Commonwealth Consolidated Acts Commonwealth Consolidated Acts1 Part 1.5, the heading to Chapter 2 and Parts 2.1, 2.2, 2.3 and 2.4
Repeal the Parts and heading, substitute:
Part 1.5 -- Small business guide
This guide summarises the main rules in the Corporations Law that apply to proprietary companies limited by shares--the most common type of company used by small business. The guide gives a general overview of the Corporations Law as it applies to those companies and directs readers to the operative provisions in the Law.
The notes in square brackets at the end of paragraphs in the guide indicate the main provisions of the Corporations Law, the regulations made under the Law, and Australian Securities Commission Practice Notes that are relevant to the information in the paragraphs.
Other Commonwealth, State and Territory laws also impose obligations on proprietary companies and their operators.
1 What registration means
1 . 1 Separate legal entity that has its own powers
As far as the law is concerned, a company has a separate legal existence that is distinct from that of its owners, managers, operators, employees and agents. A company has its own property, its own rights and its own obligations. A company's money and other assets belong to the company and must be used for the company's purposes.
A company has the powers of an individual, including the powers to:
• own and dispose of property and other assets
• enter into contracts
• sue and be sued.
Once a company is registered, its separate legal status, property, rights and liabilities continue until the ASC (Australian Securities Commission) deregisters the company.
[sections 119, 124-125, 601AA-601AD]
1 . 2 Limited liability of shareholders
Shareholders of a company are not liable (in their capacity as shareholders) for the company's debts. As shareholders, their only obligation is to pay the company any amount unpaid on their shares if they are called upon to do so. However, particularly if a shareholder is also a director, this limitation may be affected by other laws and the commercial practices discussed in 1.3 and 1.4.
[section 516]
1 . 3 Director's liability for company's debts
A director of a company may be liable for debts incurred by the company at a time when the company itself is unable to pay those debts as they fall due.
A director of a company may be liable to compensate the company for any losses the company suffers from a breach of certain of the director's duties to the company (see 5.3).
In addition to having liability for the company's debts or to pay compensation to the company, a director may also be subject to a civil penalty.
If a company holds property on trust, a director of the company may be liable in some circumstances for liabilities incurred by the company as trustee.
[sections 232, 233, 344, 588G, 588J, 588M, 1317HA, 1317HD]
1 . 4 Director's liability as guarantor/security over personal assets
As a matter of commercial practice, a bank, trade creditor or anyone else providing finance or credit to a company may ask a director of the company:
• for a personal guarantee of the company's liabilities; and
• for some form of security over their house or personal assets to secure the performance by the company of its obligations.
The director of a company may, for example, be asked by a bank to give a mortgage over their house to secure the company's repayment of a loan. If the company does not repay the loan as agreed with the bank, the director may lose the house.
1 . 5 Continuous existence
A company continues to exist even if 1 or more of its shareholders or directors sells their shares, dies or leaves the company. If a company has only 1 shareholder who is also the only director of the company and that person dies, their personal representative is able to ensure that the company continues to operate.
[sections 119, 224A]
1 . 6 Rules for the internal management of a company
The Law contains a basic set of rules for the internal management of a company (appointments, meetings etc.).
Some of these rules are mandatory for all companies. There are a few special rules for single shareholder/single director companies.
Other internal management rules in the Law are replaceable rules. The replaceable rules do not apply to:
• a single shareholder/single director company; or
• a company that had a constitution before the introduction of the replaceable rules regime and has not repealed it.
A company does not need to have a separate constitution of its own; it can simply take advantage of the rules in the Law. The company will need a constitution only if it wants to displace, modify or add to the replaceable rules.
[sections 134-141, 224B]
1 . 7 How a company acts
A company does not have a physical existence. It must act through other people.
Individual directors, the company secretary, company employees or agents may be authorised to enter into contracts that bind the company (see 7).
In some circumstances, a company will be bound by something done by another person (see 1.8).
1 . 8 Directors
The directors of a company are responsible for managing the company's business. It is a replaceable rule (see 1.6) that generally the directors may exercise all the powers of the company except a power that the Law, a replaceable rule or a provision of the company's constitution (if any) requires the company to exercise in general meeting.
The only director of a company who is also the only shareholder is responsible for managing the company's business and may exercise all of the company's powers.
The Law sets out rules dealing with the calling and conduct of directors' meetings. Directors must keep a written record (minutes) of their resolutions and meetings.
There are 2 ways that directors may pass resolutions:
• at a meeting; or
• by having all of the directors record and sign their decision.
If a company has only 1 director, the sole director may also pass a resolution by recording and signing their decision.
[sections 224B, 226A, 248A-248G, 251A]
1 . 9 Shareholders
The shareholders of a company own the company, but the company has a separate legal existence and the company's assets belong to the company.
Shareholders can make decisions about the company by passing a resolution, usually at a meeting. A "special resolution" usually involves more important questions affecting the company as a whole or the rights of some or all of its shareholders.
There are 2 ways that shareholders may pass a resolution:
• at a meeting; or
• by having all of the shareholders record and sign their decision.
If a meeting is held, an ordinary resolution must be passed by a majority of the votes cast by shareholders of the company entitled to vote on the resolution at the meeting in person or by proxy (if proxies are allowed). A special resolution must be passed by at least 75% of the votes cast by shareholders of the company entitled to vote on the resolution and who vote at the meeting in person or by proxy (if proxies are allowed).
The sole shareholder of a company may pass a resolution by recording and signing their decision.
A company must keep a written record (minutes) of the members' resolutions and meetings.
[sections 9 ( special resolution ), 249A, 249B, 249L, 251A]
1 . 10 What others can assume about the company
Anyone who does any business with the company is entitled to assume that the company has a legal right to conduct that business unless the person knows, or suspects, otherwise. For example, an outsider dealing with the company is entitled to assume:
• that a person who is shown in a notice lodged with the ASC as being the director or company secretary of a company has been properly appointed and is authorised to act for the company; and
• that a person who is held out by the company to be a director, company secretary or agent of the company has been properly appointed and is authorised to act for the company.
[sections 128-130]
2 The company structure for small business
2 . 1 Proprietary company for small business
Generally, a proprietary company limited by shares is the most suitable company for use by small business. Such a proprietary company must have a least 1 shareholder but no more than 50 shareholders (not counting employee shareholders). It may have 1 or more directors.
[sections 112-113]
3 Setting up a new company
The operators of small businesses can either buy "shelf" companies or set up new companies themselves.
3 . 1 "Shelf" companies
The operator of a small business may find it more convenient to buy a "shelf" company (a company that has already been registered but has not traded) from businesses which set up companies for this purpose or from some legal or accounting firms.
3 . 2 Setting up a company
To set up a new company themselves, the operator must apply to the ASC for registration of the company.
A proprietary company limited by shares must have at least 1 shareholder.
To obtain registration, a person must lodge a properly completed application form with the ASC. The form must set out certain information including details of every person who has consented to be a shareholder, director or company secretary of the company.
The company comes into existence when the ASC registers it.
[sections 117-119, 135-136, 140]
3 . 3 ACN and name
When a company is registered, the ASC allocates to it a unique 9 digit number called the Australian Company Number (ACN). (For use of the ACN see 4.1).
In practice, a new company must have a name that is different from the name of a company that is already registered. A proprietary company limited by shares must have the words "Proprietary Limited" as part of its name. Those words can be abbreviated to "Pty Ltd".
A proprietary company may adopt its ACN as its name. If it does so, its name must also contain the words "Australian Company Number" (which can be abbreviated to "ACN"). For example, the company's name might be "ACN 123 456 789 Pty Ltd".
[sections 119, 147-161]
3 . 4 Contracts entered into before the company is registered
A company can ratify a contract entered into by someone on its behalf or for its benefit before it was registered. If the company does not ratify the contract, the person who entered into the contract may be personally liable.
[sections 131-133]
3 . 5 First shareholders, directors and company secretary
A person listed with their consent as a shareholder, director or company secretary in the application for registration of the company becomes a shareholder, director or company secretary of the company on its registration.
The same person may be both a director of the company and the company secretary.
See 5.1 and 5.2 for directors and 5.4 for company secretaries. See 6.1 for shareholders.
[section 120]
3 . 6 Issuing shares
It is a replaceable rule (see 1.6) that, before issuing new shares, a company must first offer them to the existing shareholders in the proportions that the shareholders already hold. A company may issue shares at a price it determines.
[sections 254B, 254D]
3 . 7 Registered office
A company must have a registered office in Australia and must inform the ASC of the location of the office. A post office box cannot be the registered office of a company. The purpose of the registered office is to have a place where all communications and notices to the company may be sent.
If the company does not occupy the premises where its registered office is located, the occupier of the premises must agree in writing to having the company's registered office located there.
A proprietary company is not required to open its registered office to the public but this does not affect its obligation to make documents available for inspection.
The company must notify the ASC of any change of address of its registered office.
[sections 100, 142, 143, 173, 1300]
3 . 8 Principal place of business
If a company has a principal place of business that is different to its registered office, it must notify the ASC of the address of its principal place of business and of any changes to that address.
[sections 117, 146]
3 . 9 Registers kept by the company
A company must keep registers, including a register of shareholders and a register of charges. A company must keep its registers at:
• the company's registered office; or
• the company's principal place of business; or
• a place (whether on premises of the company or of someone else) where the work in maintaining the register is done; or
• another place approved by the ASC.
A register may be kept either in a bound or looseleaf book or on computer.
If a register is kept on computer, its contents must be capable of being printed out in hard copy.
[sections 172, 1300-1302, 1306]
3 . 10 Register of shareholders
A company must keep in its register of shareholders such information as:
• the names and addresses of its shareholders; and
• details of shares held by individual shareholders.
[sections 168-169]
3 . 11 Register of charges
A company must keep a register of charges if the company gives a bank, trade creditor or anybody else a charge over company assets.
[section 271]
4 Continuing obligations after the company is set up
The Corporations Law and other laws impose obligations on companies themselves and on their directors and company secretaries. Some of the more important obligations imposed under the Corporations Law are discussed below.
4 . 1 Use of company name and ACN
The name of a company must be shown at all the company's business premises (including its registered office) that are open to the public. The company's name and its ACN must appear:
• on some of its public documents; and
• on its cheques and negotiable instruments; and
• on all documents lodged with the ASC; and
• if it has one, on its common seal.
[sections 123, 144, 147-156,
Australian Securities Commission Practice
Note 47]
4 . 2 Annual return
A company must lodge with the ASC an annual return which contains such information as:
• names and addresses of each director and company secretary; and
• issued shares and options granted; and
• details of its shareholders; and
• address of its registered office; and
• address of its principal place of business; and
• a statement that the directors have resolved in the last month that, in the directors' opinion, there are reasonable grounds to believe the company will be able to pay its debts as and when they become payable (but if the company has lodged an annual financial report with the ASC within the last 12 months, it does not need to include this statement).
An annual return may be lodged with the ASC on a printed form or, if an agreement is in place to lodge electronically, in accordance with the agreement.
The ASC may send a partially completed annual return to a company that wants to lodge its annual return on a printed form for the company to check, amend if necessary, verify and send back to the ASC. However, a company must lodge an annual return with the ASC even if the ASC does not send a partially completed annual return to the company.
[sections 345-348, 352]
4 . 3 Annual fee
A company must pay an annual fee to the ASC on lodgment of the annual return.
[Corporations (Fees) Regulations]
4 . 4 Notification to ASC of changes
The company must notify the ASC if certain basic changes to the company occur. The following table sets out these notification requirements.
|
Notification requirements |
|
|
|||
|
|
If . . . |
the company must notify the ASC of the change . . . |
using |
see |
|
|
1. |
a company issues shares |
within 1 month after the issue |
207 |
254X |
|
|
2. |
a company changes the location of a register |
within 7 days after the change |
909 |
172, 1302 |
|
|
3. |
a company changes the address of its registered office or principal place of business |
within 14 days after the change |
203 |
142, 146 |
|
|
4. |
a company changes its directors or company secretary |
within 14 days after the change |
304 |
242 |
|
|
5. |
there is a change in the name or address of the company's directors or secretary |
within 14 days after the change |
304 |
242 |
|
|
6. |
a company creates certain kinds of charges |
within 45 days after the charge is created |
309 |
263 |
|
5 Company directors and company secretaries
5 . 1 Who can be a director
Only an individual who is at least 18 years old can be a director. If a company has only 1 director, they must ordinarily reside in Australia. If a company has more than 1 director, at least 1 of the directors must ordinarily reside in Australia.
A director must consent in writing to holding the position of director. The company must keep the consent and must notify the ASC of the appointment.
In some circumstances, the Corporations Law imposes the duties and obligations of a director on a person who, although not formally appointed as a director of a company, nevertheless acts as a director or gives instructions to the formally appointed directors as to how they should act.
The Court or the ASC may prohibit a person from being a director or from otherwise being involved in the management of a company if, for example, the person has breached the Corporations Law.
A person needs the Court's permission to be a director if the person has been convicted of certain offences or is, in some circumstances, unable to pay their debts as they fall due.
Generally, a director may resign by giving notice of the resignation to the company. The company must notify the ASC of a director's resignation. A director who resigns may also notify the ASC of the resignation.
[sections 60, 221, 222A, 224, 228-230, 242, 242C, 599, 600, 1317EA(3)]
5 . 2 Appointment of new directors
It is a replaceable rule (see 1.6) that shareholders may appoint directors by resolution at a general meeting.
[section 224C]
5 . 3 Duties and liabilities of directors
In managing the business of a company (see 1.7), each of its directors is subject to a wide range of duties under the Corporations Law and other laws. Some of the more important duties are:
• to act in good faith
• to act in the best interests of the company
• to avoid conflicts between the interests of the company and the director's interests
• to act honestly
• to exercise care and diligence
• to prevent the company trading while it is unable to pay its debts
• if the company is being wound up--to report to the liquidator on the affairs of the company
• if the company is being wound up--to help the liquidator (by, for example, giving to the liquidator any records of the company that the director has).
A director who fails to perform their duties:
• may be guilty of a criminal offence with a penalty of $200,000 or imprisonment for up to 5 years, or both; and
• may contravene a civil penalty provision (and the Court may order the person to pay to the Commonwealth an amount of up to $200,000); and
• may be personally liable to compensate the company or others for any loss or damage they suffer; and
• may be prohibited from managing a company.
A director's obligations may continue even after the company has been deregistered.
[sections 232, 475, 530A, 588G, 596, 601AD, 601AH, 1317FA,
1317HA,
1317HB, 1317HD]
5 . 4 Company secretaries
A company must have a company secretary. The directors appoint the company secretary. A company secretary must be at least 18 years old. If a company has only 1 company secretary, they must ordinarily reside in Australia. If a company has more than 1 company secretary, at least 1 of them must ordinarily reside in Australia.
A company secretary must consent in writing to holding the position of company secretary. The company must keep the consent and must notify the ASC of the appointment.
The same person may be both a director of a company and the company secretary.
Generally, a company secretary may resign by giving written notice of the resignation to the company. The company must notify the ASC of a company secretary's resignation. A company secretary who resigns may also notify the ASC of the resignation.
The company secretary is an officer of the company and, in that capacity, may be subject to the requirements imposed by the Corporations Law on company officers. The company secretary has specific responsibilities under the Corporations Law, including responsibility for ensuring that the company notifies the ASC about changes to the identities, names and addresses of the company's directors and company secretaries and that the company lodges its annual return.
A company secretary's obligations may continue even after the company has been deregistered.
[sections 83, 142, 222A, 240, 242, 242C, 345, 601AD, 601AH]
A proprietary company limited by shares must have a share capital and at least 1 shareholder. The ASC may apply to a Court to have a company wound up if it does not have any shareholders.
[sections 461- 462]
6 . 1 Becoming a shareholder and ceasing to be a shareholder
A person may become a shareholder of a company in several ways, including the following:
• the person being listed as a shareholder of the company in the application for registration of the company
• the company issuing shares to the person
• the person buying shares in the company from an existing shareholder and the company registering the transfer.
Some of the ways in which a person ceases to be a shareholder are:
• the person sells all of their shares in the company and the company registers the transfer of the shares
• the company buys back all the person's shares
• the ASC cancels the company's registration.
[sections 117, 120, 601AA-601AD]
6 . 2 Classes of shares
A company may have different classes of shares. The rights and restrictions attached to the shares in a class distinguish it from other classes of shares.
[sections 254A-254B]
6 . 3 Meetings of shareholders
Directors have the power to call meetings of all shareholders or meetings of only those shareholders who hold a particular class of shares.
Shareholders who hold at least 5% of the votes which may be cast at a general meeting of a company have the power to call and hold a meeting themselves or to require the directors to call and hold a meeting. Meetings may be held regularly or to resolve specific questions about the management or business of the company.
The Law sets out rules dealing with shareholders' meetings.
A shareholder of a company may ask the company for a copy of the record of a meeting or of a decision of shareholders taken without a meeting.
[sections 249A-251B]
6 . 4 Voting rights
Different rights to vote at meetings of shareholders may attach to different classes of shares. It is a replaceable rule (see 1.6) that, subject to those different rights, each shareholder has 1 vote on a show of hands and, on a poll, 1 vote for each share held.
[sections 250E, 254A-254B]
6 . 5 Buying and selling shares
A shareholder may sell their shares but only if the sale would not breach the company's constitution (if any). It is a replaceable rule (see 1.6) that the directors have a discretion to refuse to register a transfer of shares.
[sections 1091D-1091E]
A company's power to sign, discharge and otherwise deal with contracts can be exercised by an individual acting with the company's authority and on its behalf. A company can deal with contracts without using a common seal.
A company may execute a document by having it signed by:
• 2 directors of the company; or
• a director and the company secretary; or
• for a company with a sole director who is also the sole secretary--that director.
If the document is to have effect as a deed, it should be expressed to be a deed.
[sections 126-127, 240]
A company is not required to have a common seal. If it does, the seal must show the company's name and its ACN. The seal is equivalent to the company's signature and may be used on important company documents such as mortgages.
[sections 123, 127(2)]
8 Funding the company's operations
The shareholders may fund the company's operations by lending money to the company or by taking up other shares in the company. Except if it is raising funds from its own employees or shareholders, a proprietary company must not engage in any fundraising activity that would require the company to lodge a prospectus with the ASC (for example, advertising in a newspaper inviting people to invest in the company).
The company may also borrow money from banks and other financial organisations.
Anyone who has lent money, or provided credit, to the company may ask for a mortgage or charge over the company's assets to secure the performance by the company of its obligations.
[sections 113, 124]
Shareholders can take money out of the company in a number of ways, but only if the company complies with its constitution (if any), the Corporations Law and all other relevant laws. If a company pays out money in a way that results in the company being unable to pay its debts as they fall due, its directors may be liable:
• to pay compensation; and
• for criminal and civil penalties.
[sections 588G, 1317FA, 1317HA, 1317HB, 1317HD]
9 . 1 Dividends
Dividends are payments to shareholders out of the company's after tax profits. It is a replaceable rule (see 1.6) that the directors decide whether the company should pay a dividend.
[sections 254T, 254U]
9 . 2 Buy-back of shares
A company can buy back shares from shareholders.
[sections 257A-257J]
9 . 4 Distribution of surplus assets on winding up
If a company is wound up and there are any assets left over after all the company's debts have been paid, the surplus is distributed to shareholders in accordance with the rights attaching to their shares.
10 Annual financial reports and audit
10 . 1 The small/large distinction
The accounting requirements imposed on a proprietary company under the Corporations Law depend on whether the company is classified as small or large. A company's classification can change from 1 financial year to another as its circumstances change.
