duty to notify ASIC of name of trustee

The borrower must lodge with ASIC a notice of the name of a trustee within 14 days after they are appointed. The notice must be in the prescribed form.

260GD Duty to replace trustee

The borrower must take all reasonable steps to replace the trustee under section 260FE as soon as practicable after the borrower becomes aware that the trustee:

(a)

has ceased to exist; or

(b)

has not been validly appointed; or

(c)

cannot be a trustee under section 260FC; or

(d)

has failed or refused to act as trustee.

260GE Duty to inform trustee about charges

If the borrower creates a charge, it must:

(a)

give the trustee written details of the charge within 21 days after it is created; and

(b)

if the total amount to be advanced on the security of the charge is indeterminate and the advances are not merged in a current account with bankers, trade creditors or anyone else—give the trustee written details of the amount of each advance within 7 days after it is made.

Note: If the advances are merged in a current account the borrower must give the trustee the details in the quarterly report (see subsection 260GF(4)).

260GF Duty to give trustee and ASIC quarterly reports

Quarterly reports

(1)

Within 1 month after the end of each quarter, the borrower must:

(a)

give the trustee a quarterly report that sets out the information required by subsections (4), (5) and (6); and

(b)

lodge a copy of the report with ASIC (see section 351).

First quarter

(2)

The first quarter is the period of 3 months ending on a day fixed by the borrower, by written notice to the trustee. The day must be less than 6 months after the first issue of a debenture under the trust deed.

Subsequent quarters

(3)

Each of the subsequent quarters are periods of 3 months. The trustee may allow a particular quarter to be a period of less than 3 months if the trustee is satisfied that special circumstances justify doing so.

Content of quarterly report

(4)

The report for a quarter must include details of:

(a)

any failure by the borrower and each guarantor to comply with the terms of the debentures or the provisions of the trust deed or this Chapter during the quarter; and

(b)

any event that has happened during the quarter that has caused, or could cause, 1 or more of the following:

(i)

any amount deposited or lent under the debentures to become immediately payable

(ii)

the debentures to become immediately enforceable

(iii)

any other right or remedy under the terms of the debenture or provisions of the trust deed to become immediately enforceable; and

(c)

any circumstances that have occurred during the quarter that materially prejudice:

(i)

the borrower, any of its subsidiaries, or any of the guarantors; or

(ii)

any security or charge included in or created by the debentures or the trust deed; and

(d)

any substantial change in the nature of the business of the borrower, any of its subsidiaries, or any of the guarantors that has occurred during the quarter; and

(e)

any of the following events that happened in the quarter:

(i)

the appointment of a guarantor

(ii)

the cessation of liability of a guarantor body for the payment of the whole or part of the money for which it was liable under the guarantee

(iii)

a change of name of a guarantor (if this happens, the report must also disclose the guarantor's new name); and

(f)

the net amount outstanding on any advances at the end of the quarter if the borrower has created a charge where:

(i)

the total amount to be advanced on the security of the charge is indeterminate; and

(ii)

the advances are merged in a current account with bankers, trade creditors or anyone else; and

(g)

any other matters that may materially prejudice any security or the interests of the debenture holders.

Note: Paragraph (f)—the borrower has a duty to inform the trustee about charges as they are created (see section 260GE).

(5)

If the borrower has deposited money with, or lent money to, a related body corporate during the quarter, the report must also include details of:

(a)

the total of the money deposited with, or lent to, the related body corporate during the quarter (see subsection (7)); and

(b)

the total amount of money owing to the borrower at the end of the quarter in respect of the deposits or loans to the related body corporate.

Disregard any amount that the borrower deposits with an ADI in the normal course of the borrower's business.

(6)

If the borrower has assumed a liability of a related body corporate during the quarter, the report must also include details of the extent of the liability assumed during the quarter and the extent of the liability as at the end of the quarter.

(7)

For the purposes of subsections (5) and (6), the report:

(a)

must distinguish between deposits, loans and assumptions of liability that are secured and those that are unsecured; and

(b)

may exclude any deposit, loan or assumption of liability on behalf of the related body corporate if it has:

(i)

guaranteed the repayment of the debentures of the borrower; and

(ii)

secured the guarantee by a charge over all of its property in favour of the trustee.

Formalities

(8)

The report must:

(a)

be made in accordance with a resolution of the directors; and

(b)

specify the date on which the report is made.

