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COMPANIES ACT 1981 No. 89 of 1981 - SECT 129
Company financing dealings in its shares, &c.
129. (1) Except as otherwise expressly provided by this Act, a company shall
not-
(a) whether directly or indirectly, give any financial assistance for the
purpose of, or in connection with-
(i) the acquisition by any person, whether before, or at the same
time as, the giving of financial assistance, of-
(A) shares or units of shares in the company; or
(B) shares or units of shares in a holding company of the
company; or
(ii) the proposed acquisition by any person of-
(A) shares or units of shares in the company; or
(B) shares or units of shares in a holding company of the
company; or
(b) whether directly or indirectly, in any way-
(i) acquire shares or units of shares in the company; or
(ii) purport to acquire shares or units of shares in a holding
company of the company; or
(c) whether directly or indirectly, in any way, lend money on the security
of-
(i) shares or units of shares in the company; or
(ii) shares or units of shares in a holding company of the company.
(2) A reference in this section to the giving of financial assistance includes
a reference to the giving of financial assistance by means of the making of a
loan, the giving of a guarantee, the provision of security, the release of an
obligation or the forgiving of a debt or otherwise.
(3) For the purposes of this section, a company shall be taken to have given
financial assistance for the purpose of an acquisition or proposed acquisition
referred to in paragraph (1) (a) (in this sub-section referred to as the
''relevant purpose'') if-
(a) the company gave the financial assistance for purposes that included
the relevant purpose; and
(b) the relevant purpose was a substantial purpose of the giving of the
financial assistance.
(4) For the purposes of this section, a company shall be taken to have given
financial assistance in connection with an acquisition or proposed acquisition
referred to in paragraph (1) (a) if, when the financial assistance was given
to a person, the company was aware that the financial assistance would
financially assist-
(a) the acquisition by a person of shares or units of shares in the
company; or
(b) where shares in the company had already been acquired-the payment by a
person of any unpaid amount of the subscription payable for the shares
or of any premium payable in respect of the shares, or the payment of
any calls on the shares.
(5) If a company contravenes sub-section (1), the company is, notwithstanding
section 570, not guilty of an offence but each officer of the company who is
in default is guilty of an offence.
Penalty: $10,000 or imprisonment for 2 years, or both.
(6) Where-
(a) a person is convicted of an offence under sub-section (5) (including
an offence under that sub-section that is deemed to have been
committed by reason of sub-section 38 (1) of the
Companies and Securities (Interpretation and Miscellaneous
Provisions) Act 1980 ); and
(b) the court by which he is convicted is satisfied that the company or
another person has suffered loss or damage as a result of the
contravention that constituted the offence, that court may, in
addition to imposing a penalty under that sub-section, order the
convicted person to pay compensation to the company or other person,
as the case may be, of such amount as the court specifies, and any
such order may be enforced as if it were a judgment of the court.
(7) The power of a court under section 535 to relieve a person to whom that
section applies, wholly or partly and on such terms as the court thinks fit,
from a liability referred to in that section extends to relieving a person
against whom an order may be made under sub-section (6) of this section from
the liability to have such an order made against him.
(8) Nothing in sub-section (1) prohibits-
(a) the payment of a dividend by a company in good faith and in the
ordinary course of commercial dealing;
(b) a payment made by a company pursuant to a reduction of capital in
accordance with section 123;
(c) the discharge by a company of a liability of the company that was
incurred in good faith as a result of a transaction entered into on
ordinary commercial terms;
(d) where a corporation is a borrowing corporation by reason that it is or
will be under a liability to repay moneys received or to be received
by it-
(i) the giving, in good faith and in the ordinary course of
commercial dealing, by a company that is a subsidiary of the
borrowing corporation, of a guarantee in relation to the
repayment of those moneys, whether or not the guarantee is
secured by any charge over the property of that company; or
(ii) the provision, in good faith and in the ordinary course of
commercial dealing, by a company that is a subsidiary of the
borrowing corporation, of security in relation to the repayment
of those moneys;
(e) an acquisition by a company of an interest (other than a legal
interest) in fully-paid shares in the company where no consideration
is provided by the company, or by any corporation that is related to
the company, for the acquisition;
(f) the purchase by a company of shares in the company pursuant to an
order of a court;
(g) the creation or acquisition, in good faith and in the ordinary course
of commercial dealing, by a company of a lien on shares in the company
(other than fully-paid shares) for any amount payable to the company
in respect of the shares; or
(h) the entering into, in good faith and in the ordinary course of
commercial dealing, of an agreement by a company with a subscriber for
shares in the company permitting the subscriber to make payments for
the shares (including payments in respect of any premium) by
instalments, but nothing in this sub-section-
(j) shall be construed as implying that a particular act of a company
would, but for this sub-section, be prohibited by sub-section (1); or
(k) shall be construed as limiting the operation of any rule of law
permitting the giving of financial assistance by a company, the
acquisition of shares or units of shares by a company or the lending
of money by a company on the security of shares.
