Company Law Review Act 1998 (61 of 1998)

Schedule 1 Main amendments of the Corporations Law

4 Before Part 3.5

Insert:

Chapter 2F - Members' rights and remedies

246A Membership of a company

A person is a member of a company if they:

(a) are a member of the company on its registration; or

(b) agree to become a member of the company after its registration and their name is entered on the register of members; or

(c) become a member of the company under section 167 (membership arising from conversion of a company from one limited by guarantee to one limited by shares).

Part 2F.1 - Oppression

Part 2F.2 - Class rights

246B Varying and cancelling class rights

If constitution sets out procedure

(1) If a company has a constitution that sets out the procedure for varying or cancelling:

(a) for a company with a share capital - rights attached to shares in a class of shares; or

(b) for a company without a share capital - rights of members in a class of members;

those rights may be varied or cancelled only in accordance with the procedure. The procedure may be changed only if the procedure itself is complied with.

If constitution does not set out procedure

(2) If a company does not have a constitution, or has a constitution that does not set out the procedure for varying or cancelling:

(a) for a company with a share capital - rights attached to shares in a class of shares; or

(b) for a company without a share capital - rights of members in a class of members;

those rights may be varied or cancelled only by special resolution of the company and:

(i) for a company with a share capital of the class of members holding shares in the class; or

(ii) for a company without a share capital of the class of members whose rights are being varied or cancelled; or

(d) with the written consent of members with at least 75% of the votes in the class.

(3) The company must give written notice of the variation or cancellation to the members of the class within 7 days after the variation or cancellation is made.

246C Certain actions taken to vary rights etc.

Company with share capital

(1) If the shares in a class of shares in a company are divided into further classes, and after the division the rights attached to all of those shares are not the same:

(a) the division is taken to vary the rights attached to every share that was in the class existing before the division; and

(b) members who hold shares to which the same rights are attached after the division form a separate class.

(2) If the rights attached to some of the shares in a class of shares in a company are varied:

(a) the variation is taken to vary the rights attached to every other share that was in the class existing before the variation; and

(b) members who hold shares to which the same rights are attached after the variation form a separate class.

Company without share capital

(3) If the members in a class of members in a company without share capital are divided into further classes of members, and after the division the rights of all of those members are not the same:

(a) the division is taken to vary the rights of every member who was in the class existing before the division; and

(b) members who have the same rights after the division form a separate class.

(4) If the rights of some of the members in a class of members in a company without a share capital are varied:

(a) the variation is taken to vary the rights of every other member who was in the class existing before the variation; and

(b) members who have the same rights after the variation form a separate class.

Company with 1 class of shares issuing new class of shares

(5) If a company with 1 class of shares issues new shares, the issue is taken to vary the rights attached to shares already issued if:

(a) the rights attaching to the new shares are not the same as the rights attached to shares already issued; and

(b) those rights are not provided for in:

(i) the company's constitution (if any); or

(ii) a notice, document or resolution that is lodged with the ASC.

(6) If a company issues new preference shares that rank equally with existing preference shares, the issue is taken to vary the rights attached to the existing preference shares unless the issue is authorised by:

(a) the terms of issue of the existing preference shares; or

(b) the company's constitution (if any) as in force when the existing preference shares were issued.

246D Variation, cancellation or modification without unanimous support of class

(1) If members in a class do not all agree (whether by resolution or written consent) to:

(a) a variation or cancellation of their rights; or

(b) a modification of the company's constitution (if any) to allow their rights to be varied or cancelled;

members with at least 10% of the votes in the class may apply to the Court to have the variation, cancellation or modification set aside.

(2) An application may only be made within 1 month after the variation, cancellation or modification is made.

(3) The variation, cancellation or modification takes effect:

(a) if no application is made to the Court to have it set aside - 1 month after the variation, cancellation or modification is made; or

(b) if an application is made to the Court to have it set aside - when the application is withdrawn or finally determined.

(4) The members of the class who want to have the variation, cancellation or modification set aside may appoint 1 or more of themselves to make the application on their behalf. The appointment must be in writing.

(5) The Court may set aside the variation, cancellation or modification if it is satisfied that it would unfairly prejudice the applicants. However, the Court must confirm the variation, cancellation or modification if the Court is not satisfied of unfair prejudice.

(6) Within 14 days after the Court makes an order, the company must lodge a copy of it with the ASC.

246E Variation, cancellation or modification with unanimous support of class

If the members in a class all agree (whether by resolution or written consent) to the variation, cancellation or modification, it takes effect:

(a) if no later date is specified in the resolution or consent - on the date of the resolution or consent; or

(b) on a later date specified in the resolution or consent.

246F Company must lodge documents and resolutions with the ASC

(1) A company must lodge with the ASC a notice in the prescribed form setting out particulars of any of the following:

(a) a division of shares in the company into classes if the shares were not previously so divided

(b) a conversion of shares in a class of shares in the company into shares in another class.

(2) The notice must be lodged within 14 days after the division or conversion.

(3) A public company must lodge with the ASC a copy of each document (including an agreement or consent) or resolution that:

(a) does any of the following:

(i) attaches rights to issued or unissued shares

(ii) varies or cancels rights attaching to issued or unissued shares

(iii) varies or cancels rights of members in a class of members of a company that does not have a share capital

(iv) binds a class of members; and

(b) is not already lodged with the ASC.

This also applies to a proprietary company that has applied under Part 2B.7 to change to a public company, while its application has not yet been determined.

(4) The document must be lodged within 14 days after it is made. The resolution must be lodged within 14 days after it is passed.

246G Member's copies of documents and resolutions

(1) A member of a company may ask the company in writing for a copy of a document or resolution referred to in section 246F. The company must send the copy to the member.

(2) If the company requires the member to pay for the copy, the company must send it:

(a) within 7 days after the company receives the payment; or

(b) within any longer period approved by the ASC.

(3) The amount of any payment the company requires cannot exceed the prescribed amount.

(4) If the company does not require payment for the copy, the company must send it:

(a) within 7 days after the member asks for it; or

(b) within any longer period approved by the ASC.

Part 2F.3 - Inspection of books

247A Order for inspection of books of company or registered managed investment scheme

(1) On application by a member of a company or registered managed investment scheme, the Court may make an order:

(a) authorising the applicant to inspect books of the company or scheme; or

(b) authorising another person (whether a member or not) to inspect books of the company or scheme on the applicant's behalf.

The Court may only make the order if it is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose.

(2) A person authorised to inspect books may make copies of the books unless the Court orders otherwise.

247B Ancillary orders

If the Court makes an order under section 247A, the Court may make any other orders it considers appropriate, including either or both of the following:

(a) an order limiting the use that a person who inspects books may make of information obtained during the inspection

(b) an order limiting the right of a person who inspects books to make copies in accordance with subsection 247A(2).

247C Disclosure of information acquired in inspection

A person who inspects books on behalf of an applicant under section 247A must not disclose information obtained during the inspection unless the disclosure is to:

(a) the ASC; or

(b) the applicant.

247D Company or directors may allow member to inspect books (replaceable rule see section 135)

The directors of a company, or the company by a resolution passed at a general meeting, may authorise a member to inspect books of the company.

Chapter 2G - Meetings

Part 2G.1 - Directors' meetings

Division 1 - Resolutions and declarations without meetings

248A Circulating resolutions of companies with more than 1 director (replaceable rule see section 135)

Resolutions

(1) The directors of a company may pass a resolution without a directors' meeting being held if all the directors entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document.

Copies

(2) Separate copies of a document may be used for signing by directors if the wording of the resolution and statement is identical in each copy.

When the resolution is passed

(3) The resolution is passed when the last director signs.

Note: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A).

248B Resolutions and declarations of 1 director proprietary companies

Resolutions

(1) The director of a proprietary company that has only 1 director may pass a resolution by recording it and signing the record.

Declarations

(2) The director of a proprietary company that has only 1 director may make a declaration by recording it and signing the record. Recording and signing the declaration satisfies any requirement in this Law that the declaration be made at a directors' meeting.

Note 1: For directors' declarations, see sections 231, 295 and 494.

Note 2: Passage of a resolution or the making of a declaration under this section must be recorded in the company's minute books (see section 251A).

Division 2 - Directors' meetings

248C Calling directors' meetings (replaceable rule see section 135)

A directors' meeting may be called by a director giving reasonable notice individually to every other director.

Note: A director who has appointed an alternate director may ask for the notice to be sent to the alternate director (see section 225A).

248D Use of technology

A directors' meeting may be called or held using any technology consented to by all the directors. The consent may be a standing one. A director may only withdraw their consent within a reasonable period before the meeting.

248E Chairing directors' meetings (replaceable rule see section 135)

(1) The directors may elect a director to chair their meetings. The directors may determine the period for which the director is to be the chair.

(2) The directors must elect a director present to chair a meeting, or part of it, if:

(a) a director has not already been elected to chair the meeting; or

(b) a previously elected chair is not available or declines to act, for the meeting or the part of the meeting.

248F Quorum at directors' meetings (replaceable rule see section 135)

Unless the directors determine otherwise, the quorum for a directors' meeting is 2 directors and the quorum must be present at all times during the meeting.

Note 1: For special quorum rules for public companies, see sections 232A and 232B.

Note 2: For resolutions of 1 director proprietary companies without meetings, see section 248B.

248G Passing of directors' resolutions (replaceable rule see section 135)

(1) A resolution of the directors must be passed by a majority of the votes cast by directors entitled to vote on the resolution.

(2) The chair has a casting vote if necessary in addition to any vote they have in their capacity as a director.

Note: The chair may be precluded from voting, for example, by a conflict of interest.

Part 2G.2 - Meetings of members of companies

Division 1 - Resolutions without meetings

249A Circulating resolutions of proprietary companies with more than 1 member

(1) This section applies to resolutions of the members of proprietary companies that this Law or, if a company has a constitution, the company's constitution requires or permits to be passed at a general meeting. It does not apply to a resolution under section 329 to remove an auditor.

(2) A company may pass a resolution without a general meeting being held if all the members entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document. If a share is held jointly, each of the joint members must sign.

(3) Separate copies of a document may be used for signing by members if the wording of the resolution and statement is identical in each copy.

(4) The resolution is passed when the last member signs.

(5) A company that passes a resolution under this section without holding a meeting satisfies any requirement in this Law:

(a) to give members information or a document relating to the resolution - by giving members that information or document with the document to be signed; and

(b) to lodge with the ASC a copy of a notice of meeting to consider the resolution - by lodging a copy of the document to be signed by members; and

(c) to lodge a copy of a document that accompanies a notice of meeting to consider the resolution - by lodging a copy of the information or documents referred to in paragraph (a).

(6) The passage of the resolution satisfies any requirement in this Law, or a company's constitution (if any), that the resolution be passed at a general meeting.

(7) This section does not affect any rule of law relating to the assent of members not given at a general meeting.

Note 1: A body corporate representative may sign a circulating resolution (see section 250D).

Note 2: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A).

249B Resolutions of 1 member companies

(1) A company that has only 1 member may pass a resolution by the member recording it and signing the record.

(2) If this Law requires information or a document relating to the resolution to be lodged with the ASC, that requirement is satisfied by lodging the information or document with the resolution that is passed.

Note 1: A body corporate representative may sign such a resolution (see section 250D).

Note 2: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A).

Division 2 - Who may call meetings of members

249C Calling of meetings of members by a director (replaceable rule - see section 135)

A director may call a meeting of the company's members.

249CA Calling of meetings of members of a listed company by a director

(1) A director may call a meeting of the company's members.

(2) This section applies only to a company that is:

(a) incorporated in Australia; and

(b) included in an official list of the Exchange.

(3) This section applies despite anything in the company's constitution.

249D Calling of general meeting by directors when requested by members

(1) The directors of a company must call and arrange to hold a general meeting on the request of:

(a) members with at least 5% of the votes that may be cast at the general meeting; or

(b) at least 100 members who are entitled to vote at the general meeting.

(2) The request must:

(a) be in writing; and

(b) state any resolution to be proposed at the meeting; and

(d) be given to the company.

(3) Separate copies of a document setting out the request may be used for signing by members if the wording of the request is identical in each copy.

(4) The percentage of votes that members have is to be worked out as at the midnight before the request is given to the company.

(5) The directors must call the meeting within 21 days after the request is given to the company. The meeting is to be held not later than 2 months after the request is given to the company.

249E Failure of directors to call general meeting

(1) Members with more than 50% of the votes of all of the members who make a request under section 249D may call and arrange to hold a general meeting if the directors do not do so within 21 days after the request is given to the company.

