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Company Law Review Act 1998

Act No. 61 of 1998 as made
An Act to amend the Corporations Law, and for related purposes
Administered by: Treasury
Date of Assent 29 Jun 1998
Date of repeal 10 Mar 2016
Repealed by Amending Acts 1990 to 1999 Repeal Act 2016
Table of contents.
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1 Short title etc.
2 Commencement
3 Schedules
Expand Schedule 1—Main amendments of the Corporations LawSchedule 1—Main amendments of the Corporations Law
Expand Part 1.5—Small business guidePart 1.5—Small business guide
Chapter 2A—Registering a company
Expand Part 2A.1—What companies can be registeredPart 2A.1—What companies can be registered
Expand Part 2A.2—How a company is registeredPart 2A.2—How a company is registered
Chapter 2B—Basic features of a company
Expand Part 2B.1—Company powers and how they are exercisedPart 2B.1—Company powers and how they are exercised
Expand Part 2B.2—Assumptions people dealing with companies are entitled to makePart 2B.2—Assumptions people dealing with companies are entitled to make
Expand Part 2B.3—Contracts before registrationPart 2B.3—Contracts before registration
Expand Part 2B.4—Replaceable rules and constitutionPart 2B.4—Replaceable rules and constitution
Expand Part 2B.5—Registered office and places of businessPart 2B.5—Registered office and places of business
Expand Part 2B.6—NamesPart 2B.6—Names
Expand Chapter 2F—Members’ rights and remediesChapter 2F—Members’ rights and remedies
Part 2F.1—Oppression
Expand Part 2F.2—Class rightsPart 2F.2—Class rights
Expand Part 2F.3—Inspection of booksPart 2F.3—Inspection of books
Chapter 2G—Meetings
Expand Part 2G.1—Directors’ meetingsPart 2G.1—Directors’ meetings
Expand Part 2G.2—Meetings of members of companiesPart 2G.2—Meetings of members of companies
Expand Part 2G.3—Minutes and members’ access to minutesPart 2G.3—Minutes and members’ access to minutes
Expand Part 2G.4—Meetings of members of registered managed investment schemesPart 2G.4—Meetings of members of registered managed investment schemes
Expand Chapter 2H—SharesChapter 2H—Shares
Expand Part 2H.3—Partly-paid sharesPart 2H.3—Partly-paid shares
Expand Part 2H.4—Capitalisation of profitsPart 2H.4—Capitalisation of profits
Expand Part 2H.5—DividendsPart 2H.5—Dividends
Expand Part 2H.6—Notice requirementsPart 2H.6—Notice requirements
Chapter 2J—Transactions affecting share capital
Expand Part 2J.1—Share capital reductions and share buy-backsPart 2J.1—Share capital reductions and share buy-backs
Expand Part 2J.2—Self-acquisition and control of sharesPart 2J.2—Self-acquisition and control of shares
Expand Part 2J.3—Financial assistancePart 2J.3—Financial assistance
Expand Part 2J.4—Interaction with general directors’ dutiesPart 2J.4—Interaction with general directors’ duties
Chapter 2M—Financial reports and audit
Expand Part 2M.1—OverviewPart 2M.1—Overview
Expand Part 2M.2—Financial recordsPart 2M.2—Financial records
Expand Part 2M.3—Financial reportingPart 2M.3—Financial reporting
Expand Part 2M.5—Accounting standardsPart 2M.5—Accounting standards
Expand Part 2M.6—Exemptions and modificationsPart 2M.6—Exemptions and modifications
Expand Part 2M.7—Sanctions for contraventions of ChapterPart 2M.7—Sanctions for contraventions of Chapter
Chapter 2N—Annual returns and lodgments with the ASC
Expand Part 2N.1—Annual returnsPart 2N.1—Annual returns
Expand Part 2N.2—Lodgments with ASCPart 2N.2—Lodgments with ASC
Expand Chapter 5A—Deregistration of companiesChapter 5A—Deregistration of companies
Chapter 5B—Bodies corporate registered as companies, and registrable bodies
Expand Part 5B.1—Registering a body corporate as a companyPart 5B.1—Registering a body corporate as a company
Expand Part 5B.3—Names of registrable Australian bodies and foreign companiesPart 5B.3—Names of registrable Australian bodies and foreign companies
Expand Chapter 10—National scheme provisionsChapter 10—National scheme provisions
Chapter 11—Application and transitional provisions
Expand Part 11.1—Introduction of the Corporations LawPart 11.1—Introduction of the Corporations Law

 

 

 

 

Company Law Review Act 1998

 

No. 61, 1998

 

 

 

 

  

  

  

  

  


 

 

 

 

Company Law Review Act 1998

 

No. 61, 1998

 

 

 

 

An Act to amend the Corporations Law, and for related purposes

  

  

  

  

  


Contents

1  Short title etc.................................................................................................

2  Commencement.............................................................................................

3  Schedules.......................................................................................................

Schedule 1—Main amendments of the Corporations Law                     

1  Part 1.5, the heading to Chapter 2 and Parts 2.1, 2.2, 2.3 and 2.4                

Part 1.5—Small business guide                                                                

1  What registration means................................................................................

2  The company structure for small business....................................................

3  Setting up a new company............................................................................

4  Continuing obligations after the company is set up....................................

5  Company directors and company secretaries..............................................

6  Shares and shareholders...............................................................................

7  Signing company documents.......................................................................

8  Funding the company’s operations.............................................................

9  Returns to shareholders...............................................................................

10  Annual financial reports and audit.............................................................

11  Disagreements within the company..........................................................

12  Companies in financial trouble..................................................................

Chapter 2A—Registering a company                                                    

Part 2A.1—What companies can be registered                                    

112  Types of companies................................................................................

113  Proprietary companies............................................................................

114  Minimum of 1 member............................................................................

115  Restrictions on size of partnerships and associations.............................

116  Trade unions cannot be registered...........................................................

Part 2A.2—How a company is registered                                              

117  Applying for registration.........................................................................

118  ASC gives company ACN, registers company and issues certificate.....

119  Company comes into existence on registration.......................................

120  Members, directors and company secretary of a company....................

121  Registered office......................................................................................

122  Expenses incurred in promoting and setting up company.......................

123  Company may have common seal...........................................................

Chapter 2B—Basic features of a company                                           

Part 2B.1—Company powers and how they are exercised                   

124  Legal capacity and powers of a company...............................................

125  Constitution may limit powers and set out objects................................

126  Agent exercising a company’s power to make contracts.........................

127  Execution of documents (including deeds) by the company itself..........

Part 2B.2—Assumptions people dealing with companies are entitled to make     

128  Entitlement to make assumptions...........................................................

129  Assumptions that can be made under section 128..................................

130  Information available to the public from the ASC does not constitute constructive notice                     

Part 2B.3—Contracts before registration                                             

131  Contracts before registration...................................................................

132  Person may be released from liability but is not entitled to indemnity...

133  This Part replaces other rights and liabilities...........................................

Part 2B.4—Replaceable rules and constitution                                    

134  Internal management of companies..........................................................

135  Replaceable rules.....................................................................................

136  Constitution of a company......................................................................

137  Date of effect of adoption, modification or repeal of constitution..........

138  ASC may direct company to lodge consolidated constitution................

139  Company must send copy of constitution to member............................

140  Effect of constitution and replaceable rules.............................................

141  Table of replaceable rules........................................................................

Part 2B.5—Registered office and places of business                           

142  Registered office......................................................................................

143  ASC may change address of registered office to a director’s address......

144  Company’s name must be displayed at registered office etc..................

145  Opening hours of registered office of public company...........................

146  Change of address of principal place of business....................................

Part 2B.6—Names                                                                                  

Division 1—Selecting and using a name                                          

147  When a name is available.........................................................................

148  A company’s name..................................................................................

149  Acceptable abbreviations.........................................................................

150  Exception to requirement for using “Limited” in name...........................

151  Exception to requirement for using “Limited” in name— pre-existing licences              

152  Reserving a name.....................................................................................

153  Using a name and ACN on documents....................................................

154  Exception to requirement to have ACN on receipts................................

155  Regulations may exempt from requirement to set out information on documents         

156  Carrying on business using “Limited”, “No Liability” or “Proprietary” in name          

Division 2—Changing a company’s name                                        

157  Company changing its name....................................................................

158  ASC’s power to direct company to change its name..............................

159  ASC’s power to include “Limited” in company’s name.........................

160  ASC must issue new certificate if company’s name changes..................

161  Effect of name change..............................................................................

Part 2B.7 Changing company type                                                         

162  Changing company type..........................................................................

163  Applying for change of type...................................................................

164  ASC changes type of company...............................................................

165  ASC may direct a proprietary company to change to a public company in certain circumstances         

166  Effect of change of type..........................................................................

167  Issue of shares by company or holding company—company limited by guarantee changing to company limited by shares..........................................................................................................

2  Part 3.1                                                                                                                  

3  Part 3.3                                                                                                                  

4  Before Part 3.5                                                                                                     

Chapter 2F—Members’ rights and remedies                                       

246A  Membership of a company..................................................................

Part 2F.1—Oppression                                                                           

Part 2F.2—Class rights                                                                          

246B  Varying and cancelling class rights........................................................

246C  Certain actions taken to vary rights etc................................................

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

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

246F  Company must lodge documents and resolutions with the ASC..........

246G  Member’s copies of documents and resolutions..................................

Part 2F.3—Inspection of books                                                              

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

247B  Ancillary orders....................................................................................

247C  Disclosure of information acquired in inspection.................................

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

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)     

248B  Resolutions and declarations of 1 director proprietary companies......

Division 2—Directors’ meetings                                                     

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

248D  Use of technology.................................................................................

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

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

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

Part 2G.2—Meetings of members of companies                                  

Division 1—Resolutions without meetings                                      

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

249B  Resolutions of 1 member companies....................................................

Division 2—Who may call meetings of members                            

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

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

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

249E  Failure of directors to call general meeting............................................

249F  Calling of general meetings by members................................................

249G  Calling of meetings of members by the Court......................................

Division 3—How to call meetings of members                                

249H  Amount of notice of meetings..............................................................

249HA  Amount of notice of meetings of listed company............................. 85

249J  Notice of meetings of members to members and directors....................

249K  Auditor entitled to notice and other communications..........................

249L  Contents of notice of meetings of members..........................................

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

Division 4—Members’ rights to put resolutions etc. at general meetings       

249N  Members’ resolutions...........................................................................

249O  Company giving notice of members’ resolutions.................................

249P  Members’ statements to be distributed................................................

Division 5—Holding meetings of members                                     

249Q  Purpose.................................................................................................

249R  Time and place for meetings of members..............................................

249S  Technology............................................................................................

249T  Quorum (replaceable rule—see section 135)........................................

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

249V  Auditor’s right to be heard at general meetings.....................................

249W  Adjourned meetings.............................................................................

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).......................................................................................

249Y  Rights of proxies...................................................................................

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

250A  Appointing a proxy..............................................................................

250B  Proxy documents..................................................................................

250BA  Proxy documents—listed companies.................................................

250C  Validity of proxy vote..........................................................................

250D  Body corporate representative.............................................................

Division 7—Voting at meetings of members                                   

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

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

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

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

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

250K  Matters on which a poll may be demanded..........................................

250L  When a poll is effectively demanded.....................................................

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

Division 8—AGMs of public companies                                          

250N  Public company must hold AGM........................................................

250P  Extension of time for holding AGM.....................................................

250R  Business of AGM.................................................................................

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

250T  Questions by members of auditors at AGM........................................

Part 2G.3—Minutes and members’ access to minutes                         

251A  Minutes................................................................................................

251AA  Disclosure of proxy votes—listed companies...................................

251B  Members’ access to minutes.................................................................

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.........................

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

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

252D  Calling of meetings of members by members.....................................

252E  Calling of meetings of members by the Court.....................................

Division 2—How to call meetings of members                              

252F  Amount of notice of meetings.............................................................

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

252H  Auditors entitled to other communications........................................

252J  Contents of notice of meetings of members.........................................

252K  Notice of adjourned meetings.............................................................

Division 3—Members’ rights to put resolutions etc. at meetings of members

252L  Members’ resolutions.........................................................................

252M  Responsible entity giving notice of members’ resolutions................

252N  Members’ statements to be distributed..............................................

Division 4—Holding meetings of members                                   

252P  Time and place for meetings of members............................................

252Q  Technology.........................................................................................

252R  Quorum...............................................................................................

252S  Chairing meetings of members.............................................................

252T  Auditors’ right to be heard at meetings of members...........................

252U  Adjourned meetings............................................................................

Division 5—Proxies and body corporate representatives             

252V  Who can appoint a proxy...................................................................

252W  Rights of proxies................................................................................

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

252Y  Appointing a proxy............................................................................

252Z  Proxy documents................................................................................