260GG Exceptions

Sections 260GE and 260GF do not apply in respect of the borrower while:

(a)

it is under external administration; or

(b)

a receiver, or a receiver and manager, of property of the borrower has been appointed and has not ceased to act under that appointment.

260GH How debentures may be described

(1)

The borrower may describe or refer to the debentures in:

(a)

any disclosure in relation to the offer of the debentures; or

(b)

any other document constituting or relating to the offer of the debentures; or

(c)

the debentures themselves;

only in accordance with the following table:

When debentures can be called mortgage debentures or debentures

(2)

The borrower may describe or refer to the debentures as:

(a)

mortgage debentures; or

(b)

debentures;

if:

(c)

the repayment of all money that has been, or may be, deposited or lent under the debentures is secured by a first mortgage given to the trustee over land vested in the borrower or in any of the guarantors; and

(d)

the mortgage has been registered, or is a registrable mortgage that has been lodged for registration, in accordance with the law relating to the registration of mortgages of land in the place where the land is situated; and

(e)

the total amount of that money and of all other liabilities (if any) secured by the mortgage of that land ranking equally with the liability to repay that money does not exceed 60% of the value of the borrower's or guarantor's interest in that land as shown in the valuation included in the disclosure document for the debentures.

When debentures can be called debentures

(3)

The borrower may describe or refer to the debentures as debentures if:

(a)

the repayment of all money that has been, or may be, deposited or lent under the debentures has been secured by a charge in favour of the trustee over the whole or any part of the tangible property of the borrower or of any of the guarantors; and

(b)

the tangible property that constitutes the security for the charge is sufficient and is reasonably likely to be sufficient to meet the liability for the repayment of all such money and all other liabilities that:

(i)

have been or may be incurred; and

(ii)

rank in priority to, or equally with, that liability.

260GI Offences for failure to comply with statutory duties

The borrower commits an offence if it intentionally or recklessly contravenes section 260GB, 260GC, 260GD, 260GE, 260GF or 260KA.

Part 2L.3—Duties of guarantor

260HA Duties of guarantor

If a borrower is required to enter into a trust deed under section 260FA in relation to debentures, a guarantor in respect of the debentures has the duties imposed by this Part.

260HB General duties

The guarantor must:

(a)

carry on and conduct its business in a proper and efficient manner; and

(b)

make all of its financial and other records available for inspection by:

(i)

the trustee; or

(ii)

an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

(iii)

a registered company auditor appointed by the trustee to carry out the inspection;

and give them any information, explanations or other assistance that they require about matters relating to those records.

260HC Duty to inform trustee about charges

If the guarantor creates a charge, it must:

(a)

give the trustee written details of the charge within 21 days after it is created; and

(b)

if the total amount to be advanced on the security of the charge is indeterminate, give the trustee written details of:

(i)

the amount of each advance made within 7 days after it is made; or

(ii)

where the advances are merged in a current account with bankers, trade creditors or anyone else—the net amount outstanding on the advances at the end of every 3 months.

260HD Exceptions

Section 260HC does not apply in respect of the guarantor while:

(a)

it is under external administration; or

(b)

a receiver, or a receiver and manager, of property of the guarantor has been appointed and has not ceased to act under that appointment.

260HE Offences for failure to comply with statutory duties

The guarantor commits an offence if it intentionally or recklessly contravenes paragraph 260HB(b) or section 260HC.

Part 2L.4—Trustee

260JA Trustee's duties

The trustee of a trust deed entered into under section 260FA must:

(a)

exercise reasonable diligence to ascertain whether the property of the borrower and of each guarantor that is or should be available (whether by way of security or otherwise) will be sufficient to repay the amount deposited or lent when it becomes due; and

(b)

exercise reasonable diligence to ascertain whether the borrower or any guarantor has committed any breach of:

(i)

the terms of the debentures; or

(ii)

the provisions of the trust deed or this Chapter; and

(c)

do everything in its power to ensure that the borrower or a guarantor remedies any breach known to the trustee of:

(i)

any term of the debentures; or

(ii)

any provision of the trust deed or this Chapter;

unless the trustee is satisfied that the breach will not materially prejudice the debenture holders' interests or any security for the debentures; and

(d)

ensure that the borrower and each guarantor complies with Part 2K to the extent that it applies to the debentures; and

(e)

notify ASIC as soon as practicable if:

(i)

the borrower has not complied with section 260GE, 260GF or subsection 318(1) or (4); or