(2) The meeting must be called in the same way - so far as is possible - in which general meetings of the company may be called. The meeting must be held not later than 3 months after the request is given to the company.

(3) To call the meeting the members requesting the meeting may ask the company under section 173 for a copy of the register of members. Despite paragraph 173(3)(b), the company must give the members the copy of the register without charge.

(4) The company must pay the reasonable expenses the members incurred because the directors failed to call and arrange to hold the meeting.

(5) The company may recover the amount of the expenses from the directors. However, a director is not liable for the amount if they prove that they took all reasonable steps to cause the directors to comply with section 249D. The directors who are liable are jointly and individually liable for the amount. If a director who is liable for the amount does not reimburse the company, the company must deduct the amount from any sum payable as fees to, or remuneration of, the director.

249F Calling of general meetings by members

(1) Members with at least 5% of the votes that may be cast at a general meeting of the company may call, and arrange to hold, a general meeting. The members calling the meeting must pay the expenses of calling and holding the meeting.

(2) The meeting must be called in the same way - so far as is possible - in which general meetings of the company may be called.

(3) The percentage of votes that members have is to be worked out as at the midnight before the meeting is called.

249G Calling of meetings of members by the Court

(1) The Court may order a meeting of the company's members to be called if it is impracticable to call the meeting in any other way.

(2) The Court may make the order on application by:

(a) any director; or

(b) any member who would be entitled to vote at the meeting.

Note: For the directions the Court may give for calling, holding or conducting a meeting it has ordered be called, see section 1319.

Division 3 - How to call meetings of members

249H Amount of notice of meetings

General rule

(1) Subject to subsection (2), at least 21 days notice must be given of a meeting of a company's members. However, if a company has a constitution, it may specify a longer minimum period of notice.

Calling meetings on shorter notice

(2) A company may call on shorter notice:

(a) an AGM, if all the members entitled to attend and vote at the AGM agree beforehand; and

(b) any other general meeting, if members with at least 95% of the votes that may be cast at the meeting agree beforehand.

A company cannot call an AGM or other general meeting on shorter notice if it is a meeting of the kind referred to in subsection (3) or (4).

Shorter notice not allowed - removing or appointing director

(3) At least 21 days notice must be given of a meeting of the members of a public company at which a resolution will be moved to:

(a) remove a director under section 227; or

(b) appoint a director in place of a director removed under that section; or

(c) to appoint or reappoint as a director under subsection 228(7) or (8) - a person who has attained the age of 72 years.

Shorter notice not allowed - removing auditor

(4) At least 21 days notice must be given of a meeting of a company at which a resolution will be moved to remove an auditor under section 329.

249HA Amount of notice of meetings of listed company

(1) Despite section 249H, at least 28 days notice must be given of a meeting of a company's members.

(2) This section applies only to a company that is:

(a) incorporated in Australia; and

(b) included in an official list of the Exchange.

(3) This section applies despite anything in the company's constitution.

249J Notice of meetings of members to members and directors

Notice to members and directors individually

(1) Written notice of a meeting of a company's members must be given individually to each member entitled to vote at the meeting and to each director. If a share is held jointly, notice need only be given to 1 of the members.

Notice to joint members (replaceable rule - see section 135)

(2) Notice to joint members must be given to the joint member named first in the register of members.

How notice is given

(3) A company may give the notice of meeting to a member:

(a) personally; or

(b) by sending it by post to the address for the member in the register of members or the alternative address (if any) nominated by the member; or

(d) by any other means that the company's constitution (if any) permits.

Note: A defect in the notice given may not invalidate a meeting (see
section 1322).

When notice by post or fax is given (replaceable rule - see section 135)

(4) A notice of meeting sent by post is taken to be given 3 days after it is posted. A notice of meeting sent by fax, or other electronic means, is taken to be given on the business day after it is sent.

249K Auditor entitled to notice and other communications

A company must give its auditor:

(a) notice of a general meeting in the same way that a member of the company is entitled to receive notice; and

(b) any other communications relating to the general meeting that a member of the company is entitled to receive.

Note 1: For when a company must have an auditor, see Part 2M.3.

Note 2: An auditor may appoint a representative to attend a meeting (see subsection 249V(4)).

249L Contents of notice of meetings of members

A notice of a meeting of a company's members must:

(a) set out the place, date and time for the meeting (and, if the meeting is to be held in 2 or more places, the technology that will be used to facilitate this); and

(b) state the general nature of the meeting's business; and

(c) if a special resolution is to be proposed at the meeting - set out an intention to propose the special resolution and state the resolution; and

(d) if a member is entitled to appoint a proxy - contain a statement setting out the following information:

(i) that the member has a right to appoint a proxy

(ii) whether or not the proxy needs to be a member of the company

(iii) that a member who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise.

Note: There may be other requirements for disclosure to members.

249M Notice of adjourned meetings (replaceable rule - see section 135)

When a meeting is adjourned, new notice of the resumed meeting must be given if the meeting is adjourned for 1 month or more.

Division 4 - Members' rights to put resolutions etc. at general meetings

249N Members' resolutions

(1) The following members may give a company notice of a resolution that they propose to move at a general meeting:

(a) members with at least 5% of the votes that may be cast on the resolution; or

(b) at least 100 members who are entitled to vote at a general meeting.

(2) The notice must:

(a) be in writing; and:

(b) set out the wording of the proposed resolution; and

(3) Separate copies of a document setting out the notice may be used for signing by members if the wording of the notice is identical in each copy.

(4) The percentage of votes that members have is to be worked out as at the midnight before the members give the notice.

249O Company giving notice of members' resolutions

(1) If a company has been given notice of a resolution under section 249N, the resolution is to be considered at the next general meeting that occurs more than 2 months after the notice is given.

(2) The company must give all its members notice of the resolution at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a meeting.

(3) The company is responsible for the cost of giving members notice of the resolution if the company receives the notice in time to send it out to members with the notice of meeting.

(4) The members requesting the meeting are jointly and individually liable for the expenses reasonably incurred by the company in giving members notice of the resolution if the company does not receive the members' notice in time to send it out with the notice of meeting. At a general meeting, the company may resolve to meet the expenses itself.

(5) The company need not give notice of the resolution:

(a) if it is more than 1,000 words long or defamatory; or

(b) if the members making the request are to bear the expenses of sending the notice out - unless the members give the company a sum reasonably sufficient to meet the expenses that it will reasonably incur in giving the notice.

249P Members' statements to be distributed

(1) Members may request a company to give to all its members a statement provided by the members making the request about:

(a) a resolution that is proposed to be moved at a general meeting; or

(b) any other matter that may be properly considered at a general meeting.

(2) The request must be made by:

(a) members with at least 5% of the votes that may be cast on the resolution; or

(b) at least 100 members who are entitled to vote at the meeting.

(3) The request must be:

(a) in writing; and

(b) signed by the members making the request; and

(4) Separate copies of a document setting out the request may be used for signing by members if the wording of the request is identical in each copy.

(5) The percentage of votes that members have is to be worked out as at the midnight before the request is given to the company.

(6) After receiving the request, the company must distribute to all its members a copy of the statement at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a general meeting.

(7) The company is responsible for the cost of making the distribution if the company receives the statement in time to send it out to members with the notice of meeting.

(8) The members making the request are jointly and individually liable for the expenses reasonably incurred by the company in making the distribution if the company does not receive the statement in time to send it out with the notice of meeting. At a general meeting, the company may resolve to meet the expenses itself.

(9) The company need not comply with the request:

(a) if the statement is more than 1,000 words long or defamatory; or

(b) if the members making the request are responsible for the expenses of the distribution - unless the members give the company a sum reasonably sufficient to meet the expenses that it will reasonably incur in making the distribution.

Division 5 - Holding meetings of members

249Q Purpose

A meeting of a company's members must be held for a proper purpose.

249R Time and place for meetings of members

A meeting of a company's members must be held at a reasonable time and place.

249S Technology

A company may hold a meeting of its members at 2 or more venues using any technology that gives the members as a whole a reasonable opportunity to participate.

Note: See section 1322 for the consequences of a member not being given a reasonable opportunity to participate.

249T Quorum (replaceable rule - see section 135)

(1) The quorum for a meeting of a company's members is 2 members and the quorum must be present at all times during the meeting.

Note: For single member companies, see section 249B.

(2) In determining whether a quorum is present, count individuals attending as proxies or body corporate representatives. However, if a member has appointed more than 1 proxy or representative, count only 1 of them. If an individual is attending both as a member and as a proxy or body corporate representative, count them only once.

Note 1: For rights to appoint proxies, see section 249X.

Note 2: For body corporate representatives, see section 250D.

(3) A meeting of the company's members that does not have a quorum present within 30 minutes after the time for the meeting set out in the notice of meeting is adjourned to the date, time and place the directors specify. If the directors do not specify 1 or more of those things, the meeting is adjourned to:

(a) if the date is not specified - the same day in the next week; and

(b) if the time is not specified - the same time; and

(4) If no quorum is present at the resumed meeting within
30 minutes after the time for the meeting, the meeting is dissolved.

249U Chairing meetings of members (replaceable rule - see section 135)

(1) The directors may elect an individual to chair meetings of the company's members.

(2) The directors at a meeting of the company's members must elect an individual present to chair the meeting (or part of it) if an individual has not already been elected by the directors to chair it or, having been elected, is not available to chair it, or declines to act, for the meeting (or part of the meeting).

(3) The members at a meeting of the company's members must elect a member present to chair the meeting (or part of it) if:

(a) a chair has not previously been elected by the directors to chair the meeting; or

(b) a previously elected chair is not available, or declines to act, for the meeting (or part of the meeting).

(4) The chair must adjourn a meeting of the company's members if the members present with a majority of votes at the meeting agree or direct that the chair must do so.

249V Auditor's right to be heard at general meetings

(1) A company's auditor is entitled to attend any general meeting of the company.

(2) The auditor is entitled to be heard at the meeting on any part of the business of the meeting that concerns the auditor in their capacity as auditor.

(3) The auditor is entitled to be heard even if:

(a) the auditor retires at the meeting; or

(b) the meeting passes a resolution to remove the auditor from office.

(4) The auditor may authorise a person in writing as their representative for the purpose of attending and speaking at any general meeting.

Note 1: At an AGM, members may ask the auditor questions (see section 250T).

Note 2: For when a company must have an auditor, see Part 2M.3.

249W Adjourned meetings

When resolution passed

(1) A resolution passed at a meeting resumed after an adjournment is passed on the day it was passed.

Business at adjourned meetings (replaceable rule - see section 135)

(2) Only unfinished business is to be transacted at a meeting resumed after an adjournment

Division 6 - Proxies and body corporate representatives

249X Who can appoint a proxy (replaceable rule for proprietary companies and mandatory rule for public companies - see section 135)

(1) A member of a company who is entitled to attend and cast a vote at a meeting of the company's members may appoint a person as the member's proxy to attend and vote for the member at the meeting.

(2) The appointment may specify the proportion or number of votes that the proxy may exercise.

(3) Each member may appoint a proxy. If the member is entitled to cast 2 or more votes at the meeting, they may appoint 2 proxies. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member's votes each proxy may exercise, each proxy may exercise half of the votes.

(4) Disregard any fractions of votes resulting from the application of subsection (2) or (3).

249Y Rights of proxies

Rights of proxies

(1) A proxy appointed to attend and vote for a member has the same rights as the member:

(a) to speak at the meeting; and

(b) to vote (but only to the extent allowed by the appointment); and

Proxy's right to vote

(2) If a company has a constitution, the constitution may provide that a proxy is not entitled to vote on a show of hands.

Note: Even if the proxy is not entitled to vote on a show of hands, they may make or join in the demand for a poll.

Effect of member's presence on proxy's authority

(3) A company's constitution (if any) may provide for the effect that a member's presence at a meeting has on the authority of a proxy appointed to attend and vote for the member. However, if the constitution does not deal with this, a proxy's authority to speak and vote for a member at a meeting is suspended while the member is present at the meeting.

249Z Company sending appointment forms or lists of proxies must send to all members

If a company sends a member a proxy appointment form for a meeting or a list of persons willing to act as proxies at a meeting:

(a) if the member requested the form or list - the company must send the form or list to all members who ask for it and who are entitled to appoint a proxy to attend and vote at the meeting; or

(b) otherwise - the company must send the form or list to all its members entitled to appoint a proxy to attend and vote at the meeting.

250A Appointing a proxy

(1) An appointment of a proxy is valid if it is signed by the member of the company making the appointment and contains the following information:

(a) the member's name and address

(b) the company's name

(d) the meetings at which the appointment may be used.

An appointment may be a standing one.