253A  Validity of proxy vote........................................................................

253B  Body corporate representative...........................................................

Division 6—Voting at meetings of members                                 

253C  How many votes a member has..........................................................

253D  Jointly held interests..........................................................................

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

253F  How to work out the value of an interest...........................................

253G  Objections to a right to vote...............................................................

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

253J  How voting is carried out.....................................................................

253K  Matters on which a poll may be demanded........................................

253L  When a poll is effectively demanded...................................................

Division 7—Minutes and members’ access to minutes                

253M  Minutes.............................................................................................

253N  Members’ access to minutes..............................................................

Chapter 2H—Shares                                                                            

254AA  Shares to have nominal value...........................................................

Part 2H.1—Issuing and converting shares                                          

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

254B  Terms of issue.....................................................................................

254CA  Nominal value of shares issued after registration.............................

254CB  Share premium..................................................................................

254CC  Issue of shares at a discount.............................................................

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

254E  Court validation of issue.....................................................................

254F  Bearer shares and stock must not be issued........................................

254G  Conversion of shares..........................................................................

254H  Resolution to convert shares into larger or smaller number................

Part 2H.2—Redemption of redeemable preference shares               

254J  Redemption must be in accordance with terms of issue......................

254K  Other requirements about redemption................................................

254L  Consequences of contravening section 254J or 254K.........................

Part 2H.3—Partly-paid shares                                                             

254M  Liability on partly-paid shares..........................................................

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

254P  No liability companies—calls on shares.............................................

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

254R  No liability companies—redemption of forfeited shares....................

Part 2H.4—Capitalisation of profits                                                    

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

Part 2H.5—Dividends                                                                           

254T  Dividends to be paid out of profits....................................................

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

254V  When does the company incur a debt?...............................................

254W  Dividend rights...................................................................................

Part 2H.6—Notice requirements                                                         

254X  Notice to ASC of share issue..............................................................

254Y  Notice to ASC of share cancellation...................................................

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.................................................................

256B  Court order confirming the reduction..................................................

256C  The creditor protection test................................................................

256D  Putting the capital reduction into effect.............................................

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

256F  Consequences of failing to comply with section 256A.......................

Division 2—Share buy-backs                                                         

257AA  Purpose............................................................................................

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

257B  Buy-back procedure—general.............................................................

257C  Buy-back procedure—shareholder approval if the 10/12 limit exceeded

257D  Buy-back procedure—special shareholder approval for selective buy-back               

257E  Buy-back procedure—lodgment of offer documents with the ASC...

257F  Notice of intended buy-back...............................................................

257G  Buy-back procedure—disclosure of relevant information when offer made                

257H  Acceptance of offer and transfer of shares to the company...............

257J  Signposts to other relevant provisions................................................

Division 3—Other share capital reductions                                   

258A  Unlimited companies..........................................................................

258B  Right to occupy or use real property.................................................

258C  Brokerage or commission....................................................................

258D  Cancellation of forfeited shares..........................................................

258E  Other authorised reductions................................................................

258F  Reductions because of lost capital......................................................

Part 2J.2—Self-acquisition and control of shares                               

259A  Directly acquiring own shares............................................................

259B  Taking security over own shares or shares in holding company........

259C  Issuing or transferring shares to controlled entity..............................

259D  Company controlling entity that holds shares in it............................

259E  When a company controls an entity...................................................

259F  Consequences of failing to comply with section 259A or 259B.........

Part 2J.3—Financial assistance                                                           

260A  Financial assistance by a company for acquiring shares in the company or a holding company          

260B  Shareholder approval..........................................................................

260C  Exempted financial assistance.............................................................

260D  Consequences of failing to comply with section 260A......................

Part 2J.4—Interaction with general directors’ duties                         

260E  General duties still apply....................................................................

5  Part 3.6                                                                                                                

Chapter 2M—Financial reports and audit                                           

Part 2M.1—Overview                                                                          

285  Overview of obligations under this Chapter..........................................

Part 2M.2—Financial records                                                              

286  Obligation to keep financial records......................................................

287  Language requirements...........................................................................

288  Physical format......................................................................................

289  Place where records are kept.................................................................

290  Director access.......................................................................................

291  Signposts to other relevant provisions..................................................

Part 2M.3—Financial reporting                                                           

Division 1—Annual financial reports and directors’ reports         

292  Who has to prepare annual financial reports and directors’ reports.....

293  Small proprietary company—shareholder direction.............................

294  Small proprietary company—ASC direction........................................

295  Contents of annual financial report.......................................................

296  Compliance with accounting standards and regulations........................

297  True and fair view..................................................................................

298  Annual directors’ report........................................................................

299  Annual directors’ report—general information.....................................

300  Annual directors’ report—specific information....................................

300A  Annual directors’ report—specific information to be provided by listed companies  193

301  Audit of annual financial report.............................................................

Division 2—Half-year financial report and directors’ report         

302  Disclosing entity must prepare half-year financial report and directors’ report            

303  Contents of half-year financial report...................................................

304  Compliance with accounting standards and regulations........................

305  True and fair view..................................................................................

306  Half-year directors’ report....................................................................

Division 3—Audit and auditor’s report                                          

307  Audit......................................................................................................

308  Auditor’s report on annual financial report...........................................

309  Auditor’s report on half-year financial report.......................................

310  Auditor’s power to obtain information.................................................

311  Reporting to ASC..................................................................................

312  Assisting auditor....................................................................................

313  Special provisions on audit of borrowing corporations and guarantor bodies                

Division 4—Annual financial reporting to members                      

314  Annual financial reporting to members..................................................

315  Deadline for reporting to members........................................................

316  Member’s choices for annual financial information...............................

317  Consideration of reports at AGM.........................................................

318  Additional reporting by debenture issuers............................................

Division 5—Lodging reports with the ASC                                   

319  Lodgment of annual reports with the ASC............................................

320  Lodgment of half-year reports with the ASC........................................

321  ASC power to require lodgment............................................................

322  Relodgment if financial statements or directors’ reports amended after lodgment         

Division 6—Special provisions about consolidated financial statements           

323  Directors and officers of controlled entity to give information.............

323A  Auditor’s power to obtain information from controlled entity..........

323B  Controlled entity to assist auditor......................................................

323C  Application of Division to entity that has ceased to be controlled....

Division 7—Financial years and half-years                                    

323D  Financial years and half-years............................................................

Division 8—Disclosure by listed companies of information filed overseas        210

323DA  Listed companies to disclose information filed overseas................. 210

6  Divisions 2 and 3 of Part 3.7 and Part 3.8                                                    

Part 2M.5—Accounting standards                                                       

334  Accounting standards............................................................................

335  Equity accounting..................................................................................

336  Comparative amounts............................................................................

337  Interpretation of accounting standards..................................................

338  Severing invalid provisions....................................................................

339  Evidence of text of accounting standard................................................

Part 2M.6—Exemptions and modifications                                         

340  ASC’s power to make specific exemption orders.................................

341  ASC’s power to make class orders........................................................

342  Criteria for specific exemption orders and class orders.........................

343  Modification by regulations..................................................................

Part 2M.7—Sanctions for contraventions of Chapter                        

344  Contravention of Part 2M.2 or 2M.3....................................................

Chapter 2N—Annual returns and lodgments with the ASC               

Part 2N.1—Annual returns                                                                   

345  Deadline for lodging annual return.........................................................

346  Solvency resolution—companies..........................................................

347  Lodging annual return with ASC...........................................................

348  Contents of annual return—companies.................................................

349  Contents of annual return—registered schemes....................................

Part 2N.2—Lodgments with ASC                                                        

350  Forms for documents to be lodged with ASC.......................................

351  Signing documents lodged with ASC.....................................................

352  Documents lodged with ASIC electronically......................................... 223

7  Division 4 of Part 4.1                                                                                         224

8  Parts 4.2, 4.3, 4.4 and 4.5                                                                                 224

9  After Chapter 5                                                                                                   225

Chapter 5A—Deregistration of companies                                          225

601AA  Deregistration—voluntary............................................................... 225

601AB  Deregistration—ASC initiated......................................................... 226

601AC  Deregistration—following amalgamation or winding up.................. 227

601AD  Effect of deregistration.................................................................... 228

601AE  What the ASC does with the property............................................ 228

601AF  ASC’s power to fulfil outstanding obligations of deregistered company                   230

601AG  Claims against insurers of deregistered company............................ 230

601AH  Reinstatement.................................................................................. 230

Chapter 5B—Bodies corporate registered as companies, and registrable bodies 232

Part 5B.1—Registering a body corporate as a company                     232

Division 1—Registration                                                                 232

601BA  Bodies corporate may be registered as certain types of companies 232

601BB  Bodies registered as proprietary companies.................................... 233

601BC  Applying for registration under this Part......................................... 233

601BD  ASC gives body ACN, registers as company and issues certificate 236

601BE  Registered office............................................................................... 237

601BF  Name................................................................................................. 237

601BG  Constitution..................................................................................... 238

601BH  Modifications of constitution.......................................................... 238

601BJ  ASC may direct company to apply for Court approval for modifications of constitution                  238

601BK  Establishing registers and minute books.......................................... 239

601BL  Registration of registered bodies....................................................... 239

Division 2—Operation of the Corporations Law                            239

601BM  Effect of registration under this Part............................................... 239

601BN  Liability of members on winding up................................................ 240

601BP  Bearer shares..................................................................................... 240

601BR  First AGM....................................................................................... 241

601BS  Modification by regulations.............................................................. 241

Part 5B.3—Names of registrable Australian bodies and foreign companies          242

601DA  Reserving a name............................................................................. 242

601DB  Acceptable abbreviations................................................................. 242

601DC  When a name is available.................................................................. 243

601DD  Registered Australian bodies and registered foreign companies can carry on business with some names only           244

601DE  Using a name and ARBN................................................................. 244

601DF  Exception to requirement to have ARBN on receipts...................... 245

601DG  Regulations may exempt from requirement to set out information on documents    245

601DH  Notice of name change must be given to the ASC........................... 245

601DJ  ASC’s power to direct a registered name be changed....................... 246

10  After Part 9.10                                                                                                 247

Chapter 10—National scheme provisions                                            247

1362A  Recognition of companies from other jurisdictions.......................... 247

1362B  Transfer of registration..................................................................... 247

1362BA  Compensation for compulsory acquisition.................................... 248

Chapter 11—Application and transitional provisions                          249

Part 11.1—Introduction of the Corporations Law                                249

1362CA  Existing company........................................................................... 249

1362CB  Existing company taken to be registered under the Corporations Law 249

1362CC  Constitution of existing company.................................................. 250

1362CD  Application of Law to existing companies.................................... 250

1362CE  Acts preparatory to external administration of existing company. 251

1362CF  Appointments of receivers............................................................. 251

1362CG  Application of Division 2 of Part 5.6............................................ 251

1362CH  Reinstatement of companies deregistered before commencement. 251

1362CJ  Registrable Australian bodies and foreign companies..................... 251

11  After Division 9 of Part 9.11                                                                          253

Division 10—Changes resulting from the Company Law Review Act 1998      253

1412  Meaning of commencement, new Law and old Law............................ 253

1413  Registration—existing companies continue to be registered................ 253

1414  Registration—application orders under subsection 112(3) of the old Law                   254

1415  Basic features of a company—memorandum and articles are taken to be constitution 255

1416  Basic features of a company—companies limited both by shares and by guarantee     255

1417  Basic features of a company—acts before external administration of existing company                        256

1418  Basic features of a company—registered office.................................. 256

1419  Basic features of a company—opening hours of registered office of public company  256

1420  Basic features of a company—name, reservation of name and ACN continues            256

1421  Members’ rights and remedies—applications for inspection orders under repealed provisions            257

1422  Meetings—AGM before commencement........................................... 257

1423  Meetings—first AGM for companies incorporated before commencement                 257

1424  Meetings—general transitional arrangements...................................... 258

1425  Nominal value...................................................................................... 259

1426  Share capital—calls on partly-paid shares.......................................... 260

1427  Share capital—provisions in constitution about amount of share capital and division into shares        260

1428  Share capital—conversion of stock into shares................................... 261

1429  Share capital—previous Law continues to apply to capital reductions initiated before commencement                        261

1430  Share capital—continued operation of other repealed provisions....... 262

1431  Financial reports and audit—application of Chapter 2M to periods that end after commencement, and continued application of repealed provisions to past periods........................ 262

1432  Financial reports and audit—lodgment of accounts by public companies that are not disclosing entities                       262

1433  Financial reports and audit—continued operation of accounting standards                  262

1434  Financial reports and audit—continued operation of exemption orders 263

1435  Annual returns—solvency resolution.................................................. 264

1436  Annual returns—application of annual return provisions................... 264

1437  Deregistration—previous Law continues to apply to deregistrations initiated before commencement  265

1438  Deregistration—property vested in ASC under previous laws.......... 265

1439  Deregistration—reinstatement of registration where application under section 571 or subsection 574(3) made before commencement............................................................................... 266