(9) Nothing in sub-section (1) prohibits-
(a) the making of a loan, the giving of a guarantee or the provision of
security by a company in the ordinary course of its ordinary business
where-
(i) that business includes the lending of money, or the giving of
guarantees or the provision of security in connection with
loans made by other persons; and
(ii) the loan that is made by the company, or, where the guarantee
is given or the security is provided in respect of a loan, that
loan, is made on ordinary commercial terms as to the rate of
interest, the terms of repayment of principal and payment of
interest, the security to be provided and otherwise; or
(b) the giving by a company of financial assistance for the purpose of, or
in connection with, the acquisition or proposed acquisition of
fully-paid shares or units of fully-paid shares in the company or in a
holding company of the company to be held by or for the benefit of
employees of the company or of a corporation that is related to the
company, including any director holding a salaried employment or
office in the company or in the corporation, as the case may be,
where-
(i) in the case where neither sub-paragraph (ii) nor sub-paragraph
(iii) applies-the company has at a general meeting;
(ii) in a case where the company is a subsidiary of a
listed corporation or listed corporations-the company and the
listed corporation or listed corporations have at general
meetings; or
(iii) in the case where the company is not a subsidiary of a listed
corporation but is a subsidiary whose ultimate holding company
is incorporated in Australia or an external Territory-the
company and the ultimate holding company have at general
meetings,
approved a scheme for the provision of money for such acquisitions and the
financial assistance is given in accordance with the scheme.
(10) Nothing in sub-section (1) prohibits the giving by a company of financial
assistance for the purpose of, or in connection with, an acquisition or
proposed acquisition by a person of shares or units of shares in the company
or in a holding company of the company if-
(a) the company, by special resolution, resolves to give financial
assistance for the purpose of or in connection with, that acquisition;
(b) where-
(i) the company is a subsidiary of a listed corporation; or
(ii) the company is not a subsidiary of a listed corporation but is
a subsidiary whose ultimate holding company is incorporated in
Australia or an external Territory,
the listed corporation or the ultimate holding company, as the case may be,
has, by special resolution, approved the giving of the financial assistance;
(c) the notice specifying the intention to propose the resolution referred
to in paragraph (a) as a special resolution sets out-
(i) particulars of the financial assistance proposed to be given
and the reasons for the proposal to give that assistance; and
(ii) the effect that the giving of the financial assistance would
have on the financial position of the company and, where the
company is included in a group of corporations consisting of a
holding company and a subsidiary or subsidiaries, the effect
that the giving of the financial assistance would have on the
financial position of the group of corporations,
and is accompanied by a copy of a statement made in accordance with a
resolution of the directors, setting out the names of any directors who voted
against the resolution and the reasons why they so voted, and signed by not
less than 2 directors, stating whether, in the opinion of the directors who
voted in favour of the resolution, after taking into account the financial
position of the company (including future liabilities and contingent
liabilities of the company), the giving of the financial assistance would be
likely to prejudice materially the interests of the creditors or members of
the company or any class of those creditors or members;
(d) the notice specifying the intention to propose the resolution referred
to in paragraph (b) as a special resolution is accompanied by a copy
of the notice, and a copy of the statement, referred to in paragraph
(c);
(e) not later than the day next following the day when the notice referred
to in paragraph (c) is dispatched to members of the company there is
lodged with the Commission a copy of that notice and a copy of the
statement that accompanied that notice;
(f) the notice referred to in paragraph (c) and a copy of the statement
referred to in that paragraph are given to-
(i) all members of the company;
(ii) all trustees for debenture holders of the company; and
(iii) if there are no trustees for, or for a particular class of,
debenture holders of the company-all debenture holders, or all
debenture holders of that class, as the case may be, of the
company whose names are, at the time when the notice is
dispatched, known to the company;
(g) the notice referred to in paragraph (d) and the accompanying documents
are given to-
(i) all members of the listed corporation or of the ultimate
holding company;
(ii) all trustees for debenture holders of the listed corporation or
of the ultimate holding company; and
(iii) if there are no trustees for, or for a particular class of,
debenture holders of the listed corporation or of the ultimate
holding company-all debenture holders or debenture holders of
that class, as the case may be, of the listed corporation or of
the ultimate holding company whose names are, at the time when
the notice is dispatched, known to the listed corporation or
the ultimate holding company;
(h) within 21 days after the general meeting of the company at which the
resolution referred to in paragraph (a) is passed or, in a case to
which paragraph (b) applies, the general meeting of the
listed corporation or ultimate holding company at which the resolution
referred to in that paragraph is passed, whichever is the later, a
notice-
(i) setting out the terms of the resolution referred to in
paragraph (a); and
(ii) stating that any of the persons referred to in sub-section (9)
may, within the period referred to in that sub-section, make an
application to the Court opposing the giving of the financial
assistance,
is published, in each State and Territory in which the company is carrying on
business, in a daily newspaper circulating generally in that State or
Territory;
(j) no application opposing the giving of the financial assistance is made
within the period referred to in sub-section (12) or, if such an
application or applications has or have been made, the application or
each of the applications has been withdrawn or the Court has approved
the giving of the financial assistance; and
(k) the financial assistance is given in accordance with the terms of the
resolution referred to in paragraph (a) and not earlier than-
(i) in a case to which sub-paragraph (ii) does not apply-the
expiration of the period referred to in sub-section (12); or
(ii) if an application or applications has or have been made to the
Court within that period-
(A) where the application or each of the applications has
been withdrawn-the withdrawal of the application or of
the last of the applications to be withdrawn; or
(B) in any other case-the decision of the Court on the
application or applications.