(ii)

a guarantor has not complied with section 260HC; and

(f)

notify ASIC and the borrower as soon as practicable if the trustee discovers that it cannot be a trustee under section 260FC; and

(g)

give the debenture holders a statement explaining the effect of any proposal that the borrower submits to the debenture holders before any meeting that:

(i)

the Court calls in relation to a scheme under subsection 411(1) or (1A); or

(ii)

the trustee calls under subsection 260KB(1); and

(h)

comply with any directions given to it at a debenture holders' meeting referred to in section 260KA, 260KB or 260KC unless:

(i)

the trustee is of the opinion that the direction is inconsistent with the terms of the debentures or the provisions of the trust deed or this Law or is otherwise objectionable; and

(ii)

has either obtained, or is in the process of obtaining, an order from the Court under section 260NA setting aside or varying the direction; and

(i)

apply to the Court for an order under section 260NB if the borrower requests it to do so.

Note 1: Paragraph (g)—Section 411 relates to compromises and arrangements.

Note 2: Section 260JC deals with indemnification in respect of a trustee's liability to the debenture holders.

260JB Exemptions and indemnifications of trustee from liability

(1)

A term of a debenture, provision of a trust deed or a term of a contract with holders of debentures secured by a trust deed, is void in so far as the term or provision would have the effect of:

(a)

exempting a trustee from liability for breach of section 260JA for failure to show the degree of care and diligence required of it as trustee; or

(b)

indemnifying the trustee against that liability;

unless the term or provision:

(c)

releases the trustee from liability for something done or omitted to be done before the release is given; or

(d)

enables a meeting of debenture holders to approve the release of the trustee from liability for something done or omitted to be done before the release is given.

(2)

For the purposes of paragraph (1)(d):

(a)

a release is approved if the debenture holders who vote for the resolution hold 75% of the nominal value of the debentures held by all the debenture holders who attend the meeting and vote on the resolution; and

(b)

a debenture holder attends the meeting and votes on the resolution if:

(i)

they attend the meeting in person and vote on the resolution; or

(ii)

if proxies are permitted—they are represented at the meeting by a proxy and the proxy votes on the resolution.

260JC Indemnity

The trustee is not liable for anything done or omitted to be done in accordance with a direction given to it by the debenture holders at any meeting called under section 260KA, 260KB or 260KC.

Part 2L.5—Meetings of debenture holders

260KA Borrower's duty to call meeting

Duty to call meeting

(1)

The borrower must call a meeting of debenture holders if:

(a)

debenture holders who together hold 10% or more of the nominal value of the issued debentures to which the trust relates direct the borrower to do so; and

(b)

the direction is given to the borrower in writing at its registered office; and

(c)

the purpose of the meeting is to:

(i)

consider the financial statements that were laid before the last AGM of the borrower; or

(ii)

give the trustee directions in relation to the exercise of any of its powers.

Note: The trustee usually must comply with any directions given to it by the debenture holders at the meeting (see paragraph 260JA(h)).

Duty to give notification of meeting

(2)

If the borrower is required to call a meeting, it must give notice of the time and place of the meeting to:

(a)

the trustee; and

(b)

the borrower's auditor; and

(c)

each of the debenture holders whose names are entered on the register of debenture holders.

Notice to joint holders of a debenture must be given to the joint holder named first in the register of debenture holders.

(3)

The borrower may give the notice to a debenture holder:

(a)

personally; or

(b)

by sending it by post to the address for the debenture holder in the register of debenture holders; or

(c)

by sending it to the fax number or electronic address (if any) nominated by the debenture holder; or

(d)

by any other means that the trust deed or the terms of the debentures permit.

Note: A defect in the notice may not invalidate a meeting (see section 1322).

When notice by post or fax is given

(4)

A notice of meeting sent to a debenture holder is taken to be given:

(a)

3 days after it is posted, if it is posted; or

(b)

on the business day after it is sent, if it is sent by fax or other electronic means;

unless the trust deed or the terms of the debentures provide otherwise.

260KB Trustee's power to call meeting

Trustee may call meeting in event of breach

(1)

If the borrower or a guarantor fails to remedy any breach of the terms of the debentures or provisions of the trust deed or this Chapter when required by the trustee, the trustee may:

(a)

call a meeting of debenture holders; and

(b)

inform the debenture holders of the failure at the meeting; and

(c)

submit proposals for protection of the debenture holders' interests to the meeting; and

(d)

ask for directions from the debenture holders in relation to the matter.