1440  Deregistration—deregistration of companies dissolved under the State Bank (Corporatisation) Act 1994 of South Australia......................................................................................... 266

1441  Accounting standards made under section 32 of the Corporations Act 1989                267

1442  References in State laws and other documents.................................... 267

Schedule 2—Consequential amendment of the Corporations Law     269

Part 1—Registering a company (new Chapter 2A)
Basic features of a company (new Chapter 2B)
Members’ rights and remedies (new Chapter 2F)                 269

Part 2—Meetings (new Chapter 2G)                                                  299

Part 3—Shares (new Chapter 2H)
Transactions affecting share capital (new Chapter 2J)            307

Part 4—Financial reports and audit (new Chapter 2M)                       321

Part 5—Annual returns and ASC lodgments (new Chapter 2N)          339

Part 6—Deregistration of companies (new Chapter 5A)                     341

Schedule 3—Amendment of the Corporations Law to relocate provisions and make other structural changes                                                                                                   346

Schedule 4—Consequential amendment of other legislation              367

Australian Securities Commission Act 1989                                                     367

Corporations Act 1989                                                                                          367

Foreign Acquisitions and Takeovers Act 1975                                                368

Insurance Act 1973                                                                                                368

Life Insurance Act 1995                                                                                         368

Pooled Development Funds Act 1992                                                                369

Service and Execution of Process Act 1992                                                      371

Schedule 5—Amendments in relation to nominal value and share capital reductions               373

Corporations Law                                                                                                  373

Insurance Act 1973                                                                                                386

Life Insurance Act 1995                                                                                         386

Pooled Development Funds Act 1992                                                                387

 

 


Company Law Review Act 1998

No. 61, 1998

 

 

 

An Act to amend the Corporations Law, and for related purposes

Assented to 29 June 1998

The Parliament of Australia enacts:

 

 

1  Short title etc.

             (1)  This Act may be cited as the Company Law Review Act 1998.

             (2)  In this Act:

Corporations Law means the Corporations Law set out in section 82 of the Corporations Act 1989.

2  Commencement

             (1)  Sections 1 and 2 commence on the day on which this Act receives the Royal Assent.

             (2)  Subject to subsection (3), section 3 and Schedules 1, 2, 3 and 4 commence on a day to be fixed by Proclamation.

             (3)  If that section and those Schedules do not commence under subsection (2) within the period of 6 months beginning on the day on which this Act receives the Royal Assent, they commence on the first day after the end of that period.

             (4)  The amendments in Schedules 1, 2, 3 and 4 commence on the day determined under subsections (2) and (3) in this order:

                     (a)  first, items 29, 30 and 199 of Schedule 3;

                     (b)  then, the items in Schedules 1, 2 and 4 and the remaining items in Schedule 3 (other than items 32, 85, 158 and 198);

                     (c)  then, items 32, 85, 158 and 198 of Schedule 3.

             (5)  Schedule 5 commences immediately after the Taxation Laws Amendment (Company Law Review) Act 1998 commences.

3  Schedules

                   Subject to section 2, the Corporations Law and each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.


 

Schedule 1Main amendments of the Corporations Law

  

1  Part 1.5, the heading to Chapter 2 and Parts 2.1, 2.2, 2.3 and 2.4

Repeal the Parts and heading, substitute:

Part 1.5Small business guide

  

                   This guide summarises the main rules in the Corporations Law that apply to proprietary companies limited by shares—the most common type of company used by small business. The guide gives a general overview of the Corporations Law as it applies to those companies and directs readers to the operative provisions in the Law.

                   The notes in square brackets at the end of paragraphs in the guide indicate the main provisions of the Corporations Law, the regulations made under the Law, and Australian Securities Commission Practice Notes that are relevant to the information in the paragraphs.

                   Other Commonwealth, State and Territory laws also impose obligations on proprietary companies and their operators.

1  What registration means

1.1 Separate legal entity that has its own powers

                   As far as the law is concerned, a company has a separate legal existence that is distinct from that of its owners, managers, operators, employees and agents. A company has its own property, its own rights and its own obligations. A company’s money and other assets belong to the company and must be used for the company’s purposes.

                   A company has the powers of an individual, including the powers to:

                          own and dispose of property and other assets

                          enter into contracts

                          sue and be sued.

                   Once a company is registered, its separate legal status, property, rights and liabilities continue until the ASC (Australian Securities Commission) deregisters the company.

[sections 119, 124–125, 601AA–601AD]

1.2 Limited liability of shareholders

                   Shareholders of a company are not liable (in their capacity as shareholders) for the company’s debts. As shareholders, their only obligation is to pay the company any amount unpaid on their shares if they are called upon to do so. However, particularly if a shareholder is also a director, this limitation may be affected by other laws and the commercial practices discussed in 1.3 and 1.4.

[section 516]

1.3 Director’s liability for company’s debts

                   A director of a company may be liable for debts incurred by the company at a time when the company itself is unable to pay those debts as they fall due.

                   A director of a company may be liable to compensate the company for any losses the company suffers from a breach of certain of the director’s duties to the company (see 5.3).

                   In addition to having liability for the company’s debts or to pay compensation to the company, a director may also be subject to a civil penalty.

                   If a company holds property on trust, a director of the company may be liable in some circumstances for liabilities incurred by the company as trustee.

[sections 232, 233, 344, 588G, 588J, 588M, 1317HA, 1317HD]

1.4 Director’s liability as guarantor/security over personal assets

                   As a matter of commercial practice, a bank, trade creditor or anyone else providing finance or credit to a company may ask a director of the company:

                          for a personal guarantee of the company’s liabilities; and

                          for some form of security over their house or personal assets to secure the performance by the company of its obligations.

                   The director of a company may, for example, be asked by a bank to give a mortgage over their house to secure the company’s repayment of a loan. If the company does not repay the loan as agreed with the bank, the director may lose the house.

1.5 Continuous existence

                   A company continues to exist even if 1 or more of its shareholders or directors sells their shares, dies or leaves the company. If a company has only 1 shareholder who is also the only director of the company and that person dies, their personal representative is able to ensure that the company continues to operate.

[sections 119, 224A]

1.6 Rules for the internal management of a company

                   The Law contains a basic set of rules for the internal management of a company (appointments, meetings etc.).

                   Some of these rules are mandatory for all companies. There are a few special rules for single shareholder/single director companies.

                   Other internal management rules in the Law are replaceable rules. The replaceable rules do not apply to:

                          a single shareholder/single director company; or

                          a company that had a constitution before the introduction of the replaceable rules regime and has not repealed it.

                   A company does not need to have a separate constitution of its own; it can simply take advantage of the rules in the Law. The company will need a constitution only if it wants to displace, modify or add to the replaceable rules.

[sections 134–141, 224B]

1.7 How a company acts

                   A company does not have a physical existence. It must act through other people.

                   Individual directors, the company secretary, company employees or agents may be authorised to enter into contracts that bind the company (see 7).

                   In some circumstances, a company will be bound by something done by another person (see 1.8).

1.8 Directors

                   The directors of a company are responsible for managing the company’s business. It is a replaceable rule (see 1.6) that generally the directors may exercise all the powers of the company except a power that the Law, a replaceable rule or a provision of the company’s constitution (if any) requires the company to exercise in general meeting.

                   The only director of a company who is also the only shareholder is responsible for managing the company’s business and may exercise all of the company’s powers.

                   The Law sets out rules dealing with the calling and conduct of directors’ meetings. Directors must keep a written record (minutes) of their resolutions and meetings.

                   There are 2 ways that directors may pass resolutions:

                          at a meeting; or

                          by having all of the directors record and sign their decision.

                   If a company has only 1 director, the sole director may also pass a resolution by recording and signing their decision.

[sections 224B, 226A, 248A–248G, 251A]

1.9 Shareholders

                   The shareholders of a company own the company, but the company has a separate legal existence and the company’s assets belong to the company.

                   Shareholders can make decisions about the company by passing a resolution, usually at a meeting. A “special resolution” usually involves more important questions affecting the company as a whole or the rights of some or all of its shareholders.

                   There are 2 ways that shareholders may pass a resolution:

                          at a meeting; or

                          by having all of the shareholders record and sign their decision.

                   If a meeting is held, an ordinary resolution must be passed by a majority of the votes cast by shareholders of the company entitled to vote on the resolution at the meeting in person or by proxy (if proxies are allowed). A special resolution must be passed by at least 75% of the votes cast by shareholders of the company entitled to vote on the resolution and who vote at the meeting in person or by proxy (if proxies are allowed).

                   The sole shareholder of a company may pass a resolution by recording and signing their decision.

                   A company must keep a written record (minutes) of the members’ resolutions and meetings.

[sections 9 (special resolution), 249A, 249B, 249L, 251A]

1.10 What others can assume about the company

                   Anyone who does any business with the company is entitled to assume that the company has a legal right to conduct that business unless the person knows, or suspects, otherwise. For example, an outsider dealing with the company is entitled to assume:

                          that a person who is shown in a notice lodged with the ASC as being the director or company secretary of a company has been properly appointed and is authorised to act for the company; and

                          that a person who is held out by the company to be a director, company secretary or agent of the company has been properly appointed and is authorised to act for the company.

[sections 128–130]

2  The company structure for small business

2.1 Proprietary company for small business

                   Generally, a proprietary company limited by shares is the most suitable company for use by small business. Such a proprietary company must have a least 1 shareholder but no more than 50 shareholders (not counting employee shareholders). It may have 1 or more directors.

[sections 112–113]

3  Setting up a new company

                   The operators of small businesses can either buy “shelf” companies or set up new companies themselves.

3.1 “Shelf” companies

                   The operator of a small business may find it more convenient to buy a “shelf” company (a company that has already been registered but has not traded) from businesses which set up companies for this purpose or from some legal or accounting firms.

3.2 Setting up a company

                   To set up a new company themselves, the operator must apply to the ASC for registration of the company.

                   A proprietary company limited by shares must have at least 1 shareholder.

                   To obtain registration, a person must lodge a properly completed application form with the ASC. The form must set out certain information including details of every person who has consented to be a shareholder, director or company secretary of the company.

                   The company comes into existence when the ASC registers it.

[sections 117–119, 135–136, 140]

3.3 ACN and name

                   When a company is registered, the ASC allocates to it a unique 9 digit number called the Australian Company Number (ACN). (For use of the ACN see 4.1).

                   In practice, a new company must have a name that is different from the name of a company that is already registered. A proprietary company limited by shares must have the words “Proprietary Limited” as part of its name. Those words can be abbreviated to “Pty Ltd”.

                   A proprietary company may adopt its ACN as its name. If it does so, its name must also contain the words “Australian Company Number” (which can be abbreviated to “ACN”). For example, the company’s name might be “ACN 123 456 789 Pty Ltd”.

[sections 119, 147–161]

3.4 Contracts entered into before the company is registered

                   A company can ratify a contract entered into by someone on its behalf or for its benefit before it was registered. If the company does not ratify the contract, the person who entered into the contract may be personally liable.

[sections 131–133]

3.5  First shareholders, directors and company secretary

                   A person listed with their consent as a shareholder, director or company secretary in the application for registration of the company becomes a shareholder, director or company secretary of the company on its registration.

                   The same person may be both a director of the company and the company secretary.

                   See 5.1 and 5.2 for directors and 5.4 for company secretaries. See 6.1 for shareholders.

[section 120]

3.6 Issuing shares

                   It is a replaceable rule (see 1.6) that, before issuing new shares, a company must first offer them to the existing shareholders in the proportions that the shareholders already hold. A company may issue shares at a price it determines.

[sections 254B, 254D]

3.7 Registered office

                   A company must have a registered office in Australia and must inform the ASC of the location of the office. A post office box cannot be the registered office of a company. The purpose of the registered office is to have a place where all communications and notices to the company may be sent.

                   If the company does not occupy the premises where its registered office is located, the occupier of the premises must agree in writing to having the company’s registered office located there.

                   A proprietary company is not required to open its registered office to the public but this does not affect its obligation to make documents available for inspection.

                   The company must notify the ASC of any change of address of its registered office.

[sections 100, 142, 143, 173, 1300]

3.8 Principal place of business

                   If a company has a principal place of business that is different to its registered office, it must notify the ASC of the address of its principal place of business and of any changes to that address.

[sections 117, 146]

3.9 Registers kept by the company

                   A company must keep registers, including a register of shareholders and a register of charges. A company must keep its registers at:

                          the company’s registered office; or

                          the company’s principal place of business; or

                          a place (whether on premises of the company or of someone else) where the work in maintaining the register is done; or

                          another place approved by the ASC.