A company is classified as small for a financial year if it satisfies at least 2 of the following tests:
• gross operating revenue of less than $10 million for the year
• gross assets of less than $5 million at the end of the year
• fewer than 50 employees at the end of the year.
A company that does not satisfy at least 2 of these tests is classified as large.
[section 45A]
As the great majority of proprietary companies are small under these tests, the discussion below deals mainly with the accounting requirements for small proprietary companies.
[sections 286-301]
10 . 2 Financial records
Under the Corporations Law, all proprietary companies must keep sufficient financial records to record and explain their transactions and financial position and to allow true and fair financial statements to be prepared and audited. Financial record here means some kind of systematic record of the company's financial transactions--not merely a collection of receipts, invoices, bank statements and cheque butts. Financial records may be kept on computer.
[sections 286-289]
10 . 3 Preparing annual financial reports and directors' reports
The Corporations Law requires a small proprietary company to prepare an annual financial report (an annual profit and loss statement, a balance sheet and a statement of cash flows) and a directors' report (about the company's operations, dividends paid or recommended, options issued etc.) if:
• the shareholders with at least 5% of the votes in the company direct it to do so; or
• the ASC directs it to do so.
Unless the shareholders' direction specifies otherwise, the company must prepare the annual financial report in accordance with the applicable accounting standards.
Although the Corporations Law itself may not require a small proprietary company to prepare a financial report except in the circumstances mentioned, the company may need to prepare the annual financial reports for the purposes of other laws (for example, income tax laws). Moreover, good business practice may also make it advisable for the company to prepare the financial reports so that it can monitor and better manage its financial position.
Large proprietary companies must prepare annual financial reports and a directors' report, have the financial report audited and send both reports to shareholders. They must also lodge the annual financial reports with the ASC unless exempted.
[sections 286-301, 319-320]
11 Disagreements within the company
11 . 1 Special problems faced by minority shareholders
There are remedies available to a shareholder of a company if:
• the affairs of the company are being conducted in a way that is unfair to that shareholder or to other shareholders of the company; or
• the affairs of the company are being conducted in a way that is against the interests of the company as a whole.
A Court may, for example, order the winding up of a company or the appointment of a receiver.
[sections 246AA, 461]
11 . 2 Buy-back of shares
A company may buy back the shares of a shareholder who wants to sever their relationship with the company.
[sections 257A-257J]
11 . 3 Selling shares
A shareholder in a company who wants to sever their relationship with the company may decide to sell their shares. However, the shareholder may not be able to sell their shares readily--particularly if they want to sell their shares to someone who is not an existing shareholder. Some of the difficulties they may face in that case are:
• under the replaceable rules the directors have a discretion to refuse to transfer the shares; and
• restrictions in the company's constitution (if any) on transferring shares.
[sections 995, 1018, 1091D-1091E]
12 Companies in financial trouble
12 . 1 Voluntary administration
If a company experiences financial problems, the directors may appoint an administrator to take over the operations of the company to see if the company's creditors and the company can work out a solution to the company's problems.
If the company's creditors and the company cannot agree, the company may be wound up (see 12.3).
[Part 5.3A]
12 . 2 Receivers
A receiver, or receiver and manager, may be appointed by order of a Court or under an agreement with a secured creditor to take over some or all of the assets of a company. Generally this would occur if the company is in financial difficulty. A receiver may be appointed, for example, because an amount owed to a secured creditor is overdue.
[Part 5.2]
12 . 3 Winding up and distribution
A company may be wound up by order of a Court, or voluntarily if the shareholders of the company pass a special resolution to do so.
A liquidator is appointed:
• when a Court orders a company to be wound up; or
• the shareholders of a company pass a resolution to wind up the company.
[Part 5.2, section 495]
12 . 4 Liquidators
A liquidator is appointed to administer the winding up of a company. The liquidator's main functions are:
• to take possession of the company's assets; and
• to determine debts owed by the company and pay the company's creditors; and
• to distribute to shareholders any assets of the company left over after paying creditors (any distribution to shareholders is made according to the rights attaching to their shares); and
• finally, to have the company deregistered.
[Parts 5.4B, 5.5]
12 . 5 Order of payment of debts
Generally, creditors who hold security over company assets are paid first.
[Division 6 of Part 5.6]
12 . 6 Cancellation of registration
If a company has ceased trading or has been wound up, it remains on the register until the ASC cancels the company's registration. Once a company is deregistered, it ceases to exist.
[sections 601AA-601AB, 601AH]
Chapter 2A -- Registering a company
Part 2A.1 -- What companies can be registered
Types of companies
(1) The following types of companies can be registered under this Law:
|
Proprietary companies |
Limited by shares |
|
|
Unlimited with share capital |
|
Public companies |
Limited by shares |
|
|
Limited by guarantee |
|
|
Unlimited with share capital |
|
|
No liability company |
Note: Other types of companies that were previously allowed continue to exist under section 1413.
No liability companies
(2) A company may be registered as a no liability company only if:
(a) the company has a share capital; and
(b) the company's constitution states that its sole objects are mining purposes; and
(c) the company has no contractual right under its constitution to recover calls made on its shares from a shareholder who fails to pay them.
Note 1: Section 9 defines mining purposes and minerals .
Note 2: Special provisions on no liability companies are found in the sections referred to in the following table:
|
No liability company provisions |
||
|
item |
topic |
sections |
|
1 |
names |
|
|
2 |
terms of issue of shares |
254B |
|
3 |
liability on partly-paid shares |
254M |
|
4 |
calls |
254P-254R |
|
5 |
winding up |
477-478, 483, 514 |
|
6 |
registering a body as a company |
610BA |
|
7 |
transitional |
1413 |
(3) A no liability company must not engage in activities that are outside its mining purposes objects.
(4) The directors of a no liability company must not:
(a) let the whole or proportion of a mine or claim on tribute; or
(b) make any contract for working any land on tribute;
unless:
(c) the letting or contract is approved by a special resolution; or
(d) no such letting or contract has been made within the period of 2 years immediately preceding the proposed letting or contract.
(5) An act or transaction is not invalid merely because of a contravention of subsection (3) or (4).
(1) A company must have no more than 50 non-employee shareholders if it is to:
(a) be registered as a proprietary company; or
(b) change to a proprietary company; or
(c) remain registered as a proprietary company.
Note: Proprietary companies have different financial reporting obligations depending on whether they are small proprietary companies or large proprietary companies (see section 45A and Part 2M.3).
(2) In applying subsection (1):
(a) count joint holders of a particular parcel of shares as 1 person; and
(b) an employee shareholder is:
(i) a shareholder who is an employee of the company or of a subsidiary of the company; or
(ii) a shareholder who was an employee of the company, or of a subsidiary of the company, when they became a shareholder.
(3) A proprietary company must not engage in any activity that would require the lodgment with the ASC of a prospectus under Part 7.12, except for an offer of its shares to:
(a) existing shareholders of the company; or
(b) employees of the company or of a subsidiary of the company.
(4) An act or transaction is not invalid merely because of a contravention of subsection (3).
Note: If a proprietary company contravenes this section, the ASC may require it to change to a public company (see section 165).
A company needs to have at least 1 member.
115 Restrictions on size of partnerships and associations
A person must not participate in the formation of a partnership or association which has as an object gain for itself or for any of its members and which either:
(a) has more than 20 members; or
(b) has more than the number of members it is allowed to have under an application order made by the Minister under Part 1.3;
unless the partnership or association is incorporated or formed under an Australian law.
Note: For the effect of a contravention of this section, see section 103.
116 Trade unions cannot be registered
A trade union cannot be registered under this Law.
Part 2A.2 -- How a company is registered
Lodging application
(1) To register a company, a person must lodge an application with the ASC.
Note: For the types of companies that can be registered, see section 112.
Contents of the application
(2) The application must state the following:
(a) the type of company that is proposed to be registered under the Corporations Law of this jurisdiction
(b) the company's proposed name (unless the ACN is to be used in its name)
(c) the name and address of each person who consents to become a member
(d) the present given and family name, all former given and family names and the date and place of birth of each person who consents in writing to become a director
(e) the present given and family name, all former given and family names and the date and place of birth of each person who consents in writing to become a company secretary
(f) the address of each person who consents in writing to become a director or company secretary
(g) the address of the company's proposed registered office
(h) for a public company--the proposed opening hours of its registered office (if they are not the standard opening hours)
(j) the address of the company's proposed principal place of business (if it is not the address of the proposed registered office)
(k) for a company limited by shares or an unlimited company--the following:
(i) the number, class and nominal value of the shares that each member referred to in paragraph (c) agrees in writing to take up
(ii) the amount (if any) paid, taken to be paid or due and payable on the issue of each share
(l) for a public company that is limited by shares or is an unlimited company, if shares will be issued for non-cash consideration--the prescribed particulars about the issue of the shares, unless the shares will be issued under a written contract and a copy of the contract is lodged with the application
(m) for a company limited by guarantee--the proposed amount of the guarantee that each member agrees to in writing.
Note 1: Paragraph (b)--sections 147 and 152 deal with the availability and reservation of names.
Note 2: Paragraph (f)--the address that must be stated is usually the residential address, although an alternative address can sometimes be stated instead (see section 242AA).
Note 3: Paragraph (g)--if the company is not to be the occupier of premises at the address of its registered office, the application must state that the occupier has consented to the address being specified in the application and has not withdrawn that consent (see section 100).
Note 4: Paragraph (h)--for standard opening hours , see section 9.
(3) If the company is to be a public company and is to have a constitution on registration, a copy of the constitution must be lodged with the application.
(4) The application must be in the prescribed form.
(5) An applicant must have the consents and agreements referred to in subsection (2) when the application is lodged. After the company is registered, the applicant must give the consents and agreements to the company. The company must keep the consents and agreements.
118 ASC gives company ACN, registers company and issues certificate
Registration
(1) If an application is lodged under section 117, the ASC may:
(a) give the company an ACN; and
(b) register the company; and
(c) issue a certificate that states:
(i) the company's name; and
(ii) the company's ACN; and
(iii) the company's type; and
(iv) that the company is registered as a company under the Corporations Law of this jurisdiction; and
(v) the date of registration.
Note: For the evidentiary value of a certificate of registration, see subsection 1274(7A).
ASC must keep record of registration
(2) The ASC must keep a record of the registration. Subsections 1274(2) and (5) apply to the record as if it were a document lodged with the ASC.
119 Company comes into existence on registration
A company comes into existence as a body corporate at the beginning of the day on which it is registered. The company's name is the name specified in the certificate of registration.
Note: The company remains in existence until it is deregistered (see Chapter 5A).
120 Members, directors and company secretary of a company
(1) A person becomes a member, director or company secretary of a company on registration if the person is specified in the application with their consent as a proposed member, director or company secretary of the company.
(2) The shares to be taken up by the members as specified in the application are taken to be issued to the members on registration of the company. The shares have the nominal value specified for them in the application.
Note: A member's name must be entered in the register of members (see section 169).
The address specified in the application for registration for the company's proposed registered office becomes the address of the company's registered office on registration.
122 Expenses incurred in promoting and setting up company
The expenses incurred before registration in promoting and setting up a company may be paid out of the company's assets.
123 Company may have common seal
(1) A company may have a common seal. If a company does have a common seal, the company must set out on it:
(a) for a company that has its ACN in its name--the company's name; or
(b) otherwise--the company's name, the expression "Australian Company Number" and the company's ACN.
Note 1: A company may make contracts and execute documents without using a seal (see sections 126 and 127).
Note 2: For abbreviations that can be used on a seal, see section 149.
(2) A company may have a duplicate common seal. The duplicate must be a copy of the common seal with the words "duplicate seal", "share seal" or "certificate seal" added.
(3) A person must not use, or authorise the use of, a seal that purports to be the common seal of a company or a duplicate if the seal does not comply with the requirements set out in subsection (1) or (2).
Chapter 2B -- Basic features of a company
Part 2B.1 -- Company powers and how they are exercised
124 Legal capacity and powers of a company
(1) A company has the legal capacity and powers of an individual both in and outside this jurisdiction. A company also has all the powers of a body corporate, including the power to:
(a) issue and cancel shares in the company
(b) issue debentures
(c) grant options over unissued shares in the company
(d) distribute any of the company's property among the members, in kind or otherwise
(e) give security by charging uncalled capital
(f) grant a floating charge over the company's property
(g) arrange for the company to be registered or recognised as a body corporate in any place outside this jurisdiction
(h) do anything that it is authorised to do by any other law (including a law of a foreign country).
A company limited by guarantee does not have the power to issue shares.
Note: For a company's power to issue bonus, partly-paid, preference and redeemable preference shares, see section 254A.
(2) A company's legal capacity to do something is not affected by the fact that the company's interests are not, or would not be, served by doing it.
125 Constitution may limit powers and set out objects
(1) If a company has a constitution, it may contain an express restriction on, or a prohibition of, the company's exercise of any of its powers. The exercise of a power by the company is not invalid merely because it is contrary to an express restriction or prohibition in the company's constitution.
(2) If a company has a constitution, it may set out the company's objects. An act of the company is not invalid merely because it is contrary to or beyond any objects in the company's constitution.
126 Agent exercising a company's power to make contracts
(1) A company's power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company's express or implied authority and on behalf of the company. The power may be exercised without using a common seal.
(2) This section does not affect the operation of a law that requires a particular procedure to be complied with in relation to the contract.
127 Execution of documents (including deeds) by the company itself
(1) A company may execute a document without using a common seal if the document is signed by:
(a) 2 directors of the company; or
(b) a director and a company secretary of the company; or
(c) for a proprietary company that has a sole director who is also the sole company secretary--that director.
Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(5) for dealings in relation to the company.
(2) A company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by:
(a) 2 directors of the company; or
(b) a director and a company secretary of the company; or
(c) for a proprietary company that has a sole director who is also the sole company secretary--that director.
Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(6) for dealings in relation to the company.
(3) A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2).
(4) This section does not limit the ways in which a company may execute a document (including a deed).
Part 2B.2 -- Assumptions people dealing with companies are entitled to make
128 Entitlement to make assumptions
(1) A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.
(2) A person is entitled to make the assumptions in section 129 in relation to dealings with another person who has, or purports to have, directly or indirectly acquired title to property from a company. The company and the other person are not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.
(3) The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings.
(4) A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect.
129 Assumptions that can be made under section 128
Constitution and replaceable rules complied with
(1) A person may assume that the company's constitution (if any), and any provisions of this Law that apply to the company as replaceable rules, have been complied with.
Director or company secretary
(2) A person may assume that anyone who appears, from information provided by the company that is available to the public from the ASC, to be a director or a company secretary of the company:
(a) has been duly appointed; and
(b) has authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary of a similar company.
Officer or agent
(3) A person may assume that anyone who is held out by the company to be an officer or agent of the company:
(a) has been duly appointed; and
(b) has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company.
Proper performance of duties
(4) A person may assume that the officers and agents of the company properly perform their duties to the company.
Document duly executed without seal
(5) A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1). For the purposes of making the assumption, a person may also assume that anyone who signs the document and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices.
Document duly executed with seal
(6) A person may assume that a document has been duly executed by the company if:
(a) the company's common seal appears to have been fixed to the document in accordance with subsection 127(2); and
(b) the fixing of the common seal appears to have been witnessed in accordance with that subsection.
For the purposes of making the assumption, a person may also assume that anyone who witnesses the fixing of the common seal and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices.
Officer or agent with authority to warrant that document is genuine or true copy
(7) A person may assume that an officer or agent of the company who has authority to issue a document or a certified copy of a document on its behalf also has authority to warrant that the document is genuine or is a true copy.
(8) Without limiting the generality of this section, the assumptions that may be made under this section apply for the purposes of this section.
130 Information available to the public from the ASC does not constitute constructive notice
(1) A person is not taken to have information about a company merely because the information is available to the public from the ASC.
(2) Subsection (1) does not apply in relation to a document that has been lodged with the ASC to the extent that the document relates to a charge that is registrable under this Law.
Part 2B.3 -- Contracts before registration
131 Contracts before registration
(1) If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit of, a company before it is registered, the company becomes bound by the contract and entitled to its benefit if the company, or a company that is reasonably identifiable with it, is registered and ratifies the contract:
(a) within the time agreed to by the parties to the contract; or
(b) if there is no agreed time--within a reasonable time after the contract is entered into.
(2) The person is liable to pay damages to each other party to the pre‑registration contract if the company is not registered, or the company is registered but does not ratify the contract or enter into a substitute for it:
(a) within the time agreed to by the parties to the contract; or
(b) if there is no agreed time--within a reasonable time after the contract is entered into.
The amount that the person is liable to pay to a party is the amount the company would be liable to pay to the party if the company had ratified the contract and then did not perform it at all.
(3) If proceedings are brought to recover damages under subsection (2) because the company is registered but does not ratify the pre‑registration contract or enter into a substitute for it, the court may do anything that it considers appropriate in the circumstances, including ordering the company to do 1 or more of the following:
(a) pay all or part of the damages that the person is liable to pay
(b) transfer property that the company received because of the contract to a party to the contract
(c) pay an amount to a party to the contract.
(4) If the company ratifies the pre-registration contract but fails to perform all or part of it, the court may order the person to pay all or part of the damages that the company is ordered to pay.
132 Person may be released from liability but is not entitled to indemnity
(1) A party to the pre-registration contract may release the person from all or part of their liability under section 131 to the party by signing a release.
(2) Despite any rule of law or equity, the person does not have any right of indemnity against the company in respect of the person's liability under this Part. This is so even if the person was acting, or purporting to act, as trustee for the company.
133 This Part replaces other rights and liabilities
This Part replaces any rights or liabilities anyone would otherwise have on the pre-registration contract.
Part 2B.4 -- Replaceable rules and constitution
134 Internal management of companies
A company's internal management may be governed by provisions of this Law that apply to the company as replaceable rules, by a constitution or by a combination of both.
Note: There are additional rules about internal management in ordinary provisions of this Law and also in the common law.
Companies to which replaceable rules apply
(1) A section or subsection (except subsection 129(1), this section and sections 140 and 141) whose heading contains the words:
(a) replaceable rule --applies as a replaceable rule to:
(i) each company that is registered after the commencement of this Part; and
(ii) any company registered before that commencement that repeals its constitution after that commencement; and
(b) replaceable rule for proprietary companies and mandatory rule for public companies --applies:
(i) as a replaceable rule to any proprietary company that is registered after the commencement of this Part; and
(ii) as a replaceable rule to any company that is registered after that commencement and that changes to a proprietary company (but only while it is a proprietary company); and
(iii) as a replaceable rule to any proprietary company registered before that commencement that repeals its constitution after that commencement; and
(iv) as an ordinary provision of this Law to any public company whenever registered.
The section or subsection does not apply to a proprietary company while the same person is both its sole director and sole shareholder.
Note 1: See section 224B for the special provisions that apply to a proprietary company while the same person is both its sole director and sole shareholder.
Note 2: A company may include in its constitution (by reference or otherwise) a replaceable rule that does not otherwise apply to it.
Company's constitution can displace or modify replaceable rules
(2) A provision of a section or subsection that applies to a company as a replaceable rule can be displaced or modified by the company's constitution.
Failure to comply with replaceable rules
(3) A failure to comply with the replaceable rules as they apply to a company is not of itself a contravention of this Law (so the provisions about criminal liability, civil liability and injunctions do not apply).
Note: Replaceable rules that apply to a company have effect as a contract (see section 140).
(1) A company adopts a constitution:
(a) on registration--if each person specified in the application for the company's registration as a person who consents to become a member agrees in writing to the terms of a constitution before the application is lodged; or
(b) after registration--if the company passes a special resolution adopting a constitution.
Note: The memorandum and articles of a company immediately before the commencement of this Part are taken together to make up the company's constitution after commencement (see section 1414).