(2) If a company has a constitution, the constitution may provide that an appointment is valid even if it contains only some of the information required by subsection (1).

(3) An undated appointment is taken to have been dated on the day it is given to the company.

(4) An appointment may specify the way the proxy is to vote on a particular resolution. If it does:

(a) the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way; and

(b) if the proxy has 2 or more appointments that specify different ways to vote on the resolution - the proxy must not vote on a show of hands; and

(d) if the proxy is not the chair - the proxy need not vote on a poll, but if the proxy does so, the proxy must vote that way.

If a proxy is also a member, this subsection does not affect the way that the person can cast any votes they hold as a member.

Note: A company's constitution may provide that a proxy is not entitled to vote on a show of hands (see subsection 249Y(2)).

(5) A person who contravenes subsection (4) is guilty of an offence, but only if their appointment as a proxy resulted from the company sending to members:

(a) a list of persons willing to act as proxies; or

(b) a proxy appointment form holding the person out as being willing to act as a proxy.

(6) An appointment does not have to be witnessed.

(7) A later appointment revokes an earlier one if both appointments could not be validly exercised at the meeting.

250B Proxy documents

Documents to be received by company before meeting

(1) For an appointment of a proxy for a meeting of a company's members to be effective, the following documents must be received by the company at least 48 hours before the meeting:

(a) the proxy's appointment

(b) if the appointment is signed by the appointor's attorney - the authority under which the appointment was signed or a certified copy of the authority.

Documents received following adjournment of meeting

(2) If a meeting of a company's members has been adjourned, an appointment and any authority received by the company at least 48 hours before the resumption of the meeting are effective for the resumed part of the meeting.

Receipt of documents

(3) A company receives an appointment authority when it is received at any of the following:

(a) the company's registered office

(b) a fax number at the company's registered office

Constitution or notice of meeting may provide for different notification period

(5) The company's constitution (if any) or the notice of meeting may reduce the period of 48 hours referred to in subsection (1) or (2).

250BA Proxy documents - listed companies

(1) In a notice of meeting for a meeting of the members of a company, the company:

(a) must specify a place and a fax number; and

(b) may specify an electronic address;

for the purposes of receipt of proxy appointments.

(2) This section applies only to a company that is:

(a) incorporated in Australia; and

(b) included in an official list of the Exchange.

(3) This section applies despite anything in the company's constitution.

250C Validity of proxy vote

Proxy vote valid even if proxy cannot vote as member

(1) A proxy who is not entitled to vote on a resolution as a member may vote as a proxy for another member who can vote if their appointment specifies the way they are to vote on the resolution and they vote that way.

Proxy vote valid even if member dies, revokes appointment etc. (replaceable rule - see section 135)

(2) Unless the company has received written notice of the matter before the start or resumption of the meeting at which a proxy votes, a vote cast by the proxy will be valid even if, before the proxy votes:

(a) the appointing member dies; or

(b) the member is mentally incapacitated; or

(d) the member revokes the authority under which the proxy was appointed by a third party; or

(e) the member transfers the share in respect of which the proxy was given.

Note: A proxy's authority to vote is suspended while the member is present at the meeting (see subsection 249Y(3)).

250D Body corporate representative

(1) A body corporate may appoint an individual as a representative to exercise all or any of the powers the body corporate may exercise:

(a) at meetings of a company's members; or

(b) at meetings of creditors or debenture holders; or

The appointment may be a standing one.

(2) The appointment may set out restrictions on the representative's powers. If the appointment is to be by reference to a position held, the appointment must identify the position.

(3) A body corporate may appoint more than 1 representative but only 1 representative may exercise the body's powers at any one time.

(4) Unless otherwise specified in the appointment, the representative may exercise, on the body corporate's behalf, all of the powers that the body could exercise at a meeting or in voting on a resolution.

Note: For resolutions of members without meetings, see sections 249A and 249B.

Division 7 - Voting at meetings of members

250E How many votes a member has (replaceable rule - see section 135)

Company with share capital

(1) Subject to any rights or restrictions attached to any class of shares, at a meeting of members of a company with a share capital:

(a) on a show of hands, each member has 1 vote; and

(b) on a poll, each member has 1 vote for each share they hold.

Note: Unless otherwise specified in the appointment, a body corporate representative has all the powers that a body corporate has as a member (including the power to vote on a show of hands).

Company without share capital

(2) Each member of a company that does not have a share capital has 1 vote, both on a show of hands and a poll.

Chair's casting vote

(3) The chair has a casting vote, and also, if they are a member, any vote they have in their capacity as a member.

Note 1: The chair may be precluded from voting, for example, by a conflict of interest.

Note 2: For rights to appoint proxies, see section 249X.

250F Jointly held shares (replaceable rule - see section 135)

If a share is held jointly and more than 1 member votes in respect of that share, only the vote of the member whose name appears first in the register of members counts.

250G Objections to right to vote (replaceable rule - see section 135)

A challenge to a right to vote at a meeting of a company's members:

(a) may only be made at the meeting; and

(b) must be determined by the chair, whose decision is final.

250H Votes need not all be cast in the same way

On a poll a person voting who is entitled to 2 or more votes:

(a) need not cast all their votes; and

(b) may cast their votes in different ways.

Note: For proxy appointments that specify the way the proxy is to vote on a particular resolution, see subsection 250A(4).

250J How voting is carried out (replaceable rule - see section 135)

(1) A resolution put to the vote at a meeting of a company's members must be decided on a show of hands unless a poll is demanded.

(1A) Before a vote is taken the chair must inform the meeting whether any proxy votes have been received and how the proxy votes are to be cast.

(2) On a show of hands, a declaration by the chair is conclusive evidence of the result, provided that the declaration reflects the show of hands and the votes of the proxies received. Neither the chair nor the minutes need to state the number or proportion of the votes recorded in favour or against.

Note: Even though the chair's declaration is conclusive of the voting results, the members present may demand a poll (see paragraph 250L(3)(c)).

250K Matters on which a poll may be demanded

(1) A poll may be demanded on any resolution.

(2) If a company has a constitution, the constitution may provide that a poll cannot be demanded on any resolution concerning:

(a) the election of the chair of a meeting; or

(b) the adjournment of a meeting.

(3) A demand for a poll may be withdrawn.

250L When a poll is effectively demanded

(1) At a meeting of a company's members, a poll may be demanded by:

(a) at least 5 members entitled to vote on the resolution; or

(b) members with at least 5% of the votes that may be cast on the resolution on a poll; or

Note: A proxy may join in the demand for a poll (see paragraph 249Y(1)(c)).

(2) If a company has a constitution, the constitution may provide that fewer members or members with a lesser percentage of votes may demand a poll.

(3) The poll may be demanded:

(a) before a vote is taken; or

(b) before the voting results on a show of hands are declared; or

(4) The percentage of votes that members have is to be worked out as at the midnight before the poll is demanded.

250M When and how polls must be taken (replaceable rule - see section 135)

(1) A poll demanded on a matter other than the election of a chair or the question of an adjournment must be taken when and in the manner the chair directs.

(2) A poll on the election of a chair or on the question of an adjournment must be taken immediately.

Division 8 - AGMs of public companies

250N Public company must hold AGM

(1) A public company must hold an annual general meeting ( AGM ) within 18 months after its registration.

(2) A public company must hold an AGM at least once in each calendar year and within 5 months after the end of its financial year.

Note: An AGM held to satisfy this subsection may also satisfy
subsection (1).

(3) An AGM is to be held in addition to any other meetings held by a public company in the year.

Note 1: The company's annual financial report, directors' report and auditor's report must be laid before the AGM (see section 317).

Note 2: The rules in sections 249C-250M apply to an AGM.

(4) A public company that has only 1 member is not required to hold an AGM under this section.

250P Extension of time for holding AGM

(1) A public company may lodge an application with the ASC to extend the period within which section 250N requires the company to hold an AGM.

(2) If the company applies before the end of the period within which the company would otherwise be required to hold an AGM, the ASC may extend the period in writing. The ASC must specify the period of the extension.

(3) A company granted an extension under subsection (2) must hold its AGM within the extended period.

(4) The ASC may impose conditions on the extension and the company must comply with those conditions.

250R Business of AGM

The business of an AGM may include any of the following, even if not referred to in the notice of meeting:

(a) the consideration of the annual financial report, directors' report and auditor's report

(b) the election of directors

(d) the fixing of the auditor's remuneration.

250S Questions and comments by members on company management at AGM

The chair of an AGM must allow a reasonable opportunity for the members as a whole at the meeting to ask questions about or make comments on the management of the company.

250T Questions by members of auditors at AGM

If the company's auditor or their representative is at the meeting, the chair of an AGM must allow a reasonable opportunity for the members as a whole at the meeting to ask the auditor or their representative questions relevant to the conduct of the audit and the preparation and content of the auditor's report.

Part 2G.3 - Minutes and members' access to minutes

251A Minutes

(1) A company must keep minute books in which it records within 1 month:

(a) proceedings and resolutions of meetings of the company's members; and

(b) proceedings and resolutions of directors' meetings (including meetings of a committee of directors); and

(d) resolutions passed by directors without a meeting; and

(e) if the company is a proprietary company with only 1 director - the making of declarations by the director.

Note: For resolutions and declarations without meetings, see sections 248A, 248B, 249A and 249B.

(2) The company must ensure that minutes of a meeting are signed within a reasonable time after the meeting by 1 of the following:

(a) the chair of the meeting

(b) the chair of the next meeting.

(3) The company must ensure that minutes of the passing of a resolution without a meeting are signed by a director within a reasonable time after the resolution is passed.

(4) The director of a proprietary company with only 1 director must sign the minutes of the making of a declaration by the director within a reasonable time after the declaration is made.

(5) A company must keep its minute books at:

(a) its registered office; or

(b) its principal place of business in Australia; or

(6) A minute that is so recorded and signed is evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved.

251AA Disclosure of proxy votes - listed companies

(1) A company must record in the minutes of a meeting, in respect of each resolution in the notice of meeting, the total number of proxy votes exercisable by all proxies validly appointed and:

(a) if the resolution is decided by a show of hands - the total number of proxy votes in respect of which the appointments specified that:

(i) the proxy is to vote for the resolution; and

(ii) the proxy is to vote against the resolution; and

(iii) the proxy is to abstain on the resolution; and

(iv) the proxy may vote at the proxy's discretion; and

(b) if the resolution is decided on a poll - the information specified in paragraph (a) and the total number of votes cast on the poll:

(i) in favour of the resolution; and

(ii) against the resolution; and

(iii) abstaining on the resolution.

(2) A company that must notify the Exchange of a resolution passed by members at a meeting of the company must, at the same time, give the Exchange the information specified in subsection (1).

(3) This section applies only to a company that is:

(a) incorporated in Australia; and

(b) included in an official list of the Exchange.

(4) This section applies despite anything in the company's constitution.

251B Members' access to minutes

(1) A company must ensure that the minute books for the meetings of its members and for resolutions of members passed without meetings are open for inspection by members free of charge.

(2) A member of a company may ask the company in writing for a copy of:

(a) any minutes of a meeting of the company's members or an extract of the minutes; or

(b) any minutes of a resolution passed by members without a meeting.

(3) If the company does not require the member to pay for the copy, the company must send it:

(a) within 14 days after the member asks for it; or

(b) within any longer period that the ASC approves.

(4) If the company requires payment for the copy, the company must send it:

(a) within 14 days after the company receives the payment; or

(b) within any longer period that the ASC approves.

The amount of any payment the company requires cannot exceed the prescribed amount.

Part 2G.4 - Meetings of members of registered managed investment schemes

Division 1 - Who may call meetings of members

252A Calling of meetings of members by responsible entity

The responsible entity of a registered scheme may call a meeting of the scheme's members.

252B Calling of meetings of members by responsible entity when requested by members

(1) The responsible entity of a registered scheme must call and arrange to hold a meeting of the scheme's members to consider and vote on a proposed special or extraordinary resolution on the request of:

(a) members with at least 5% of the votes that may be cast on the resolution; or

(b) at least 100 members who are entitled to vote on the resolution.

(2) The request must:

(a) be in writing; and

(b) state any resolution to be proposed at the meeting; and

(3) The request may be accompanied by a statement about the proposed resolution provided by the members making the request.

(4) Separate copies of a document setting out the request and statement (if any) may be used for signing by members if the wording of the request and statement (if any) is identical in each copy.

(5) The percentage of the votes that members have is to be worked out as at the midnight before the request is given to the responsible entity.

(6) The responsible entity must call the meeting within 21 days after the request is given to it. The meeting is to be held not later than 2 months after the request is given to the responsible entity.

(7) The responsible entity must give to each of the members a copy of the proposed resolution and statement (if any) at the same time, or as soon as practicable afterwards, as it gives notice of the meeting. The responsible entity must distribute the copies in the same way in which it gives notice of the meeting.

(8) The responsible entity does not have to distribute a copy of the resolution or statement if either is more than 1,000 words long or defamatory.

(9) The responsible entity is responsible for the expenses of calling and holding the meeting and making the distribution. The responsible entity may meet those expenses from the scheme's assets.

252C Failure of responsible entity to call meeting of the scheme's members

(1) Members with more than 50% of the votes carried by interests held by the members who make a request under section 252B may call and arrange to hold a meeting of the scheme's members and distribute the statement (if any) if the responsible entity does not do so within 21 days after the request is given to the responsible entity.

(2) The meeting must be called and the statement is to be distributed in the same way - so far as is possible - in which meetings of the scheme's members may be called by the responsible entity and information is distributed to members by the responsible entity. The meeting must be held not later than 3 months after the request is given to the responsible entity.

(3) To call the meeting the members requesting the meeting may ask the responsible entity under section 173 for a copy of the register of members. Despite paragraph 173(3)(b), the responsible entity must give the members requesting the meeting the copy of the register without charge.

(4) The responsible entity must pay the reasonable expenses the members incurred because the responsible entity failed to call and arrange to hold the meeting and to make the distribution (if any). The responsible entity must not pay those expenses from the scheme's assets.

252D Calling of meetings of members by members

(1) Members of a registered scheme who hold interests carrying at least 5% of the votes that may be cast at a meeting of the scheme's members may call and arrange to hold a meeting of the scheme's members to consider and vote on a proposed special resolution or a proposed extraordinary resolution. The members calling the meeting must pay the expenses of calling and holding the meeting.

(2) The meeting must be called in the same way - so far as is possible - in which meetings of the scheme's members may be called by the responsible entity.

(3) The percentage of the votes carried by interests that members hold is to be worked out as at the midnight before the meeting is called.

252E Calling of meetings of members by the Court

(1) The Court may order a meeting of a registered scheme's members to be called to consider and vote on a proposed special or extraordinary resolution if it is impracticable to call the meeting in any other way.

(2) The Court may make the order on application by:

(a) the responsible entity; or

(b) any member of the scheme who would be entitled to vote at the meeting.

Note: For the directions the Court may give for calling, holding or conducting a meeting it has ordered be called, see section 1319.

Division 2 - How to call meetings of members

252F Amount of notice of meetings

At least 21 days notice must be given of a meeting of the members of a registered scheme. However, the scheme's constitution may specify a longer minimum period of notice.

252G Notice of meetings of members to members, directors and auditors

Notice to members, directors and auditors individually

(1) Written notice of a meeting of a registered scheme's members must be given to:

(a) each member of the scheme entitled to vote at the meeting; and

(b) each director of the responsible entity; and

(d) the auditor of the scheme compliance plan.

If an interest is held jointly, notice need only be given to 1 of the members.

Notice to joint members

(2) Unless the scheme's constitution provides otherwise, notice to joint members must be given to the joint member named first in the register of members.

How notice is given

(3) Unless the scheme's constitution provides otherwise, the responsible entity may give notice of the meeting to a member:

(a) personally; or

(b) by sending it by post to the address for the member in the register of members or an alternative address (if any) nominated by the member; or

Note: A defect in the notice given may not invalidate a meeting (see section 1322).

When notice by post or fax is given

(4) Unless the scheme's constitution provides otherwise, a notice of meeting sent by post is taken to be given 3 days after it is posted. A notice of meeting sent by fax, or other electronic means, is taken to be given on the business day after it is sent.

252H Auditors entitled to other communications

The responsible entity of a registered scheme must give the auditor of the scheme and the auditor of the scheme compliance plan any other communications relating to the meeting that a member of the scheme is entitled to receive.

252J Contents of notice of meetings of members

A notice of a meeting of a registered scheme's members must:

(a) set out the place, date and time for the meeting (and, if the meeting is to be held in 2 or more places, the technology that will be used to facilitate this); and

(b) state the general nature of the meeting's business; and

(c) if a special or extraordinary resolution is to be proposed at the meeting - set out an intention to propose the special or extraordinary resolution and state the resolution; and

(d) contain a statement setting out the following information:

(i) that the member has a right to appoint a proxy

(ii) that the proxy does not need to be a member of the registered scheme

(iii) that if the member appoints 2 proxies the member may specify the proportion or number of votes the proxy is appointed to exercise.

Note: There may be other requirements for disclosure to members.

252K Notice of adjourned meetings

When a meeting is adjourned, new notice of the adjourned meeting must be given if the meeting is adjourned for 1 month or more.

Division 3 - Members' rights to put resolutions etc. at meetings of members

252L Members' resolutions

(1) The following members of a registered scheme may give the responsible entity notice of a special or extraordinary resolution that they propose to move at a meeting of the scheme's members:

(a) members with at least 5% of the votes that may be cast on the resolution; or

(b) at least 100 members who are entitled to vote at a meeting of the scheme's members.

(2) The notice must:

(a) be in writing; and

(b) set out the wording of the proposed resolution; and

(3) Separate copies of a document setting out the notice may be used for signing by members if the wording of the notice is identical in each copy.

(4) The percentage of the votes that members have is to be worked out as at the midnight before the members give the notice.

252M Responsible entity giving notice of members' resolutions

(1) If a responsible entity has been given notice of a special or extraordinary resolution under section 252L, the resolution is to be considered at the next meeting of the scheme's members that occurs more than 2 months after the notice is given.

(2) The responsible entity must give all the members of the scheme notice of the resolution at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a meeting.

(3) The responsible entity is responsible for the cost of giving members notice of the resolution if the responsible entity receives the notice in time to send it out to members with the notice of meeting.

(4) The members requesting the meeting are jointly and individually liable for the expenses reasonably incurred by the responsible entity in giving members notice of the resolution if the responsible entity does not receive the members' notice in time to send it out with the notice of meeting. A resolution may be passed at a meeting of the scheme's members that the responsible entity is to meet the expenses out of the scheme's assets.

(5) The responsible entity need not give notice of the resolution:

(a) if it is more than 1,000 words long or defamatory; or

(b) if the members making the request are to bear the expenses of sending the notice out - unless the members give the responsible entity a sum reasonably sufficient to meet the expenses that it will reasonably incur in giving the notice.

252N Members' statements to be distributed

(1) Members may request a responsible entity to give to all its members a statement provided by the members making the request about:

(a) a resolution that is proposed to be moved at a meeting of the scheme's members; or

(b) any other matter that may be properly considered at a meeting of the scheme's members.

(2) The request must be made by:

(a) members with at least 5% of the votes that may be cast on the resolution; or

(b) at least 100 members who are entitled to vote at the meeting.

(3) The request must be:

(a) in writing; and

(b) signed by the members making the request; and

(4) Separate copies of a document setting out the request may be used for signing by members if the wording of the request is identical in each copy.

(5) The percentage of the votes that members have is to be worked out as at the midnight before the request is given to the responsible entity.

(6) After receiving the request, the responsible entity must distribute to all the members of the scheme a copy of the statement at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a meeting.

(7) The responsible entity is responsible for the cost of making the distribution if the responsible entity receives the statement in time to send it out to members with the notice of meeting.

(8) The members making the request are jointly and individually liable for the expenses reasonably incurred by the responsible entity in making the distribution if the responsible entity does not receive the statement in time to send it out with the notice of meeting. A resolution may be passed at a meeting of the scheme's members that the responsible entity is to meet the expenses out of the scheme's assets.

(9) The responsible entity need not comply with the request:

(a) if the statement is more than 1,000 words long or defamatory; or

Division 4 - Holding meetings of members

252P Time and place for meetings of members

A meeting of a registered scheme's members must be held at a reasonable time and place.

252Q Technology

A responsible entity of a registered scheme may hold a meeting of the scheme's members at 2 or more venues using any technology that gives the members as a whole a reasonable opportunity to participate.

Note: See section 1322 for the consequences of members not being given a reasonable opportunity to participate.

252R Quorum

(1) This section applies to a registered scheme subject to the provisions of the scheme's constitution.

(2) The quorum for a meeting of a registered scheme's members is 2 members and the quorum must be present at all times during the meeting.

(3) In determining whether a quorum is present, count individuals attending as proxies or body corporate representatives. However, if a member has appointed more than 1 proxy or representative, count only 1 of them. If an individual is attending both as a member and as a proxy or body corporate representative, count them only once.

Note 1: For rights to appoint proxies, see section 252V.

Note 2: For body corporate representatives, see section 253B.

(4) A meeting of the scheme's members that does not have a quorum present within 30 minutes after the time for the start of the meeting set out in the notice of meeting is adjourned to the date, time and place the responsible entity specifies. If the responsible entity does not specify 1 or more of those things, the meeting is adjourned to:

(a) if the date is not specified - the same day in the next week; and

(b) if the time is not specified - the same time; and

(5) If no quorum is present at the resumed meeting within 30 minutes after the time for the start of the meeting, the meeting is dissolved.

252S Chairing meetings of members

(1) The responsible entity may, in writing, appoint an individual to chair a meeting called under section 252A or 252B.

(2) The members present at a meeting called under section 252A or 252B must elect a member present to chair the meeting (or part of it) if:

(a) a chair has not previously been appointed to chair the meeting; or

(b) a previously appointed chair is not available, or declines to act, for the meeting (or part of the meeting).

(3) The members present at a meeting called under section 252C, 252D or 252E must elect a member present to chair the meeting. This is not so if the meeting is called under section 252E and the Court has directed otherwise under section 1319.

252T Auditors' right to be heard at meetings of members

(1) The auditor of a registered scheme and the auditor of the scheme compliance plan are entitled to attend any meeting of the scheme's members.

(2) An auditor is entitled to be heard at the meeting on any part of the business of the meeting that concerns the auditor in their capacity as auditor.

(3) An auditor may authorise a person in writing as their representative for the purpose of attending and speaking at any meeting of the scheme's members.

252U Adjourned meetings

(1) A resolution passed at a meeting resumed after an adjournment is passed on the day it was passed.

(2) Only unfinished business is to be transacted at a meeting resumed after an adjournment.

Division 5 - Proxies and body corporate representatives

252V Who can appoint a proxy

(1) A member of a registered scheme who is entitled to attend and cast a vote at a meeting of the scheme's members may appoint a person as the member's proxy to attend and vote for the member at the meeting.

(2) The appointment may specify the proportion or number of votes that the proxy may exercise.

(3) A member may appoint 1 or 2 proxies. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member's votes each proxy may exercise, each proxy may exercise half of the votes.

(4) Disregard any fractions of votes resulting from the application of subsection (2) or (3).

252W Rights of proxies

Rights of proxies

(1) A proxy appointed to attend and vote for a member has the same rights as the member:

(a) to speak at the meeting; and

(b) to vote (but only to the extent allowed by the appointment).

Proxy's right to vote

(2) A registered scheme's constitution (if any) may provide that a proxy is not entitled to vote on a show of hands.

Note: Even if the proxy is not entitled to vote on a show of hands, they may make or join in the demand for a poll (see section 253L).

Effect of member's presence on proxy's authority

(3) A registered scheme's constitution (if any) may provide for the effect that a member's presence at a meeting has on the authority of a proxy appointed to attend and vote for the member. However, if the constitution does not make such provision, a proxy's authority to speak and vote for a member at a meeting is suspended while the member is present at the meeting.

252X Responsible entity sending appointment forms or lists of proxies must send to all members

If the responsible entity of a registered scheme sends a member a proxy appointment form for a meeting or a list of persons willing to act as proxies at a meeting:

(a) if the member requested the form or list - the responsible entity must send the form or list to all members who ask for it and who are entitled to appoint a proxy to attend and vote at the meeting; or

(b) otherwise - the responsible entity must send the form or list to all its members entitled to appoint a proxy to attend and vote at the meeting.

252Y Appointing a proxy

(1) An appointment of a proxy is valid if it is signed by the member of the registered scheme making the appointment and contains the following information:

(a) the member's name and address

(b) the scheme's name

(d) the meetings at which the appointment may be used.

An appointment may be a standing one

(2) A registered scheme's constitution may provide that an appointment is valid even if it contains only some of the information required by subsection (1).

(3) An undated appointment is taken to have been dated on the day it is given to the responsible entity.

(4) An appointment may specify the way the proxy is to vote on a particular resolution. If it does:

(a) the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way; and

(b) if the proxy has 2 or more appointments that specify different ways to vote on the resolution - the proxy must not vote on a show of hands; and

(d) if the proxy is not the chair - the proxy need not vote on a poll, but if the proxy does so, the proxy must vote that way.