                   A register may be kept either in a bound or looseleaf book or on computer.

                   If a register is kept on computer, its contents must be capable of being printed out in hard copy.

[sections 172, 1300–1302, 1306]

3.10 Register of shareholders

                   A company must keep in its register of shareholders such information as:

                          the names and addresses of its shareholders; and

                          details of shares held by individual shareholders.

[sections 168–169]

3.11 Register of charges

                   A company must keep a register of charges if the company gives a bank, trade creditor or anybody else a charge over company assets.

[section 271]

4  Continuing obligations after the company is set up

                   The Corporations Law and other laws impose obligations on companies themselves and on their directors and company secretaries. Some of the more important obligations imposed under the Corporations Law are discussed below.

4.1 Use of company name and ACN

                   The name of a company must be shown at all the company’s business premises (including its registered office) that are open to the public. The company’s name and its ACN must appear:

                          on some of its public documents; and

                          on its cheques and negotiable instruments; and

                          on all documents lodged with the ASC; and

                          if it has one, on its common seal.

[sections 123, 144, 147–156,
Australian Securities Commission Practice Note 47]

4.2 Annual return

                   A company must lodge with the ASC an annual return which contains such information as:

                          names and addresses of each director and company secretary; and

                          issued shares and options granted; and

                          details of its shareholders; and

                          address of its registered office; and

                          address of its principal place of business; and

                          a statement that the directors have resolved in the last month that, in the directors’ opinion, there are reasonable grounds to believe the company will be able to pay its debts as and when they become payable (but if the company has lodged an annual financial report with the ASC within the last 12 months, it does not need to include this statement).

                   An annual return may be lodged with the ASC on a printed form or, if an agreement is in place to lodge electronically, in accordance with the agreement.

                   The ASC may send a partially completed annual return to a company that wants to lodge its annual return on a printed form for the company to check, amend if necessary, verify and send back to the ASC. However, a company must lodge an annual return with the ASC even if the ASC does not send a partially completed annual return to the company.

[sections 345–348, 352]

4.3 Annual fee

                   A company must pay an annual fee to the ASC on lodgment of the annual return.

[Corporations (Fees) Regulations]

4.4 Notification to ASC of changes

                   The company must notify the ASC if certain basic changes to the company occur. The following table sets out these notification requirements.

 

Notification requirements

 

 

 

If . . .

the company must notify the ASC of the change . . .

using
Form No. . . .

see
section . . .

1.

a company issues shares

within 1 month after the issue

207

254X

2.

a company changes the location of a register

within 7 days after the change

909

172, 1302

3.

a company changes the address of its registered office or principal place of business

within 14 days after the change

203

142, 146

4.

a company changes its directors or company secretary

within 14 days after the change

304

242

5.

there is a change in the name or address of the company’s directors or secretary

within 14 days after the change

304

242

6.

a company creates certain kinds of charges

within 45 days after the charge is created

309

263

5  Company directors and company secretaries

5.1 Who can be a director

                   Only an individual who is at least 18 years old can be a director. If a company has only 1 director, they must ordinarily reside in Australia. If a company has more than 1 director, at least 1 of the directors must ordinarily reside in Australia.

                   A director must consent in writing to holding the position of director. The company must keep the consent and must notify the ASC of the appointment.

                   In some circumstances, the Corporations Law imposes the duties and obligations of a director on a person who, although not formally appointed as a director of a company, nevertheless acts as a director or gives instructions to the formally appointed directors as to how they should act.

                   The Court or the ASC may prohibit a person from being a director or from otherwise being involved in the management of a company if, for example, the person has breached the Corporations Law.

                   A person needs the Court’s permission to be a director if the person has been convicted of certain offences or is, in some circumstances, unable to pay their debts as they fall due.

                   Generally, a director may resign by giving notice of the resignation to the company. The company must notify the ASC of a director’s resignation. A director who resigns may also notify the ASC of the resignation.

[sections 60, 221, 222A, 224, 228–230, 242, 242C, 599, 600, 1317EA(3)]

5.2  Appointment of new directors

                   It is a replaceable rule (see 1.6) that shareholders may appoint directors by resolution at a general meeting.

[section 224C]

5.3 Duties and liabilities of directors

                   In managing the business of a company (see 1.7), each of its directors is subject to a wide range of duties under the Corporations Law and other laws. Some of the more important duties are:

                          to act in good faith

                          to act in the best interests of the company

                          to avoid conflicts between the interests of the company and the director’s interests

                          to act honestly

                          to exercise care and diligence

                          to prevent the company trading while it is unable to pay its debts

                          if the company is being wound up—to report to the liquidator on the affairs of the company

                          if the company is being wound up—to help the liquidator (by, for example, giving to the liquidator any records of the company that the director has).

                   A director who fails to perform their duties:

                          may be guilty of a criminal offence with a penalty of $200,000 or imprisonment for up to 5 years, or both; and

                          may contravene a civil penalty provision (and the Court may order the person to pay to the Commonwealth an amount of up to $200,000); and

                          may be personally liable to compensate the company or others for any loss or damage they suffer; and

                          may be prohibited from managing a company.

                   A director’s obligations may continue even after the company has been deregistered.

[sections 232, 475, 530A, 588G, 596, 601AD, 601AH, 1317FA,
1317HA, 1317HB, 1317HD]

5.4 Company secretaries

                   A company must have a company secretary. The directors appoint the company secretary. A company secretary must be at least 18 years old. If a company has only 1 company secretary, they must ordinarily reside in Australia. If a company has more than 1 company secretary, at least 1 of them must ordinarily reside in Australia.

                   A company secretary must consent in writing to holding the position of company secretary. The company must keep the consent and must notify the ASC of the appointment.

                   The same person may be both a director of a company and the company secretary.

                   Generally, a company secretary may resign by giving written notice of the resignation to the company. The company must notify the ASC of a company secretary’s resignation. A company secretary who resigns may also notify the ASC of the resignation.

                   The company secretary is an officer of the company and, in that capacity, may be subject to the requirements imposed by the Corporations Law on company officers. The company secretary has specific responsibilities under the Corporations Law, including responsibility for ensuring that the company notifies the ASC about changes to the identities, names and addresses of the company’s directors and company secretaries and that the company lodges its annual return.

                   A company secretary’s obligations may continue even after the company has been deregistered.

[sections 83, 142, 222A, 240, 242, 242C, 345, 601AD, 601AH]

6  Shares and shareholders

                   A proprietary company limited by shares must have a share capital and at least 1 shareholder. The ASC may apply to a Court to have a company wound up if it does not have any shareholders.

[sections 461– 462]

6.1 Becoming a shareholder and ceasing to be a shareholder

                   A person may become a shareholder of a company in several ways, including the following:

                          the person being listed as a shareholder of the company in the application for registration of the company

                          the company issuing shares to the person

                          the person buying shares in the company from an existing shareholder and the company registering the transfer.

                   Some of the ways in which a person ceases to be a shareholder are:

                          the person sells all of their shares in the company and the company registers the transfer of the shares

                          the company buys back all the person’s shares

                          the ASC cancels the company’s registration.

[sections 117, 120, 601AA–601AD]

6.2 Classes of shares

                   A company may have different classes of shares. The rights and restrictions attached to the shares in a class distinguish it from other classes of shares.

[sections 254A–254B]

6.3 Meetings of shareholders

                   Directors have the power to call meetings of all shareholders or meetings of only those shareholders who hold a particular class of shares.

                   Shareholders who hold at least 5% of the votes which may be cast at a general meeting of a company have the power to call and hold a meeting themselves or to require the directors to call and hold a meeting. Meetings may be held regularly or to resolve specific questions about the management or business of the company.

                   The Law sets out rules dealing with shareholders’ meetings.

                   A shareholder of a company may ask the company for a copy of the record of a meeting or of a decision of shareholders taken without a meeting.

[sections 249A–251B]

6.4 Voting rights

                   Different rights to vote at meetings of shareholders may attach to different classes of shares. It is a replaceable rule (see 1.6) that, subject to those different rights, each shareholder has 1 vote on a show of hands and, on a poll, 1 vote for each share held.

[sections 250E, 254A–254B]

6.5 Buying and selling shares

                   A shareholder may sell their shares but only if the sale would not breach the company’s constitution (if any). It is a replaceable rule (see 1.6) that the directors have a discretion to refuse to register a transfer of shares.

[sections 1091D–1091E]

7  Signing company documents

                   A company’s power to sign, discharge and otherwise deal with contracts can be exercised by an individual acting with the company’s authority and on its behalf. A company can deal with contracts without using a common seal.

                   A company may execute a document by having it signed by:

                          2 directors of the company; or

                          a director and the company secretary; or

                          for a company with a sole director who is also the sole secretary—that director.

                   If the document is to have effect as a deed, it should be expressed to be a deed.

[sections 126–127, 240]

                   A company is not required to have a common seal. If it does, the seal must show the company’s name and its ACN. The seal is equivalent to the company’s signature and may be used on important company documents such as mortgages.

[sections 123, 127(2)]

8  Funding the company’s operations

                   The shareholders may fund the company’s operations by lending money to the company or by taking up other shares in the company. Except if it is raising funds from its own employees or shareholders, a proprietary company must not engage in any fundraising activity that would require the company to lodge a prospectus with the ASC (for example, advertising in a newspaper inviting people to invest in the company).

                   The company may also borrow money from banks and other financial organisations.

                   Anyone who has lent money, or provided credit, to the company may ask for a mortgage or charge over the company’s assets to secure the performance by the company of its obligations.

[sections 113, 124]

9  Returns to shareholders

                   Shareholders can take money out of the company in a number of ways, but only if the company complies with its constitution (if any), the Corporations Law and all other relevant laws. If a company pays out money in a way that results in the company being unable to pay its debts as they fall due, its directors may be liable:

                          to pay compensation; and

                          for criminal and civil penalties.

[sections 588G, 1317FA, 1317HA, 1317HB, 1317HD]

9.1 Dividends

                   Dividends are payments to shareholders out of the company’s after tax profits. It is a replaceable rule (see 1.6) that the directors decide whether the company should pay a dividend.

[sections 254T, 254U]

9.2 Buy–back of shares

                   A company can buy back shares from shareholders.

[sections 257A–257J]

9.4 Distribution of surplus assets on winding up

                   If a company is wound up and there are any assets left over after all the company’s debts have been paid, the surplus is distributed to shareholders in accordance with the rights attaching to their shares.

10  Annual financial reports and audit

10.1 The small/large distinction

                   The accounting requirements imposed on a proprietary company under the Corporations Law depend on whether the company is classified as small or large. A company’s classification can change from 1 financial year to another as its circumstances change.

                   A company is classified as small for a financial year if it satisfies at least 2 of the following tests:

                          gross operating revenue of less than $10 million for the year

                          gross assets of less than $5 million at the end of the year

                          fewer than 50 employees at the end of the year.

                   A company that does not satisfy at least 2 of these tests is classified as large.

[section 45A]

                   As the great majority of proprietary companies are small under these tests, the discussion below deals mainly with the accounting requirements for small proprietary companies.

[sections 286–301]

10.2 Financial records

                   Under the Corporations Law, all proprietary companies must keep sufficient financial records to record and explain their transactions and financial position and to allow true and fair financial statements to be prepared and audited. Financial record here means some kind of systematic record of the company’s financial transactions—not merely a collection of receipts, invoices, bank statements and cheque butts. Financial records may be kept on computer.

[sections 286–289]

10.3 Preparing annual financial reports and directors’ reports

                   The Corporations Law requires a small proprietary company to prepare an annual financial report (an annual profit and loss statement, a balance sheet and a statement of cash flows) and a directors’ report (about the company’s operations, dividends paid or recommended, options issued etc.) if:

                          the shareholders with at least 5% of the votes in the company direct it to do so; or

                          the ASC directs it to do so.

                   Unless the shareholders’ direction specifies otherwise, the company must prepare the annual financial report in accordance with the applicable accounting standards.

                   Although the Corporations Law itself may not require a small proprietary company to prepare a financial report except in the circumstances mentioned, the company may need to prepare the annual financial reports for the purposes of other laws (for example, income tax laws). Moreover, good business practice may also make it advisable for the company to prepare the financial reports so that it can monitor and better manage its financial position.

                   Large proprietary companies must prepare annual financial reports and a directors’ report, have the financial report audited and send both reports to shareholders. They must also lodge the annual financial reports with the ASC unless exempted.

[sections 286–301, 319–320]

11  Disagreements within the company

11.1 Special problems faced by minority shareholders

                   There are remedies available to a shareholder of a company if:

                          the affairs of the company are being conducted in a way that is unfair to that shareholder or to other shareholders of the company; or

                          the affairs of the company are being conducted in a way that is against the interests of the company as a whole.

                   A Court may, for example, order the winding up of a company or the appointment of a receiver.