(2) The company may modify or repeal its constitution, or a provision of its constitution, by special resolution.
(3) The company's constitution may provide that the special resolution does not have any effect unless a further requirement specified in the constitution relating to that modification or repeal has been complied with.
(4) Unless the constitution provides otherwise, the company may modify or repeal a further requirement described in subsection (3) only if the further requirement is itself complied with.
(5) A public company must lodge with the ASC a copy of a special resolution adopting, modifying or repealing its constitution within 14 days after it is passed. The company must also lodge with the ASC within that period:
(a) if the company adopts a constitution--a copy of that constitution; or
(b) if the company modifies its constitution--a copy of that modification.
This also applies to a proprietary company that has applied under Part 2B.7 to change to a public company, while its application has not yet been determined.
137 Date of effect of adoption, modification or repeal of constitution
(1) A special resolution adopting, modifying or repealing a company's constitution takes effect:
(a) if no later date is specified in the resolution--on the date on which the resolution is passed; or
(b) on a later date specified in, or determined in accordance with, the resolution.
(2) Subsection (1) does not apply to the date of effect of a special resolution passed in connection with a change of name, change of type or a variation or cancellation of class rights.
Note: For the date of effect of these changes, see subsection 157(3) (name), subsection 164(5) (type) and subsection 246D(3) and section 246E (class rights).
138 ASC may direct company to lodge consolidated constitution
The ASC may direct a company to lodge a consolidated copy of its constitution with the ASC.
139 Company must send copy of constitution to member
A company must send a copy of its constitution to a member of the company within 7 days if the member:
(a) asks the company, in writing, for the copy; and
(b) pays any fee (up to the prescribed amount) required by the company.
140 Effect of constitution and replaceable rules
(1) A company's constitution (if any) and any replaceable rules that apply to the company have effect as a contract:
(a) between the company and each member; and
(b) between the company and each director and company secretary; and
(c) between a member and each other member;
under which each person agrees to observe and perform the constitution and rules so far as they apply to that person.
(2) Unless a member of a company agrees in writing to be bound, they are not bound by a modification of the constitution made after the date on which they became a member so far as the modification:
(a) requires the member to take up additional shares; or
(b) increases the member's liability to contribute to the share capital of, or otherwise to pay money to, the company; or
(c) imposes or increases restrictions on the right to transfer the shares already held by the member, unless the modification is made:
(i) in connection with the company's change from a public company to a proprietary company under Part 2B.7; or
(ii) to insert takeover approval provisions of a kind referred to in section 671.
141 Table of replaceable rules
The following table sets out the provisions of this Law that apply as replaceable rules.
|
Provisions that apply as replaceable rules |
|
|
|
|
|
Directors Company may appoint a director |
|
|
|
2 |
Alternate directors |
225A |
|
|
3 |
Powers of directors |
226A |
|
|
4 |
Executing negotiable instruments |
226B |
|
|
5 |
Managing director |
226C |
|
|
6 |
Delegation to committees |
226D |
|
|
7 |
Proprietary company may remove director |
226E |
|
|
8 |
Director may resign by giving written notice to company |
227A |
|
|
9 |
Director interested in contract with proprietary company |
231(1A) |
|
|
10 |
Remuneration of directors |
236A |
|
|
|
Directors' meetings Circulating resolutions |
|
|
|
12 |
Calling directors' meetings |
248C |
|
|
13 |
Chairing directors' meetings |
248E |
|
|
14 |
Quorum at directors' meetings |
248F |
|
|
15 |
Passing of directors' resolutions |
248G |
|
|
|
Meetings of members Calling of meetings of members by a director |
|
|
|
17 |
Notice to joint members |
249J(2) |
|
|
18 |
When notice by post or fax is given |
249J(4) |
|
|
19 |
Notice of adjourned meetings |
249M |
|
|
20 |
Quorum |
249T |
|
|
21 |
Chairing meetings of members |
249U |
|
|
22 |
Business at adjourned meetings |
249W(2) |
|
|
23 |
Who can appoint a proxy [replaceable rule for proprietary companies only] |
249X |
|
|
24 |
Proxy vote valid even if member dies, revokes appointment etc. |
250C(2) |
|
|
25 |
How many votes a member has |
250E |
|
|
26 |
Jointly held shares |
250F |
|
|
27 |
Objection to right to vote |
250G |
|
|
28 |
How voting is carried out |
250J |
|
|
29 |
When and how polls must be taken |
250M |
|
|
|
Company secretary Terms of office determined by directors |
|
|
|
31 |
Inspection of books Company or directors may allow member to inspect books |
|
|
|
|
Shares Pre-emption for existing shareholders on issue of shares in proprietary company |
|
|
|
33 |
Other provisions about paying dividends |
254U |
|
|
34 |
Dividend rights for shares in proprietary companies |
254W(2) |
|
|
|
Transfer of shares Transmission of shares on death |
|
|
|
36 |
Transmission of shares on bankruptcy |
1091AB |
|
|
37 |
Transmission of shares on mental incapacity |
1091B |
|
|
38 |
Registration of transfers |
1091D |
|
|
39 |
Additional general discretion for directors of proprietary companies to refuse to register transfers |
1091E |
|
|
|
Share capital Capitalisation of profits |
|
|
Part 2B.5 -- Registered office and places of business
(1) A company must have a registered office in Australia. Communications and notices to the company may be addressed to its registered office.
Note: A document may be served on a company by leaving it at, or posting it to, the company's registered office (see subsection 109X(1)).
(2) A company must lodge notice of a change of address of its registered office with the ASC not later than 14 days after the date on which the change occurs. The notice must be in the prescribed form.
Note: If the company is not to be the occupier of premises at the address of its new registered office, the notice must state that the occupier has consented to the address being specified in the notice and has not withdrawn that consent (see section 100).
(3) A notice of change of address takes effect from the later of:
(a) the 7th day after the notice was lodged; or
(b) a later day specified in the notice as the date from which the change is to take effect.
143 ASC may change address of registered office to a director's address
(1) A company that does not occupy the premises at the address of its registered office must be able to show to the ASC the occupier's written consent to the company's use of those premises as its registered office.
Note: The ASC can require the company to produce the consent (see section 100).
(2) If the ASC becomes aware that the occupier of those premises:
(a) has not consented to the use of the premises as the address of the company's registered office; or
(b) has withdrawn the consent;
the ASC may give written notice to a director of the company who resides in Australia that the ASC intends to change the address of the company's registered office to the director's address.
(3) If the ASC is not notified of the address of the company's proposed new registered office under subsection 142(2) within 14 days after the notice under subsection (2) is sent, the ASC may change the address of the company's registered office to the director's address.
144 Company's name must be displayed at registered office etc.
(1) A company must display its name prominently at every place at which the company carries on business and that is open to the public.
(2) A public company must also display its name and the words "Registered Office" prominently at its registered office.
145 Opening hours of registered office of public company
(1) The registered office of a public company must be open to the public:
(a) each business day from at least 10 am to 12 noon and from at least 2 pm to 4 pm; or
(b) at least 3 hours chosen by the company between 9 am and 5 pm each business day.
(2) If the company chooses its own opening hours, the hours must be specified:
(a) if the company is to have its own opening hours from its registration--in the application for registration of the company under section 117; or
(b) if the company changes its opening hours after its registration--in the most recent notice of change of opening hours lodged with the ASC under subsection (3).
(3) The company must lodge notice of a change in the opening hours of its registered office with the ASC before the day on which a change occurs. The notice must be in the prescribed form.
146 Change of address of principal place of business
A company must lodge with the ASC notice of a change of the address of its principal place of business not later than 14 days after the date on which the change occurs. The notice must be in the prescribed form.
Division 1 -- Selecting and using a name
Name is available unless identical or unacceptable
(1) A name is available to a company unless the name is:
(a) identical (under rules set out in the regulations) to a name that is reserved or registered under this Law for another body; or
(b) identical (under rules set out in the regulations) to a name that is included on the national business names register in respect of another individual or body who is not the person applying to have the name; or
(c) unacceptable for registration under the regulations.
Minister may consent to a name being available to a company
(2) The Minister may consent in writing to a name being available to a company even if the name is:
(a) identical to a name that is reserved or registered under this Law for another body; or
(b) unacceptable for registration under the regulations.
(3) The Minister's consent may be given subject to conditions.
Note: If the company breaches a condition, the ASC may direct it to change its name under section 158.
Company may use available name or ACN
(1) A company may have as its name:
(a) an available name; or
(b) the expression "Australian Company Number" followed by the company's ACN.
The name must also include the words required by subsection (2) or (3).
Limited companies
(2) A limited public company must have the word "Limited" at the end of its name unless section 150 or 151 applies. A limited proprietary company must have the words "Proprietary Limited" at the end of its name.
Unlimited proprietary companies
(3) An unlimited proprietary company must have the word "Proprietary" at the end of its name.
No liability companies
(4) A no liability company must have the words "No Liability" at the end of its name.
Public companies with "Proprietary" included in their name
(5) A public company must not include the word "Proprietary" (or an abbreviation of it) in its name unless:
(a) it was a public company before the commencement of this section; and
(b) the word "Proprietary" (or an abbreviation of it) was included in its name before that commencement.
(1) The abbreviations set out in the following table may be used:
(a) instead of words that this Law requires to be part of a company's name or to be included in a document or on a company's common seal; and
(b) instead of words that are part of a company's name; and
(c) with or without full stops.
|
Acceptable abbreviations |
[operative table] |
|
|
|
Word |
Abbreviation |
|
1 |
Company |
Co or Coy |
|
2 |
Proprietary |
Pty |
|
3 |
Limited |
Ltd |
|
4 |
No Liability |
NL |
|
5 |
Australian |
Aust |
|
6 |
Number |
No |
|
7 |
and |
& |
|
8 |
Australian Company Number |
ACN |
(2) If a company's name includes any of these abbreviations, the word corresponding to the abbreviation may be used instead.
150 Exception to requirement for using "Limited" in name
(1) The ASC may register a company limited by guarantee without "Limited" in its name, or alter the registration of a company of that type by omitting "Limited" from its name, if its constitution:
(a) requires the company to pursue charitable purposes only and to apply its income in promoting those purposes; and
(b) prohibits the company making distributions to its members and paying fees to its directors; and
(c) requires the directors to approve all other payments the company makes to directors.
(2) The company must notify the ASC as soon as practicable if any of those requirements or prohibitions in its constitution are not complied with or if its constitution is modified to remove any of those requirements or prohibitions.
151 Exception to requirement for using "Limited" in name--
pre-existing licences
(1) A licence in force immediately before the commencement of this section that allowed a company to omit "Limited" from its name continues in force subject to subsection (3).
(2) The company must notify the ASC as soon as practicable if it:
(a) breaches a condition of the licence; or
(b) pursues objects or purposes that would have prevented it being granted the licence; or
(c) applies its profits or other income to promote objects or purposes that would have prevented it being granted the licence; or
(d) pays a dividend to its members; or
(e) modifies its constitution to allow it to do anything set out in paragraphs (a) to (d).
(3) The ASC may revoke the company's licence if the company does anything set out in paragraphs (2)(a) to (e).
(1) A person may lodge an application in the prescribed form with the ASC to reserve a name for a company. If the name is available, the ASC must reserve it.
Note: For available names, see section 147.
(2) The reservation lasts for 2 months from the date when the application was lodged. An applicant may ask the ASC in writing for an extension of the reservation during a period that the name is reserved, and the ASC may extend the reservation for 2 months.
(3) The ASC must cancel a reservation if the applicant asks the ASC in writing to do so.
153 Using a name and ACN on documents
(1) A company must set out its name on all its public documents and negotiable instruments.
(2) Subject to sections 154 and 155, if the company's ACN is not used in its name, the company must also set out with its name, or with 1 of the references to its name, the expression "Australian Company Number" followed by its ACN. If the company's name appears on 2 or more pages of the document or instrument, this must be done on the first of those pages.
Note 1: If a company has a common seal, its name and ACN must be set out on the seal (see section 123).
Note 2: A public company must display its name at its registered office. Every company must display its name at places at which the company carries on business and that are open to the public (see section 144).
Note 3: Section 149 provides that "ACN" is an acceptable abbreviation of "Australian Company Number".
154 Exception to requirement to have ACN on receipts
A company does not have to set out the expression "Australian Company Number" followed by its ACN on a receipt (for example, a cash register receipt) that sets out information recorded in the machine that produced the receipt.
155 Regulations may exempt from requirement to set out information on documents
The regulations may exempt a specified company, or a class of companies, from the requirement in subsection 153(2) to set out information on its public documents and negotiable instruments. The exemption may relate to specified documents or instruments, or a class of documents or instruments.
156 Carrying on business using "Limited", "No Liability" or "Proprietary" in name
A person must not carry on business under a name or title that:
(a) has the words "Limited" or "No Liability" (or an abbreviation of those words) at the end; or
(b) includes the word "Proprietary" (or an abbreviation of it);
unless allowed or required to do so under an Australian law.
Division 2 -- Changing a company's name
(1) If a company wants to change its name, it must:
(a) pass a special resolution adopting a new name; and
(b) lodge an application in the prescribed form with the ASC.
Note: The company may reserve a name before the resolution is passed or the application is lodged (see section 152).
(2) The company must lodge a copy of the special resolution with the ASC within 14 days after it is passed.
(3) If the proposed name is available, the ASC must change the company's name by altering the details of the company's registration to reflect the change. The change of name takes effect when the ASC alters the details of the company's registration.
Note: For available names, see section 147.
158 ASC's power to direct company to change its name
(1) The ASC may direct a company in writing to change its name within 2 months if:
(a) the name should not have been registered; or
(b) the company has breached a condition under subsection 147(3) on the availability of the name.
(2) The company must comply with the direction within 2 months after being given it by doing everything necessary to change its name under section 157.
(3) If the company does not comply with subsection (2), the ASC may change the company's name to its ACN and any other words that section 148 requires, by altering the details of the company's registration to reflect the change.
(4) A change of name under subsection (3) takes effect when the ASC alters the details of the company's registration.
159 ASC's power to include "Limited" in company's name
(1) The ASC may change a company's name so that it includes the word "Limited" by altering the details of the company's registration to reflect the change if:
(a) the company contravenes any of the requirements or prohibitions in its constitution referred to in subsection 150(1); or
(b) the company modifies its constitution to remove any of those requirements or prohibitions; or
(c) the ASC revokes a licence referred to in section 151 that applies to the company.
(2) The change of name takes effect when the ASC alters the details of the company's registration.
160 ASC must issue new certificate if company's name changes
If the ASC changes a company's name, it must give the company a new certificate of registration. The company's new name is the name specified in the certificate of registration issued under this section.
Note: For the evidentiary value of a certificate of registration, see subsection 1274(7A).
(1) A change of company name does not:
(a) create a new legal entity; or
(b) affect the company's existing property, rights or obligations; or
(c) render defective any legal proceedings by or against the company.
(2) Any legal proceedings that could have been continued or begun by or against the company in its former name may be continued or begun by or against it in its new name.
Part 2B.7 Changing company type
(1) A company may change to a company of a different type as set out in the following table by:
(a) passing a special resolution resolving to change its type; and
(b) complying with sections 163 and 164.
|
Allowed conversions |
[operative table] |
|
|
|
This type of company may change. . . |
. . . to this type of company |
|
1 |
proprietary company limited by shares |
unlimited proprietary company unlimited public company public company limited by shares |
|
2 |
unlimited proprietary company |
proprietary company limited by shares (but only if, within the last 3 years, it was not a limited company that became an unlimited company) public company limited by shares (but only if, within the last 3 years, it was not a limited company that became an unlimited company) unlimited public company |
|
3 |
public company limited by shares |
unlimited public company unlimited proprietary company proprietary company limited by shares no liability company (see subsection (2)) |
|
4 |
company limited by guarantee |
public company limited by shares unlimited public company proprietary company limited by shares unlimited proprietary company |
|
5 |
unlimited public company |
public company limited by shares (but only if, within the last 3 years, it was not a limited company that became an unlimited company) proprietary company limited by shares (but only if, within the last 3 years, it was not a limited company that became an unlimited company) unlimited proprietary company |
|
6 |
public no liability company |
public company limited by shares (but only if all the issued shares are fully paid up) proprietary company limited by shares (but only if all the issued shares are fully paid up) |
Note 1: A public company seeking to change to a proprietary company must comply with the requirements for proprietary companies set out in section 113.
Note 2: Other types of companies that were previously allowed can change type under section 1416.
(2) A public company limited by shares may only convert to a no liability company if:
(a) the company's constitution states that its sole objects are mining purposes; and
(b) under the constitution the company has no contractual right to recover calls made on its shares from a shareholder who fails to pay them; and
(c) all the company's issued shares are fully paid up.
Note: Section 9 defines mining purposes and minerals .
(3) The company must lodge a copy of the special resolution with the ASC within 14 days after it is passed.
Unlimited company changing to limited company--resolution may deal with uncalled share capital and nominal value
(4) A special resolution to change an unlimited company that has share capital to a company limited by shares may also do either or both of the following:
(a) provide that a specified portion of its uncalled share capital may only be called up if the company is wound up
(b) increase the nominal value of each of its shares.
Any increase in nominal value may only be called up if the company is wound up.
163 Applying for change of type
Lodging application
(1) To change its type, a company must lodge an application with the ASC.
Contents of the application
(2) The application must be accompanied by the following:
(a) a copy of:
(i) the special resolution that resolves to change the type of the company, specifies the new type and the company's new name (if a change of name is necessary); and
(ii) any other special resolution passed in connection with the change of type
(b) for a company limited by guarantee changing to a company limited by shares:
(i) a statement signed by the directors of the company that in their opinion the company's creditors are not likely to be materially prejudiced by the change of type and that sets out their reasons for that opinion; and
(ii) any special resolution dealing with an issue of shares according to section 167
(c) for a company limited by shares or a company limited by guarantee changing to an unlimited company:
(i) an assent to the change of type in the prescribed form signed by all the members of the company; and
(ii) a statement signed by a director or a company secretary of the company that all the members of the company have signed the assent
(d) for a proprietary company changing to a public company:
(i) a consolidated copy of the company's constitution (if any) as at the date of lodgment; and
(ii) a copy of each document (including an agreement or consent) or resolution that is necessary to ascertain the rights attached to issued or unissued shares of the company.
Note 1: The company must lodge a copy of any special resolution modifying its constitution passed after the application is lodged (see subsection 136(5)).
Note 2: The company must lodge information relating to any change of rights attached to its shares, or any division or conversion of its shares into new classes, occurring after the application is lodged (see section 246F).
Company limited by guarantee to company limited by shares
(3) If shares will be issued to persons under paragraph 166(2)(c) on the change of type from a company limited by guarantee to a company limited by shares, the application must state:
(a) that the company has prepared a list that sets out the following details about each person to whom the shares will be issued and about the shares:
(i) name and address
(ii) the number, class and nominal value of the shares the person will take up
(iii) the amount (if any) paid, taken to be paid or due and payable on the issue of the shares; and
(b) the number, class and nominal value of the shares those persons will take up; and
(c) the amount (if any) paid, taken to be paid or due and payable on the issue of the shares
(d) if the shares will be issued for non-cash consideration--the prescribed particulars about the issue of the shares, unless the shares will be issued under a written contract and a copy of the contract is lodged with the application; and
(e) that each of those persons who is not a member of the company when the application is made consents in writing to the inclusion in the list of the details about them that are referred to in paragraph (a).
The shares may be issued to existing members only, to new members only or to existing and new members.
Note: An offer of shares associated with a proposed change of type may be subject to the prospectus provisions (see section 1018).
(4) The application must be in the prescribed form.