If a proxy is also a member, this subsection does not affect the way that the person can cast any votes they hold as a member.

Note: The scheme's constitution may provide that a proxy is not entitled to vote on a show of hands (see subsection 252W(2)).

(5) A person who contravenes subsection (4) is guilty of an offence, but only if their appointment as a proxy resulted from the responsible entity sending to members:

(a) a list of persons willing to act as proxies; or

(b) a proxy appointment form holding the person out as being willing to act as a proxy.

(6) An appointment does not have to be witnessed.

(7) A later appointment revokes an earlier one if both appointments could not be validly exercised at the meeting.

252Z Proxy documents

Section applies subject to scheme's constitution

(1) Subsections (2), (3) and (4) apply to a registered scheme subject to the provisions of the scheme's constitution.

Documents to be received by responsible entity before meeting

(2) For an appointment of a proxy for a meeting of the scheme's members to be effective, the following documents must be received by the responsible entity at least 48 hours before the meeting:

(a) the proxy's appointment

(b) if the appointment is signed by the appointor's attorney - the authority under which the appointment was signed or a certified copy of the authority.

Documents received following adjournment of meeting

(3) If a meeting of the scheme's members has been adjourned, an appointment and any authority received by the responsible entity at least 48 hours before the resumption of the meeting are effective for the resumed part of the meeting.

Receipt of documents

(3) A responsible entity receives an appointment authority when it is received at any of the following:

(a) the responsible entity's registered office

(b) a fax number at the responsible entity's registered office

Ineffective appointments of fax or electronic notification

(4) An appointment of a proxy is ineffective if:

(a) the responsible entity receives either or both the appointment or authority at a fax number or electronic address; and

(b) a requirement (if any) in the notice of meeting that:

(i) the transmission be verified in a way specified in the notice; or

(ii) the proxy produce the appointment and authority (if any) at the meeting;

is not complied with.

Constitution or notice of meeting may provide for different notification period

(5) The scheme's constitution or the notice of meeting may reduce the period of 48 hours referred to in subsection (2) or (3).

253A Validity of proxy vote

Proxy vote valid even if member dies, revokes appointment etc.

(1) Unless the responsible entity has received written notice of the matter before the start or resumption of the meeting at which a proxy votes, a vote cast by the proxy will be valid even if, before the proxy votes:

(a) the appointing member dies; or

(b) the member is mentally incapacitated; or

(d) the member revokes the authority under which the proxy was appointed by a third party; or

(e) the member transfers the interest in respect of which the proxy was given.

This subsection applies to a registered scheme subject to the provisions of the scheme's constitution.

Note: A proxy's authority to vote is suspended while the member is present at the meeting (see subsection 252W(3)).

Proxy vote valid even if proxy cannot vote as member

(2) A proxy who is not entitled to vote on a resolution as a member may vote as a proxy for another member who can vote if their appointment specifies the way they are to vote on the resolution and they vote that way.

253B Body corporate representative

(1) A body corporate may appoint an individual as a representative to exercise all or any of its powers at a meeting of a registered scheme's members. The appointment may be a standing one.

(2) The appointment must set out what the representative is appointed to do and may set out restrictions on the representative's powers. If the appointment is to be by reference to a position held, the appointment must identify the position.

(3) A body corporate may appoint more than 1 representative but only 1 representative may exercise the body's powers at any one time.

Division 6 - Voting at meetings of members

253C How many votes a member has

(1) On a show of hands, each member of a registered scheme has 1 vote.

(2) On a poll, each member of the scheme has 1 vote for each dollar of the value of the total interests they have in the scheme.

Note 1: For rights to appoint proxies, see section 252V.

Note 2: Unless otherwise specified in the appointment, a body corporate representative has all the powers that a body corporate has as a member (including the power to vote on a show of hands).

253D Jointly held interests

If an interest in a registered scheme is held jointly and more than 1 member votes in respect of that interest, only the vote of the member whose name appears first in the register of members counts.

253E Responsible entity and associates cannot vote if interested in resolution

The responsible entity of a registered scheme and its associates are not entitled to vote their interest on a resolution at a meeting of the scheme's members if they have an interest in the resolution or matter other than as a member.

Note: The responsible entity and its associates may vote as proxies if their appointments specify the way they are to vote and they vote that way (see subsection 253A(2)).

253F How to work out the value of an interest

The value of an interest in a registered scheme is:

(a) if it is quoted on a stock market of a stock exchange - the last sale price on that market on the trading day immediately before the day on which the poll is taken; or

(b) if it is not quoted on a stock market of a stock exchange and the scheme is liquid and has a withdrawal provision in its constitution - the amount that would be paid for the interest under that provision on the business day immediately before the day on which the poll is taken; or

(c) in any other case - the amount that the responsible entity determines in writing to be the price that a willing but not anxious buyer would pay for the interest if it was sold on the business day immediately before the day on which the poll is taken.

253G Objections to a right to vote

A challenge to a right to vote at a meeting of members of a registered scheme:

(a) may only be made at the meeting; and

(b) must be determined by the chair, whose decision is final.

253H Votes need not all be cast in the same way

On a poll a person voting who is entitled to 2 or more votes:

(a) need not cast all their votes; and

(b) may cast their votes in different ways.

Note: For proxy appointments that specify the proxy is to vote on a particular resolution, see subsection 252Y(4).

253J How voting is carried out

(1) A special or extraordinary resolution put to the vote at a meeting of a registered scheme's members must be decided on a poll.

(2) Any other resolution put to the vote at a meeting of the scheme's members must be decided on a show of hands unless a poll is demanded. The resolution is passed on a poll if it has been passed by at least 50% of the votes cast by members entitled to vote on the resolution.

(3) On a show of hands, a declaration by the chair is conclusive evidence of the result. Neither the chair nor the minutes need to state the number or proportion of the votes recorded in favour or against.

Note: Even though the chair's declaration is conclusive of the voting results, the members present may demand a poll (see paragraph 253L(3)(c)).

253K Matters on which a poll may be demanded

(1) A poll may be demanded on any resolution.

(2) A registered scheme's constitution may provide that a poll cannot be demanded on any resolution concerning:

(a) the election of the chair of a meeting; or

(b) the adjournment of a meeting.

(3) A demand for a poll may be withdrawn.

253L When a poll is effectively demanded

(1) At a meeting of a registered scheme's members, a poll may be demanded by:

(a) at least 5 members present entitled to vote on the resolution; or

(b) members present with at least 5% of the votes that may be cast on the resolution on a poll; or

(2) A registered scheme's constitution may provide that fewer members or members with a lesser percentage of votes may demand a poll.

(3) The poll may be demanded:

(a) before a vote is taken; or

(b) before the voting results on a show of hands are declared; or

(4) The percentage of votes that members have is to be worked out as at close of business on the day before the poll is demanded.

Division 7 - Minutes and members' access to minutes

253M Minutes

(1) A responsible entity of a registered scheme must keep minute books in which it records within 1 month:

(a) proceedings of meetings of the scheme's members; and

(b) resolutions of meetings of the scheme's members.

(2) The responsible entity must ensure that minutes of a meeting are signed within a reasonable time after the meeting by the chair of the meeting or the chair of the next meeting.

(3) The responsible entity must keep the minute books at:

(a) its registered office; or

(b) its principal place of business in Australia; or

(4) A minute that is so recorded and signed is evidence of the proceeding or resolution to which it relates, unless the contrary is proved.

253N Members' access to minutes

(1) The responsible entity of a registered scheme must ensure that the minute books for the meetings of the scheme's members are open for inspection by members free of charge.

(2) A member of a registered scheme may ask the responsible entity in writing for a copy of any minutes of a meeting of the scheme's members or an extract of the minutes.

(3) If the responsible entity does not require the member to pay for the copy, the responsible entity must send it:

(a) within 14 days after the member asks for it; or

(b) within any longer period that the ASC approves.

(4) If the responsible entity requires payment for the copy, the responsible entity must send it:

(a) within 14 days after the responsible entity receives the payment; or

(b) within any longer period that the ASC approves.

The amount of any payment the responsible entity requires cannot exceed the prescribed amount.

Chapter 2H - Shares

254AA Shares to have nominal value

Shares of a company with share capital have a nominal value.

Note: See subsection 120(2) for the nominal value of the shares that are taken to be issued on registration of the company. See section 254CA for the nominal value of shares issued after registration.

Part 2H.1 - Issuing and converting shares

254A Power to issue bonus, partly-paid, preference and redeemable preference shares

(1) A company's power under section 124 to issue shares includes the power to issue:

(a) bonus shares (shares for whose issue no consideration is payable to the issuing company); and

(b) preference shares (including redeemable preference shares); and

(c) partly-paid shares (whether or not on the same terms for the amount of calls to be paid or the time for paying calls).

Note 1: Subsections 246C(5) and (6) provide that in certain circumstances the issue of preference shares is taken to be a variation of class rights.

Note 2: Partly-paid shares are dealt with in sections 254M-254N.

(2) A company can issue preference shares only if the rights attached to the preference shares with respect to the following matters are set out in the company's constitution (if any) or have been otherwise approved by special resolution of the company:

(a) repayment of capital

(b) participation in surplus assets and profits

(d) voting

(e) priority of payment of capital and dividends in relation to other shares or classes of preference shares.

(3) Redeemable preference shares are preference shares that are issued on the terms that they are liable to be redeemed. They may be redeemable:

(a) at a fixed time or on the happening of a particular event; or

(b) at the company's option; or

Note: Redeemable preference shares are dealt with in sections 254J-254L.

254B Terms of issue

(1) 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 the ASC 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 the ASC (see subsection 246F(3)).

Note 3: Sections 246B-246G provide safeguards in cases where class rights are cancelled or varied.

No liability companies - special terms of issue

(2) 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.

Companies incorporated as no liability companies - special terms of issue

(3) 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.

(4) 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.

254CA Nominal value of shares issued after registration

On the issue of shares by a company after registration, the shares may only have:

(a) a nominal value that is the same as the nominal value of shares of the company that are already on issue; or

(b) a nominal value provided for in the company's constitution (if any); or

Note: The nominal value of the shares may subsequently be altered by consolidation or division of the shares under section 254H or as a result of a reduction in share capital under sections 256A-256F.

254CB Share premium

Issue of shares at a premium

(1) A company may issue a share at a premium.

Note: Sections 256A-256F (reductions in share capital) apply to amounts paid by way of share premium as well as to amounts paid by way of nominal value.

Share premium account

(2) When the company receives a premium for the issue of a share, an amount equal to the amount or value of the premium is transferred to the company's share premium account.

Payments out of the share premium account

(3) The share premium account may be applied:

(a) in paying up shares to be issued to members of the company as fully-paid bonus shares; or

(b) in paying up in whole or in part the balance unpaid on shares previously issued to members of the company; or

(d) in the case of a company that carries on life insurance business - by appropriation or transfer to any statutory fund established and maintained under the Life Insurance Act 1995; or

(e) in writing off:

(i) the preliminary expenses of the company; or

(ii) the expenses of, or the payment made in respect of or discount allowed on, any issue of shares in, or debentures of, the company; or

(f) in providing consideration payable by the company on a buy-back of its shares; or

(g) in providing the premium payable on redemption of debentures or redeemable preference shares.

254CC Issue of shares at a discount

(1) A no liability company may issue shares at a discount.

(2) A company other than a no liability company may only issue shares at a discount if:

(a) the shares are in a class of shares already issued; and

(b) the issue of the shares at a discount is:

(i) authorised by resolution passed in general meeting of the company; and

(ii) confirmed by order of the Court; and

(d) the shares are issued within:

(i) 1 month after the day on which the issue is confirmed by the Court; or

(ii) that period as extended by the Court; and

(e) the shares are first offered to every holder of shares in that class in proportion to the number of shares in that class already held.

(3) The Court may confirm the issue if it considers it appropriate to do so having regard to all the circumstances of the case and may confirm the issue on the terms and conditions it considers appropriate.

(4) An offer made for the purposes of paragraph (2)(e) must be made in a notice that specifies:

(a) the number of shares to which the member is entitled; and

(b) the period (ending not less than 21 days after the date of the notice) within which the offer may be accepted.

(5) If an offer for shares made in accordance with subsection (4) is not accepted within the period specified in the notice, the shares may be issued on terms not more favourable than those offered to the shareholders.

254D Pre-emption for existing shareholders on issue of shares in proprietary company (replaceable rule - see section 135)

(1) Before issuing shares of a particular class, the directors of a proprietary company must offer them to the existing holders of shares of that class. As far as practicable, the number of shares offered to each shareholder must be in proportion to the number of shares of that class that they already hold.

(2) To make the offer, the directors must give the shareholders a statement setting out the terms of the offer, including:

(a) the number of shares offered; and

(b) the period for which it will remain open.

(3) The directors may issue any shares not taken up under the offer under subsection (1) as they see fit.

(4) The company may by resolution passed at a general meeting authorise the directors to make a particular issue of shares without complying with subsection (1).

254E Court validation of issue

(1) On application by a company, a shareholder, a creditor or any other person whose interests have been or may be affected, the Court may make an order validating, or confirming the terms of, a purported issue of shares if:

(a) the issue is or may be invalid for any reason; or

(b) the terms of the issue are inconsistent with or not authorised by:

(i) this Law; or

(ii) another law of this jurisdiction; or

(iii) the company's constitution (if any).

(2) On lodgment of a copy of the order with the ASC, the order has effect from the time of the purported issue.

254F Bearer shares and stock must not be issued

A company does not have the power to:

(a) issue bearer shares; or

(b) issue stock or convert shares into stock.

Note: Section 1432 contains transitional provisions for the conversion of existing stock into shares.

254G Conversion of shares

(1) A company may:

(a) convert an ordinary share into a preference share; and

(b) convert a preference share into an ordinary share.

Note: The variation of class rights provisions (sections 246B-246G) will apply to the conversion.

(2) A company can convert ordinary shares into preference shares only if the holders' rights with respect to the following matters are set out in the company's constitution (if any) or have been otherwise approved by special resolution of the company:

(a) repayment of capital

(b) participation in surplus assets and profits

(d) voting

(e) priority of payment of capital and dividends in relation to other shares or classes or preference shares.

(3) A share that is not a redeemable preference share when issued cannot afterwards be converted into a redeemable preference share.

254H Resolution to convert shares into larger or smaller number

(1) By resolution passed in general meeting, a company may:

(a) consolidate and divide all or any of its share capital into shares of larger nominal value than its existing shares; or

(b) subdivide all or any of its shares into shares of smaller nominal value.

A subdivision must not alter the proportion between the amount paid and the amount (if any) unpaid on the shares concerned.

Note 1: The variation of class rights provisions (sections 246B-246G) may apply to the conversion.

Note 2: An unlimited company converting to a company limited by shares can increase the nominal value of its shares under subsection 162(4).

(2) The conversion takes effect on:

(a) the day the resolution is passed; or

(b) a later date specified in the resolution.

(3) If the nominal value of the shares converted is specified in the company's constitution, the resolution under subsection (1) may also amend the company's constitution to specify a new nominal value for the shares.

(4) The company must lodge a copy of the resolution with the ASC within 1 month after it is passed.

Part 2H.2 - Redemption of redeemable preference shares

254J Redemption must be in accordance with terms of issue

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

(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.

254K Other requirements about redemption

(1) A company may only redeem redeemable preference shares if the shares are fully paid-up and may only redeem them:

(a) out of profits; or

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

Note: This subsection deals with the redemption of the nominal value of the shares.

(2) If the shares are not redeemed out of the proceeds of a fresh issue of shares, the company must transfer an amount equal to the nominal value of the shares out of profits and into its capital redemption reserve.

Note: Sections 256A-256D (reductions in share capital) apply to amounts in the capital redemption reserve as well as to amounts in the share capital account.

(3) The premium (if any) payable on redemption must be paid out of profits or out of the share premium account.

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

(4) The capital redemption reserve may be applied in paying up shares to be issued to members of the company as fully-paid bonus shares.

254L Consequences of contravening section 254J or 254K

(1) 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.

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

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

Part 2H.3 - Partly-paid shares

254M Liability on partly-paid shares

General rule about shareholder's liability for calls

(1) 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.

No liability companies

(2) 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.

254N Calls may be limited to when company is externally-administered

(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 an externally-administered body corporate.

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

254P No liability companies - calls on shares

Making calls

(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

(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;

(b) the day when it is payable; and

The notice must be sent by post. If the notice is not given, the call is not payable.

(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.

254Q No liability companies - forfeiture and sale of shares for failure to meet call

Forfeiture and sale of shares

(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.

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

Advertisement of sale

(3) At least 14 days, and not more than 21 days, before the day of the sale, the sale must be advertised in a daily newspaper circulating generally throughout Australia. The specific number of shares to be offered need not be specified in the advertisement and it is sufficient to give notice of the sale by advertising to the effect that all shares on which a call remains unpaid will be sold.

Postponement of sale

(4) An intended sale of forfeited shares that has been duly advertised may be postponed for not more than 21 days from the advertised date of sale. The date to which the sale is postponed must be advertised in a daily newspaper circulating generally in Australia.

(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.

Shares may be offered as credited to a particular amount

(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

if the company in accordance with its constitution or by ordinary resolution so determines.

Reserve price

(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

(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

(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

(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

(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

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

(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

(13) If there is failure to comply with subsection (2) or (3), the company and any officer of the company who is involved in the contravention are each guilty of an offence.

254R No liability companies - redemption of forfeited shares

(1) 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.

(2) 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 Law required to be open and accessible to the public.

Part 2H.4 - Capitalisation of profits

254S Capitalisation of profits (replaceable rule - see section 135)

A company may capitalise profits to:

(a) pay up any amount unpaid on issued shares; or

(b) pay up shares to be issued to members as fully-paid bonus shares.

The amount capitalised must be applied for the benefit of members in the proportions in which the members would have been entitled to dividends if the amount capitalised had been distributed as a dividend.

Part 2H.5 - Dividends

254T Dividends to be paid out of profits

A dividend may only be paid:

(a) out of profits of the company; or

(b) out of the share premium account if the dividend is satisfied by the issue of shares to members of the company.

Note 1: For a director's duty to prevent insolvent trading on payment of dividends, see section 588G.

Note 2: For the use of the share premium account to pay dividends, see paragraph 254CB(3)(c).

254U Other provisions about paying dividends (replaceable rule - see section 135)

(1) The directors may determine that a dividend is payable and fix:

(a) the amount; and

(b) the time for payment; and

The methods of payment may include the payment of cash, the issue of shares, the grant of options and the transfer of assets.

(2) Interest is not payable on a dividend.

254V When does the company incur a debt?

(1) A company does not incur a debt merely by fixing the amount or time for payment of a dividend. The debt arises only when the time fixed for payment arrives and the decision to pay the dividend may be revoked at any time before then.

(2) However, if the company has a constitution and it provides for the declaration of dividends, the company incurs a debt when the dividend is declared.

254W Dividend rights

Shares in public companies

(1) Each share in a class of shares in a public company has the same dividend rights unless:

(a) the company has a constitution and it provides for the shares to have different dividend rights; or

(b) different dividend rights are provided for by special resolution of the company.

Shares in proprietary companies (replaceable rule - see section 135)

(2) Subject to the terms on which shares in a proprietary company are on issue, the directors may pay dividends as they see fit.

No liability companies

(3) A person is not entitled to a dividend on a share in a no liability company if a call:

(a) has been made on the share; and

(b) is due and unpaid.

(4) Dividends are payable to the shareholders in a no liability company in proportion to the number of shares held by them, irrespective of the amount paid up, or credited as paid up, on the shares. This subsection has effect subject to any provisions in the company's constitution relating to shares that are not ordinary shares.

Part 2H.6 - Notice requirements

254X Notice to ASC of share issue

(1) Within 1 month after issuing shares, a company must lodge with the ASC a notice in the prescribed form that sets out:

(a) the number of shares that were issued; and

(b) if the company has different classes of shares - the class to which each of those shares belongs; and

(d) the amount (if any) paid, taken to be paid or due and payable on the issue of the shares; and

(e) if the company is a public company and the shares were issued for non-cash consideration - the prescribed particulars about the issue of the shares, unless the shares were issued under a written contract and a copy of the contract is lodged with the notice.

Note: The company must lodge information when rights attached to the shares change, or when the shares are divided or converted into new classes (see section 246F).

(2) If the shares were issued for non-cash consideration under a contract, the company must also lodge with the ASC a certificate stating that all stamp duty payable on the contract under any applicable law relating to stamp duty has been paid. This certificate must be lodged with the subsection (1) notice or at a later time permitted by the regulations or by the ASC.

(3) The company does not have to lodge a subsection (1) notice about the issue of shares to a person on the registration of the company or on the company changing its type from a company limited by guarantee to a company limited by shares.

Note: Information about shares issued in these situations will come to the ASC under subsections 117(2), 163(3) and 601BC(2).

254Y Notice to ASC of share cancellation

Within 1 month after shares are cancelled, the company must lodge with the ASC a notice in the prescribed form that sets out:

(a) the number, and nominal value, of shares cancelled; and

(b) any amount paid by the company (in cash or otherwise) on the cancellation of the shares; and

(c) if the shares are cancelled following a share buy-back - the amount paid by the company (in cash or otherwise) on the buy-back; and

(d) if the company has different classes of shares - the class to which each cancelled share belonged.

Note: Provisions under which shares are cancelled include section 254J (redeemable preference shares), section 256B (capital reductions),
subsection 257H(3) (shares a company has bought back), section 258D (forfeited shares), and subsection 1024E(7) (shares returned to a company).

Chapter 2J - Transactions affecting share capital

Part 2J.1 - Share capital reductions and share
buy-backs

Division 1 - Reductions in share capital not otherwise authorised by law

256A Reductions in share capital

Requirement for special resolution and Court confirmation

(1) A company must not reduce its share capital unless:

(a) the reduction is authorised by law; or

(b) the reduction is:

(i) agreed to by a special resolution; and

(ii) confirmed by the Court under section 256B.

Note 1: Examples of share capital reductions are:

_ extinguishing or reducing a person's liability on shares in respect of share capital not paid up

cancelling paid-up share capital that is lost or is not represented by available assets

paying off any paid-up share capital that is in excess of the company's needs.

Note 2: Sections 258A-258F deal with some of the other situations in which reductions of share capital are authorised.

Note 3: Subsection 256B(2) provides that the Court will generally not confirm a reduction in share capital unless a creditor protection test in section 256C is satisfied

Note 4: If the nominal value of shares affected by the reduction is specified in the company's constitution, the company may amend its constitution by special resolution to make any necessary adjustments to the nominal value of those shares.

(2) Without limiting subsection (1), paying an amount out of the company's share premium account or capital redemption reserve is to be treated as a reduction in the company's paid up share capital.

Note: Certain payments out of the share premium account and capital redemption reserve are authorised under subsections 254CB(3) and 254K(2) and (4).

256B Court order confirming the reduction

(1) The Court may confirm a reduction in share capital on the terms and conditions that it considers appropriate.

(2) If the reduction involves:

(a) reducing a person's liability for unpaid share capital; or

(b) paying a shareholder:

(i) paid-up share capital; or

(ii) an amount out of the share premium account or capital redemption reserve;

the Court may only confirm the reduction if:

(d) the Court is satisfied that the reduction does not need to satisfy the creditor protection test in section 256C because of the special circumstances of the case.

(3) The Court may direct that a reduction that would not otherwise have to satisfy the creditor protection test in section 256C must satisfy that test.

(4) The order confirming the reduction must specify:

(a) the nominal value of each share; and

(b) the amount (if any) that at the date of the order is taken to be paid up on each share.

256C The creditor protection test

Identifying the company's creditors

(1) If a reduction in share capital has to satisfy the creditor protection test:

(a) the Court must fix the date for determining who the company's creditors are; and

(b) the company must prepare a list of the company's creditors as at that date that shows the nature and amount of their debts or claims and present it to the Court; and

(i) settle the list of creditors; and

(ii) ascertain (as far as possible) the nature and amount of their debts or claims.

(2) To settle the list of creditors and ascertain the nature and amount of their debts, the Court:

(a) need not require an application from any creditor; and

(b) may publish notices fixing a day by which creditors whose names are not on the list may claim to be included on the list.

(3) A person is a creditor of the company for the purposes of this section if they:

(a) are entitled to a debt or claim at the date fixed by the Court under paragraph (1)(a); and

(b) would be able to prove the debt or claim against the company if a winding up of the company commenced on that date.

A creditor is entitled to become a party to the proceedings for the Court's confirmation of the reduction.

Satisfying the creditor protection test

(4) A reduction in share capital satisfies the creditor protection test if each creditor on the list settled by the Court:

(a) consents to the reduction; or

(b) has their debt discharged or their claim determined; or

(d) has their debt or claim provided for under subsection (5).

(5) A creditor's debt or claim is provided for under this subsection if the company appropriates an amount to cover the debt or claim in the manner approved by the Court. The amount appropriated must be:

(a) the full amount of the debt or claim if:

(i) the company admits that amount; or

(ii) the company does not admit that amount but is willing to provide for it; or

(b) the amount fixed by the Court if:

(i) the company does not admit, and is not willing to provide for, the full amount of the debt or claim; or

(ii) the amount of the debt or claim is contingent or not ascertained.

In fixing an amount under paragraph (b), the Court must make the inquiries and adjudicate on the matter as if the company were being wound up by the Court.

(6) Having regard to any special circumstances of any case, the Court may direct that particular requirements of this section do not apply in respect of creditors included in a class of creditors.

Company officers not to conceal or misrepresent debts or claims

(7) An officer of a company must not:

(a) knowingly conceal from the company or the Court the name of a creditor of the company; or

(b) knowingly misrepresent to the company or the Court the nature or amount of the debt or claim of a creditor of the company.

256D Putting the capital reduction into effect

Lodgment of resolution and court order with the ASC

(1) The company must lodge with the ASC copies of:

(a) the special resolution; and

(b) the Court order confirming the reduction.

Implementation of capital reduction

(2) A company must not act upon a resolution to reduce its share capital before the date on which the documents are lodged with the ASC under subsection (1). However, the resolution may specify as the date from which the reduction of capital is to have effect a date that is earlier than the lodgment date but not earlier than the date of the resolution.

256E Effect of reduction of share capital on members and former members

Effect of reduction on liability of members and former members for calls and contributions

(1) The liability of a member or former member of a company for a call or contribution in respect of a share in the company is not to exceed the difference (if any) between:

(a) the amount of the share fixed by the confirming order under subsection 256B(4); and

(b) the amount paid, or the reduced amount (if any) that is taken to have been paid, on the share.

Liability of members and former members to unsatisfied creditors

(2) A person who is a member of the company on the date on which the copy of the confirming order is lodged with the ASC under subsection 256D(1) is liable to contribute towards the payment of a creditor's debt or claim if:

(a) the creditor is a creditor of the company for the purposes of section 256C; and

(b) the creditor's name is not entered on the list of creditors settled under that section because they are not aware of:

(i) the proceedings for confirmation of the reduction; or

(ii) the nature of the proceedings and the effect of the proceedings on their claim; and

(c) after the reduction, the company is unable (within the meaning of the provisions of this Law with respect to winding up by the Court) to pay the debt or claim in full.

The amount the person is liable to contribute is not to exceed the amount that they would have been liable to contribute if the company had commenced to be wound up on the day before that date.

Liability as contributory on winding up

(3) If:

(a) the company is wound up; and

(b) the creditor referred to in subsection (2) applies to the Court; and

(i) the proceedings for confirmation of the reduction; or

(ii) the nature of the proceedings or effect of the proceedings on the debt or claim; and

(d) the Court considers it appropriate to do so;

the Court may:

(e) settle a list of the names of people liable to contribute under subsection (2); and

(f) make and enforce calls and orders on the contributories whose names are included in the list as if they were ordinary contributories in a winding up.

Nothing in this subsection affects the rights of the contributories among themselves.

256F Consequences of failing to comply with section 256A

(1) A company must not make a reduction in share capital unless it complies with subsection 256A(1).

(2) If the company contravenes subsection (1):

(a) the contravention does not affect the validity of the reduction or of any contract or transaction connected with it; and

(b) the company is not guilty of an offence.

(3) Any person who is involved in a company's contravention of subsection (1) contravenes this subsection.

Note: Subsection (3) is a civil penalty provision (see section 1317DA).

Division 2 - Share buy-backs

257AA Purpose

The rules to be followed by a company for share buy-backs are designed to protect the interests of shareholders and creditors by:

(a) addressing the risk of buy-backs leading to the company's insolvency

(b) seeking to ensure fairness between the company's shareholders

257A The company's power to buy back its own shares

A company may buy back its own shares (other than redeemable preference shares) if:

(a) the buy-back does not materially prejudice the company's ability to pay its creditors; and

(b) the company follows the procedures laid down in this Division.

Note 1: If a company has a constitution, it may include provisions in the constitution that preclude the company buying back its own shares or impose restrictions on the exercise of the company's power to buy back its own shares.

Note 2: A company may buy-back redeemable preference shares and may do so on terms other than the terms on which they could be redeemed. For the redemption of redeemable preference shares, see sections 254J-254L.

257B Buy-back procedure - general

(1) The following table specifies the steps required for, and the sections that apply to, the different types of buy-back.

Procedures [and sections applied]	minimum holding	employee share scheme		on-market		equal access scheme		selective buy-back
		within 10/12 limit	over 10/12 limit	within 10/12 limit	over 10/12 limit	within 10/12 limit	over 10/12 limit
ordinary resolution [257C]	-	-	yes	-	yes	-	yes	-
special/unanimous resolution [ 257D]	-	-	-	-	-	-	-	yes
lodge offer documents with ASC [257E]	-	-	-	-	-	yes	yes	yes
14 days notice [257F]	-	yes	yes	yes	yes	yes	yes	yes
disclose relevant information when offer made [257G]	-	-	-	-	-	yes	yes	yes
cancel shares [257H]	yes	yes	yes	yes	yes	yes	yes	yes
notify cancellation to ASC [254Y]	yes	yes	yes	yes	yes	yes	yes	yes

Note: Subsections (2) and (3) of this section explain what an equal access scheme is. The 10/12 limit is the 10% in 12 months limit laid down in subsections (4) and (5). Subsections (6) and (7) of this section explain what an on-market buy-back is. See section 9 for definitions of minimum holding buy-back , employee share scheme buy-back and selective buy-back .

Equal access scheme

(2) An equal access scheme is a scheme that satisfies all the following conditions:

(a) the offers under the scheme relate only to ordinary shares

(b) the offers are to be made to every person who holds ordinary shares to buy back the same percentage of their ordinary shares

(d) buy-back agreements are not entered into until a specified time for acceptances of offers has closed

(e) the terms of all the offers are the same.

(3) In applying subsection (2), ignore:

(a) differences in consideration attributable to the fact that the offers relate to shares having different accrued dividend entitlements

(b) differences in consideration attributable to the fact that the offers relate to shares on which different amounts remain unpaid

10/12 limit

(4) The 10/12 limit for a company proposing to make a buy-back is 10% of the smallest number, at any time during the last
12 months, of votes attaching to voting shares of the company.

Exceeding the 10/12 limit

(5) A proposed buy-back would exceed the 10/12 limit if the number of votes attaching to:

(a) all the voting shares in the company that have been bought back during the last 12 months; and

(b) the voting shares that will be bought back if the proposed buy-back is made;

would exceed the 10/12 limit.

On-market buy-backs

(6) A buy-back is an on-market buy-back if it results from an offer made by a listed corporation at an official meeting of a securities exchange in Australia in the ordinary course of trading on a stock market of that exchange.

(7) A buy-back by a company (whether listed or not) is also an on-market buy-back if it results from an offer made in the ordinary course of trading on a stock market of a body corporate that:

(a) operates a securities market outside Australia; and

(b) the ASC declares in writing to be an approved overseas securities exchange for the purposes of this subsection.

A buy-back by a listed company is an on-market buy-back under this subsection only if an offer to buy-back those shares is also made on a stock market of a securities exchange in Australia at the same time.

(8) A declaration under paragraph (7)(b) may be subject to conditions. Notice of the making of the declaration must be published in the Gazette.

257C Buy-back procedure - shareholder approval if the 10/12 limit exceeded

Ordinary resolution required

(1) If section 257B applies this section to a buy-back, the terms of the buy-back agreement must be approved before it is entered into by a resolution passed at a general meeting of the company, or the agreement must be conditional on such an approval.

Information to accompany the notice of meeting

(2) The company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision how to vote on the resolution. However, the company does not have to disclose information if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders.

Documents to be lodged with the ASC

(3) Before the notice of the meeting is sent to shareholders, the company must lodge with the ASC a copy of:

(a) the notice of the meeting; and

(b) any document relating to the buy-back that will accompany the notice of the meeting sent to shareholders.

257D Buy-back procedure - special shareholder approval for selective buy-back

Selective buy-back requires special or unanimous resolution

(1) If section 257B applies this section to a buy-back, the terms of the buy-back agreement must be approved before it is entered into by either:

(a) a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by any person whose shares are proposed to be bought back or by their associates; or

(b) a resolution agreed to, at a general meeting, by all ordinary shareholders;

or the agreement must be conditional on such an approval.

Information to accompany the notice of meeting

Documents to be lodged with the ASC

(3) Before the notice of the meeting is sent to shareholders, the company must lodge with the ASC a copy of:

(a) the notice of the meeting; and

(b) any document relating to the buy-back that will accompany the notice of the meeting sent to shareholders.

(4) The ASC may exempt a company from the operation of this section. The exemption:

(a) must be in writing; and

(b) must be granted before the buy-back agreement is entered into; and

257E Buy-back procedure - lodgment of offer documents with the ASC

If section 257B applies this section to a buy-back, the company must lodge with the ASC, before the buy-back agreement is entered into, a copy of:

(a) a document setting out the terms of the offer; and

(b) any document that is to accompany the offer.

257F Notice of intended buy-back

(1) If section 257B applies this section to a buy-back, the company must satisfy the lodgment requirement in subsection (2) at least 14 days before:

(a) if the buy-back agreement is conditional on the passing of a resolution under subsection 257C(1) or 257D(1) - the resolution is passed; or

(b) if it is not - the agreement is entered into.

(2) The company satisfies the lodgment requirement when it lodges with the ASC:

(a) documents under subsection 257C(3) or 257D(3) or section 257E; or

(b) a notice that the company intends to carry out the buy-back.

Note 1: A company that has to lodge documents under section 257C, 257D or 257E needs to lodge a notice under paragraph (2)(b) of this section only if it wants for some reason to enter into the agreement or pass the resolution less than 14 days after lodging the section 257C, 257D or 257E documents.

Note 2: The company may specify a buy-back under paragraph (2)(b) in any way. It may, for instance, choose to lodge a notice covering buy-backs to be carried out:

_ under a particular scheme; or

as part of particular on-market buy-back activity.

257G Buy-back procedure - disclosure of relevant information when offer made

If section 257B applies this section to a buy-back, the company must include with the offer to buy back shares a statement setting out all information known to the company that is material to the decision whether to accept the offer.

257H Acceptance of offer and transfer of shares to the company

Effect of acceptance of the buy-back offer on share rights

(1) Once a company has entered into an agreement to buy back shares, all rights attaching to the shares are suspended. The suspension is lifted if the agreement is terminated.

Shares transferred to the company and cancelled

(2) A company must not deal in shares it buys back. An agreement entered into in contravention of this subsection is void.

(3) Immediately after the registration of the transfer to the company of the shares bought back, the shares are cancelled.

Note: The ASC must be notified of the cancellation under section 254Y.

257J Signposts to other relevant provisions

The following table sets out other provisions of this Law that are relevant to buy-backs.

Other provisions relevant to buy-backs
	provision	comment
1	section 588G section 1317HA	liability of directors on insolvency The directors may have to compensate the company if the company is, or becomes, insolvent when the company enters into the buy-back agreement.
2	section 1324	injunctions to restrain contravention The Court may grant an injunction against conduct that constitutes, or would constitute, a contravention of this Law.
3	section 733	ASC intervention (application to the Panel) The ASC may apply to the Corporations and Securities Panel for a declaration if it appears to the ASC that unacceptable circumstances have, or may have, occurred in relation to a share buy-back. If the Panel makes a declaration it may exercise a range of powers under section 734.
4	section 42A section 632A	application of takeover provisions These sections deal with the application of Chapter 6 to buy-backs.
5	section 259A	consequences of failure to follow procedures - the company and the officers If a company fails to follow the procedure in this Division, the company contravenes this section and the officers who are involved in the contravention are liable to a civil penalty under Part 9.4B and may commit an offence.
6	section 256F	consequences of failure to follow procedures if reduction in share capital involved - the company and the officers If the buy-back involves a reduction in share capital and the company fails to follow the procedures in this Division, the company contravenes this section and the officers who are involved in the contravention are liable to a civil penalty under Part 9.4B and may commit an offence.
7	section 256F	consequences of failure to follow procedures if reduction in share capital involved - the transaction This section provides that a failure to follow the procedures for share capital reductions does not affect the validity of the buy-back transaction itself.
8	sections 1001A-1001D	continuous disclosure provisions A disclosing entity is required to disclose information about its securities that is material and not generally available.
9	Chapter 2E	benefits to related parties to be disclosed Under this Chapter, a financial benefit to a director or other related party may need to be approved at a general meeting before it is given.
10	section 125	provisions in constitution This section deals with the way in which a company's constitution may restrict the exercise of the company's powers and the consequences of a failure to observe these restrictions.
11	sections 246B-246G	variation of class rights These sections deal with the variation of rights attached to a class of shares. This variation may be governed by the provisions of a company's constitution.