[sections 246AA, 461]

11.2 Buy–back of shares

                   A company may buy back the shares of a shareholder who wants to sever their relationship with the company.

[sections 257A–257J]

11.3 Selling shares

                   A shareholder in a company who wants to sever their relationship with the company may decide to sell their shares. However, the shareholder may not be able to sell their shares readily—particularly if they want to sell their shares to someone who is not an existing shareholder. Some of the difficulties they may face in that case are:

                          under the replaceable rules the directors have a discretion to refuse to transfer the shares; and

                          restrictions in the company’s constitution (if any) on transferring shares.

[sections 995, 1018, 1091D–1091E]

12  Companies in financial trouble

12.1 Voluntary administration

                   If a company experiences financial problems, the directors may appoint an administrator to take over the operations of the company to see if the company’s creditors and the company can work out a solution to the company’s problems.

                   If the company’s creditors and the company cannot agree, the company may be wound up (see 12.3).

[Part 5.3A]

12.2 Receivers

                   A receiver, or receiver and manager, may be appointed by order of a Court or under an agreement with a secured creditor to take over some or all of the assets of a company. Generally this would occur if the company is in financial difficulty. A receiver may be appointed, for example, because an amount owed to a secured creditor is overdue.

[Part 5.2]

12.3 Winding up and distribution

                   A company may be wound up by order of a Court, or voluntarily if the shareholders of the company pass a special resolution to do so.

                   A liquidator is appointed:

                          when a Court orders a company to be wound up; or

                          the shareholders of a company pass a resolution to wind up the company.

[Part 5.2, section 495]

12.4 Liquidators

                   A liquidator is appointed to administer the winding up of a company. The liquidator’s main functions are:

                          to take possession of the company’s assets; and

                          to determine debts owed by the company and pay the company’s creditors; and

                          to distribute to shareholders any assets of the company left over after paying creditors (any distribution to shareholders is made according to the rights attaching to their shares); and

                          finally, to have the company deregistered.

[Parts 5.4B, 5.5]

12.5 Order of payment of debts

                   Generally, creditors who hold security over company assets are paid first.

[Division 6 of Part 5.6]

12.6 Cancellation of registration

                   If a company has ceased trading or has been wound up, it remains on the register until the ASC cancels the company’s registration. Once a company is deregistered, it ceases to exist.

[sections 601AA–601AB, 601AH]


 

Chapter 2ARegistering a company

Part 2A.1What companies can be registered

  

112  Types of companies

Types of companies

             (1)  The following types of companies can be registered under this Law:

 

Proprietary companies

 Limited by shares

 

 Unlimited with share capital

Public companies

 Limited by shares

 

 Limited by guarantee

 

 Unlimited with share capital

 

No liability company

 

Note:          Other types of companies that were previously allowed continue to exist under section 1413.

No liability companies

             (2)  A company may be registered as a no liability company only if:

                     (a)  the company has a share capital; and

                     (b)  the company’s constitution states that its sole objects are mining purposes; and

                     (c)  the company has no contractual right under its constitution to recover calls made on its shares from a shareholder who fails to pay them.

Note 1:       Section 9 defines mining purposes and minerals.

Note 2:       Special provisions on no liability companies are found in the sections referred to in the following table:

 

No liability company provisions

item

topic

sections

1

names

148, 156, 162

2

terms of issue of shares

254B

3

liability on partly-paid shares

254M

4

calls

254P-254R

5

winding up

477-478, 483, 514

6

registering a body as a company

610BA

7

transitional

1413

             (3)  A no liability company must not engage in activities that are outside its mining purposes objects.

             (4)  The directors of a no liability company must not:

                     (a)  let the whole or proportion of a mine or claim on tribute; or

                     (b)  make any contract for working any land on tribute;

unless:

                     (c)  the letting or contract is approved by a special resolution; or

                     (d)  no such letting or contract has been made within the period of 2 years immediately preceding the proposed letting or contract.

             (5)  An act or transaction is not invalid merely because of a contravention of subsection (3) or (4).

113  Proprietary companies

             (1)  A company must have no more than 50 non–employee shareholders if it is to:

                     (a)  be registered as a proprietary company; or

                     (b)  change to a proprietary company; or

                     (c)  remain registered as a proprietary company.

Note:          Proprietary companies have different financial reporting obligations depending on whether they are small proprietary companies or large proprietary companies (see section 45A and Part 2M.3).

             (2)  In applying subsection (1):

                     (a)  count joint holders of a particular parcel of shares as 1 person; and

                     (b)  an employee shareholder is:

                              (i)  a shareholder who is an employee of the company or of a subsidiary of the company; or

                             (ii)  a shareholder who was an employee of the company, or of a subsidiary of the company, when they became a shareholder.

             (3)  A proprietary company must not engage in any activity that would require the lodgment with the ASC of a prospectus under Part 7.12, except for an offer of its shares to:

                     (a)  existing shareholders of the company; or

                     (b)  employees of the company or of a subsidiary of the company.

             (4)  An act or transaction is not invalid merely because of a contravention of subsection (3).

Note:          If a proprietary company contravenes this section, the ASC may require it to change to a public company (see section 165).

114  Minimum of 1 member

                   A company needs to have at least 1 member.

115  Restrictions on size of partnerships and associations

                   A person must not participate in the formation of a partnership or association which has as an object gain for itself or for any of its members and which either:

                     (a)  has more than 20 members; or

                     (b)  has more than the number of members it is allowed to have under an application order made by the Minister under Part 1.3;

unless the partnership or association is incorporated or formed under an Australian law.

Note:          For the effect of a contravention of this section, see section 103.

116  Trade unions cannot be registered

                   A trade union cannot be registered under this Law.


 

Part 2A.2How a company is registered

  

117  Applying for registration

Lodging application

             (1)  To register a company, a person must lodge an application with the ASC.

Note:          For the types of companies that can be registered, see section 112.

Contents of the application

             (2)  The application must state the following:

                     (a)  the type of company that is proposed to be registered under the Corporations Law of this jurisdiction

                     (b)  the company’s proposed name (unless the ACN is to be used in its name)

                     (c)  the name and address of each person who consents to become a member

                     (d)  the present given and family name, all former given and family names and the date and place of birth of each person who consents in writing to become a director

                     (e)  the present given and family name, all former given and family names and the date and place of birth of each person who consents in writing to become a company secretary

                      (f)  the address of each person who consents in writing to become a director or company secretary

                     (g)  the address of the company’s proposed registered office

                     (h)  for a public company—the proposed opening hours of its registered office (if they are not the standard opening hours)

                      (j)  the address of the company’s proposed principal place of business (if it is not the address of the proposed registered office)

                     (k)  for a company limited by shares or an unlimited company—the following:

                              (i)  the number, class and nominal value of the shares that each member referred to in paragraph (c) agrees in writing to take up

                             (ii)  the amount (if any) paid, taken to be paid or due and payable on the issue of each share

                      (l)  for a public company that is limited by shares or is an unlimited company, if shares will be issued for non-cash consideration—the prescribed particulars about the issue of the shares, unless the shares will be issued under a written contract and a copy of the contract is lodged with the application

                    (m)  for a company limited by guarantee—the proposed amount of the guarantee that each member agrees to in writing.

Note 1:       Paragraph (b)—sections 147 and 152 deal with the availability and reservation of names.

Note 2:       Paragraph (f)—the address that must be stated is usually the residential address, although an alternative address can sometimes be stated instead (see section 242AA).

Note 3:       Paragraph (g)—if the company is not to be the occupier of premises at the address of its registered office, the application must state that the occupier has consented to the address being specified in the application and has not withdrawn that consent (see section 100).

Note 4:       Paragraph (h)—for standard opening hours, see section 9.

             (3)  If the company is to be a public company and is to have a constitution on registration, a copy of the constitution must be lodged with the application.

             (4)  The application must be in the prescribed form.

             (5)  An applicant must have the consents and agreements referred to in subsection (2) when the application is lodged. After the company is registered, the applicant must give the consents and agreements to the company. The company must keep the consents and agreements.

118  ASC gives company ACN, registers company and issues certificate

Registration

             (1)  If an application is lodged under section 117, the ASC may:

                     (a)  give the company an ACN; and

                     (b)  register the company; and

                     (c)  issue a certificate that states:

                              (i)  the company’s name; and

                             (ii)  the company’s ACN; and

                            (iii)  the company’s type; and

                            (iv)  that the company is registered as a company under the Corporations Law of this jurisdiction; and

                             (v)  the date of registration.

Note:          For the evidentiary value of a certificate of registration, see subsection 1274(7A).

ASC must keep record of registration

             (2)  The ASC must keep a record of the registration. Subsections 1274(2) and (5) apply to the record as if it were a document lodged with the ASC.

119  Company comes into existence on registration

                   A company comes into existence as a body corporate at the beginning of the day on which it is registered. The company’s name is the name specified in the certificate of registration.

Note:          The company remains in existence until it is deregistered (see Chapter 5A).

120  Members, directors and company secretary of a company

             (1)  A person becomes a member, director or company secretary of a company on registration if the person is specified in the application with their consent as a proposed member, director or company secretary of the company.

             (2)  The shares to be taken up by the members as specified in the application are taken to be issued to the members on registration of the company. The shares have the nominal value specified for them in the application.

Note:          A member’s name must be entered in the register of members (see section 169).

121  Registered office

                   The address specified in the application for registration for the company’s proposed registered office becomes the address of the company’s registered office on registration.

122  Expenses incurred in promoting and setting up company

                   The expenses incurred before registration in promoting and setting up a company may be paid out of the company’s assets.

123  Company may have common seal

             (1)  A company may have a common seal. If a company does have a common seal, the company must set out on it:

                     (a)  for a company that has its ACN in its name—the company’s name; or

                     (b)  otherwise—the company’s name, the expression “Australian Company Number” and the company’s ACN.

Note 1:       A company may make contracts and execute documents without using a seal (see sections 126 and 127).

Note 2:       For abbreviations that can be used on a seal, see section 149.

             (2)  A company may have a duplicate common seal. The duplicate must be a copy of the common seal with the words “duplicate seal”, “share seal” or “certificate seal” added.

             (3)  A person must not use, or authorise the use of, a seal that purports to be the common seal of a company or a duplicate if the seal does not comply with the requirements set out in subsection (1) or (2).


 

Chapter 2BBasic features of a company

Part 2B.1Company powers and how they are exercised

  

124  Legal capacity and powers of a company

             (1)  A company has the legal capacity and powers of an individual both in and outside this jurisdiction. A company also has all the powers of a body corporate, including the power to:

                     (a)  issue and cancel shares in the company

                     (b)  issue debentures

                     (c)  grant options over unissued shares in the company

                     (d)  distribute any of the company’s property among the members, in kind or otherwise

                     (e)  give security by charging uncalled capital

                      (f)  grant a floating charge over the company’s property

                     (g)  arrange for the company to be registered or recognised as a body corporate in any place outside this jurisdiction

                     (h)  do anything that it is authorised to do by any other law (including a law of a foreign country).

A company limited by guarantee does not have the power to issue shares.

Note:          For a company’s power to issue bonus, partly–paid, preference and redeemable preference shares, see section 254A.

             (2)  A company’s legal capacity to do something is not affected by the fact that the company’s interests are not, or would not be, served by doing it.

125  Constitution may limit powers and set out objects

             (1)  If a company has a constitution, it may contain an express restriction on, or a prohibition of, the company’s exercise of any of its powers. The exercise of a power by the company is not invalid merely because it is contrary to an express restriction or prohibition in the company’s constitution.

             (2)  If a company has a constitution, it may set out the company’s objects. An act of the company is not invalid merely because it is contrary to or beyond any objects in the company’s constitution.

126  Agent exercising a company’s power to make contracts

             (1)  A company’s power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company’s express or implied authority and on behalf of the company. The power may be exercised without using a common seal.

             (2)  This section does not affect the operation of a law that requires a particular procedure to be complied with in relation to the contract.

127  Execution of documents (including deeds) by the company itself

             (1)  A company may execute a document without using a common seal if the document is signed by:

                     (a)  2 directors of the company; or

                     (b)  a director and a company secretary of the company; or

                     (c)  for a proprietary company that has a sole director who is also the sole company secretary—that director.

Note:          If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(5) for dealings in relation to the company.

             (2)  A company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by:

                     (a)  2 directors of the company; or

                     (b)  a director and a company secretary of the company; or

                     (c)  for a proprietary company that has a sole director who is also the sole company secretary—that director.

Note:          If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(6) for dealings in relation to the company.

             (3)  A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2).

             (4)  This section does not limit the ways in which a company may execute a document (including a deed).


 

Part 2B.2Assumptions people dealing with companies are entitled to make

  

128  Entitlement to make assumptions

             (1)  A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.

