THE CORPORATIONS LAW

CHAPTER 2H - SHARES

PART 2H.1 - ISSUING AND CONVERTING SHARES

SECTION 254B   TERMS OF ISSUE  

254B(1)  [Terms, rights and restrictions]  

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 ASIC 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 ASIC (see subsection 246F(3)).

Note 3:

Sections 246B-246G provide safeguards in cases where class rights are cancelled or varied.

Note 4:

The company cannot issue par value shares (see section 254C) or bearer shares (see section 254F).

254B(2)  No liability companies - special terms of issue.  

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.

254B(3)  Companies incorporated as no liability companies - special terms of issue.  

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.

254B(4)  [Shares issued to vendors or promoters]  

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.