New South Wales Consolidated Acts

LOAN FUND COMPANIES ACT 1976 - SECT 19

19 Offers of loans to holders of loan entitlement shares in loan fund companies

(1) In this section, "loan", in relation to loan entitlement shares in a loan fund company, means a loan of an amount which, having regard to the memorandum and articles of association of the company or the prospectus under which those shares were allotted, is appropriate to those shares.

(2) Subject to this section, a loan fund company shall not offer a loan to the holder of loan entitlement shares in the company which have a higher loan priority number than that allocated or deemed to have been allocated in respect of other loan entitlement shares in the company unless:

(a) the company has made a loan in relation to those other loan entitlement shares, either to the holder or to a former holder, or

(b) where the company has not made a loan in relation to those other loan entitlement shares:

(i) the company has offered a loan in relation to those shares, but the holder of those shares has refused the loan or has failed or has been unable to comply with the terms and conditions or any of the terms or conditions on which the loan is offered, or

(ii) the holder of those shares is for the time being in arrear with the payment of calls or instalments in respect of those shares or has failed to pay any penalty or other amount that is for the time being due in respect of those shares.

(3) A loan fund company shall not offer a loan to the holder of loan entitlement shares in the company which have a higher loan priority number than that allocated in respect of an option to acquire loan entitlement shares in the company or qualifying shares in the company unless:

(a) the company has given notice in writing, by letter sent to the holder at the holder’s address last known to the company, to the holder of that option or those qualifying shares (being an option or qualifying shares in respect of which the holder is not for the time being in arrear with the payment of calls or instalments and in respect of which the holder has paid all penalties and other amounts (if any) that are for the time being due) advising the holder that, if the holder does not acquire the loan entitlement shares to which the holder’s option relates or, as the case may be, the holder’s qualifying shares relate within such period as is specified in the notice, being a period of not less than 21 days, the company proposes to offer the loan to that holder of loan entitlement shares, and

(b) the holder of that option or those qualifying shares fails within that period to acquire the loan entitlement shares to which the holder’s option relates or the holder’s qualifying shares relate.

(4) Where the holder of loan entitlement shares in a loan fund company is offered a loan in relation to those shares and the holder refuses the offer, or fails or is unable to comply with the terms and conditions or any of the terms or conditions on which the loan is offered, the company may offer the loan to the holder of the loan entitlement shares in the company which have the next highest loan priority number and so on until the offer is accepted, but any such refusal, failure or inability shall not affect the loan priority number allocated or deemed to have been allocated in respect of the loan entitlement shares of the first mentioned holder or the company’s obligation to offer to the holder a loan in relation to those shares on the next occasion that the company makes offers of loans in relation to loan entitlement shares.

(5) If a loan has been offered by a loan fund company to all of the holders of loan entitlement shares in the company who are eligible by virtue of the memorandum and articles of association of the company to be offered loans by the company and none of those holders has accepted the loan, the company may vary the terms and conditions on which the loan is offered (including the rate of interest at which the loan is to be repayable), but, if the company exercises that power, the provisions of this section shall apply to the offer of the loan as if the loan had not previously been offered and the terms and conditions on which the loan is offered had not been varied.

(6) A loan fund company which contravenes subsection (2) or (3) is guilty of an offence and is liable on conviction to a penalty not exceeding 5 penalty units.