Trustee may appoint person to chair meeting

(2)

The trustee may appoint a person to chair a meeting of debenture holders called under subsection (1). If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.

260KC Court may order meeting

(1)

Without limiting section 260NA or 260NB, the Court may make an order under either of those sections for a meeting of all or any of the debenture holders to be held to give directions to the trustee. The order may direct the trustee to:

(a)

place before the debenture holders any information concerning their interests; and

(b)

place before the debenture holders any proposals to protect their interests that the Court directs or the trustee considers appropriate; and

(c)

obtain the debenture holders' directions concerning the protection of their interests.

(2)

The meeting is to be held and conducted in the manner the Court directs. The trustee may appoint a person to chair the meeting. If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.

Part 2L.6—Civil liability

260L Civil liability for contravening this Chapter

(1)

A person who suffers loss or damage because a person contravenes a provision of this Chapter may recover the amount of the loss or damage from:

(a)

the person who contravened the provision; or

(b)

a person involved in the contravention.

This is so even if the person did not commit, and was not involved in, the contravention.

(2)

An action under subsection (1) may begin at any time within 6 years after the day on which the cause of action arose.

(3)

This Part does not affect any liability that a person has under any other law.

Part 2L.7—ASIC powers

260MA ASIC's power to exempt and modify

(1)

ASIC may:

(a)

exempt a person from a provision of this Chapter; or

(b)

declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

(2)

The exemption or declaration may do all or any of the following:

(a)

apply to all or specified provisions of this Chapter

(b)

apply to all persons, specified persons, or a specified class of persons

(c)

relate to all debentures, specified debentures or a specified class of debentures

(d)

relate to any other matter generally or as specified.

(3)

An exemption may apply unconditionally or subject to specified conditions. A person to whom a condition specified in an exemption applies must comply with the condition. The Court may order the person to comply with the condition in a specified way. Only ASIC may apply to the Court for the order.

(4)

The exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette .

(5)

For the purposes of this section, the provisions of this Chapter include:

(a)

regulations made for the purposes of this Chapter; and

(b)

definitions in this Law or the regulations as they apply to references in:

(i)

this Chapter; or

(ii)

regulations made for the purposes of this Chapter; and

(c)

Division 12 of Part 11.2.

260MB ASIC may approve body corporate to be trustee

(1)

ASIC may approve a body corporate in writing to be a trustee for the purposes of paragraph 260FC(1)(f). The approval may allow the body corporate to act as trustee:

(a)

in any circumstances; or

(b)

in relation to a particular borrower or particular class of borrower; or

(c)

in relation to a particular trust deed;

and may be given subject to conditions.

(2)

ASIC must publish notice of the approval in the Gazette .

Part 2L.8—Court

260NA General Court power to give directions and determine questions

If the trustee applies to the Court for any direction in relation to the performance of the trustee's functions or to determine any question in relation to the interests of the debenture holders, the Court may give any direction and make any declaration or determination in relation to the matter that the Court considers appropriate. The Court may also make ancillary or consequential orders.

Note: Under this section, the Court may order a meeting of debenture holders to be held, see section 260KC.

260NB Specific Court powers

(1)

If the trustee or ASIC applies to the Court, the Court may make any or all of the following orders:

(a)

an order staying an action or other civil proceedings before a court by or against the borrower or a guarantor body

(b)

an order restraining the borrower from paying any money to the debenture holders or any holders of any other class of debentures

(c)

an order that any security for the debentures be enforceable immediately or at the time the Court directs (even if the debentures are irredeemable or redeemable only on the happening of a contingency)

(d)

an order appointing a receiver of any property constituting security for the debentures

(e)

an order restricting advertising by the borrower for deposits or loans

(f)

an order restricting borrowing by the borrower

(g)

any other order that the Court considers appropriate to protect the interests of existing or prospective debenture holders.

(2)

In deciding whether to make an order under subsection (1), the Court must have regard to:

(a)

the ability of the borrower and each guarantor to repay the amount deposited or lent as and when it becomes due; and

(b)

any contravention of section 260MA by the borrower; and

(c)

the interests of the borrower's members and creditors; and

(d)

the interests of the members of each of the guarantors.

Note: The Court may order a meeting of debenture holders to be held (see section 260KC).

Part 2L.9—Location of other debenture provisions

260P Signpost to other debenture provisions

There are other rules relating to debentures in paragraph 124(1)(b) and section 563AAA.

