Corporations Act 2001

CHAPTER 2H - SHARES  

PART 2H.2 - REDEMPTION OF REDEEMABLE PREFERENCE SHARES  

Note: This Part does not apply to a CCIV: see section 1230D .

SECTION 254J   REDEMPTION MUST BE IN ACCORDANCE WITH TERMS OF ISSUE  

254J(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 1: For the power to issue redeemable preference shares see paragraph 254A(1)(b) and subsections 254A(2) and (3) .

Note 2: For the criminal liability of a person dishonestly involved in a contravention of this section, see subsection 254L(3) . Section 79 defines involved .

254J(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 .

SECTION 254K  

254K   OTHER REQUIREMENTS ABOUT REDEMPTION  
A company may only redeem redeemable preference shares:

(a) if the shares are fully paid-up; and

(b) out of profits or the proceeds of a new issue of shares made for the purpose of the redemption.

Note 1: For a director ' s duty to prevent insolvent trading on redeeming redeemable preference shares, see section 588G .

Note 2: For the criminal liability of a person dishonestly involved in a contravention of this section, see subsection 254L(3) . Section 79 defines involved .

SECTION 254L   CONSEQUENCES OF CONTRAVENING SECTION 254J OR 254K  

254L(1)   [ Effect of contravention]  

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.

254L(2)   [ Person involved in contravention]  

Any person who is involved in a company's contravention of section 254J or 254K contravenes this subsection.

Note 1: Subsection (2) is a civil penalty provision (see section 1317E).

Note 2: Section 79 defines involved .

254L(3)   [ Dishonest involvement]  

A person commits an offence if they are involved in a company's contravention of section 254J or 254K and the involvement is dishonest.