(5) The company must have the consents referred to in paragraph (3)(e) (if any) when the application is lodged. The company must keep the consents.
164 ASC changes type of company
(1) The ASC must give notice under subsection (3) that it intends to alter the details of the company's registration if:
(a) the ASC is satisfied that:
(i) the application complies with section 163; and
(ii) for an application by a company limited by guarantee to change to a company limited by shares--the company's creditors are not likely to be materially prejudiced by the change; and
(b) for an application by a company limited by guarantee to change to a company limited by shares that is accompanied by a copy of a special resolution dealing with an issue of shares according to section 167--the ASC is not of the opinion that the obligations that would attach to the shares are unreasonable compared with the obligations that attach to membership of the company limited by guarantee.
(2) To make a decision under subparagraph (1)(a)(ii), the ASC may direct the company in writing to:
(a) notify some or all of its creditors of the proposed change in the way the ASC specifies; and
(b) invite those creditors to make submissions to the ASC.
(3) The notice that the ASC intends to alter the details of the company's registration must be:
(a) included on the ASC database; and
(b) published in the Gazette .
The notice must also state that the ASC will alter the details of the company's registration 1 month after the notice has been published in the Gazette unless an order by a court or the Administrative Appeals Tribunal prevents it from doing so.
(4) Subject to an order made by a court or the Administrative Appeals Tribunal within that month, after that month has passed the ASC must alter the details of the company's registration to reflect the company's new type.
(5) A change of type under this section takes effect when the ASC alters the details of the company's registration. Despite subsection 246D(3) and section 246E, a special resolution passed in connection with the change of type also takes effect when the ASC alters the details of the company's registration.
(6) The ASC must give the company a new certificate of registration after it alters the details of the company's registration. The company's name is the name specified in the certificate of registration issued under this section.
Note: For the evidentiary value of a certificate of registration, see subsection 1274(7A).
(7) If the ASC alters the details of a company's registration under subsection (4), a court is not to make an order reversing the alteration of the details of the company's registration.
Note: The Administrative Appeals Tribunal cannot review the change of the company's type once the ASC has issued a new certificate of registration to the company (see subsection 1274(7A) and paragraph 1317C(b)).
165 ASC may direct a proprietary company to change to a public company in certain circumstances
(1) The ASC may direct a proprietary company in writing to change to a public company within 2 months if it is satisfied that the company has contravened section 113 (requirements for proprietary companies).
(2) The company must comply with the direction within 2 months after being given it by doing everything necessary to change to a public company under section 164.
(3) If a proprietary company does not comply with subsection (2), the ASC may change the company from a proprietary to a public company by altering the details of the company's registration to reflect the company's new type.
(4) A change of type under this section takes effect when the ASC alters the details of the company's registration.
(5) The ASC must give the company a new certificate of registration after it alters the details of the company's registration under subsection (3). The company's name is the name specified in the certificate of registration issued under this section.
Note: For the evidentiary value of a certificate of registration, see subsection 1274(7A).
(1) A change of type does not:
(a) create a new legal entity; or
(b) affect the company's existing property, rights or obligations (except as against the members of the company in their capacity as members); or
(c) render defective any legal proceedings by or against the company or its members.
(2) On the change of type of a company from a company limited by guarantee to a company limited by shares:
(a) the liability of each member and past member as a guarantor on the winding up of the company is extinguished; and
(b) the members cease to be members of the company; and
(c) if shares are to be issued to a person as specified in the list referred to in subsection 163(3):
(i) the shares are taken to be issued to that person; and
(ii) the person is taken to have consented to be a member of the company; and
(iii) the person becomes a member of the company.
Note: The company must maintain a register of members that complies with subsection 169(3).
(1) If:
(a) a company limited by guarantee changes type under this Part to a company limited by shares; and
(b) that company, or another company that beneficially owns all the shares in that company, issues shares to a person who was a member of that company immediately before the change of type took effect;
the person becomes a member of the company issuing the shares if:
(c) the issue of the shares is in accordance with the special resolution that accompanied the application to change type under subparagraph 163(2)(a)(ii); and
(d) the shares are fully paid up; and
(e) the business, assets and liabilities of the issuing company (together with its subsidiaries) when the shares are issued are substantially the same as the business, assets and liabilities of the company changing type (together with its subsidiaries) immediately before the change of type took effect.
(2) If shares are issued according to this section, a court is not to make an order reversing the issue of the shares.
2 Part 3.1
Repeal the Part.
3 Part 3.3
Repeal the Part.
4 Before Part 3.5
Insert:
Chapter 2F -- Members' rights and remedies
A person is a member of a company if they:
(a) are a member of the company on its registration; or
(b) agree to become a member of the company after its registration and their name is entered on the register of members; or
(c) become a member of the company under section 167 (membership arising from conversion of a company from one limited by guarantee to one limited by shares).
246B Varying and cancelling class rights
If constitution sets out procedure
(1) If a company has a constitution that sets out the procedure for varying or cancelling:
(a) for a company with a share capital--rights attached to shares in a class of shares; or
(b) for a company without a share capital--rights of members in a class of members;
those rights may be varied or cancelled only in accordance with the procedure. The procedure may be changed only if the procedure itself is complied with.
If constitution does not set out procedure
(2) If a company does not have a constitution, or has a constitution that does not set out the procedure for varying or cancelling:
(a) for a company with a share capital--rights attached to shares in a class of shares; or
(b) for a company without a share capital--rights of members in a class of members;
those rights may be varied or cancelled only by special resolution of the company and:
(c) by special resolution passed at a meeting:
(i) for a company with a share capital of the class of members holding shares in the class; or
(ii) for a company without a share capital of the class of members whose rights are being varied or cancelled; or
(d) with the written consent of members with at least 75% of the votes in the class.
(3) The company must give written notice of the variation or cancellation to the members of the class within 7 days after the variation or cancellation is made.
246C Certain actions taken to vary rights etc.
Company with share capital
(1) If the shares in a class of shares in a company are divided into further classes, and after the division the rights attached to all of those shares are not the same:
(a) the division is taken to vary the rights attached to every share that was in the class existing before the division; and
(b) members who hold shares to which the same rights are attached after the division form a separate class.
(2) If the rights attached to some of the shares in a class of shares in a company are varied:
(a) the variation is taken to vary the rights attached to every other share that was in the class existing before the variation; and
(b) members who hold shares to which the same rights are attached after the variation form a separate class.
Company without share capital
(3) If the members in a class of members in a company without share capital are divided into further classes of members, and after the division the rights of all of those members are not the same:
(a) the division is taken to vary the rights of every member who was in the class existing before the division; and
(b) members who have the same rights after the division form a separate class.
(4) If the rights of some of the members in a class of members in a company without a share capital are varied:
(a) the variation is taken to vary the rights of every other member who was in the class existing before the variation; and
(b) members who have the same rights after the variation form a separate class.
Company with 1 class of shares issuing new class of shares
(5) If a company with 1 class of shares issues new shares, the issue is taken to vary the rights attached to shares already issued if:
(a) the rights attaching to the new shares are not the same as the rights attached to shares already issued; and
(b) those rights are not provided for in:
(i) the company's constitution (if any); or
(ii) a notice, document or resolution that is lodged with the ASC.
(6) If a company issues new preference shares that rank equally with existing preference shares, the issue is taken to vary the rights attached to the existing preference shares unless the issue is authorised by:
(a) the terms of issue of the existing preference shares; or
(b) the company's constitution (if any) as in force when the existing preference shares were issued.
246D Variation, cancellation or modification without unanimous support of class
(1) If members in a class do not all agree (whether by resolution or written consent) to:
(a) a variation or cancellation of their rights; or
(b) a modification of the company's constitution (if any) to allow their rights to be varied or cancelled;
members with at least 10% of the votes in the class may apply to the Court to have the variation, cancellation or modification set aside.
(2) An application may only be made within 1 month after the variation, cancellation or modification is made.
(3) The variation, cancellation or modification takes effect:
(a) if no application is made to the Court to have it set aside--1 month after the variation, cancellation or modification is made; or
(b) if an application is made to the Court to have it set aside--when the application is withdrawn or finally determined.
(4) The members of the class who want to have the variation, cancellation or modification set aside may appoint 1 or more of themselves to make the application on their behalf. The appointment must be in writing.
(5) The Court may set aside the variation, cancellation or modification if it is satisfied that it would unfairly prejudice the applicants. However, the Court must confirm the variation, cancellation or modification if the Court is not satisfied of unfair prejudice.
(6) Within 14 days after the Court makes an order, the company must lodge a copy of it with the ASC.
246E Variation, cancellation or modification with unanimous support of class
If the members in a class all agree (whether by resolution or written consent) to the variation, cancellation or modification, it takes effect:
(a) if no later date is specified in the resolution or consent--on the date of the resolution or consent; or
(b) on a later date specified in the resolution or consent.
246F Company must lodge documents and resolutions with the ASC
(1) A company must lodge with the ASC a notice in the prescribed form setting out particulars of any of the following:
(a) a division of shares in the company into classes if the shares were not previously so divided
(b) a conversion of shares in a class of shares in the company into shares in another class.
(2) The notice must be lodged within 14 days after the division or conversion.
(3) A public company must lodge with the ASC a copy of each document (including an agreement or consent) or resolution that:
(a) does any of the following:
(i) attaches rights to issued or unissued shares
(ii) varies or cancels rights attaching to issued or unissued shares
(iii) varies or cancels rights of members in a class of members of a company that does not have a share capital
(iv) binds a class of members; and
(b) is not already lodged with the ASC.
This also applies to a proprietary company that has applied under Part 2B.7 to change to a public company, while its application has not yet been determined .
(4) The document must be lodged within 14 days after it is made. The resolution must be lodged within 14 days after it is passed.
246G Member's copies of documents and resolutions
(1) A member of a company may ask the company in writing for a copy of a document or resolution referred to in section 246F. The company must send the copy to the member.
(2) If the company requires the member to pay for the copy, the company must send it:
(a) within 7 days after the company receives the payment; or
(b) within any longer period approved by the ASC.
(3) The amount of any payment the company requires cannot exceed the prescribed amount.
(4) If the company does not require payment for the copy, the company must send it:
(a) within 7 days after the member asks for it; or
(b) within any longer period approved by the ASC.
Part 2F.3 -- Inspection of books
247A Order for inspection of books of company or registered managed investment scheme
(1) On application by a member of a company or registered managed investment scheme, the Court may make an order:
(a) authorising the applicant to inspect books of the company or scheme; or
(b) authorising another person (whether a member or not) to inspect books of the company or scheme on the applicant's behalf.
The Court may only make the order if it is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose.
(2) A person authorised to inspect books may make copies of the books unless the Court orders otherwise.
If the Court makes an order under section 247A, the Court may make any other orders it considers appropriate, including either or both of the following:
(a) an order limiting the use that a person who inspects books may make of information obtained during the inspection
(b) an order limiting the right of a person who inspects books to make copies in accordance with subsection 247A(2).
247C Disclosure of information acquired in inspection
A person who inspects books on behalf of an applicant under section 247A must not disclose information obtained during the inspection unless the disclosure is to:
(a) the ASC; or
(b) the applicant.
247D Company or directors may allow member to inspect books (replaceable rule see section 135)
The directors of a company, or the company by a resolution passed at a general meeting, may authorise a member to inspect books of the company.
Part 2G.1 -- Directors' meetings
Division 1 -- Resolutions and declarations without meetings
248A Circulating resolutions of companies with more than 1 director (replaceable rule see section 135)
Resolutions
(1) The directors of a company may pass a resolution without a directors' meeting being held if all the directors entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document.
Copies
(2) Separate copies of a document may be used for signing by directors if the wording of the resolution and statement is identical in each copy.
When the resolution is passed
(3) The resolution is passed when the last director signs.
Note: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A).
248B Resolutions and declarations of 1 director proprietary companies
Resolutions
(1) The director of a proprietary company that has only 1 director may pass a resolution by recording it and signing the record.
Declarations
(2) The director of a proprietary company that has only 1 director may make a declaration by recording it and signing the record. Recording and signing the declaration satisfies any requirement in this Law that the declaration be made at a directors' meeting.
Note 1: For directors' declarations, see sections 231, 295 and 494.
Note 2: Passage of a resolution or the making of a declaration under this section must be recorded in the company's minute books (see section 251A).
Division 2 -- Directors' meetings
248C Calling directors' meetings (replaceable rule see section 135)
A directors' meeting may be called by a director giving reasonable notice individually to every other director.
Note: A director who has appointed an alternate director may ask for the notice to be sent to the alternate director (see section 225A).
A directors' meeting may be called or held using any technology consented to by all the directors. The consent may be a standing one. A director may only withdraw their consent within a reasonable period before the meeting.
248E Chairing directors' meetings (replaceable rule see section 135)
(1) The directors may elect a director to chair their meetings. The directors may determine the period for which the director is to be the chair.
(2) The directors must elect a director present to chair a meeting, or part of it, if:
(a) a director has not already been elected to chair the meeting; or
(b) a previously elected chair is not available or declines to act, for the meeting or the part of the meeting.
248F Quorum at directors' meetings (replaceable rule see section 135)
Unless the directors determine otherwise, the quorum for a directors' meeting is 2 directors and the quorum must be present at all times during the meeting.
Note 1: For special quorum rules for public companies, see sections 232A and 232B.
Note 2: For resolutions of 1 director proprietary companies without meetings, see section 248B.
248G Passing of directors' resolutions (replaceable rule see section 135)
(1) A resolution of the directors must be passed by a majority of the votes cast by directors entitled to vote on the resolution.
(2) The chair has a casting vote if necessary in addition to any vote they have in their capacity as a director.
Note: The chair may be precluded from voting, for example, by a conflict of interest.
Part 2G.2 -- Meetings of members of companies
Division 1 -- Resolutions without meetings
249A Circulating resolutions of proprietary companies with more than 1 member
(1) This section applies to resolutions of the members of proprietary companies that this Law or, if a company has a constitution, the company's constitution requires or permits to be passed at a general meeting. It does not apply to a resolution under section 329 to remove an auditor.
(2) A company may pass a resolution without a general meeting being held if all the members entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document. If a share is held jointly, each of the joint members must sign.
(3) Separate copies of a document may be used for signing by members if the wording of the resolution and statement is identical in each copy.
(4) The resolution is passed when the last member signs.
(5) A company that passes a resolution under this section without holding a meeting satisfies any requirement in this Law:
(a) to give members information or a document relating to the resolution--by giving members that information or document with the document to be signed; and
(b) to lodge with the ASC a copy of a notice of meeting to consider the resolution--by lodging a copy of the document to be signed by members; and
(c) to lodge a copy of a document that accompanies a notice of meeting to consider the resolution--by lodging a copy of the information or documents referred to in paragraph (a).
(6) The passage of the resolution satisfies any requirement in this Law, or a company's constitution (if any), that the resolution be passed at a general meeting.
(7) This section does not affect any rule of law relating to the assent of members not given at a general meeting.
Note 1: A body corporate representative may sign a circulating resolution (see section 250D).
Note 2: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A).
249B Resolutions of 1 member companies
(1) A company that has only 1 member may pass a resolution by the member recording it and signing the record.
(2) If this Law requires information or a document relating to the resolution to be lodged with the ASC, that requirement is satisfied by lodging the information or document with the resolution that is passed.
Note 1: A body corporate representative may sign such a resolution (see section 250D).
Note 2: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A).
Division 2 -- Who may call meetings of members
249C Calling of meetings of members by a director (replaceable rule--see section 135)
A director may call a meeting of the company's members.
249CA Calling of meetings of members of a listed company by a director
(1) A director may call a meeting of the company's members.
(2) This section applies only to a company that is:
(a) incorporated in Australia; and
(b) included in an official list of the Exchange.
(3) This section applies despite anything in the company's constitution.
249D Calling of general meeting by directors when requested by members
(1) The directors of a company must call and arrange to hold a general meeting on the request of:
(a) members with at least 5% of the votes that may be cast at the general meeting; or
(b) at least 100 members who are entitled to vote at the general meeting.
(2) The request must:
(a) be in writing; and
(b) state any resolution to be proposed at the meeting; and
(c) be signed by the members making the request; and
(d) be given to the company.
(3) Separate copies of a document setting out the request may be used for signing by members if the wording of the request is identical in each copy.
(4) The percentage of votes that members have is to be worked out as at the midnight before the request is given to the company.
(5) The directors must call the meeting within 21 days after the request is given to the company. The meeting is to be held not later than 2 months after the request is given to the company.
249E Failure of directors to call general meeting
(1) Members with more than 50% of the votes of all of the members who make a request under section 249D may call and arrange to hold a general meeting if the directors do not do so within 21 days after the request is given to the company.
(2) The meeting must be called in the same way--so far as is possible--in which general meetings of the company may be called. The meeting must be held not later than 3 months after the request is given to the company.
(3) To call the meeting the members requesting the meeting may ask the company under section 173 for a copy of the register of members. Despite paragraph 173(3)(b), the company must give the members the copy of the register without charge.
(4) The company must pay the reasonable expenses the members incurred because the directors failed to call and arrange to hold the meeting.
(5) The company may recover the amount of the expenses from the directors. However, a director is not liable for the amount if they prove that they took all reasonable steps to cause the directors to comply with section 249D. The directors who are liable are jointly and individually liable for the amount. If a director who is liable for the amount does not reimburse the company, the company must deduct the amount from any sum payable as fees to, or remuneration of, the director.
249F Calling of general meetings by members
(1) Members with at least 5% of the votes that may be cast at a general meeting of the company may call, and arrange to hold, a general meeting. The members calling the meeting must pay the expenses of calling and holding the meeting.
(2) The meeting must be called in the same way--so far as is possible--in which general meetings of the company may be called.
(3) The percentage of votes that members have is to be worked out as at the midnight before the meeting is called.
249G Calling of meetings of members by the Court
(1) The Court may order a meeting of the company's members to be called if it is impracticable to call the meeting in any other way.
(2) The Court may make the order on application by:
(a) any director; or
(b) any member who would be entitled to vote at the meeting.
Note: For the directions the Court may give for calling, holding or conducting a meeting it has ordered be called, see section 1319.
Division 3 -- How to call meetings of members
249H Amount of notice of meetings
General rule
(1) Subject to subsection (2), at least 21 days notice must be given of a meeting of a company's members. However, if a company has a constitution, it may specify a longer minimum period of notice.
Calling meetings on shorter notice
(2) A company may call on shorter notice:
(a) an AGM, if all the members entitled to attend and vote at the AGM agree beforehand; and
(b) any other general meeting, if members with at least 95% of the votes that may be cast at the meeting agree beforehand.
A company cannot call an AGM or other general meeting on shorter notice if it is a meeting of the kind referred to in subsection (3) or (4).
Shorter notice not allowed--removing or appointing director
(3) At least 21 days notice must be given of a meeting of the members of a public company at which a resolution will be moved to:
(a) remove a director under section 227; or
(b) appoint a director in place of a director removed under that section; or
(c) to appoint or reappoint as a director under subsection 228(7) or (8)--a person who has attained the age of 72 years.
Shorter notice not allowed--removing auditor
(4) At least 21 days notice must be given of a meeting of a company at which a resolution will be moved to remove an auditor under section 329.
249HA Amount of notice of meetings of listed company
(1) Despite section 249H, at least 28 days notice must be given of a meeting of a company's members.
(2) This section applies only to a company that is:
(a) incorporated in Australia; and
(b) included in an official list of the Exchange.
(3) This section applies despite anything in the company's constitution.
249J Notice of meetings of members to members and directors
Notice to members and directors individually
(1) Written notice of a meeting of a company's members must be given individually to each member entitled to vote at the meeting and to each director. If a share is held jointly, notice need only be given to 1 of the members.
Notice to joint members (replaceable rule--see section 135)
(2) Notice to joint members must be given to the joint member named first in the register of members.
How notice is given
(3) A company may give the notice of meeting to a member:
(a) personally; or
(b) by sending it by post to the address for the member in the register of members or the alternative address (if any) nominated by the member; or
(c) by sending it to the fax number or electronic address (if any) nominated by the member; or
(d) by any other means that the company's constitution (if any) permits.
Note: A defect in the
notice given may not invalidate a meeting (see
section 1322).
When notice by post or fax is given (replaceable rule--see section 135)
(4) A notice of meeting sent by post is taken to be given 3 days after it is posted. A notice of meeting sent by fax, or other electronic means, is taken to be given on the business day after it is sent.
249K Auditor entitled to notice and other communications
A company must give its auditor:
(a) notice of a general meeting in the same way that a member of the company is entitled to receive notice; and
(b) any other communications relating to the general meeting that a member of the company is entitled to receive.
Note 1: For when a company must have an auditor, see Part 2M.3.
Note 2: An auditor may appoint a representative to attend a meeting (see subsection 249V(4)).
249L Contents of notice of meetings of members
A notice of a meeting of a company's members must:
(a) set out the place, date and time for the meeting (and, if the meeting is to be held in 2 or more places, the technology that will be used to facilitate this); and
(b) state the general nature of the meeting's business; and
(c) if a special resolution is to be proposed at the meeting--set out an intention to propose the special resolution and state the resolution; and
(d) if a member is entitled to appoint a proxy--contain a statement setting out the following information:
(i) that the member has a right to appoint a proxy
(ii) whether or not the proxy needs to be a member of the company
(iii) that a member who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise.
Note: There may be other requirements for disclosure to members.
249M Notice of adjourned meetings (replaceable rule--see section 135)
When a meeting is adjourned, new notice of the resumed meeting must be given if the meeting is adjourned for 1 month or more.
Division 4 -- Members' rights to put resolutions etc. at general meetings
(1) The following members may give a company notice of a resolution that they propose to move at a general meeting:
(a) members with at least 5% of the votes that may be cast on the resolution; or
(b) at least 100 members who are entitled to vote at a general meeting.
(2) The notice must:
(a) be in writing; and:
(b) set out the wording of the proposed resolution; and
(c) be signed by the members proposing to move the resolution.
(3) Separate copies of a document setting out the notice may be used for signing by members if the wording of the notice is identical in each copy.
(4) The percentage of votes that members have is to be worked out as at the midnight before the members give the notice.
249O Company giving notice of members' resolutions
(1) If a company has been given notice of a resolution under section 249N, the resolution is to be considered at the next general meeting that occurs more than 2 months after the notice is given.
(2) The company must give all its members notice of the resolution at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a meeting.
(3) The company is responsible for the cost of giving members notice of the resolution if the company receives the notice in time to send it out to members with the notice of meeting.
(4) The members requesting the meeting are jointly and individually liable for the expenses reasonably incurred by the company in giving members notice of the resolution if the company does not receive the members' notice in time to send it out with the notice of meeting. At a general meeting, the company may resolve to meet the expenses itself.
(5) The company need not give notice of the resolution:
(a) if it is more than 1,000 words long or defamatory; or
(b) if the members making the request are to bear the expenses of sending the notice out--unless the members give the company a sum reasonably sufficient to meet the expenses that it will reasonably incur in giving the notice.
249P Members' statements to be distributed
(1) Members may request a company to give to all its members a statement provided by the members making the request about:
(a) a resolution that is proposed to be moved at a general meeting; or
(b) any other matter that may be properly considered at a general meeting.
(2) The request must be made by:
(a) members with at least 5% of the votes that may be cast on the resolution; or
(b) at least 100 members who are entitled to vote at the meeting.
(3) The request must be:
(a) in writing; and
(b) signed by the members making the request; and
(c) given to the company.
(4) Separate copies of a document setting out the request may be used for signing by members if the wording of the request is identical in each copy.
(5) The percentage of votes that members have is to be worked out as at the midnight before the request is given to the company.
(6) After receiving the request, the company must distribute to all its members a copy of the statement at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a general meeting.
(7) The company is responsible for the cost of making the distribution if the company receives the statement in time to send it out to members with the notice of meeting.
(8) The members making the request are jointly and individually liable for the expenses reasonably incurred by the company in making the distribution if the company does not receive the statement in time to send it out with the notice of meeting. At a general meeting, the company may resolve to meet the expenses itself.
(9) The company need not comply with the request:
(a) if the statement is more than 1,000 words long or defamatory; or
(b) if the members making the request are responsible for the expenses of the distribution--unless the members give the company a sum reasonably sufficient to meet the expenses that it will reasonably incur in making the distribution.
Division 5 -- Holding meetings of members
A meeting of a company's members must be held for a proper purpose.
249R Time and place for meetings of members
A meeting of a company's members must be held at a reasonable time and place.
A company may hold a meeting of its members at 2 or more venues using any technology that gives the members as a whole a reasonable opportunity to participate.
Note: See section 1322 for the consequences of a member not being given a reasonable opportunity to participate.
249T Quorum (replaceable rule--see section 135)
(1) The quorum for a meeting of a company's members is 2 members and the quorum must be present at all times during the meeting.
Note: For single member companies, see section 249B.
(2) In determining whether a quorum is present, count individuals attending as proxies or body corporate representatives. However, if a member has appointed more than 1 proxy or representative, count only 1 of them. If an individual is attending both as a member and as a proxy or body corporate representative, count them only once.
Note 1: For rights to appoint proxies, see section 249X.
Note 2: For body corporate representatives, see section 250D.
(3) A meeting of the company's members that does not have a quorum present within 30 minutes after the time for the meeting set out in the notice of meeting is adjourned to the date, time and place the directors specify. If the directors do not specify 1 or more of those things, the meeting is adjourned to:
(a) if the date is not specified--the same day in the next week; and
(b) if the time is not specified--the same time; and
(c) if the place is not specified--the same place.
(4) If no quorum is present at the resumed meeting within
30 minutes
after the time for the meeting, the meeting is dissolved.
249U Chairing meetings of members (replaceable rule--see section 135)
(1) The directors may elect an individual to chair meetings of the company's members.
(2) The directors at a meeting of the company's members must elect an individual present to chair the meeting (or part of it) if an individual has not already been elected by the directors to chair it or, having been elected, is not available to chair it, or declines to act, for the meeting (or part of the meeting).
(3) The members at a meeting of the company's members must elect a member present to chair the meeting (or part of it) if:
(a) a chair has not previously been elected by the directors to chair the meeting; or
(b) a previously elected chair is not available, or declines to act, for the meeting (or part of the meeting).
(4) The chair must adjourn a meeting of the company's members if the members present with a majority of votes at the meeting agree or direct that the chair must do so.
249V Auditor's right to be heard at general meetings
(1) A company's auditor is entitled to attend any general meeting of the company.
(2) The auditor is entitled to be heard at the meeting on any part of the business of the meeting that concerns the auditor in their capacity as auditor.
(3) The auditor is entitled to be heard even if:
(a) the auditor retires at the meeting; or
(b) the meeting passes a resolution to remove the auditor from office.
(4) The auditor may authorise a person in writing as their representative for the purpose of attending and speaking at any general meeting.
Note 1: At an AGM, members may ask the auditor questions (see section 250T).
Note 2: For when a company must have an auditor, see Part 2M.3.
When resolution passed
(1) A resolution passed at a meeting resumed after an adjournment is passed on the day it was passed.
Business at adjourned meetings (replaceable rule--see section 135)
(2) Only unfinished business is to be transacted at a meeting resumed after an adjournment
Division 6 -- Proxies and body corporate representatives
249X Who can appoint a proxy (replaceable rule for proprietary companies and mandatory rule for public companies--see section 135)
(1) A member of a company who is entitled to attend and cast a vote at a meeting of the company's members may appoint a person as the member's proxy to attend and vote for the member at the meeting.
(2) The appointment may specify the proportion or number of votes that the proxy may exercise.
(3) Each member may appoint a proxy. If the member is entitled to cast 2 or more votes at the meeting, they may appoint 2 proxies. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member's votes each proxy may exercise, each proxy may exercise half of the votes.
(4) Disregard any fractions of votes resulting from the application of subsection (2) or (3).
Rights of proxies
(1) A proxy appointed to attend and vote for a member has the same rights as the member:
(a) to speak at the meeting; and
(b) to vote (but only to the extent allowed by the appointment); and
(c) join in a demand for a poll.
Proxy's right to vote
(2) If a company has a constitution, the constitution may provide that a proxy is not entitled to vote on a show of hands.
Note: Even if the proxy is not entitled to vote on a show of hands, they may make or join in the demand for a poll.
Effect of member's presence on proxy's authority
(3) A company's constitution (if any) may provide for the effect that a member's presence at a meeting has on the authority of a proxy appointed to attend and vote for the member. However, if the constitution does not deal with this, a proxy's authority to speak and vote for a member at a meeting is suspended while the member is present at the meeting.
249Z Company sending appointment forms or lists of proxies must send to all members
If a company sends a member a proxy appointment form for a meeting or a list of persons willing to act as proxies at a meeting:
(a) if the member requested the form or list--the company must send the form or list to all members who ask for it and who are entitled to appoint a proxy to attend and vote at the meeting; or
(b) otherwise--the company must send the form or list to all its members entitled to appoint a proxy to attend and vote at the meeting.
(1) An appointment of a proxy is valid if it is signed by the member of the company making the appointment and contains the following information:
(a) the member's name and address
(b) the company's name
(c) the proxy's name or the name of the office held by the proxy
(d) the meetings at which the appointment may be used.
An appointment may be a standing one.
(2) If a company has a constitution, the constitution may provide that an appointment is valid even if it contains only some of the information required by subsection (1).
(3) An undated appointment is taken to have been dated on the day it is given to the company.
(4) An appointment may specify the way the proxy is to vote on a particular resolution. If it does:
(a) the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way; and
(b) if the proxy has 2 or more appointments that specify different ways to vote on the resolution--the proxy must not vote on a show of hands; and
(c) if the proxy is the chair--the proxy must vote on a poll, and must vote that way; and
(d) if the proxy is not the chair--the proxy need not vote on a poll, but if the proxy does so, the proxy must vote that way.
If a proxy is also a member, this subsection does not affect the way that the person can cast any votes they hold as a member.
Note: A company's constitution may provide that a proxy is not entitled to vote on a show of hands (see subsection 249Y(2)).
(5) A person who contravenes subsection (4) is guilty of an offence, but only if their appointment as a proxy resulted from the company sending to members:
(a) a list of persons willing to act as proxies; or
(b) a proxy appointment form holding the person out as being willing to act as a proxy.
(6) An appointment does not have to be witnessed.
(7) A later appointment revokes an earlier one if both appointments could not be validly exercised at the meeting.
Documents to be received by company before meeting
(1) For an appointment of a proxy for a meeting of a company's members to be effective, the following documents must be received by the company at least 48 hours before the meeting:
(a) the proxy's appointment
(b) if the appointment is signed by the appointor's attorney--the authority under which the appointment was signed or a certified copy of the authority.
Documents received following adjournment of meeting
(2) If a meeting of a company's members has been adjourned, an appointment and any authority received by the company at least 48 hours before the resumption of the meeting are effective for the resumed part of the meeting.
Receipt of documents
(3) A company receives an appointment authority when it is received at any of the following:
(a) the company's registered office
(b) a fax number at the company's registered office
(c) a place, fax number or electronic address specified for the purpose in the notice of meeting.
Constitution or notice of meeting may provide for different notification period
(5) The company's constitution (if any) or the notice of meeting may reduce the period of 48 hours referred to in subsection (1) or (2).
250BA Proxy documents--listed companies
(1) In a notice of meeting for a meeting of the members of a company, the company:
(a) must specify a place and a fax number; and
(b) may specify an electronic address;
for the purposes of receipt of proxy appointments.
(2) This section applies only to a company that is:
(a) incorporated in Australia; and
(b) included in an official list of the Exchange.
(3) This section applies despite anything in the company's constitution.
Proxy vote valid even if proxy cannot vote as member
(1) A proxy who is not entitled to vote on a resolution as a member may vote as a proxy for another member who can vote if their appointment specifies the way they are to vote on the resolution and they vote that way.
Proxy vote valid even if member dies, revokes appointment etc. (replaceable rule--see section 135)
(2) Unless the company has received written notice of the matter before the start or resumption of the meeting at which a proxy votes, a vote cast by the proxy will be valid even if, before the proxy votes:
(a) the appointing member dies; or
(b) the member is mentally incapacitated; or
(c) the member revokes the proxy's appointment; or
(d) the member revokes the authority under which the proxy was appointed by a third party; or
(e) the member transfers the share in respect of which the proxy was given.
Note: A proxy's authority to vote is suspended while the member is present at the meeting (see subsection 249Y(3)).
250D Body corporate representative
(1) A body corporate may appoint an individual as a representative to exercise all or any of the powers the body corporate may exercise:
(a) at meetings of a company's members; or
(b) at meetings of creditors or debenture holders; or
(c) relating to resolutions to be passed without meetings.
The appointment may be a standing one.
(2) The appointment may set out restrictions on the representative's powers. If the appointment is to be by reference to a position held, the appointment must identify the position.
(3) A body corporate may appoint more than 1 representative but only 1 representative may exercise the body's powers at any one time.
(4) Unless otherwise specified in the appointment, the representative may exercise, on the body corporate's behalf, all of the powers that the body could exercise at a meeting or in voting on a resolution.
Note: For resolutions of members without meetings, see sections 249A and 249B .
Division 7 -- Voting at meetings of members
250E How many votes a member has (replaceable rule--see section 135)
Company with share capital
(1) Subject to any rights or restrictions attached to any class of shares, at a meeting of members of a company with a share capital:
(a) on a show of hands, each member has 1 vote; and
(b) on a poll, each member has 1 vote for each share they hold.
Note: Unless otherwise specified in the appointment, a body corporate representative has all the powers that a body corporate has as a member (including the power to vote on a show of hands).
Company without share capital
(2) Each member of a company that does not have a share capital has 1 vote, both on a show of hands and a poll.
Chair's casting vote
(3) The chair has a casting vote, and also, if they are a member, any vote they have in their capacity as a member.
Note 1: The chair may be precluded from voting, for example, by a conflict of interest.
Note 2: For rights to appoint proxies, see section 249X.
250F Jointly held shares (replaceable rule--see section 135)
If a share is held jointly and more than 1 member votes in respect of that share, only the vote of the member whose name appears first in the register of members counts.
250G Objections to right to vote (replaceable rule--see section 135)
A challenge to a right to vote at a meeting of a company's members:
(a) may only be made at the meeting; and
(b) must be determined by the chair, whose decision is final.
250H Votes need not all be cast in the same way
On a poll a person voting who is entitled to 2 or more votes:
(a) need not cast all their votes; and
(b) may cast their votes in different ways.
Note: For proxy appointments that specify the way the proxy is to vote on a particular resolution, see subsection 250A(4).
250J How voting is carried out (replaceable rule--see section 135)
(1) A resolution put to the vote at a meeting of a company's members must be decided on a show of hands unless a poll is demanded.
(1A) Before a vote is taken the chair must inform the meeting whether any proxy votes have been received and how the proxy votes are to be cast.
(2) On a show of hands, a declaration by the chair is conclusive evidence of the result, provided that the declaration reflects the show of hands and the votes of the proxies received. Neither the chair nor the minutes need to state the number or proportion of the votes recorded in favour or against.
Note: Even though the chair's declaration is conclusive of the voting results, the members present may demand a poll (see paragraph 250L(3)(c)).
250K Matters on which a poll may be demanded
(1) A poll may be demanded on any resolution.
(2) If a company has a constitution, the constitution may provide that a poll cannot be demanded on any resolution concerning:
(a) the election of the chair of a meeting; or
(b) the adjournment of a meeting.
(3) A demand for a poll may be withdrawn.
250L When a poll is effectively demanded
(1) At a meeting of a company's members, a poll may be demanded by:
(a) at least 5 members entitled to vote on the resolution; or
(b) members with at least 5% of the votes that may be cast on the resolution on a poll; or
(c) the chair.
Note: A proxy may join in the demand for a poll (see paragraph 249Y(1)(c)).
(2) If a company has a constitution, the constitution may provide that fewer members or members with a lesser percentage of votes may demand a poll.
(3) The poll may be demanded:
(a) before a vote is taken; or
(b) before the voting results on a show of hands are declared; or
(c) immediately after the voting results on a show of hands are declared.
(4) The percentage of votes that members have is to be worked out as at the midnight before the poll is demanded.
250M When and how polls must be taken (replaceable rule--see section 135)
(1) A poll demanded on a matter other than the election of a chair or the question of an adjournment must be taken when and in the manner the chair directs.
(2) A poll on the election of a chair or on the question of an adjournment must be taken immediately.
Division 8 -- AGMs of public companies
250N Public company must hold AGM
(1) A public company must hold an annual general meeting ( AGM ) within 18 months after its registration.
(2) A public company must hold an AGM at least once in each calendar year and within 5 months after the end of its financial year.
Note: An AGM held to
satisfy this subsection may also satisfy
subsection (1).
(3) An AGM is to be held in addition to any other meetings held by a public company in the year.
Note 1: The company's annual financial report, directors' report and auditor's report must be laid before the AGM (see section 317).
Note 2: The rules in sections 249C-250M apply to an AGM.
(4) A public company that has only 1 member is not required to hold an AGM under this section.
250P Extension of time for holding AGM
(1) A public company may lodge an application with the ASC to extend the period within which section 250N requires the company to hold an AGM.
(2) If the company applies before the end of the period within which the company would otherwise be required to hold an AGM, the ASC may extend the period in writing. The ASC must specify the period of the extension.
(3) A company granted an extension under subsection (2) must hold its AGM within the extended period.
(4) The ASC may impose conditions on the extension and the company must comply with those conditions.
The business of an AGM may include any of the following, even if not referred to in the notice of meeting:
(a) the consideration of the annual financial report, directors' report and auditor's report
(b) the election of directors
(c) the appointment of the auditor
(d) the fixing of the auditor's remuneration.
250S Questions and comments by members on company management at AGM
The chair of an AGM must allow a reasonable opportunity for the members as a whole at the meeting to ask questions about or make comments on the management of the company.
250T Questions by members of auditors at AGM
If the company's auditor or their representative is at the meeting, the chair of an AGM must allow a reasonable opportunity for the members as a whole at the meeting to ask the auditor or their representative questions relevant to the conduct of the audit and the preparation and content of the auditor's report.
Part 2G.3 -- Minutes and members' access to minutes
(1) A company must keep minute books in which it records within 1 month:
(a) proceedings and resolutions of meetings of the company's members; and
(b) proceedings and resolutions of directors' meetings (including meetings of a committee of directors); and
(c) resolutions passed by members without a meeting; and
(d) resolutions passed by directors without a meeting; and
(e) if the company is a proprietary company with only 1 director--the making of declarations by the director.
Note: For resolutions and declarations without meetings, see sections 248A, 248B, 249A and 249B.
(2) The company must ensure that minutes of a meeting are signed within a reasonable time after the meeting by 1 of the following:
(a) the chair of the meeting
(b) the chair of the next meeting.
(3) The company must ensure that minutes of the passing of a resolution without a meeting are signed by a director within a reasonable time after the resolution is passed.
(4) The director of a proprietary company with only 1 director must sign the minutes of the making of a declaration by the director within a reasonable time after the declaration is made.
(5) A company must keep its minute books at:
(a) its registered office; or
(b) its principal place of business in Australia; or
(c) another place approved by the ASC.
(6) A minute that is so recorded and signed is evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved.
251AA Disclosure of proxy votes--listed companies
(1) A company must record in the minutes of a meeting, in respect of each resolution in the notice of meeting, the total number of proxy votes exercisable by all proxies validly appointed and:
(a) if the resolution is decided by a show of hands--the total number of proxy votes in respect of which the appointments specified that:
(i) the proxy is to vote for the resolution; and
(ii) the proxy is to vote against the resolution; and
(iii) the proxy is to abstain on the resolution; and
(iv) the proxy may vote at the proxy's discretion; and
(b) if the resolution is decided on a poll--the information specified in paragraph (a) and the total number of votes cast on the poll:
(i) in favour of the resolution; and
(ii) against the resolution; and
(iii) abstaining on the resolution.
(2) A company that must notify the Exchange of a resolution passed by members at a meeting of the company must, at the same time, give the Exchange the information specified in subsection (1).
(3) This section applies only to a company that is:
(a) incorporated in Australia; and
(b) included in an official list of the Exchange.
(4) This section applies despite anything in the company's constitution.
251B Members' access to minutes
(1) A company must ensure that the minute books for the meetings of its members and for resolutions of members passed without meetings are open for inspection by members free of charge.
(2) A member of a company may ask the company in writing for a copy of:
(a) any minutes of a meeting of the company's members or an extract of the minutes; or
(b) any minutes of a resolution passed by members without a meeting.
(3) If the company does not require the member to pay for the copy, the company must send it:
(a) within 14 days after the member asks for it; or
(b) within any longer period that the ASC approves.
(4) If the company requires payment for the copy, the company must send it:
(a) within 14 days after the company receives the payment; or
(b) within any longer period that the ASC approves.
The amount of any payment the company requires cannot exceed the prescribed amount.
Part 2G.4 -- Meetings of members of registered managed investment schemes
Division 1 -- Who may call meetings of members
252A Calling of meetings of members by responsible entity
The responsible entity of a registered scheme may call a meeting of the scheme's members.
252B Calling of meetings of members by responsible entity when requested by members
(1) The responsible entity of a registered scheme must call and arrange to hold a meeting of the scheme's members to consider and vote on a proposed special or extraordinary resolution on the request of:
(a) members with at least 5% of the votes that may be cast on the resolution; or
(b) at least 100 members who are entitled to vote on the resolution.
(2) The request must:
(a) be in writing; and
(b) state any resolution to be proposed at the meeting; and
(c) be signed by the members proposing to move the resolution.
(3) The request may be accompanied by a statement about the proposed resolution provided by the members making the request.
(4) Separate copies of a document setting out the request and statement (if any) may be used for signing by members if the wording of the request and statement (if any) is identical in each copy.
(5) The percentage of the votes that members have is to be worked out as at the midnight before the request is given to the responsible entity.
(6) The responsible entity must call the meeting within 21 days after the request is given to it. The meeting is to be held not later than 2 months after the request is given to the responsible entity.
(7) The responsible entity must give to each of the members a copy of the proposed resolution and statement (if any) at the same time, or as soon as practicable afterwards, as it gives notice of the meeting. The responsible entity must distribute the copies in the same way in which it gives notice of the meeting.
(8) The responsible entity does not have to distribute a copy of the resolution or statement if either is more than 1,000 words long or defamatory.
(9) The responsible entity is responsible for the expenses of calling and holding the meeting and making the distribution. The responsible entity may meet those expenses from the scheme's assets.
252C Failure of responsible entity to call meeting of the scheme's members
(1) Members with more than 50% of the votes carried by interests held by the members who make a request under section 252B may call and arrange to hold a meeting of the scheme's members and distribute the statement (if any) if the responsible entity does not do so within 21 days after the request is given to the responsible entity.
(2) The meeting must be called and the statement is to be distributed in the same way--so far as is possible--in which meetings of the scheme's members may be called by the responsible entity and information is distributed to members by the responsible entity. The meeting must be held not later than 3 months after the request is given to the responsible entity.
(3) To call the meeting the members requesting the meeting may ask the responsible entity under section 173 for a copy of the register of members. Despite paragraph 173(3)(b), the responsible entity must give the members requesting the meeting the copy of the register without charge.
(4) The responsible entity must pay the reasonable expenses the members incurred because the responsible entity failed to call and arrange to hold the meeting and to make the distribution (if any). The responsible entity must not pay those expenses from the scheme's assets.
252D Calling of meetings of members by members
(1) Members of a registered scheme who hold interests carrying at least 5% of the votes that may be cast at a meeting of the scheme's members may call and arrange to hold a meeting of the scheme's members to consider and vote on a proposed special resolution or a proposed extraordinary resolution. The members calling the meeting must pay the expenses of calling and holding the meeting.
(2) The meeting must be called in the same way--so far as is possible--in which meetings of the scheme's members may be called by the responsible entity.
(3) The percentage of the votes carried by interests that members hold is to be worked out as at the midnight before the meeting is called.
252E Calling of meetings of members by the Court
(1) The Court may order a meeting of a registered scheme's members to be called to consider and vote on a proposed special or extraordinary resolution if it is impracticable to call the meeting in any other way.
(2) The Court may make the order on application by:
(a) the responsible entity; or
(b) any member of the scheme who would be entitled to vote at the meeting.
Note: For the directions the Court may give for calling, holding or conducting a meeting it has ordered be called, see section 1319.
Division 2 -- How to call meetings of members
252F Amount of notice of meetings
At least 21 days notice must be given of a meeting of the members of a registered scheme. However, the scheme's constitution may specify a longer minimum period of notice.
252G Notice of meetings of members to members, directors and auditors
Notice to members, directors and auditors individually
(1) Written notice of a meeting of a registered scheme's members must be given to:
(a) each member of the scheme entitled to vote at the meeting; and
(b) each director of the responsible entity; and
(c) the auditor of the scheme; and
(d) the auditor of the scheme compliance plan.
If an interest is held jointly, notice need only be given to 1 of the members.
Notice to joint members
(2) Unless the scheme's constitution provides otherwise, notice to joint members must be given to the joint member named first in the register of members.
How notice is given
(3) Unless the scheme's constitution provides otherwise, the responsible entity may give notice of the meeting to a member:
(a) personally; or
(b) by sending it by post to the address for the member in the register of members or an alternative address (if any) nominated by the member; or
(c) by sending it to the fax number or electronic address (if any) nominated by the member.
Note: A defect in the notice given may not invalidate a meeting (see section 1322).
When notice by post or fax is given
(4) Unless the scheme's constitution provides otherwise, a notice of meeting sent by post is taken to be given 3 days after it is posted. A notice of meeting sent by fax, or other electronic means, is taken to be given on the business day after it is sent.
252H Auditors entitled to other communications
The responsible entity of a registered scheme must give the auditor of the scheme and the auditor of the scheme compliance plan any other communications relating to the meeting that a member of the scheme is entitled to receive.
252J Contents of notice of meetings of members
A notice of a meeting of a registered scheme's members must:
(a) set out the place, date and time for the meeting (and, if the meeting is to be held in 2 or more places, the technology that will be used to facilitate this); and
(b) state the general nature of the meeting's business; and
(c) if a special or extraordinary resolution is to be proposed at the meeting--set out an intention to propose the special or extraordinary resolution and state the resolution; and
(d) contain a statement setting out the following information:
(i) that the member has a right to appoint a proxy
(ii) that the proxy does not need to be a member of the registered scheme
(iii) that if the member appoints 2 proxies the member may specify the proportion or number of votes the proxy is appointed to exercise.
Note: There may be other requirements for disclosure to members.
252K Notice of adjourned meetings
When a meeting is adjourned, new notice of the adjourned meeting must be given if the meeting is adjourned for 1 month or more.
Division 3 -- Members' rights to put resolutions etc. at meetings of members
(1) The following members of a registered scheme may give the responsible entity notice of a special or extraordinary resolution that they propose to move at a meeting of the scheme's members:
(a) members with at least 5% of the votes that may be cast on the resolution; or
(b) at least 100 members who are entitled to vote at a meeting of the scheme's members.
(2) The notice must:
(a) be in writing; and
(b) set out the wording of the proposed resolution; and
(c) be signed by the members giving the notice.
(3) Separate copies of a document setting out the notice may be used for signing by members if the wording of the notice is identical in each copy.
(4) The percentage of the votes that members have is to be worked out as at the midnight before the members give the notice.
252M Responsible entity giving notice of members' resolutions
(1) If a responsible entity has been given notice of a special or extraordinary resolution under section 252L, the resolution is to be considered at the next meeting of the scheme's members that occurs more than 2 months after the notice is given.
(2) The responsible entity must give all the members of the scheme notice of the resolution at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a meeting.
(3) The responsible entity is responsible for the cost of giving members notice of the resolution if the responsible entity receives the notice in time to send it out to members with the notice of meeting.
(4) The members requesting the meeting are jointly and individually liable for the expenses reasonably incurred by the responsible entity in giving members notice of the resolution if the responsible entity does not receive the members' notice in time to send it out with the notice of meeting. A resolution may be passed at a meeting of the scheme's members that the responsible entity is to meet the expenses out of the scheme's assets.
(5) The responsible entity need not give notice of the resolution:
(a) if it is more than 1,000 words long or defamatory; or
(b) if the members making the request are to bear the expenses of sending the notice out--unless the members give the responsible entity a sum reasonably sufficient to meet the expenses that it will reasonably incur in giving the notice.
252N Members' statements to be distributed
(1) Members may request a responsible entity to give to all its members a statement provided by the members making the request about:
(a) a resolution that is proposed to be moved at a meeting of the scheme's members; or
(b) any other matter that may be properly considered at a meeting of the scheme's members.
(2) The request must be made by:
(a) members with at least 5% of the votes that may be cast on the resolution; or
(b) at least 100 members who are entitled to vote at the meeting.
(3) The request must be:
(a) in writing; and
(b) signed by the members making the request; and
(c) given to the responsible entity.
(4) Separate copies of a document setting out the request may be used for signing by members if the wording of the request is identical in each copy.
(5) The percentage of the votes that members have is to be worked out as at the midnight before the request is given to the responsible entity.
(6) After receiving the request, the responsible entity must distribute to all the members of the scheme a copy of the statement at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a meeting.
(7) The responsible entity is responsible for the cost of making the distribution if the responsible entity receives the statement in time to send it out to members with the notice of meeting.
(8) The members making the request are jointly and individually liable for the expenses reasonably incurred by the responsible entity in making the distribution if the responsible entity does not receive the statement in time to send it out with the notice of meeting. A resolution may be passed at a meeting of the scheme's members that the responsible entity is to meet the expenses out of the scheme's assets.
(9) The responsible entity need not comply with the request:
(a) if the statement is more than 1,000 words long or defamatory; or
(b) if the members making the request are responsible for the expenses of the distribution--unless the members give the company a sum reasonably sufficient to meet the expenses that it will reasonably incur in making the distribution.
Division 4 -- Holding meetings of members
252P Time and place for meetings of members
A meeting of a registered scheme's members must be held at a reasonable time and place.
A responsible entity of a registered scheme may hold a meeting of the scheme's members at 2 or more venues using any technology that gives the members as a whole a reasonable opportunity to participate.
Note: See section 1322 for the consequences of members not being given a reasonable opportunity to participate.
(1) This section applies to a registered scheme subject to the provisions of the scheme's constitution.
(2) The quorum for a meeting of a registered scheme's members is 2 members and the quorum must be present at all times during the meeting.
(3) In determining whether a quorum is present, count individuals attending as proxies or body corporate representatives. However, if a member has appointed more than 1 proxy or representative, count only 1 of them. If an individual is attending both as a member and as a proxy or body corporate representative, count them only once.
Note 1: For rights to appoint proxies, see section 252V.
Note 2: For body corporate representatives, see section 253B.
(4) A meeting of the scheme's members that does not have a quorum present within 30 minutes after the time for the start of the meeting set out in the notice of meeting is adjourned to the date, time and place the responsible entity specifies. If the responsible entity does not specify 1 or more of those things, the meeting is adjourned to:
(a) if the date is not specified--the same day in the next week; and
(b) if the time is not specified--the same time; and
(c) if the place is not specified--the same place.
(5) If no quorum is present at the resumed meeting within 30 minutes after the time for the start of the meeting, the meeting is dissolved.
252S Chairing meetings of members
(1) The responsible entity may, in writing, appoint an individual to chair a meeting called under section 252A or 252B.
(2) The members present at a meeting called under section 252A or 252B must elect a member present to chair the meeting (or part of it) if:
(a) a chair has not previously been appointed to chair the meeting; or
(b) a previously appointed chair is not available, or declines to act, for the meeting (or part of the meeting).
(3) The members present at a meeting called under section 252C, 252D or 252E must elect a member present to chair the meeting. This is not so if the meeting is called under section 252E and the Court has directed otherwise under section 1319.
252T Auditors' right to be heard at meetings of members
(1) The auditor of a registered scheme and the auditor of the scheme compliance plan are entitled to attend any meeting of the scheme's members.
(2) An auditor is entitled to be heard at the meeting on any part of the business of the meeting that concerns the auditor in their capacity as auditor.
(3) An auditor may authorise a person in writing as their representative for the purpose of attending and speaking at any meeting of the scheme's members.
(1) A resolution passed at a meeting resumed after an adjournment is passed on the day it was passed.
(2) Only unfinished business is to be transacted at a meeting resumed after an adjournment.
Division 5 -- Proxies and body corporate representatives
(1) A member of a registered scheme who is entitled to attend and cast a vote at a meeting of the scheme's members may appoint a person as the member's proxy to attend and vote for the member at the meeting.
(2) The appointment may specify the proportion or number of votes that the proxy may exercise.
(3) A member may appoint 1 or 2 proxies. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member's votes each proxy may exercise, each proxy may exercise half of the votes.
(4) Disregard any fractions of votes resulting from the application of subsection (2) or (3).
Rights of proxies
(1) A proxy appointed to attend and vote for a member has the same rights as the member:
(a) to speak at the meeting; and
(b) to vote (but only to the extent allowed by the appointment).
Proxy's right to vote
(2) A registered scheme's constitution (if any) may provide that a proxy is not entitled to vote on a show of hands.
Note: Even if the proxy is not entitled to vote on a show of hands, they may make or join in the demand for a poll (see section 253L).
Effect of member's presence on proxy's authority
(3) A registered scheme's constitution (if any) may provide for the effect that a member's presence at a meeting has on the authority of a proxy appointed to attend and vote for the member. However, if the constitution does not make such provision, a proxy's authority to speak and vote for a member at a meeting is suspended while the member is present at the meeting.
252X Responsible entity sending appointment forms or lists of proxies must send to all members
If the responsible entity of a registered scheme sends a member a proxy appointment form for a meeting or a list of persons willing to act as proxies at a meeting:
(a) if the member requested the form or list--the responsible entity must send the form or list to all members who ask for it and who are entitled to appoint a proxy to attend and vote at the meeting; or
(b) otherwise--the responsible entity must send the form or list to all its members entitled to appoint a proxy to attend and vote at the meeting.
(1) An appointment of a proxy is valid if it is signed by the member of the registered scheme making the appointment and contains the following information:
(a) the member's name and address
(b) the scheme's name
(c) the proxy's name or the name of the office held by the proxy
(d) the meetings at which the appointment may be used.
An appointment may be a standing one
(2) A registered scheme's constitution may provide that an appointment is valid even if it contains only some of the information required by subsection (1).
(3) An undated appointment is taken to have been dated on the day it is given to the responsible entity.
(4) An appointment may specify the way the proxy is to vote on a particular resolution. If it does:
(a) the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way; and
(b) if the proxy has 2 or more appointments that specify different ways to vote on the resolution--the proxy must not vote on a show of hands; and
(c) if the proxy is the chair--the proxy must vote on a poll, and must vote that way; and
(d) if the proxy is not the chair--the proxy need not vote on a poll, but if the proxy does so, the proxy must vote that way.
If a proxy is also a member, this subsection does not affect the way that the person can cast any votes they hold as a member.
Note: The scheme's constitution may provide that a proxy is not entitled to vote on a show of hands (see subsection 252W(2)).
(5) A person who contravenes subsection (4) is guilty of an offence, but only if their appointment as a proxy resulted from the responsible entity sending to members:
(a) a list of persons willing to act as proxies; or
(b) a proxy appointment form holding the person out as being willing to act as a proxy.
(6) An appointment does not have to be witnessed.
(7) A later appointment revokes an earlier one if both appointments could not be validly exercised at the meeting.
Section applies subject to scheme's constitution
(1) Subsections (2), (3) and (4) apply to a registered scheme subject to the provisions of the scheme's constitution.
Documents to be received by responsible entity before meeting
(2) For an appointment of a proxy for a meeting of the scheme's members to be effective, the following documents must be received by the responsible entity at least 48 hours before the meeting:
(a) the proxy's appointment
(b) if the appointment is signed by the appointor's attorney--the authority under which the appointment was signed or a certified copy of the authority.
Documents received following adjournment of meeting
(3) If a meeting of the scheme's members has been adjourned, an appointment and any authority received by the responsible entity at least 48 hours before the resumption of the meeting are effective for the resumed part of the meeting.
Receipt of documents
(3) A responsible entity receives an appointment authority when it is received at any of the following:
(a) the responsible entity's registered office
(b) a fax number at the responsible entity's registered office
(c) a place, fax number or electronic address specified for the purpose in the notice of meeting.
Ineffective appointments of fax or electronic notification
(4) An appointment of a proxy is ineffective if:
(a) the responsible entity receives either or both the appointment or authority at a fax number or electronic address; and
(b) a requirement (if any) in the notice of meeting that:
(i) the transmission be verified in a way specified in the notice; or
(ii) the proxy produce the appointment and authority (if any) at the meeting;
is not complied with.
Constitution or notice of meeting may provide for different notification period
(5) The scheme's constitution or the notice of meeting may reduce the period of 48 hours referred to in subsection (2) or (3).
Proxy vote valid even if member dies, revokes appointment etc.
(1) Unless the responsible entity has received written notice of the matter before the start or resumption of the meeting at which a proxy votes, a vote cast by the proxy will be valid even if, before the proxy votes:
(a) the appointing member dies; or
(b) the member is mentally incapacitated; or
(c) the member revokes the proxy's appointment; or
(d) the member revokes the authority under which the proxy was appointed by a third party; or
(e) the member transfers the interest in respect of which the proxy was given.
This subsection applies to a registered scheme subject to the provisions of the scheme's constitution.
Note: A proxy's authority to vote is suspended while the member is present at the meeting (see subsection 252W(3)).
Proxy vote valid even if proxy cannot vote as member
(2) A proxy who is not entitled to vote on a resolution as a member may vote as a proxy for another member who can vote if their appointment specifies the way they are to vote on the resolution and they vote that way.
253B Body corporate representative
(1) A body corporate may appoint an individual as a representative to exercise all or any of its powers at a meeting of a registered scheme's members. The appointment may be a standing one.
(2) The appointment must set out what the representative is appointed to do and may set out restrictions on the representative's powers. If the appointment is to be by reference to a position held, the appointment must identify the position.
(3) A body corporate may appoint more than 1 representative but only 1 representative may exercise the body's powers at any one time.
(4) Unless otherwise specified in the appointment, the representative may exercise, on the body corporate's behalf, all of the powers that the body could exercise at a meeting or in voting on a resolution.
Division 6 -- Voting at meetings of members
253C How many votes a member has
(1) On a show of hands, each member of a registered scheme has 1 vote.
(2) On a poll, each member of the scheme has 1 vote for each dollar of the value of the total interests they have in the scheme.
Note 1: For rights to appoint proxies, see section 252V.