5 Chapter 6

Repeal the Chapter, substitute:

Chapter 6—Takeovers

602 Purposes of Chapter

The purposes of this Chapter are to ensure that:

(a)

the acquisition of control over:

(i)

the voting shares in a listed company, or an unlisted company with more than 50 members; or

(ii)

the voting shares in a listed body; or

(iii)

the voting interests in a listed managed investment scheme;

takes place in an efficient, competitive and informed market; and

(b)

the holders of the shares or interests, and the directors of the company or body or the responsible entity for the scheme:

(i)

know the identity of any person who proposes to acquire a substantial interest in the company, body or scheme; and

(ii)

have a reasonable time to consider the proposal; and

(iii)

are given enough information to enable them to assess the merits of the proposal; and

(c)

as far as practicable, the holders of the relevant class of voting shares or interests all have a reasonable and equal opportunity to participate in any benefits accruing to the holders through any proposal under which a person would acquire a substantial interest in the company, body or scheme; and

(d)

an appropriate procedure is followed as a preliminary to compulsory acquisition of voting shares or interests or any other kind of securities under Part 6A.1.

Note 1: To achieve the objectives referred to in paragraphs (a),

(b)

and (c), the prohibition in section 606 and the exceptions to it refer to interests in "voting shares". To achieve the objective in paragraph (d), the provisions that deal with the takeover procedure refer more broadly to interests in "securities".

Note 2: Subsection 92(3) defines securities for the purposes of this Chapter.

603 Chapter extends to some listed bodies that are not companies

This Chapter applies to the acquisition of relevant interests in the securities of listed bodies that are not companies but are incorporated or formed in this jurisdiction in the same way as it applies to the acquisition of relevant interests in the securities of companies.

Note: Section 9 defines company , jurisdiction and listed .

604 Chapter extends to listed managed investment schemes

(1)

This Chapter applies to the acquisition of relevant interests in the interests in a listed managed investment scheme registered in this jurisdiction as if:

(a)

the scheme were a listed company; and

(b)

interests in the scheme were shares in the company; and

(c)

voting interests in the scheme were voting shares in the company; and

(d)

a meeting of the members of the scheme were a general meeting of the company; and

(e)

the obligations and powers that are imposed or conferred on the company were imposed or conferred on the responsible entity; and

(f)

the directors of the responsible entity were the directors of the company; and

(g)

the appointment of a responsible entity for the scheme were the election of a director of the company; and

(h)

the scheme's constitution were the company's constitution.

Note 1: Paragraph (g): See subsection 610(2).

Note 2: Section 9 defines voting interest in a managed investment scheme.

(2)

The regulations may modify the operation of this Chapter as it applies in relation to the acquisition of interests in listed managed investment schemes.

605 Classes of securities

(1)

Takeover bids are made for securities within a particular class. Similarly, compulsory acquisition and buy-out rights operate on securities within a particular class.

(2)

For the purposes of this Chapter and Chapters 6A and 6C, securities are not to be taken to be different classes merely because:

(a)

some of the securities are fully-paid and others are partly-paid; or

(b)

different amounts are paid up or remain unpaid on the securities.

Part 6.1—Prohibited acquisitions of relevant interests in voting shares

606 Prohibition on certain acquisitions of relevant interests in voting shares

Acquisition of relevant interests in voting shares through transaction entered into by or on behalf of person acquiring relevant interest

(1)

A person must not acquire a relevant interest in issued voting shares in a company if:

(a)

the company is:

(i)

a listed company; or

(ii)

an unlisted company with more than 50 members; and

(b)

the person acquiring the interest does so through a transaction in relation to securities entered into by or on behalf of the person; and

(c)

because of the transaction, that person's or someone else's voting power in the company increases:

(i)

from 20% or below to more than 20%; or

(ii)

from a starting point that is above 20% and below 90%.

However, the person may acquire the relevant interest under one of the exceptions set out in section 611 without contravening this subsection.

Note 1: Section 9 defines company as meaning a company incorporated, or taken to have been incorporated, in this jurisdiction.

Note 2: Section 607 deals with the effect of a contravention of this section on transactions. Sections 608 and 609 deal with the meaning of relevant interest . Section 610 deals with the calculation of a person's voting power in a company.