(11) Where, on application to the Court by a company, the Court is satisfied
that the provisions of sub-section (10) have been substantially complied with
in relation to a proposed giving by the company of financial assistance of a
kind mentioned in that sub-section, the Court may, by order, declare that the
provisions of that sub-section have been complied with in relation to the
proposed giving by the company of financial assistance.
(12) Where a special resolution referred to in paragraph (10) (a) is passed by
a company, an application to the Court opposing the giving of the financial
assistance to which the special resolution relates may be made, within the
period of 21 days after the publication of the notice referred to in paragraph
(10) (h), by-
(a) a member of the company;
(b) a trustee for debenture holders of the company;
(c) a debenture holder of the company;
(d) a creditor of the company;
(da) if the company is included in a group of corporations consisting of a
holding company and a subsidiary or subsidiaries-
(i) a member of that subsidiary or of any of those subsidiaries;
(ii) a trustee for debenture holders of that subsidiary or of any of
those subsidiaries;
(iii) a debenture holder of that subsidiary or of any of those
subsidiaries; or
(iv) a creditor of that subsidiary or of any of those subsidiaries;
(e) if paragraph (10) (b) applies-
(i) a member of the listed corporation or ultimate holding company
that passed a special resolution referred to in that paragraph;
(ii) a trustee for debenture holders of that listed corporation or
ultimate holding company;
(iii) a debenture holder of that listed corporation or ultimate
holding company; or
(iv) a creditor of that listed corporation or ultimate holding
company; or
(f) the Commission.
(13) Where an application or applications opposing the giving of financial
assistance by a company in accordance with a special resolution passed by the
company is or are made to the Court under sub-section (12), the Court-
(a) shall, in determining what order or orders to make in relation to the
application or applications, have regard to the rights and interests
of the members of the company or of any class of them as well as to
the rights and interests of the creditors of the company or of any
class of them; and
(b) shall not make an order approving the giving of the financial
assistance unless the Court is satisfied that-
(i) the company has disclosed to the members of the company all
material matters relating to the proposed financial assistance;
and
(ii) the proposed financial assistance would not, after taking into
account the financial position of the company (including any
future or contingent liabilities), be likely to prejudice
materially the interests of the creditors or members of the
company or of any class of those creditors or members, and may
do all or any of the following:
(c) if it thinks fit, make an order for the purchase by the company of the
interests of dissentient members of the company and for the reduction
accordingly of the capital of the company;
(d) if it thinks fit, adjourn the proceedings in order that an arrangement
may be made to the satisfaction of the Court for the purchase
(otherwise than by the company or by a subsidiary of the company) of
the interests of dissentient members;
(e) give such ancillary or consequential directions and make such
ancillary or consequential orders as it thinks expedient;
(f) make an order disapproving the giving of the financial assistance or,
subject to paragraph (b), an order approving the giving of the
financial assistance.
(14) Where the Court makes an order under this section in relation to the
giving of financial assistance by a company, the company shall, within 14 days
after the order is made, lodge with the Commission an office copy of the
order.
(15) The passing of a special resolution by a company for the giving of
financial assistance by the company for the purpose of, or in connection with,
an acquisition or proposed acquisition of shares or units of shares in the
company, and the approval by the Court of the giving of the financial
assistance, do not relieve a director of the company of any duty to the
company under section 229 or otherwise, and whether of a fiduciary nature or
not, in connection with the giving of the financial assistance.
(16) A reference in this section to an acquisition or proposed acquisition of
shares or units of shares is a reference to any acquisition or proposed
acquisition whether by way of purchase, subscription or otherwise.
(17) This section does not apply in relation to the doing of any act or thing
pursuant to a contract entered into before the commencement of this Act if the
doing of that act or thing would have been lawful if this Act had not been
enacted.
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