Note 2: Unless otherwise specified in the appointment, a body corporate representative has all the powers that a body corporate has as a member (including the power to vote on a show of hands).
If an interest in a registered scheme is held jointly and more than 1 member votes in respect of that interest, only the vote of the member whose name appears first in the register of members counts.
253E Responsible entity and associates cannot vote if interested in resolution
The responsible entity of a registered scheme and its associates are not entitled to vote their interest on a resolution at a meeting of the scheme's members if they have an interest in the resolution or matter other than as a member.
Note: The responsible entity and its associates may vote as proxies if their appointments specify the way they are to vote and they vote that way (see subsection 253A(2)).
253F How to work out the value of an interest
The value of an interest in a registered scheme is:
(a) if it is quoted on a stock market of a stock exchange--the last sale price on that market on the trading day immediately before the day on which the poll is taken; or
(b) if it is not quoted on a stock market of a stock exchange and the scheme is liquid and has a withdrawal provision in its constitution--the amount that would be paid for the interest under that provision on the business day immediately before the day on which the poll is taken; or
(c) in any other case--the amount that the responsible entity determines in writing to be the price that a willing but not anxious buyer would pay for the interest if it was sold on the business day immediately before the day on which the poll is taken.
253G Objections to a right to vote
A challenge to a right to vote at a meeting of members of a registered scheme:
(a) may only be made at the meeting; and
(b) must be determined by the chair, whose decision is final.
253H Votes need not all be cast in the same way
On a poll a person voting who is entitled to 2 or more votes:
(a) need not cast all their votes; and
(b) may cast their votes in different ways.
Note: For proxy appointments that specify the proxy is to vote on a particular resolution, see subsection 252Y(4).
253J How voting is carried out
(1) A special or extraordinary resolution put to the vote at a meeting of a registered scheme's members must be decided on a poll.
(2) Any other resolution put to the vote at a meeting of the scheme's members must be decided on a show of hands unless a poll is demanded. The resolution is passed on a poll if it has been passed by at least 50% of the votes cast by members entitled to vote on the resolution.
(3) On a show of hands, a declaration by the chair is conclusive evidence of the result. Neither the chair nor the minutes need to state the number or proportion of the votes recorded in favour or against.
Note: Even though the chair's declaration is conclusive of the voting results, the members present may demand a poll (see paragraph 253L(3)(c)).
253K Matters on which a poll may be demanded
(1) A poll may be demanded on any resolution.
(2) A registered scheme's constitution may provide that a poll cannot be demanded on any resolution concerning:
(a) the election of the chair of a meeting; or
(b) the adjournment of a meeting.
(3) A demand for a poll may be withdrawn.
253L When a poll is effectively demanded
(1) At a meeting of a registered scheme's members, a poll may be demanded by:
(a) at least 5 members present entitled to vote on the resolution; or
(b) members present with at least 5% of the votes that may be cast on the resolution on a poll; or
(c) the chair.
(2) A registered scheme's constitution may provide that fewer members or members with a lesser percentage of votes may demand a poll.
(3) The poll may be demanded:
(a) before a vote is taken; or
(b) before the voting results on a show of hands are declared; or
(c) immediately after the voting results on a show of hands are declared.
(4) The percentage of votes that members have is to be worked out as at close of business on the day before the poll is demanded.
Division 7 -- Minutes and members' access to minutes
(1) A responsible entity of a registered scheme must keep minute books in which it records within 1 month:
(a) proceedings of meetings of the scheme's members; and
(b) resolutions of meetings of the scheme's members.
(2) The responsible entity must ensure that minutes of a meeting are signed within a reasonable time after the meeting by the chair of the meeting or the chair of the next meeting.
(3) The responsible entity must keep the minute books at:
(a) its registered office; or
(b) its principal place of business in Australia; or
(c) another place approved by the ASC.
(4) A minute that is so recorded and signed is evidence of the proceeding or resolution to which it relates, unless the contrary is proved.
253N Members' access to minutes
(1) The responsible entity of a registered scheme must ensure that the minute books for the meetings of the scheme's members are open for inspection by members free of charge.
(2) A member of a registered scheme may ask the responsible entity in writing for a copy of any minutes of a meeting of the scheme's members or an extract of the minutes.
(3) If the responsible entity does not require the member to pay for the copy, the responsible entity must send it:
(a) within 14 days after the member asks for it; or
(b) within any longer period that the ASC approves.
(4) If the responsible entity requires payment for the copy, the responsible entity must send it:
(a) within 14 days after the responsible entity receives the payment; or
(b) within any longer period that the ASC approves.
The amount of any payment the responsible entity requires cannot exceed the prescribed amount.
254AA Shares to have nominal value
Shares of a company with share capital have a nominal value.
Note: See subsection 120(2) for the nominal value of the shares that are taken to be issued on registration of the company. See section 254CA for the nominal value of shares issued after registration.
Part 2H.1 -- Issuing and converting shares
254A Power to issue bonus, partly-paid, preference and redeemable preference shares
(1) A company's power under section 124 to issue shares includes the power to issue:
(a) bonus shares (shares for whose issue no consideration is payable to the issuing company); and
(b) preference shares (including redeemable preference shares); and
(c) partly-paid shares (whether or not on the same terms for the amount of calls to be paid or the time for paying calls).
Note 1: Subsections 246C(5) and (6) provide that in certain circumstances the issue of preference shares is taken to be a variation of class rights.
Note 2: Partly-paid shares are dealt with in sections 254M-254N.
(2) A company can issue preference shares only if the rights attached to the preference shares with respect to the following matters are set out in the company's constitution (if any) or have been otherwise approved by special resolution of the company:
(a) repayment of capital
(b) participation in surplus assets and profits
(c) cumulative and non-cumulative dividends
(d) voting
(e) priority of payment of capital and dividends in relation to other shares or classes of preference shares.
(3) Redeemable preference shares are preference shares that are issued on the terms that they are liable to be redeemed. They may be redeemable:
(a) at a fixed time or on the happening of a particular event; or
(b) at the company's option; or
(c) at the shareholder's option.
Note: Redeemable preference shares are dealt with in sections 254J-254L.
(1) A company may determine:
(a) the terms on which its shares are issued; and
(b) the rights and restrictions attaching to the shares.
Note 1: Details of any division of shares into classes or conversion of classes of shares must be given to the ASC by a notice in the prescribed form (see subsection 246F(1)).
Note 2: For public companies, any document or resolution that attaches rights to shares or varies or cancels rights attaching to shares must be lodged with the ASC (see subsection 246F(3)).
Note 3: Sections 246B-246G provide safeguards in cases where class rights are cancelled or varied.
No liability companies--special terms of issue
(2) A share in a no liability company is issued on the following terms:
(a) if a no liability company is wound up and a surplus remains, it must be distributed among the parties entitled to it in proportion to the number of shares held by them, irrespective of the amounts paid up on the shares; and
(b) a member who is in arrears in payment of a call on a share, but whose share has not been forfeited, is not entitled to participate in the distribution on the basis of holding that share until the amount owing in respect of the call has been fully paid and satisfied.
Companies incorporated as no liability companies--special terms of issue
(3) If a company:
(a) either:
(i) is a no liability company; or
(ii) was initially registered as a no liability company and has changed its status under section 162 to another type of company; and
(b) ceases to carry on business within 12 months after its registration and is wound up;
shares issued for cash rank (to the extent of the capital contributed by subscribing shareholders) in the winding up in priority to shares issued to vendors or promoters, or both, for consideration other than cash.
(4) The holders of shares issued to vendors or promoters are not entitled to preference on the winding up of a company that:
(a) is a no liability company; or
(b) was initially registered as a no liability company and has changed its status under section 162 to another type of company.
This is so despite anything in the company's constitution or the terms on which the shares are on issue.
254CA Nominal value of shares issued after registration
On the issue of shares by a company after registration, the shares may only have:
(a) a nominal value that is the same as the nominal value of shares of the company that are already on issue; or
(b) a nominal value provided for in the company's constitution (if any); or
(c) a nominal value approved by a resolution of the company passed at a general meeting.
Note: The nominal value of the shares may subsequently be altered by consolidation or division of the shares under section 254H or as a result of a reduction in share capital under sections 256A-256F.
Issue of shares at a premium
(1) A company may issue a share at a premium.
Note: Sections 256A-256F (reductions in share capital) apply to amounts paid by way of share premium as well as to amounts paid by way of nominal value.
Share premium account
(2) When the company receives a premium for the issue of a share, an amount equal to the amount or value of the premium is transferred to the company's share premium account.
Payments out of the share premium account
(3) The share premium account may be applied:
(a) in paying up shares to be issued to members of the company as fully-paid bonus shares; or
(b) in paying up in whole or in part the balance unpaid on shares previously issued to members of the company; or
(c) in paying dividends if those dividends are satisfied by the issue of shares to members of the company; or
(d) in the case of a company that carries on life insurance business--by appropriation or transfer to any statutory fund established and maintained under the Life Insurance Act 1995 ; or
(e) in writing off:
(i) the preliminary expenses of the company; or
(ii) the expenses of, or the payment made in respect of or discount allowed on, any issue of shares in, or debentures of, the company; or
(f) in providing consideration payable by the company on a buy‑back of its shares; or
(g) in providing the premium payable on redemption of debentures or redeemable preference shares.
254CC Issue of shares at a discount
(1) A no liability company may issue shares at a discount.
(2) A company other than a no liability company may only issue shares at a discount if:
(a) the shares are in a class of shares already issued; and
(b) the issue of the shares at a discount is:
(i) authorised by resolution passed in general meeting of the company; and
(ii) confirmed by order of the Court; and
(c) the resolution specifies the maximum rate of discount at which the shares may be issued; and
(d) the shares are issued within:
(i) 1 month after the day on which the issue is confirmed by the Court; or
(ii) that period as extended by the Court; and
(e) the shares are first offered to every holder of shares in that class in proportion to the number of shares in that class already held.
(3) The Court may confirm the issue if it considers it appropriate to do so having regard to all the circumstances of the case and may confirm the issue on the terms and conditions it considers appropriate.
(4) An offer made for the purposes of paragraph (2)(e) must be made in a notice that specifies:
(a) the number of shares to which the member is entitled; and
(b) the period (ending not less than 21 days after the date of the notice) within which the offer may be accepted.
(5) If an offer for shares made in accordance with subsection (4) is not accepted within the period specified in the notice, the shares may be issued on terms not more favourable than those offered to the shareholders.
254D Pre-emption for existing shareholders on issue of shares in proprietary company (replaceable rule--see section 135)
(1) Before issuing shares of a particular class, the directors of a proprietary company must offer them to the existing holders of shares of that class. As far as practicable, the number of shares offered to each shareholder must be in proportion to the number of shares of that class that they already hold.
(2) To make the offer, the directors must give the shareholders a statement setting out the terms of the offer, including:
(a) the number of shares offered; and
(b) the period for which it will remain open.
(3) The directors may issue any shares not taken up under the offer under subsection (1) as they see fit.
(4) The company may by resolution passed at a general meeting authorise the directors to make a particular issue of shares without complying with subsection (1).
254E Court validation of issue
(1) On application by a company, a shareholder, a creditor or any other person whose interests have been or may be affected, the Court may make an order validating, or confirming the terms of, a purported issue of shares if:
(a) the issue is or may be invalid for any reason; or
(b) the terms of the issue are inconsistent with or not authorised by:
(i) this Law; or
(ii) another law of this jurisdiction; or
(iii) the company's constitution (if any).
(2) On lodgment of a copy of the order with the ASC, the order has effect from the time of the purported issue.
254F Bearer shares and stock must not be issued
A company does not have the power to:
(a) issue bearer shares; or
(b) issue stock or convert shares into stock.
Note: Section 1432 contains transitional provisions for the conversion of existing stock into shares.
(1) A company may:
(a) convert an ordinary share into a preference share; and
(b) convert a preference share into an ordinary share.
Note: The variation of class rights provisions (sections 246B-246G) will apply to the conversion.
(2) A company can convert ordinary shares into preference shares only if the holders' rights with respect to the following matters are set out in the company's constitution (if any) or have been otherwise approved by special resolution of the company:
(a) repayment of capital
(b) participation in surplus assets and profits
(c) cumulative and non-cumulative dividends
(d) voting
(e) priority of payment of capital and dividends in relation to other shares or classes or preference shares.
(3) A share that is not a redeemable preference share when issued cannot afterwards be converted into a redeemable preference share.
254H Resolution to convert shares into larger or smaller number
(1) By resolution passed in general meeting, a company may:
(a) consolidate and divide all or any of its share capital into shares of larger nominal value than its existing shares; or
(b) subdivide all or any of its shares into shares of smaller nominal value.
A subdivision must not alter the proportion between the amount paid and the amount (if any) unpaid on the shares concerned.
Note 1: The variation of class rights provisions (sections 246B-246G) may apply to the conversion.
Note 2: An unlimited company converting to a company limited by shares can increase the nominal value of its shares under subsection 162(4).
(2) The conversion takes effect on:
(a) the day the resolution is passed; or
(b) a later date specified in the resolution.
(3) If the nominal value of the shares converted is specified in the company's constitution, the resolution under subsection (1) may also amend the company's constitution to specify a new nominal value for the shares.
(4) The company must lodge a copy of the resolution with the ASC within 1 month after it is passed.
Part 2H.2 -- Redemption of redeemable preference shares
254J Redemption must be in accordance with terms of issue
(1) A company may redeem redeemable preference shares only on the terms on which they are on issue. On redemption, the shares are cancelled.
Note: For the power to issue redeemable preference shares see paragraph 254A(1)(b) and subsections 254A(2) and (3).
(2) This section does not affect the terms on which redeemable preference shares may be cancelled under a reduction of capital or a share buy-back under Part 2J.1.
254K Other requirements about redemption
(1) A company may only redeem redeemable preference shares if the shares are fully paid-up and may only redeem them:
(a) out of profits; or
(b) out of the proceeds of a new issue of shares made for the purpose of the redemption.
Note: This subsection deals with the redemption of the nominal value of the shares.
(2) If the shares are not redeemed out of the proceeds of a fresh issue of shares, the company must transfer an amount equal to the nominal value of the shares out of profits and into its capital redemption reserve.
Note: Sections 256A-256D (reductions in share capital) apply to amounts in the capital redemption reserve as well as to amounts in the share capital account.
(3) The premium (if any) payable on redemption must be paid out of profits or out of the share premium account.
Note: For a director's duty to prevent insolvent trading on redeeming redeemable preference shares, see section 588G.
(4) The capital redemption reserve may be applied in paying up shares to be issued to members of the company as fully-paid bonus shares.
254L Consequences of contravening section 254J or 254K
(1) If a company redeems shares in contravention of section 254J or 254K:
(a) the contravention does not affect the validity of the redemption or of any contract or transaction connected with it; and
(b) the company is not guilty of an offence.
(2) Any person who is involved in a company's contravention of section 254J or 254K contravenes this subsection.
Note: Subsection (2) is a civil penalty provision (see section 1317DA).
Part 2H.3 -- Partly-paid shares
254M Liability on partly-paid shares
General rule about shareholder's liability for calls
(1) If shares in a company are partly-paid, the shareholder is liable to pay calls on the shares in accordance with the terms on which the shares are on issue. This subsection does not apply to a no liability company
Note: The shareholder may also be liable as a contributory under sections 514-529 if the company is wound up.
No liability companies
(2) The acceptance by a person of a share in a no liability company, whether by issue or transfer, does not constitute a contract by the person to pay:
(a) calls in respect of the share; or
(b) any contribution to the debts and liabilities of the company.
254N Calls may be limited to when company is externally‑administered
(1) A limited company may provide by special resolution that the whole or a part of its unpaid share capital may be called up only if the company becomes an externally-administered body corporate.
(2) The company must lodge with the ASC a copy of the special resolution within 14 days after it is passed.
254P No liability companies--calls on shares
Making calls
(1) A call on a share in a no liability company is not effective unless it is made payable at least 14 days after the call is made.
Notice of call
(2) At least 7 days before a call on shares in a no liability company becomes payable, the company must give the holders of the shares notice of:
(a) the amount of the call;
(b) the day when it is payable; and
(c) the place for payment.
The notice must be sent by post. If the notice is not given, the call is not payable.
(3) A call does not have any effect on a forfeited share that is held by or in trust for the company under subsection 254Q(6). However, when the share is re-issued or sold by the company, the share may be credited as paid up to the amount determined by the company in accordance with its constitution or by resolution.
254Q No liability companies--forfeiture and sale of shares for failure to meet call
Forfeiture and sale of shares
(1) A share in a no liability company is immediately forfeited if:
(a) a call is made on the share; and
(b) the call is unpaid at the end of 14 days after it became payable.
Note: The holder of the share may redeem it under section 254R.
(2) The forfeited share must then be offered for sale by public auction within 6 weeks after the call became payable.
Advertisement of sale
(3) At least 14 days, and not more than 21 days, before the day of the sale, the sale must be advertised in a daily newspaper circulating generally throughout Australia. The specific number of shares to be offered need not be specified in the advertisement and it is sufficient to give notice of the sale by advertising to the effect that all shares on which a call remains unpaid will be sold.
Postponement of sale
(4) An intended sale of forfeited shares that has been duly advertised may be postponed for not more than 21 days from the advertised date of sale. The date to which the sale is postponed must be advertised in a daily newspaper circulating generally in Australia.
(5) There may be more than 1 postponement but the sale cannot be postponed to a date more than 90 days from the first date fixed for the intended sale.
Shares may be offered as credited to a particular amount
(6) The share may be sold credited as paid up to the sum of:
(a) the amount paid upon the share at the time of forfeiture; and
(b) the amount of the call; and
(c) the amount of any other calls becoming payable on or before the day of the sale;
if the company in accordance with its constitution or by ordinary resolution so determines.
Reserve price
(7) The directors may fix a reserve price for the share that does not exceed the sum of:
(a) the amount of the call due and unpaid on the share at the time of forfeiture; and
(b) the amount of any other calls that become payable on or before the date of the sale.
Withdrawal from sale
(8) The share may be withdrawn from sale if no bid at least equal to the reserve price is made at the sale.
Disposal of shares withdrawn from sale
(9) If:
(a) no bid for the share is received at the sale; or
(b) the share is withdrawn from sale;
the share must be held by the directors in trust for the company. It must be then disposed of in the manner determined by the company in accordance with its constitution or by resolution. Unless otherwise specifically provided by resolution, the share must first be offered to shareholders for a period of 14 days before being disposed of in any other manner.
Suspension of voting rights attached to share held in trust
(10) At any meeting of the company, no person is entitled to any vote in respect of the shares held by the directors in trust under subsection (9).
Application of proceeds of sale
(11) The proceeds of the sale under subsection (2) or the disposal under subsection (9) must be applied to pay:
(a) first, the expenses of the sale; and
(b) then, any expenses necessarily incurred in respect of the forfeiture; and
(c) then, the calls on the share that are due and unpaid.
The balance (if any) must be paid to the member whose share has been sold. If there is a share certificate that relates to the share, the balance does not have to be paid until the member delivers the certificate to the company.
Validity of sale
(12) If a sale is not held in time because of error or inadvertence, a late sale is not invalid if it is held as soon as practicable after the discovery of the error or inadvertence.
Failure to comply an offence
(13) If there is failure to comply with subsection (2) or (3), the company and any officer of the company who is involved in the contravention are each guilty of an offence.
254R No liability companies--redemption of forfeited shares
(1) Despite section 254Q, if a person's share has been forfeited, the person may redeem the share, at any time up to or on the last business day before the proposed sale, by paying the company:
(a) all calls due on the share; and
(b) if the company so requires:
(i) a portion, calculated on a pro rata basis, of all expenses incurred by the company in respect of the forfeiture; and
(ii) a portion, calculated on a pro rata basis, of all costs and expenses of any proceeding that has been taken in respect of the forfeiture.
On payment, the person is entitled to the share as if the forfeiture had not occurred.
(2) On the last business day before the proposed sale, the registered office of the company must be open during the hours for which it is by this Law required to be open and accessible to the public.
Part 2H.4 -- Capitalisation of profits
254S Capitalisation of profits (replaceable rule--see section 135)
A company may capitalise profits to:
(a) pay up any amount unpaid on issued shares; or
(b) pay up shares to be issued to members as fully-paid bonus shares.
The amount capitalised must be applied for the benefit of members in the proportions in which the members would have been entitled to dividends if the amount capitalised had been distributed as a dividend.
254T Dividends to be paid out of profits
A dividend may only be paid:
(a) out of profits of the company; or
(b) out of the share premium account if the dividend is satisfied by the issue of shares to members of the company.
Note 1: For a director's duty to prevent insolvent trading on payment of dividends, see section 588G.
Note 2: For the use of the share premium account to pay dividends, see paragraph 254CB(3)(c).
254U Other provisions about paying dividends (replaceable rule--see section 135)
(1) The directors may determine that a dividend is payable and fix:
(a) the amount; and
(b) the time for payment; and
(c) the method of payment.
The methods of payment may include the payment of cash, the issue of shares, the grant of options and the transfer of assets.
(2) Interest is not payable on a dividend.
254V When does the company incur a debt?
(1) A company does not incur a debt merely by fixing the amount or time for payment of a dividend. The debt arises only when the time fixed for payment arrives and the decision to pay the dividend may be revoked at any time before then.
(2) However, if the company has a constitution and it provides for the declaration of dividends, the company incurs a debt when the dividend is declared.
Shares in public companies
(1) Each share in a class of shares in a public company has the same dividend rights unless:
(a) the company has a constitution and it provides for the shares to have different dividend rights; or
(b) different dividend rights are provided for by special resolution of the company.
Shares in proprietary companies (replaceable rule--see section 135)
(2) Subject to the terms on which shares in a proprietary company are on issue, the directors may pay dividends as they see fit.
No liability companies
(3) A person is not entitled to a dividend on a share in a no liability company if a call:
(a) has been made on the share; and
(b) is due and unpaid.
(4) Dividends are payable to the shareholders in a no liability company in proportion to the number of shares held by them, irrespective of the amount paid up, or credited as paid up, on the shares. This subsection has effect subject to any provisions in the company's constitution relating to shares that are not ordinary shares.
Part 2H.6 -- Notice requirements
254X Notice to ASC of share issue
(1) Within 1 month after issuing shares, a company must lodge with the ASC a notice in the prescribed form that sets out:
(a) the number of shares that were issued; and
(b) if the company has different classes of shares--the class to which each of those shares belongs; and
(c) the nominal value of the shares; and
(d) the amount (if any) paid, taken to be paid or due and payable on the issue of the shares; and
(e) if the company is a public company and the shares were issued for non-cash consideration--the prescribed particulars about the issue of the shares, unless the shares were issued under a written contract and a copy of the contract is lodged with the notice.
Note: The company must lodge information when rights attached to the shares change, or when the shares are divided or converted into new classes (see section 246F).
(2) If the shares were issued for non-cash consideration under a contract, the company must also lodge with the ASC a certificate stating that all stamp duty payable on the contract under any applicable law relating to stamp duty has been paid. This certificate must be lodged with the subsection (1) notice or at a later time permitted by the regulations or by the ASC.
(3) The company does not have to lodge a subsection (1) notice about the issue of shares to a person on the registration of the company or on the company changing its type from a company limited by guarantee to a company limited by shares.
Note: Information about shares issued in these situations will come to the ASC under subsections 117(2), 163(3) and 601BC(2).
254Y Notice to ASC of share cancellation
Within 1 month after shares are cancelled, the company must lodge with the ASC a notice in the prescribed form that sets out:
(a) the number, and nominal value, of shares cancelled; and
(b) any amount paid by the company (in cash or otherwise) on the cancellation of the shares; and
(c) if the shares are cancelled following a share buy-back--the amount paid by the company (in cash or otherwise) on the buy-back; and
(d) if the company has different classes of shares--the class to which each cancelled share belonged.
Note: Provisions under
which shares are cancelled include section 254J (redeemable preference
shares), section 256B (capital reductions),
subsection 257H(3) (shares a
company has bought back), section 258D (forfeited shares), and subsection
1024E(7) (shares returned to a company).
Chapter 2J -- Transactions affecting share capital
Part 2J.1 -- Share capital reductions and share
buy-backs
Division 1 -- Reductions in share capital not otherwise authorised by law
256A Reductions in share capital
Requirement for special resolution and Court confirmation
(1) A company must not reduce its share capital unless:
(a) the reduction is authorised by law; or
(b) the reduction is:
(i) agreed to by a special resolution; and
(ii) confirmed by the Court under section 256B.
Note 1: Examples of share capital reductions are:
* extinguishing or reducing a person's liability on shares in respect of share capital not paid up
* cancelling paid-up share capital that is lost or is not represented by available assets
* paying off any paid-up share capital that is in excess of the company's needs.
Note 2: Sections 258A-258F deal with some of the other situations in which reductions of share capital are authorised.
Note 3: Subsection 256B(2) provides that the Court will generally not confirm a reduction in share capital unless a creditor protection test in section 256C is satisfied
Note 4: If the nominal value of shares affected by the reduction is specified in the company's constitution, the company may amend its constitution by special resolution to make any necessary adjustments to the nominal value of those shares.
(2) Without limiting subsection (1), paying an amount out of the company's share premium account or capital redemption reserve is to be treated as a reduction in the company's paid up share capital.
Note: Certain payments out of the share premium account and capital redemption reserve are authorised under subsections 254CB(3) and 254K(2) and (4).
256B Court order confirming the reduction
(1) The Court may confirm a reduction in share capital on the terms and conditions that it considers appropriate.
(2) If the reduction involves:
(a) reducing a person's liability for unpaid share capital; or
(b) paying a shareholder:
(i) paid-up share capital; or
(ii) an amount out of the share premium account or capital redemption reserve;
the Court may only confirm the reduction if:
(c) the reduction satisfies the creditor protection test in section 256C; or
(d) the Court is satisfied that the reduction does not need to satisfy the creditor protection test in section 256C because of the special circumstances of the case.
(3) The Court may direct that a reduction that would not otherwise have to satisfy the creditor protection test in section 256C must satisfy that test.
(4) The order confirming the reduction must specify:
(a) the nominal value of each share; and
(b) the amount (if any) that at the date of the order is taken to be paid up on each share.
256C The creditor protection test
Identifying the company's creditors
(1) If a reduction in share capital has to satisfy the creditor protection test:
(a) the Court must fix the date for determining who the company's creditors are; and
(b) the company must prepare a list of the company's creditors as at that date that shows the nature and amount of their debts or claims and present it to the Court; and
(c) the Court must:
(i) settle the list of creditors; and
(ii) ascertain (as far as possible) the nature and amount of their debts or claims.
(2) To settle the list of creditors and ascertain the nature and amount of their debts, the Court:
(a) need not require an application from any creditor; and
(b) may publish notices fixing a day by which creditors whose names are not on the list may claim to be included on the list.
(3) A person is a creditor of the company for the purposes of this section if they:
(a) are entitled to a debt or claim at the date fixed by the Court under paragraph (1)(a); and
(b) would be able to prove the debt or claim against the company if a winding up of the company commenced on that date.
A creditor is entitled to become a party to the proceedings for the Court's confirmation of the reduction.
Satisfying the creditor protection test
(4) A reduction in share capital satisfies the creditor protection test if each creditor on the list settled by the Court:
(a) consents to the reduction; or
(b) has their debt discharged or their claim determined; or
(c) has their debt or claim secured; or
(d) has their debt or claim provided for under subsection (5).
(5) A creditor's debt or claim is provided for under this subsection if the company appropriates an amount to cover the debt or claim in the manner approved by the Court. The amount appropriated must be:
(a) the full amount of the debt or claim if:
(i) the company admits that amount; or
(ii) the company does not admit that amount but is willing to provide for it; or
(b) the amount fixed by the Court if:
(i) the company does not admit, and is not willing to provide for, the full amount of the debt or claim; or
(ii) the amount of the debt or claim is contingent or not ascertained.
In fixing an amount under paragraph (b), the Court must make the inquiries and adjudicate on the matter as if the company were being wound up by the Court.
(6) Having regard to any special circumstances of any case, the Court may direct that particular requirements of this section do not apply in respect of creditors included in a class of creditors.
Company officers not to conceal or misrepresent debts or claims
(7) An officer of a company must not:
(a) knowingly conceal from the company or the Court the name of a creditor of the company; or
(b) knowingly misrepresent to the company or the Court the nature or amount of the debt or claim of a creditor of the company.
256D Putting the capital reduction into effect
Lodgment of resolution and court order with the ASC
(1) The company must lodge with the ASC copies of:
(a) the special resolution; and
(b) the Court order confirming the reduction.
Implementation of capital reduction
(2) A company must not act upon a resolution to reduce its share capital before the date on which the documents are lodged with the ASC under subsection (1). However, the resolution may specify as the date from which the reduction of capital is to have effect a date that is earlier than the lodgment date but not earlier than the date of the resolution.
256E Effect of reduction of share capital on members and former members
Effect of reduction on liability of members and former members for calls and contributions
(1) The liability of a member or former member of a company for a call or contribution in respect of a share in the company is not to exceed the difference (if any) between:
(a) the amount of the share fixed by the confirming order under subsection 256B(4); and
(b) the amount paid, or the reduced amount (if any) that is taken to have been paid, on the share.
Liability of members and former members to unsatisfied creditors
(2) A person who is a member of the company on the date on which the copy of the confirming order is lodged with the ASC under subsection 256D(1) is liable to contribute towards the payment of a creditor's debt or claim if:
(a) the creditor is a creditor of the company for the purposes of section 256C; and
(b) the creditor's name is not entered on the list of creditors settled under that section because they are not aware of:
(i) the proceedings for confirmation of the reduction; or
(ii) the nature of the proceedings and the effect of the proceedings on their claim; and
(c) after the reduction, the company is unable (within the meaning of the provisions of this Law with respect to winding up by the Court) to pay the debt or claim in full.
The amount the person is liable to contribute is not to exceed the amount that they would have been liable to contribute if the company had commenced to be wound up on the day before that date.
Liability as contributory on winding up
(3) If:
(a) the company is wound up; and
(b) the creditor referred to in subsection (2) applies to the Court; and
(c) the creditor proves that they were not aware of:
(i) the proceedings for confirmation of the reduction; or
(ii) the nature of the proceedings or effect of the proceedings on the debt or claim; and
(d) the Court considers it appropriate to do so;
the Court may:
(e) settle a list of the names of people liable to contribute under subsection (2); and
(f) make and enforce calls and orders on the contributories whose names are included in the list as if they were ordinary contributories in a winding up.
Nothing in this subsection affects the rights of the contributories among themselves.
256F Consequences of failing to comply with section 256A
(1) A company must not make a reduction in share capital unless it complies with subsection 256A(1).
(2) If the company contravenes subsection (1):
(a) the contravention does not affect the validity of the reduction or of any contract or transaction connected with it; and
(b) the company is not guilty of an offence.
(3) Any person who is involved in a company's contravention of subsection (1) contravenes this subsection.
Note: Subsection (3) is a civil penalty provision (see section 1317DA).
The rules to be followed by a company for share buy-backs are designed to protect the interests of shareholders and creditors by:
(a) addressing the risk of buy-backs leading to the company's insolvency
(b) seeking to ensure fairness between the company's shareholders
(c) requiring the company to disclose all material information.
257A The company's power to buy back its own shares
A company may buy back its own shares (other than redeemable preference shares) if:
(a) the buy-back does not materially prejudice the company's ability to pay its creditors; and
(b) the company follows the procedures laid down in this Division.
Note 1: If a company has a constitution, it may include provisions in the constitution that preclude the company buying back its own shares or impose restrictions on the exercise of the company's power to buy back its own shares.
Note 2: A company may buy-back redeemable preference shares and may do so on terms other than the terms on which they could be redeemed. For the redemption of redeemable preference shares, see sections 254J-254L.
257B Buy-back procedure--general
(1) The following table specifies the steps required for, and the sections that apply to, the different types of buy-back.
|
Procedures |
minimum holding |
employee share scheme |
on-market |
equal access scheme |
selective buy-back |
||||
|
|
|
within 10/12 limit |
over 10/12 limit |
within 10/12 limit |
over 10/12 limit |
within 10/12 limit |
over 10/12 limit |
|
|
|
ordinary
resolution |
-- |
-- |
yes |
-- |
yes |
-- |
yes |
-- |
|
|
special/unanimous resolution [ 257D] |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
yes |
|
|
lodge offer documents with ASC [257E] |
-- |
-- |
-- |
-- |
-- |
yes |
yes |
yes |
|
|
14 days notice [257F] |
-- |
yes |
yes |
yes |
yes |
yes |
yes |
yes |
|
|
disclose relevant information when offer made [257G] |
-- |
-- |
-- |
-- |
-- |
yes |
yes |
yes |
|
|
cancel shares [257H] |
yes |
yes |
yes |
yes |
yes |
yes |
yes |
yes |
|
|
notify cancellation to ASC [254Y] |
yes |
yes |
yes |
yes |
yes |
yes |
yes |
yes |
|
Note: Subsections (2) and (3) of this section explain what an equal access scheme is. The 10/12 limit is the 10% in 12 months limit laid down in subsections (4) and (5). Subsections (6) and (7) of this section explain what an on-market buy-back is. See section 9 for definitions of minimum holding buy-back , employee share scheme buy-back and selective buy‑back .
Equal access scheme
(2) An equal access scheme is a scheme that satisfies all the following conditions:
(a) the offers under the scheme relate only to ordinary shares
(b) the offers are to be made to every person who holds ordinary shares to buy back the same percentage of their ordinary shares
(c) all of those persons have a reasonable opportunity to accept the offers made to them
(d) buy-back agreements are not entered into until a specified time for acceptances of offers has closed
(e) the terms of all the offers are the same.
(3) In applying subsection (2), ignore:
(a) differences in consideration attributable to the fact that the offers relate to shares having different accrued dividend entitlements
(b) differences in consideration attributable to the fact that the offers relate to shares on which different amounts remain unpaid
(c) differences in the offers introduced solely to ensure that each shareholder is left with a whole number of shares.
10/12 limit
(4) The 10/12 limit for a company proposing to make a buy-back is 10% of
the smallest number, at any time during the last
12 months, of votes
attaching to voting shares of the company.
Exceeding the 10/12 limit
(5) A proposed buy-back would exceed the 10/12 limit if the number of votes attaching to:
(a) all the voting shares in the company that have been bought back during the last 12 months; and
(b) the voting shares that will be bought back if the proposed buy-back is made;
would exceed the 10/12 limit.
On-market buy-backs
(6) A buy-back is an on-market buy-back if it results from an offer made by a listed corporation at an official meeting of a securities exchange in Australia in the ordinary course of trading on a stock market of that exchange.
(7) A buy-back by a company (whether listed or not) is also an on‑market buy-back if it results from an offer made in the ordinary course of trading on a stock market of a body corporate that:
(a) operates a securities market outside Australia; and
(b) the ASC declares in writing to be an approved overseas securities exchange for the purposes of this subsection.
A buy-back by a listed company is an on-market buy-back under this subsection only if an offer to buy-back those shares is also made on a stock market of a securities exchange in Australia at the same time.
(8) A declaration under paragraph (7)(b) may be subject to conditions. Notice of the making of the declaration must be published in the Gazette .
257C Buy-back procedure--shareholder approval if the 10/12 limit exceeded
Ordinary resolution required
(1) If section 257B applies this section to a buy-back, the terms of the buy-back agreement must be approved before it is entered into by a resolution passed at a general meeting of the company, or the agreement must be conditional on such an approval.
Information to accompany the notice of meeting
(2) The company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision how to vote on the resolution. However, the company does not have to disclose information if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders.
Documents to be lodged with the ASC
(3) Before the notice of the meeting is sent to shareholders, the company must lodge with the ASC a copy of:
(a) the notice of the meeting; and
(b) any document relating to the buy-back that will accompany the notice of the meeting sent to shareholders.
257D Buy-back procedure--special shareholder approval for selective buy-back
Selective buy-back requires special or unanimous resolution
(1) If section 257B applies this section to a buy-back, the terms of the buy-back agreement must be approved before it is entered into by either:
(a) a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by any person whose shares are proposed to be bought back or by their associates; or
(b) a resolution agreed to, at a general meeting, by all ordinary shareholders;
or the agreement must be conditional on such an approval.
Information to accompany the notice of meeting
(2) The company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision how to vote on the resolution. However, the company does not have to disclose information if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders.
Documents to be lodged with the ASC
(3) Before the notice of the meeting is sent to shareholders, the company must lodge with the ASC a copy of:
(a) the notice of the meeting; and
(b) any document relating to the buy-back that will accompany the notice of the meeting sent to shareholders.
(4) The ASC may exempt a company from the operation of this section. The exemption:
(a) must be in writing; and
(b) must be granted before the buy-back agreement is entered into; and
(c) may be granted subject to conditions.
257E Buy-back procedure--lodgment of offer documents with the ASC
If section 257B applies this section to a buy-back, the company must lodge with the ASC, before the buy-back agreement is entered into, a copy of:
(a) a document setting out the terms of the offer; and
(b) any document that is to accompany the offer.
257F Notice of intended buy-back
(1) If section 257B applies this section to a buy-back, the company must satisfy the lodgment requirement in subsection (2) at least 14 days before:
(a) if the buy-back agreement is conditional on the passing of a resolution under subsection 257C(1) or 257D(1)--the resolution is passed; or
(b) if it is not--the agreement is entered into.
(2) The company satisfies the lodgment requirement when it lodges with the ASC:
(a) documents under subsection 257C(3) or 257D(3) or section 257E; or
(b) a notice that the company intends to carry out the buy-back.
Note 1: A company that has to lodge documents under section 257C, 257D or 257E needs to lodge a notice under paragraph (2)(b) of this section only if it wants for some reason to enter into the agreement or pass the resolution less than 14 days after lodging the section 257C, 257D or 257E documents.
Note 2: The company may specify a buy-back under paragraph (2)(b) in any way. It may, for instance, choose to lodge a notice covering buy‑backs to be carried out:
* under a particular scheme; or
* as part of particular on-market buy-back activity.
257G Buy-back procedure--disclosure of relevant information when offer made
If section 257B applies this section to a buy-back, the company must include with the offer to buy back shares a statement setting out all information known to the company that is material to the decision whether to accept the offer.
257H Acceptance of offer and transfer of shares to the company
Effect of acceptance of the buy-back offer on share rights
(1) Once a company has entered into an agreement to buy back shares, all rights attaching to the shares are suspended. The suspension is lifted if the agreement is terminated.
Shares transferred to the company and cancelled
(2) A company must not deal in shares it buys back. An agreement entered into in contravention of this subsection is void.
(3) Immediately after the registration of the transfer to the company of the shares bought back, the shares are cancelled.
Note: The ASC must be notified of the cancellation under section 254Y.
257J Signposts to other relevant provisions
The following table sets out other provisions of this Law that are relevant to buy-backs.
|
Other provisions relevant to buy-backs |
|
|
||
|
|
provision |
comment |
||
|
1 |
section 588G section 1317HA |
liability of directors on insolvency The directors may have to compensate the company if the company is, or becomes, insolvent when the c | ||