Note 3: If the acquisition of relevant interests in an unlisted company with 50 or fewer members leads to the acquisition of a relevant interest in another company that is an unlisted company with more than 50 members, or a listed company, the acquisition is caught by this section because of its effect on that other company.

Acquisition of legal or equitable interest giving rise to relevant interest for someone else

(2)

A person must not acquire a legal or equitable interest in securities of a body corporate if, because of the acquisition:

(a)

another person acquires a relevant interest in issued voting shares in a company that is:

(i)

a listed company; or

(ii)

an unlisted company with more than 50 members; and

(b)

someone's voting power in the company increases:

(i)

from 20% or below to more than 20%; or

(ii)

from a starting point that is above 20% and below 90%.

However, if the acquisition of the relevant interest is covered by one of the exceptions set out in section 611, the person may acquire the legal or equitable interest without contravening this subsection.

50 member threshold

(3)

In determining whether the company has more than 50 members for the purposes of subsection (1) or (2), count joint holders of a particular parcel of shares as 1 person.

Offers and invitations

(4)

A person must not:

(a)

make an offer, or cause an offer to be made on their behalf, if the person would contravene subsection (1) or (2) if the offer were accepted; or

(b)

issue an invitation, or cause an invitation to be issued on their behalf, if the person would contravene subsection (1) or (2) if:

(i)

an offer were made in response to the invitation; and

(ii)

the offer were accepted.

Defences

(5)

It is a defence to the prosecution of a person for contravening subsection (1), (2) or (4) if the person proves that they contravened the subsection:

(a)

because of inadvertence or mistake; or

(b)

because the person was not aware of a relevant fact or occurrence.

In determining whether the defence is available, disregard the person's ignorance of, or a mistake on the person's part concerning, a matter of law.

Extended meaning of acquiring relevant interests—conversions and increases in voting rights

(6)

A person is taken for the purposes of subsection (1) or (2) to acquire a relevant interest in voting shares in a company if:

(a)

securities in which the person already had a relevant interest become voting shares in the company; or

(b)

there is an increase in the number of votes that may be cast on a poll attached to voting shares that the person already had a relevant interest in.

The acquisition occurs when the securities become voting shares or the number of votes increases.

Note: Some examples of cases to which this subsection applies are:

* A person exercises a right to convert a non-voting preference share into an ordinary share that carries votes.
* A person pays up partly-paid shares with limited votes and this leads to an increase in the number of votes attached to the shares.

607 Effect on transactions

A transaction is not invalid merely because it involves a contravention of section 606.

608 Relevant interests in securities

Basic rule—relevant interest is holding, or controlling voting or disposal of, securities

(1)

A person has a relevant interest in securities if they:

(a)

are the holder of the securities; or

(b)

have power to exercise, or control the exercise of, a right to vote attached to the securities; or

(c)

have power to dispose of, or control the exercise of a power to dispose of, the securities.

It does not matter how remote the relevant interest is or how it arises. If 2 or more people can jointly exercise one of these powers, each of them is taken to have that power.

Extension to control exercisable through a trust, agreement or practice

(2)

In this section, power or control includes:

(a)

power or control that is indirect; and

(b)

power or control that is, or can be, exercised as a result of, by means of or by the revocation or breach of:

(i)

a trust; or

(ii)

an agreement; or

(iii)

a practice; or

(iv)

any combination of them;

whether or not they are enforceable; and

(c)

power or control that is, or can be made, subject to restraint or restriction.

It does not matter whether the power or control is express or implied, formal or informal, exercisable alone or jointly with someone else. It does not matter that the power or control cannot be related to a particular security.

Extension to relevant interests held through bodies corporate

(3)

A person has the relevant interests in any securities that any of the following has:

(a)

a body corporate, or managed investment scheme, in which the person's voting power is above 20%

(b)

a body corporate, or managed investment scheme, that the person controls.

Paragraph (a) does not apply to a relevant interest that the body corporate or scheme itself has in the securities merely because of the operation of that paragraph in relation to another body corporate or managed investment scheme.

(4)

For the purposes of paragraph (3)(b), a person controls a body corporate if the person has the capacity to determine the outcome of decisions about the body corporate's financial and operating policies.

(5)

In determining whether a person has this capacity:

(a)

the practical influence the person can exert (rather than the rights they can enforce) is the issue to be addressed; and

(b)

any practice or pattern of behaviour affecting the body corporate's financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).

(6)

The person does not control the body corporate merely because the person and an entity that is not an associate jointly have the capacity to determine the outcome of decisions about the body corporate's financial and operating policies.