Division 3 - Other share capital reductions

258A Unlimited companies

An unlimited company may reduce its share capital in any way.

258B Right to occupy or use real property

(1) If a company has a constitution, under it the company may grant to a shareholder, as a shareholder, a right to occupy or use real property that the company owns or holds under lease, whether the right is a lease or licence or a contractual right.

Note: Before the introduction of strata or unit titles systems, rights to occupy real property were sometimes based on a holding of shares in a company.

(2) A company may transfer to a person an interest in land in exchange for, or in satisfaction of, a right to occupy or use the land of the kind referred to in subsection (1).

Example: A person has a right to occupy an apartment in a block of units because they hold shares in a company. As part of converting the block of units to strata title, the person surrenders the shares in return for a transfer of strata title over the apartment. The capital reduction involved in the transfer is authorised under this subsection.

258C Brokerage or commission

A company may pay brokerage or commission to a person in respect of that person or another person agreeing to take up shares in the company.

258D Cancellation of forfeited shares

A company may, by resolution passed at a general meeting, cancel shares that have been forfeited under the terms on which the shares are on issue.

258E Other authorised reductions

(1) This subsection authorises any reduction in share capital involved in:

(a) the redemption of redeemable preference shares out of the proceeds of a new issue of shares made for the purpose of the redemption (see section 254K); or

(b) a company's buying-back of its own shares under sections 257AA to 257J; or

(2) This subsection authorises any payment out of, or transfer from, a company's share premium account under:

(a) subsection 254CB(3) (permitted uses of the share premium account); or

(b) subsection 254K(2) (payment of premium payable on redemption of redeemable preference shares).

(3) This subsection authorises any payment out of, or transfer from, a company's capital redemption reserve under subsection 254K(4) (paying up shares to be issued to members as fully-paid bonus shares).

258F Reductions because of lost capital

A company may reduce its share capital by cancelling any paid-up share capital that is lost or is not represented by available assets. This power does not apply if the company also cancels shares.

Part 2J.2 - Self-acquisition and control of shares

259A Directly acquiring own shares

A company must not acquire shares (or units of shares) in itself except:

(a) in buying back shares under section 257A; or

(b) in acquiring an interest (other than a legal interest) in fully-paid shares in the company if no consideration is given for the acquisition by the company or an entity it controls; or

(d) in circumstances covered by subsection 259B(2) or (3).

259B Taking security over own shares or shares in holding company

(1) A company must not take security over shares (or units of shares) in itself or in a company that controls it, except as permitted by subsection (2) or (3).

(2) A company may take security over shares in itself under an employee share scheme that has been approved by:

(a) a resolution passed at a general meeting of the company; and

(b) if the company is a subsidiary of a listed domestic corporation - a resolution passed at a general meeting of the listed domestic corporation; and

(c) if paragraph (b) does not apply but the company has a holding company that is a domestic corporation and that is not itself a subsidiary of a domestic corporation - a resolution passed at a general meeting of that holding company.

Special exemptions for financial institutions

(3) A company's taking security over shares (or units of shares) in itself or in a company that controls it is exempted from subsection (1) if:

(a) the company's ordinary business includes providing finance; and

(b) the security is taken in the ordinary course of that business and on ordinary commercial terms.

(4) If a company acquires shares (or units of shares) in itself because it exercises rights under a security permitted by subsection (2) or (3), then, within the following 12 months, the company must cease to hold those shares (or units of shares). The ASC may extend this period of 12 months if the company applies for the extension before the end of the period.

(5) Any voting rights attached to the shares (or units of shares) cannot be exercised while the company continues to hold them.

(6) If, at the end of the 12 months (or extended period), the company still holds any of the shares (or units of shares), the company commits an offence for each day while that situation continues.

259C Issuing or transferring shares to controlled entity

(1) The issue or transfer of shares (or units of shares) of a company to an entity it controls is void unless:

(a) the issue or transfer is to the entity as a personal representative; or

(b) the issue or transfer is to the entity as trustee and neither the company nor any entity it controls has a beneficial interest in the trust, other than a beneficial interest that satisfies these conditions:

(i) the interest arises from a security given for the purposes of a transaction entered into in the ordinary course of business in connection with providing finance; and

(ii) that transaction was not entered into with an associate of the company or an entity it controls; or

(c) the issue to the entity is made as a result of an offer to all the members of the company who hold shares of the class being issued and is made on a basis that does not discriminate unfairly, either directly or indirectly, in favour of the entity; or

(d) the transfer to the entity is by a wholly-owned subsidiary of a body corporate and the entity is also a wholly-owned subsidiary of that body corporate.

(2) The ASC may exempt a company from the operation of this section. The exemption:

(a) must be in writing; and

(b) may be granted subject to conditions.

(3) If paragraph (1)(c) or (d) applies to an issue or transfer of shares (or units of shares), section 259D applies.

259D Company controlling entity that holds shares in it

(1) If any of the following occur:

(a) a company obtains control of an entity that holds shares (or units of shares) in the company

(b) a company's control over an entity that holds shares (or units of shares) in the company increases

(c) a company issues shares (or units of shares) to an entity it controls in the situation covered by paragraph 259C(1)(c)

(d) shares (or units of shares) in the company are transferred to an entity it controls in the situation covered by paragraph 259C(1)(d);

then, within 12 months after it occurs either:

(e) the entity must cease to hold the shares (or units); or

(f) the company must cease to control the entity.

The ASC may extend this period of 12 months if the company applies for the extension before the end of the period.

(2) If this section applies to shares (or units of shares), it also applies to bonus shares issued in respect of those shares (or units of shares). Within the same period that applies to the shares themselves under subsection (1), either:

(a) the entity must cease to hold the bonus shares; or

(b) the company must cease to control the entity.

(3) Any voting rights attached to the shares (or units of shares) cannot be exercised while the company continues to control the entity.

(4) If, at the end of the 12 months (or extended period), the company still controls the entity and the entity still holds the shares (or units of shares), the company commits an offence for each day while that situation continues.

(5) This section does not apply to shares (or units of shares) if:

(a) they are held by the entity as a personal representative; or

(b) they are held by the entity as trustee and neither the company nor any entity it controls has a beneficial interest in the trust, other than a beneficial interest that satisfies these conditions:

(i) the interest arises from a security given for the purposes of a transaction entered into in the ordinary course of business in connection with providing finance; and

(ii) that transaction was not entered into with an associate of the company or an entity it controls.

(6) A contravention of this section does not affect the validity of any transaction.

259E When a company controls an entity

(1) For the purposes of this Part, a company controls an entity if the company has the capacity to determine the outcome of decisions about the entity's financial and operating policies.

(2) In determining whether a company has this capacity:

(a) the practical influence the company can exert (rather than the rights it can enforce) is the issue to be addressed; and

(b) any practice or pattern of behaviour affecting the entity's financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).

(3) Merely because the company and an unrelated entity jointly have the capacity to determine the outcome of decisions about another entity's financial and operating policies, the company does not control the other entity.

(4) A company is not to be taken to control an entity merely because of a capacity that it is under a legal obligation to exercise for the benefit of someone other than its shareholders.

Note: This situation could arise, for example, if the company holds shares as a trustee or is performing duties as a liquidator.

259F Consequences of failing to comply with section 259A or 259B

(1) If a company contravenes section 259A or subsection 259B(1):

(a) the contravention does not affect the validity of the acquisition or security or of any contract or transaction connected with it; and

(b) the company is not guilty of an offence.

(2) Any person who is involved in a company's contravention of section 259A or subsection 259B(1) contravenes this subsection.

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

Part 2J.3 - Financial assistance

260A Financial assistance by a company for acquiring shares in the company or a holding company

(1) A company may financially assist a person to acquire shares (or units of shares) in the company or a holding company of the company only if:

(a) giving the assistance does not materially prejudice:

(i) the interests of the company or its shareholders; or

(ii) the company's ability to pay its creditors; or

(b) the assistance is approved by shareholders under section 260B (that section also requires advance notice to the ASC); or

(2) Without limiting subsection (1), financial assistance may:

(a) be given before or after the acquisition of shares (or units of shares); and

(b) take the form of paying a dividend.

(3) Subsection (1) extends to the acquisition of shares (or units of shares) by:

(a) issue; or

(b) transfer; or

260B Shareholder approval

Approval by company's own shareholders

(1) Shareholder approval for financial assistance by a company must be given by:

(a) a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by the person acquiring the shares (or units of shares) or by their associates; or

(b) a resolution agreed to, at a general meeting, by all ordinary shareholders.

Approval by shareholders of listed holding corporation

(2) If the company will be a subsidiary of a listed domestic corporation immediately after the acquisition referred to in section 260A occurs, the financial assistance must also be approved by a special resolution passed at a general meeting of that corporation.

Approval by shareholders in ultimate Australian holding company

(3) If, immediately after the acquisition, the company will have a holding company that:

(a) is a domestic corporation but not listed; and

(b) is not itself a subsidiary of a domestic corporation;

the financial assistance must also be approved by a special resolution passed at a general meeting of the body corporate that will be the holding company.

Information to accompany the notice of meeting

(4) A company or other body that calls a meeting for the purpose of subsection (1), (2) or (3) must include with the notice of the meeting a statement setting out all the information known to the company or body that is material to the decision on how to vote on the resolution. However, the company or body does not have to disclose information if it would be unreasonable to require the company or body to do so because the company or body had previously disclosed the information to its members.

Documents to be lodged with the ASC before notice of meeting is sent out

(5) Before the notice of a meeting for the purpose of subsection (1), (2) or (3) is sent to members of a company or other body, the company or body must lodge with the ASC a copy of:

(a) the notice of the meeting; and

(b) any document relating to the financial assistance that will accompany the notice of the meeting sent to the members.

(6) The company must lodge with the ASC, at least 14 days before giving the financial assistance, a notice in the prescribed form stating that the assistance has been approved under this section.

Lodgment of special resolutions

(7) A special resolution passed for the purpose of subsection (1), (2) or (3) must be lodged with the ASC by the company, listed domestic corporation or holding company within 14 days after it is passed.

260C Exempted financial assistance

General exemptions based on ordinary course of commercial dealing

(1) Financial assistance is exempted from section 260A if it is given in the ordinary course of commercial dealing and consists of:

(a) acquiring or creating a lien on partly-paid shares in the company for amounts payable to the company on the shares; or

(b) entering into an agreement with a person under which the person may make payments to the company on shares by instalments.

Special exemptions for financial institutions

(2) Financial assistance is exempted from section 260A if:

(a) the company's ordinary business includes providing finance; and

(b) the financial assistance is given in the ordinary course of that business and on ordinary commercial terms.

Special exemptions for subsidiaries of borrowing corporations

(3) Financial assistance is exempted from section 260A if:

(a) the company is a subsidiary of a borrowing corporation; and

(b) the financial assistance is a guarantee or other security given by the company for the repayment by the borrowing corporation of money that it is or will be liable to repay; and

(d) the guarantee or security is given by the company in the ordinary course of commercial dealing.

Special exemption for approved employee share schemes

(4) Financial assistance is exempted from section 260A if it is given under an employee share scheme that has been approved by:

(a) a resolution passed at a general meeting of the company; and

(b) if the company is a subsidiary of a listed domestic corporation - a resolution passed at a general meeting of the listed domestic corporation; and

Other exemptions

(5) The following types of financial assistance are exempted from section 260A:

(a) a reduction of share capital in accordance with Division 1 of Part 2J.1

(b) a share buy-back in accordance with Division 2 of Part 2J.1

(d) a discharge on ordinary commercial terms of a liability that the company incurred as a result of a transaction entered into on ordinary commercial terms.

260D Consequences of failing to comply with section 260A

(1) If a company provides financial assistance in contravention of section 260A:

(a) the contravention does not affect the validity of the financial assistance or of any contract or transaction connected with it; and

(b) the company is not guilty of an offence.

(2) Any person who is involved in a company's contravention of section 260A contravenes this subsection.

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

Part 2J.4 - Interaction with general directors' duties

260E General duties still apply

A director is not relieved from any of their duties under this Law (including section 232), or their fiduciary duties, in connection with a transaction merely because the transaction is authorised by a provision of this Chapter or is approved by a resolution of members under a provision of this Chapter.

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