             (2)  A person is entitled to make the assumptions in section 129 in relation to dealings with another person who has, or purports to have, directly or indirectly acquired title to property from a company. The company and the other person are not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.

             (3)  The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings.

             (4)  A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect.

129  Assumptions that can be made under section 128

Constitution and replaceable rules complied with

             (1)  A person may assume that the company’s constitution (if any), and any provisions of this Law that apply to the company as replaceable rules, have been complied with.

Director or company secretary

             (2)  A person may assume that anyone who appears, from information provided by the company that is available to the public from the ASC, to be a director or a company secretary of the company:

                     (a)  has been duly appointed; and

                     (b)  has authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary of a similar company.

Officer or agent

             (3)  A person may assume that anyone who is held out by the company to be an officer or agent of the company:

                     (a)  has been duly appointed; and

                     (b)  has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company.

Proper performance of duties

             (4)  A person may assume that the officers and agents of the company properly perform their duties to the company.

Document duly executed without seal

             (5)  A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1). For the purposes of making the assumption, a person may also assume that anyone who signs the document and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices.

Document duly executed with seal

             (6)  A person may assume that a document has been duly executed by the company if:

                     (a)  the company’s common seal appears to have been fixed to the document in accordance with subsection 127(2); and

                     (b)  the fixing of the common seal appears to have been witnessed in accordance with that subsection.

For the purposes of making the assumption, a person may also assume that anyone who witnesses the fixing of the common seal and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices.

Officer or agent with authority to warrant that document is genuine or true copy

             (7)  A person may assume that an officer or agent of the company who has authority to issue a document or a certified copy of a document on its behalf also has authority to warrant that the document is genuine or is a true copy.

             (8)  Without limiting the generality of this section, the assumptions that may be made under this section apply for the purposes of this section.

130  Information available to the public from the ASC does not constitute constructive notice

             (1)  A person is not taken to have information about a company merely because the information is available to the public from the ASC.

             (2)  Subsection (1) does not apply in relation to a document that has been lodged with the ASC to the extent that the document relates to a charge that is registrable under this Law.


 

Part 2B.3Contracts before registration

  

131  Contracts before registration

             (1)  If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit of, a company before it is registered, the company becomes bound by the contract and entitled to its benefit if the company, or a company that is reasonably identifiable with it, is registered and ratifies the contract:

                     (a)  within the time agreed to by the parties to the contract; or

                     (b)  if there is no agreed time—within a reasonable time after the contract is entered into.

             (2)  The person is liable to pay damages to each other party to the pre-registration contract if the company is not registered, or the company is registered but does not ratify the contract or enter into a substitute for it:

                     (a)  within the time agreed to by the parties to the contract; or

                     (b)  if there is no agreed time—within a reasonable time after the contract is entered into.

The amount that the person is liable to pay to a party is the amount the company would be liable to pay to the party if the company had ratified the contract and then did not perform it at all.

             (3)  If proceedings are brought to recover damages under subsection (2) because the company is registered but does not ratify the pre-registration contract or enter into a substitute for it, the court may do anything that it considers appropriate in the circumstances, including ordering the company to do 1 or more of the following:

                     (a)  pay all or part of the damages that the person is liable to pay

                     (b)  transfer property that the company received because of the contract to a party to the contract

                     (c)  pay an amount to a party to the contract.

             (4)  If the company ratifies the pre–registration contract but fails to perform all or part of it, the court may order the person to pay all or part of the damages that the company is ordered to pay.

132  Person may be released from liability but is not entitled to indemnity

             (1)  A party to the pre–registration contract may release the person from all or part of their liability under section 131 to the party by signing a release.

             (2)  Despite any rule of law or equity, the person does not have any right of indemnity against the company in respect of the person’s liability under this Part. This is so even if the person was acting, or purporting to act, as trustee for the company.

133  This Part replaces other rights and liabilities

                   This Part replaces any rights or liabilities anyone would otherwise have on the pre–registration contract.


 

Part 2B.4Replaceable rules and constitution

  

134  Internal management of companies

                   A company’s internal management may be governed by provisions of this Law that apply to the company as replaceable rules, by a constitution or by a combination of both.

Note:          There are additional rules about internal management in ordinary provisions of this Law and also in the common law.

135  Replaceable rules

Companies to which replaceable rules apply

             (1)  A section or subsection (except subsection 129(1), this section and sections 140 and 141) whose heading contains the words:

                     (a)  replaceable rule—applies as a replaceable rule to:

                              (i)  each company that is registered after the commencement of this Part; and

                             (ii)  any company registered before that commencement that repeals its constitution after that commencement; and

                     (b)  replaceable rule for proprietary companies and mandatory rule for public companies—applies:

                              (i)  as a replaceable rule to any proprietary company that is registered after the commencement of this Part; and

                             (ii)  as a replaceable rule to any company that is registered after that commencement and that changes to a proprietary company (but only while it is a proprietary company); and

                            (iii)  as a replaceable rule to any proprietary company registered before that commencement that repeals its constitution after that commencement; and

                            (iv)  as an ordinary provision of this Law to any public company whenever registered.

                   The section or subsection does not apply to a proprietary company while the same person is both its sole director and sole shareholder.

Note 1:       See section 224B for the special provisions that apply to a proprietary company while the same person is both its sole director and sole shareholder.

Note 2:       A company may include in its constitution (by reference or otherwise) a replaceable rule that does not otherwise apply to it.

Company’s constitution can displace or modify replaceable rules

             (2)  A provision of a section or subsection that applies to a company as a replaceable rule can be displaced or modified by the company’s constitution.

Failure to comply with replaceable rules

             (3)  A failure to comply with the replaceable rules as they apply to a company is not of itself a contravention of this Law (so the provisions about criminal liability, civil liability and injunctions do not apply).

Note:          Replaceable rules that apply to a company have effect as a contract (see section 140).

136  Constitution of a company

             (1)  A company adopts a constitution:

                     (a)  on registration—if each person specified in the application for the company’s registration as a person who consents to become a member agrees in writing to the terms of a constitution before the application is lodged; or

                     (b)  after registration—if the company passes a special resolution adopting a constitution.

Note:          The memorandum and articles of a company immediately before the commencement of this Part are taken together to make up the company’s constitution after commencement (see section 1414).

             (2)  The company may modify or repeal its constitution, or a provision of its constitution, by special resolution.

             (3)  The company’s constitution may provide that the special resolution does not have any effect unless a further requirement specified in the constitution relating to that modification or repeal has been complied with.

             (4)  Unless the constitution provides otherwise, the company may modify or repeal a further requirement described in subsection (3) only if the further requirement is itself complied with.

             (5)  A public company must lodge with the ASC a copy of a special resolution adopting, modifying or repealing its constitution within 14 days after it is passed. The company must also lodge with the ASC within that period:

                     (a)  if the company adopts a constitution—a copy of that constitution; or

                     (b)  if the company modifies its constitution—a copy of that modification.

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.

137  Date of effect of adoption, modification or repeal of constitution

             (1)  A special resolution adopting, modifying or repealing a company’s constitution takes effect:

                     (a)  if no later date is specified in the resolution—on the date on which the resolution is passed; or

                     (b)  on a later date specified in, or determined in accordance with, the resolution.

             (2)  Subsection (1) does not apply to the date of effect of a special resolution passed in connection with a change of name, change of type or a variation or cancellation of class rights.

Note:          For the date of effect of these changes, see subsection 157(3) (name), subsection 164(5) (type) and subsection 246D(3) and section 246E (class rights).

138  ASC may direct company to lodge consolidated constitution

                   The ASC may direct a company to lodge a consolidated copy of its constitution with the ASC.

139  Company must send copy of constitution to member

                   A company must send a copy of its constitution to a member of the company within 7 days if the member:

                     (a)  asks the company, in writing, for the copy; and

                     (b)  pays any fee (up to the prescribed amount) required by the company.

140  Effect of constitution and replaceable rules

             (1)  A company’s constitution (if any) and any replaceable rules that apply to the company have effect as a contract:

                     (a)  between the company and each member; and

                     (b)  between the company and each director and company secretary; and

                     (c)  between a member and each other member;

under which each person agrees to observe and perform the constitution and rules so far as they apply to that person.

             (2)  Unless a member of a company agrees in writing to be bound, they are not bound by a modification of the constitution made after the date on which they became a member so far as the modification:

                     (a)  requires the member to take up additional shares; or

                     (b)  increases the member’s liability to contribute to the share capital of, or otherwise to pay money to, the company; or

                     (c)  imposes or increases restrictions on the right to transfer the shares already held by the member, unless the modification is made:

                              (i)  in connection with the company’s change from a public company to a proprietary company under Part 2B.7; or

                             (ii)  to insert takeover approval provisions of a kind referred to in section 671.

141  Table of replaceable rules

                   The following table sets out the provisions of this Law that apply as replaceable rules.

 

Provisions that apply as replaceable rules

 

 


1

Directors

Company may appoint a director


224C

2

Alternate directors

225A

3

Powers of directors

226A

4

Executing negotiable instruments

226B

5

Managing director

226C

6

Delegation to committees

226D

7

Proprietary company may remove director

226E

8

Director may resign by giving written notice to company

227A

9

Director interested in contract with proprietary company

231(1A)

10

Remuneration of directors

236A


11

Directors’ meetings

Circulating resolutions


248A

12

Calling directors’ meetings

248C

13

Chairing directors’ meetings

248E

14

Quorum at directors’ meetings

248F

15

Passing of directors’ resolutions

248G


16

Meetings of members

Calling of meetings of members by a director


249C

17

Notice to joint members

249J(2)

18

When notice by post or fax is given

249J(4)

19

Notice of adjourned meetings

249M

20

Quorum

249T

21

Chairing meetings of members

249U

22

Business at adjourned meetings

249W(2)

23

Who can appoint a proxy

[replaceable rule for proprietary companies only]

249X

24

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

250C(2)

25

How many votes a member has

250E

26

Jointly held shares

250F

27

Objection to right to vote

250G

28

How voting is carried out

250J

29

When and how polls must be taken

250M


30

Company secretary

Terms of office determined by directors


240(4A)

31

Inspection of books

Company or directors may allow member to inspect books


247D


32

Shares

Pre–emption for existing shareholders on issue of shares in proprietary company


254D

33

Other provisions about paying dividends

254U

34

Dividend rights for shares in proprietary companies

254W(2)


35

Transfer of shares

Transmission of shares on death


1091AA

36

Transmission of shares on bankruptcy

1091AB

37

Transmission of shares on mental incapacity

1091B

38

Registration of transfers

1091D

39

Additional general discretion for directors of proprietary companies to refuse to register transfers

1091E


40

Share capital

Capitalisation of profits


254S


 

Part 2B.5Registered office and places of business

  

142  Registered office

             (1)  A company must have a registered office in Australia. Communications and notices to the company may be addressed to its registered office.

Note:          A document may be served on a company by leaving it at, or posting it to, the company’s registered office (see subsection 109X(1)).

             (2)  A company must lodge notice of a change of address of its registered office with the ASC not later than 14 days after the date on which the change occurs. The notice must be in the prescribed form.

Note:          If the company is not to be the occupier of premises at the address of its new registered office, the notice must state that the occupier has consented to the address being specified in the notice and has not withdrawn that consent (see section 100).

             (3)  A notice of change of address takes effect from the later of:

                     (a)  the 7th day after the notice was lodged; or

                     (b)  a later day specified in the notice as the date from which the change is to take effect.

143  ASC may change address of registered office to a director’s address

             (1)  A company that does not occupy the premises at the address of its registered office must be able to show to the ASC the occupier’s written consent to the company’s use of those premises as its registered office.

Note:          The ASC can require the company to produce the consent (see section 100).

             (2)  If the ASC becomes aware that the occupier of those premises:

                     (a)  has not consented to the use of the premises as the address of the company’s registered office; or

                     (b)  has withdrawn the consent;

the ASC may give written notice to a director of the company who resides in Australia that the ASC intends to change the address of the company’s registered office to the director’s address.

             (3)  If the ASC is not notified of the address of the company’s proposed new registered office under subsection 142(2) within 14 days after the notice under subsection (2) is sent, the ASC may change the address of the company’s registered office to the director’s address.

144  Company’s name must be displayed at registered office etc.

             (1)  A company must display its name prominently at every place at which the company carries on business and that is open to the public.

             (2)  A public company must also display its name and the words “Registered Office” prominently at its registered office.

145  Opening hours of registered office of public company

             (1)  The registered office of a public company must be open to the public:

                     (a)  each business day from at least 10 am to 12 noon and from at least 2 pm to 4 pm; or

                     (b)  at least 3 hours chosen by the company between 9 am and 5 pm each business day.