(7)

A person is not to be taken to control a body corporate merely because of a capacity they have if they are under a legal obligation to exercise that capacity for the benefit of:

(a)

if the person is an individual—someone else; or

(b)

if the person is a body corporate—someone other than its members.

Extension to control in anticipation of performance of agreements etc.

(8)

If at a particular time all the following conditions are satisfied:

(a)

a person has a relevant interest in issued securities

(b)

the person (whether before or after acquiring the relevant interest):

(i)

has entered or enters into an agreement with another person with respect to the securities; or

(ii)

has given or gives another person an enforceable right, or has been or is given an enforceable right by another person, in relation to the securities (whether the right is enforceable presently or in the future and whether or not on the fulfilment of a condition); or

(iii)

has granted or grants an option to, or has been or is granted an option by, another person with respect to the securities

(c)

the other person would have a relevant interest in the securities if the agreement were performed, the right enforced or the option exercised;

the other person is taken to already have a relevant interest in the securities.

Note: Subsections 609(6) and (7) deal with specific situations in which the agreement will not give rise to a relevant interest.

Body corporate may have relevant interest in its own securities

(9)

This section may result in a body corporate having a relevant interest in its own securities.

609 Situations not giving rise to relevant interests

Money lending and financial accommodation

(1)

A person does not have a relevant interest in securities merely because of a mortgage, charge or other security taken for the purpose of a transaction entered into by the person if:

(a)

the mortgage, charge or security is taken or acquired in the ordinary course of the person's business of providing financial services and on ordinary commercial terms; and

(b)

the person whose property is subject to the mortgage, charge or security is not an associate of the person.

Note: Sections 11 to 17 define associate .

Nominees and other trustees

(2)

A person who would otherwise have a relevant interest in securities as a bare trustee does not have a relevant interest in the securities if a beneficiary under the trust has a relevant interest in the securities because of a presently enforceable and unconditional right of the kind referred to in subsection 608(8).

Note: This subsection will often apply to a person who holds securities as a nominee.

Holding of securities by securities dealer

(3)

A securities dealer does not have a relevant interest in securities merely because they hold securities on behalf of someone else in the ordinary course of their securities business.

Shares covered by buy-backs

(4)

A person does not have a relevant interest in a company's shares if the relevant interest would arise merely because the company has entered into an agreement to buy back the shares.

Proxies

(5)

A person does not have a relevant interest in securities merely because the person has been appointed to vote as a proxy or representative at a meeting of members, or of a class of members, of the company, body or managed investment scheme if:

(a)

the appointment is for one meeting only; and

(b)

neither the person nor any associate gives valuable consideration for the appointment.

Exchange traded options and futures contracts

(6)

A person does not have a relevant interest in securities merely because of:

(a)

an exchange traded option over the securities; or

(b)

a right to acquire the securities given by a futures contract.

This subsection stops applying to the relevant interest when the obligation to make or take delivery of the securities arises.

Note: Without this subsection, subsection 608(8) would create a relevant interest from the option or contract.

Conditional agreements

(7)

A person does not have a relevant interest in securities merely because of an agreement if the agreement:

(a)

is conditional on:

(i)

a resolution under item 7 in the table in section 611 being passed; or

(ii)

ASIC exempting the acquisition under the agreement from the provisions of this Chapter under section 655A; and

(b)

does not confer any control over, or power to substantially influence, the exercise of a voting right attached to the securities; and

(c)

does not restrict disposal of the securities for more than 3 months from the date when the agreement is entered into.

The person acquires a relevant interest in the securities when the condition referred to in paragraph (a) is satisfied.

Pre-emptive rights

(8)

A member of a company, body or managed investment scheme does not have a relevant interest in securities of the company, body or scheme merely because the company's, body's or scheme's constitution gives members pre-emptive rights on the transfer of the securities if all members have pre-emptive rights on the same terms.

Director of body corporate holding securities

(9)

A person does not have a relevant interest in securities merely because:

(a)

the person is a director of a body corporate; and

(b)

the body corporate has a relevant interest in those securities.

Prescribed exclusions

(10)

A person does not have a relevant interest in securities in the circumstances specified in the regulations. The regulations may provide that interests in securities are not relevant interests subject to specified conditions.

610 Voting power in a body corporate

Person's voting power in a body corporate

(1)

A person's voting power in a body corporate is:

where: