Corporations Act 2001

CHAPTER 2H - SHARES  

PART 2H.3 - PARTLY-PAID SHARES  

SECTION 254M   LIABILITY ON PARTLY-PAID SHARES  

254M(1)   General rule about shareholder's liability for calls.  

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.

254M(2)   No liability companies.  

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.

SECTION 254N   CALLS MAY BE LIMITED TO WHEN COMPANY IS EXTERNALLY-ADMINISTERED  

254N(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 a Chapter 5 body corporate.

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

254N(2)    
The company must lodge with ASIC a copy of the special resolution within 14 days after it is passed.

254N(3)    

An offence based on subsection (2) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

SECTION 254P   NO LIABILITY COMPANIES - CALLS ON SHARES  
Making calls

254P(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

254P(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; and

(b)    the day when it is payable; and

(c)    

details for making the payment.

If the notice is not given, the call is not payable.

254P(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.

SECTION 254Q   NO LIABILITY COMPANIES - FORFEITURE AND SALE OF SHARES FOR FAILURE TO MEET CALL  
Forfeiture and sale of shares

254Q(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 .

254Q(2)    
The forfeited share must then be offered for sale by public auction within 6 weeks after the call became payable.

Advertisement of sale

254Q(3)    

At least 14 days, and not more than 21 days, before the day of the sale, a notice of the sale must be published in accordance with subsection (5A) . The specific number of shares to be offered need not be specified in the notice and it is sufficient for the notice to be to the effect that all shares on which a call remains unpaid will be sold.

Postponement of sale

254Q(4)    

An intended sale of forfeited shares of which a notice has been published in accordance with subsection (3) may be postponed for not more than 21 days from the date of sale specified in the notice. A notice of the date to which the sale is postponed must be published in accordance with subsection (5A) .

254Q(4A)    
(Repealed by No 69 of 2023, s 3, Sch 1[90] (effective 1 January 2024).)

254Q(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.

Publishing notices

254Q(5A)    

A notice under subsection (3) or (4) is published in accordance with this subsection if the notice is published:

(a)    unless paragraph (b) of this subsection applies - in a manner that results in the notice being accessible to the public and reasonably prominent; or

(b)    if a determination in force under subsection (5B) specifies one or more manners in which such a notice may be published - in a manner so specified.

254Q(5B)    

For the purposes of paragraph (5A)(b) , ASIC may, by legislative instrument, make a determination specifying one or more manners in which a notice under subsection (3) or (4) may be published.

254Q(5C)    

A manner of publication may be specified in the determination only if ASIC considers that the manner of publication would result in such a notice being accessible to the public and reasonably prominent.

Shares may be offered as credited to a particular amount

254Q(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

254Q(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

254Q(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

254Q(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

254Q(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

254Q(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

254Q(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

254Q(13)    

If there is failure to comply with subsection (2) or (3) , the company is guilty of an offence.

Strict liability offences

254Q(14)    

An offence by the company based on subsection (13) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

SECTION 254R   NO LIABILITY COMPANIES - REDEMPTION OF FORFEITED SHARES  

254R(1)   [ Redemption]  

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.

254R(2)   [ Registered office]  

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 Act required to be open and accessible to the public.