             (2)  If the company chooses its own opening hours, the hours must be specified:

                     (a)  if the company is to have its own opening hours from its registration—in the application for registration of the company under section 117; or

                     (b)  if the company changes its opening hours after its registration—in the most recent notice of change of opening hours lodged with the ASC under subsection (3).

             (3)  The company must lodge notice of a change in the opening hours of its registered office with the ASC before the day on which a change occurs. The notice must be in the prescribed form.

146  Change of address of principal place of business

                   A company must lodge with the ASC notice of a change of the address of its principal place of business not later than 14 days after the date on which the change occurs. The notice must be in the prescribed form.


 

Part 2B.6Names

Division 1Selecting and using a name

147  When a name is available

Name is available unless identical or unacceptable

             (1)  A name is available to a company unless the name is:

                     (a)  identical (under rules set out in the regulations) to a name that is reserved or registered under this Law for another body; or

                     (b)  identical (under rules set out in the regulations) to a name that is included on the national business names register in respect of another individual or body who is not the person applying to have the name; or

                     (c)  unacceptable for registration under the regulations.

Minister may consent to a name being available to a company

             (2)  The Minister may consent in writing to a name being available to a company even if the name is:

                     (a)  identical to a name that is reserved or registered under this Law for another body; or

                     (b)  unacceptable for registration under the regulations.

             (3)  The Minister’s consent may be given subject to conditions.

Note:          If the company breaches a condition, the ASC may direct it to change its name under section 158.

148  A company’s name

Company may use available name or ACN

             (1)  A company may have as its name:

                     (a)  an available name; or

                     (b)  the expression “Australian Company Number” followed by the company’s ACN.

The name must also include the words required by subsection (2) or (3).

Limited companies

             (2)  A limited public company must have the word “Limited” at the end of its name unless section 150 or 151 applies. A limited proprietary company must have the words “Proprietary Limited” at the end of its name.

Unlimited proprietary companies

             (3)  An unlimited proprietary company must have the word “Proprietary” at the end of its name.

No liability companies

             (4)  A no liability company must have the words “No Liability” at the end of its name.

Public companies with “Proprietary” included in their name

             (5)  A public company must not include the word “Proprietary” (or an abbreviation of it) in its name unless:

                     (a)  it was a public company before the commencement of this section; and

                     (b)  the word “Proprietary” (or an abbreviation of it) was included in its name before that commencement.

149  Acceptable abbreviations

             (1)  The abbreviations set out in the following table may be used:

                     (a)  instead of words that this Law requires to be part of a company’s name or to be included in a document or on a company’s common seal; and

                     (b)  instead of words that are part of a company’s name; and

                     (c)  with or without full stops.

 

Acceptable abbreviations

[operative table]

 

Word

Abbreviation

1

Company

Co or Coy

2

Proprietary

Pty

3

Limited

Ltd

4

No Liability

NL

5

Australian

Aust

6

Number

No

7

and

&

8

Australian Company Number

ACN

             (2)  If a company’s name includes any of these abbreviations, the word corresponding to the abbreviation may be used instead.

150  Exception to requirement for using “Limited” in name

             (1)  The ASC may register a company limited by guarantee without “Limited” in its name, or alter the registration of a company of that type by omitting “Limited” from its name, if its constitution:

                     (a)  requires the company to pursue charitable purposes only and to apply its income in promoting those purposes; and

                     (b)  prohibits the company making distributions to its members and paying fees to its directors; and

                     (c)  requires the directors to approve all other payments the company makes to directors.

             (2)  The company must notify the ASC as soon as practicable if any of those requirements or prohibitions in its constitution are not complied with or if its constitution is modified to remove any of those requirements or prohibitions.

151  Exception to requirement for using “Limited” in name—
pre-existing licences

             (1)  A licence in force immediately before the commencement of this section that allowed a company to omit “Limited” from its name continues in force subject to subsection (3).

             (2)  The company must notify the ASC as soon as practicable if it:

                     (a)  breaches a condition of the licence; or

                     (b)  pursues objects or purposes that would have prevented it being granted the licence; or

                     (c)  applies its profits or other income to promote objects or purposes that would have prevented it being granted the licence; or

                     (d)  pays a dividend to its members; or

                     (e)  modifies its constitution to allow it to do anything set out in paragraphs (a) to (d).

             (3)  The ASC may revoke the company’s licence if the company does anything set out in paragraphs (2)(a) to (e).

152  Reserving a name

             (1)  A person may lodge an application in the prescribed form with the ASC to reserve a name for a company. If the name is available, the ASC must reserve it.

Note:          For available names, see section 147.

             (2)  The reservation lasts for 2 months from the date when the application was lodged. An applicant may ask the ASC in writing for an extension of the reservation during a period that the name is reserved, and the ASC may extend the reservation for 2 months.

             (3)  The ASC must cancel a reservation if the applicant asks the ASC in writing to do so.

153  Using a name and ACN on documents

             (1)  A company must set out its name on all its public documents and negotiable instruments.

             (2)  Subject to sections 154 and 155, if the company’s ACN is not used in its name, the company must also set out with its name, or with 1 of the references to its name, the expression “Australian Company Number” followed by its ACN. If the company’s name appears on 2 or more pages of the document or instrument, this must be done on the first of those pages.

Note 1:       If a company has a common seal, its name and ACN must be set out on the seal (see section 123).

Note 2:       A public company must display its name at its registered office. Every company must display its name at places at which the company carries on business and that are open to the public (see section 144).

Note 3:       Section 149 provides that “ACN” is an acceptable abbreviation of “Australian Company Number”.

154  Exception to requirement to have ACN on receipts

                   A company does not have to set out the expression “Australian Company Number” followed by its ACN on a receipt (for example, a cash register receipt) that sets out information recorded in the machine that produced the receipt.

155  Regulations may exempt from requirement to set out information on documents

                   The regulations may exempt a specified company, or a class of companies, from the requirement in subsection 153(2) to set out information on its public documents and negotiable instruments. The exemption may relate to specified documents or instruments, or a class of documents or instruments.

156  Carrying on business using “Limited”, “No Liability” or “Proprietary” in name

                   A person must not carry on business under a name or title that:

                     (a)  has the words “Limited” or “No Liability” (or an abbreviation of those words) at the end; or

                     (b)  includes the word “Proprietary” (or an abbreviation of it);

unless allowed or required to do so under an Australian law.

Division 2Changing a company’s name

157  Company changing its name

             (1)  If a company wants to change its name, it must:

                     (a)  pass a special resolution adopting a new name; and

                     (b)  lodge an application in the prescribed form with the ASC.

Note:          The company may reserve a name before the resolution is passed or the application is lodged (see section 152).

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

             (3)  If the proposed name is available, the ASC must change the company’s name by altering the details of the company’s registration to reflect the change. The change of name takes effect when the ASC alters the details of the company’s registration.

Note:          For available names, see section 147.

158  ASC’s power to direct company to change its name

             (1)  The ASC may direct a company in writing to change its name within 2 months if:

                     (a)  the name should not have been registered; or

                     (b)  the company has breached a condition under subsection 147(3) on the availability of the name.

             (2)  The company must comply with the direction within 2 months after being given it by doing everything necessary to change its name under section 157.

             (3)  If the company does not comply with subsection (2), the ASC may change the company’s name to its ACN and any other words that section 148 requires, by altering the details of the company’s registration to reflect the change.

             (4)  A change of name under subsection (3) takes effect when the ASC alters the details of the company’s registration.

159  ASC’s power to include “Limited” in company’s name

             (1)  The ASC may change a company’s name so that it includes the word “Limited” by altering the details of the company’s registration to reflect the change if:

                     (a)  the company contravenes any of the requirements or prohibitions in its constitution referred to in subsection 150(1); or

                     (b)  the company modifies its constitution to remove any of those requirements or prohibitions; or

                     (c)  the ASC revokes a licence referred to in section 151 that applies to the company.

             (2)  The change of name takes effect when the ASC alters the details of the company’s registration.

160  ASC must issue new certificate if company’s name changes

                   If the ASC changes a company’s name, it must give the company a new certificate of registration. The company’s new name is the name specified in the certificate of registration issued under this section.

Note:          For the evidentiary value of a certificate of registration, see subsection 1274(7A).

161  Effect of name change

             (1)  A change of company name does not:

                     (a)  create a new legal entity; or

                     (b)  affect the company’s existing property, rights or obligations; or

                     (c)  render defective any legal proceedings by or against the company.

             (2)  Any legal proceedings that could have been continued or begun by or against the company in its former name may be continued or begun by or against it in its new name.


 

Part 2B.7 Changing company type

  

162  Changing company type

             (1)  A company may change to a company of a different type as set out in the following table by:

                     (a)  passing a special resolution resolving to change its type; and

                     (b)  complying with sections 163 and 164.

 

Allowed conversions

[operative table]

 

This type of company may change. . .

. . . to this type of company

1

proprietary company limited by shares

unlimited proprietary company

unlimited public company

public company limited by shares

2

unlimited proprietary company

proprietary company limited by shares (but only if, within the last 3 years, it was not a limited company that became an unlimited company)

public company limited by shares (but only if, within the last 3 years, it was not a limited company that became an unlimited company)

unlimited public company

3

public company limited by shares

unlimited public company

unlimited proprietary company

proprietary company limited by shares

no liability company (see subsection (2))

4

company limited by guarantee

public company limited by shares

unlimited public company

proprietary company limited by shares

unlimited proprietary company

5

unlimited public company

public company limited by shares (but only if, within the last 3 years, it was not a limited company that became an unlimited company)

proprietary company limited by shares (but only if, within the last 3 years, it was not a limited company that became an unlimited company)

unlimited proprietary company

6

public no liability company

public company limited by shares (but only if all the issued shares are fully paid up)

proprietary company limited by shares (but only if all the issued shares are fully paid up)

Note 1:       A public company seeking to change to a proprietary company must comply with the requirements for proprietary companies set out in section 113.

Note 2:       Other types of companies that were previously allowed can change type under section 1416.

             (2)  A public company limited by shares may only convert to a no liability company if:

                     (a)  the company’s constitution states that its sole objects are mining purposes; and

                     (b)  under the constitution the company has no contractual right to recover calls made on its shares from a shareholder who fails to pay them; and

                     (c)  all the company’s issued shares are fully paid up.

Note:          Section 9 defines mining purposes and minerals.

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

Unlimited company changing to limited company—resolution may deal with uncalled share capital and nominal value

             (4)  A special resolution to change an unlimited company that has share capital to a company limited by shares may also do either or both of the following:

                     (a)  provide that a specified portion of its uncalled share capital may only be called up if the company is wound up

                     (b)  increase the nominal value of each of its shares.

Any increase in nominal value may only be called up if the company is wound up.

163  Applying for change of type

Lodging application

             (1)  To change its type, a company must lodge an application with the ASC.

Contents of the application

             (2)  The application must be accompanied by the following:

                     (a)  a copy of:

                              (i)  the special resolution that resolves to change the type of the company, specifies the new type and the company’s new name (if a change of name is necessary); and

                             (ii)  any other special resolution passed in connection with the change of type

                     (b)  for a company limited by guarantee changing to a company limited by shares:

                              (i)  a statement signed by the directors of the company that in their opinion the company’s creditors are not likely to be materially prejudiced by the change of type and that sets out their reasons for that opinion; and

                             (ii)  any special resolution dealing with an issue of shares according to section 167

                     (c)  for a company limited by shares or a company limited by guarantee changing to an unlimited company:

                              (i)  an assent to the change of type in the prescribed form signed by all the members of the company; and

                             (ii)  a statement signed by a director or a company secretary of the company that all the members of the company have signed the assent

                     (d)  for a proprietary company changing to a public company:

                              (i)  a consolidated copy of the company’s constitution (if any) as at the date of lodgment; and

                             (ii)  a copy of each document (including an agreement or consent) or resolution that is necessary to ascertain the rights attached to issued or unissued shares of the company.

Note 1:       The company must lodge a copy of any special resolution modifying its constitution passed after the application is lodged (see subsection 136(5)).

Note 2:       The company must lodge information relating to any change of rights attached to its shares, or any division or conversion of its shares into new classes, occurring after the application is lodged (see section 246F).

Company limited by guarantee to company limited by shares

             (3)  If shares will be issued to persons under paragraph 166(2)(c) on the change of type from a company limited by guarantee to a company limited by shares, the application must state:

                     (a)  that the company has prepared a list that sets out the following details about each person to whom the shares will be issued and about the shares:

                              (i)  name and address

                             (ii)  the number, class and nominal value of the shares the person will take up

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

                     (b)  the number, class and nominal value of the shares those persons will take up; and

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

                     (d)  if the shares will be issued for non-cash consideration—the prescribed particulars about the issue of the shares, unless the shares will be issued under a written contract and a copy of the contract is lodged with the application; and

                     (e)  that each of those persons who is not a member of the company when the application is made consents in writing to the inclusion in the list of the details about them that are referred to in paragraph (a).

The shares may be issued to existing members only, to new members only or to existing and new members.

Note:          An offer of shares associated with a proposed change of type may be subject to the prospectus provisions (see section 1018).

             (4)  The application must be in the prescribed form.

             (5)  The company must have the consents referred to in paragraph (3)(e) (if any) when the application is lodged. The company must keep the consents.

164  ASC changes type of company

             (1)  The ASC must give notice under subsection (3) that it intends to alter the details of the company’s registration if:

                     (a)  the ASC is satisfied that:

                              (i)  the application complies with section 163; and

                             (ii)  for an application by a company limited by guarantee to change to a company limited by shares—the company’s creditors are not likely to be materially prejudiced by the change; and

                     (b)  for an application by a company limited by guarantee to change to a company limited by shares that is accompanied by a copy of a special resolution dealing with an issue of shares according to section 167—the ASC is not of the opinion that the obligations that would attach to the shares are unreasonable compared with the obligations that attach to membership of the company limited by guarantee.

             (2)  To make a decision under subparagraph (1)(a)(ii), the ASC may direct the company in writing to:

                     (a)  notify some or all of its creditors of the proposed change in the way the ASC specifies; and

                     (b)  invite those creditors to make submissions to the ASC.

             (3)  The notice that the ASC intends to alter the details of the company’s registration must be:

                     (a)  included on the ASC database; and

                     (b)  published in the Gazette.

The notice must also state that the ASC will alter the details of the company’s registration 1 month after the notice has been published in the Gazette unless an order by a court or the Administrative Appeals Tribunal prevents it from doing so.

             (4)  Subject to an order made by a court or the Administrative Appeals Tribunal within that month, after that month has passed the ASC must alter the details of the company’s registration to reflect the company’s new type.

             (5)  A change of type under this section takes effect when the ASC alters the details of the company’s registration. Despite subsection 246D(3) and section 246E, a special resolution passed in connection with the change of type also takes effect when the ASC alters the details of the company’s registration.

             (6)  The ASC must give the company a new certificate of registration after it alters the details of the company’s registration. The company’s name is the name specified in the certificate of registration issued under this section.

Note:          For the evidentiary value of a certificate of registration, see subsection 1274(7A).

             (7)  If the ASC alters the details of a company’s registration under subsection (4), a court is not to make an order reversing the alteration of the details of the company’s registration.

Note:          The Administrative Appeals Tribunal cannot review the change of the company’s type once the ASC has issued a new certificate of registration to the company (see subsection 1274(7A) and paragraph 1317C(b)).

165  ASC may direct a proprietary company to change to a public company in certain circumstances

             (1)  The ASC may direct a proprietary company in writing to change to a public company within 2 months if it is satisfied that the company has contravened section 113 (requirements for proprietary companies).

             (2)  The company must comply with the direction within 2 months after being given it by doing everything necessary to change to a public company under section 164.

             (3)  If a proprietary company does not comply with subsection (2), the ASC may change the company from a proprietary to a public company by altering the details of the company’s registration to reflect the company’s new type.

             (4)  A change of type under this section takes effect when the ASC alters the details of the company’s registration.

             (5)  The ASC must give the company a new certificate of registration after it alters the details of the company’s registration under subsection (3). The company’s name is the name specified in the certificate of registration issued under this section.

Note:          For the evidentiary value of a certificate of registration, see subsection 1274(7A).

166  Effect of change of type

             (1)  A change of type does not:

                     (a)  create a new legal entity; or

                     (b)  affect the company’s existing property, rights or obligations (except as against the members of the company in their capacity as members); or

                     (c)  render defective any legal proceedings by or against the company or its members.

             (2)  On the change of type of a company from a company limited by guarantee to a company limited by shares:

                     (a)  the liability of each member and past member as a guarantor on the winding up of the company is extinguished; and

                     (b)  the members cease to be members of the company; and

                     (c)  if shares are to be issued to a person as specified in the list referred to in subsection 163(3):

                              (i)  the shares are taken to be issued to that person; and

                             (ii)  the person is taken to have consented to be a member of the company; and

                            (iii)  the person becomes a member of the company.

Note:          The company must maintain a register of members that complies with subsection 169(3).

167  Issue of shares by company or holding company—company limited by guarantee changing to company limited by shares

             (1)  If:

                     (a)  a company limited by guarantee changes type under this Part to a company limited by shares; and

                     (b)  that company, or another company that beneficially owns all the shares in that company, issues shares to a person who was a member of that company immediately before the change of type took effect;

the person becomes a member of the company issuing the shares if:

                     (c)  the issue of the shares is in accordance with the special resolution that accompanied the application to change type under subparagraph 163(2)(a)(ii); and

                     (d)  the shares are fully paid up; and

                     (e)  the business, assets and liabilities of the issuing company (together with its subsidiaries) when the shares are issued are substantially the same as the business, assets and liabilities of the company changing type (together with its subsidiaries) immediately before the change of type took effect.

             (2)  If shares are issued according to this section, a court is not to make an order reversing the issue of the shares.

2  Part 3.1

Repeal the Part.

3  Part 3.3

Repeal the Part.


 

4  Before Part 3.5

Insert:

Chapter 2FMembers’ 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.1Oppression

  

Part 2F.2Class 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:

                     (c)  by special resolution passed at a meeting:

                              (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.3Inspection 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 2GMeetings

Part 2G.1Directors’ meetings

Division 1Resolutions 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 2Directors’ 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.2Meetings of members of companies

Division 1Resolutions 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 2Who 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

                     (c)  be signed by the members making the request; 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 3How 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

                     (c)  by sending it to the fax number or electronic 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 4Members’ 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

                     (c)  be signed by the members proposing to move the resolution.

             (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

                     (c)  given to the company.

             (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 5Holding 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

                     (c)  if the place is not specified—the same place.

             (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 6Proxies 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

                     (c)  join in a demand for a poll.

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

                     (c)  the proxy’s name or the name of the office held by the proxy

                     (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

                     (c)  if the proxy is the chair—the proxy must vote on a poll, and must vote that way; 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

                     (c)  a place, fax number or electronic address specified for the purpose in the notice of meeting.

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

                     (c)  the member revokes the proxy’s appointment; 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

                     (c)  relating to resolutions to be passed without meetings.

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 7Voting 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

                     (c)  the chair.

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

                     (c)  immediately after the voting results on a show of hands are declared.

             (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 8AGMs 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

                     (c)  the appointment of the auditor

                     (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.3Minutes 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

                     (c)  resolutions passed by members without a meeting; 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

                     (c)  another place approved by the ASC.

             (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.

           & nbsp; (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.4Meetings of members of registered managed investment schemes

Division 1Who 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

                     (c)  be signed by the members proposing to move the resolution.

             (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 2How 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

                     (c)  the auditor of the scheme; 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

                     (c)  by sending it to the fax number or electronic address (if any) nominated by the member.

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 3Members’ 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

                     (c)  be signed by the members giving the notice.

             (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

                     (c)  given to the responsible entity.

             (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

                     (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 4Holding 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

                     (c)  if the place is not specified—the same place.

             (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 5Proxies 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

                     (c)  the proxy’s name or the name of the office held by the proxy

                     (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

                     (c)  if the proxy is the chair—the proxy must vote on a poll, and must vote that way; 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

                     (c)  a place, fax number or electronic address specified for the purpose in the notice of meeting.

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

                     (c)  the member revokes the proxy’s appointment; 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.

             (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.

Division 6Voting 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

                     (c)  the chair.

             (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

                     (c)  immediately after the voting results on a show of hands are declared.

             (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 7Minutes 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

                     (c)  another place approved by the ASC.

             (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 2HShares

  

  

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.1Issuing 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

                     (c)  cumulative and non-cumulative dividends

                     (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

                     (c)  at the shareholder’s option.

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

                     (c)  a nominal value approved by a resolution of the company passed at a general meeting.

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

                     (c)  in paying dividends if those dividends are satisfied by the issue of shares 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

                     (c)  the resolution specifies the maximum rate of discount at which the shares may be issued; 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

                     (c)  cumulative and non-cumulative dividends

                     (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.2Redemption 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.3Partly-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

                     (c)  the place for payment.

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

                     (c)  the amount of any other calls becoming payable on or before the day of the sale;

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

Reserve price

             (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

                     (c)  then, the calls on the share that are due and unpaid.

The balance (if any) must be paid to the member whose share has been sold. If there is a share certificate that relates to the share, the balance does not have to be paid until the member delivers the certificate to the company.

Validity of sale

           (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.4Capitalisation 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.5Dividends

  

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

                     (c)  the method of payment.

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.6Notice 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

                     (c)  the nominal value of the shares; 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 ca ncelled 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 2JTransactions affecting share capital

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

Division 1Reductions 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:

                     (c)  the reduction satisfies the creditor protection test in section 256C; or

                     (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

                     (c)  the Court must:

                              (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

                     (c)  has their debt or claim secured; 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

                     (c)  the creditor proves that they were not aware of:

                              (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 2Share 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

                     (c)  requiring the company to disclose all material information.

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

                     (c)  all of those persons have a reasonable opportunity to accept the offers made to them

                     (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

                     (c)  differences in the offers introduced solely to ensure that each shareholder is left with a whole number of shares.

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

             (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.

             (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

                     (c)  may be granted subject to conditions.

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 3Other 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

                     (c)  the cancellation of a share under subsection 254H(1), 667(3) or 1024E(7).

             (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.2Self-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

                     (c)  under a court order; 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.3Financial 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

                     (c)  the assistance is exempted under section 260C.

             (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

                     (c)  any other means.

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

                     (c)  the borrowing corporation is a borrowing corporation because it is or will be liable to repay the money; 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

                     (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.

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

                     (c)  assistance given under a court order

                     (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.4Interaction 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.


 

5  Part 3.6

Repeal the Part, substitute:

Chapter 2MFinancial reports and audit

Part 2M.1Overview

  

285  Overview of obligations under this Chapter

Obligations under this Chapter

             (1)  Under this Chapter, all companies, registered schemes and disclosing entities must keep financial records (see sections
286-291)—and some must prepare financial reports (see sections 292-323D). All those that have to prepare financial reports have to prepare them annually; disclosing entities have to prepare half-year financial reports as well. The following table sets out what is involved in annual financial reporting:

 

Annual financial reporting

 

steps

sections

comments

1

prepare financial report

s. 295

The financial report includes:

• financial statements

• disclosures and notes

• directors’ declaration.

2

prepare directors’ report

s. 298

The report has both a general component (s. 299) and a specific component (s. 300).

3

have the financial report audited and obtain auditor’s report

s. 301, 307, 308

A small proprietary company preparing a financial report in response to a shareholder direction under s. 293 only has to have an audit if the direction asks for it.

Under s. 312, officers must assist the auditor in the conduct of the audit.

The ASC may use its exemption powers under s. 340 and 341 to relieve large proprietary companies from the audit requirements in appropriate cases (s. 342(2) and (3)).

4

send the financial report, directors’ report and auditor’s report to members

s. 314

A concise financial report may be sent to members instead of the full financial statements (s. 314(1)-(2)).

For deadline see s. 315(1)-(4).

5

lodge the financial report, directors’ report and auditor’s report with the ASC

s. 319

For deadline see s. 319(3).

Companies that have the benefit of the grandfathering in s. 319(4) do not have to lodge.

6

[public companies only] lay financial report, directors’ report and auditor’s report before AGM

s. 317

For the AGM deadline see s. 250N.

Application to disclosing entities

             (2)  This Chapter covers all disclosing entities incorporated or formed in this jurisdiction (whether or not they are companies or registered schemes).

Application to registered schemes

             (3)  For the purposes of applying this Chapter to a registered scheme:

                     (a)  the scheme’s responsible entity is responsible for the performance of obligations in respect of the scheme; and

                     (b)  the directors and officers of the responsible entity are to be taken to be the directors and officers of the scheme; and

                     (c)  the debts incurred in operating the scheme are to be taken to be the debts of the scheme.


 

Part 2M.2Financial records

  

286  Obligation to keep financial records

             (1)  A company, registered scheme or disclosing entity must keep written financial records that:

                     (a)  correctly record and explain its transactions and financial position and performance; and

                     (b)  would enable true and fair financial statements to be prepared and audited.

The obligation to keep financial records of transactions extends to transactions undertaken as trustee.

Note:          Section 9 defines financial records.

Period for which records must be retained

             (2)  The financial records must be retained for 7 years after the transactions covered by the records are completed.

287  Language requirements

             (1)  The financial records may be kept in any language.

             (2)  An English translation of financial records not kept in English must be made available within a reasonable time to a person who:

                     (a)  is entitled to inspect the records; and

                     (b)  asks for the English translation.

288  Physical format

                   If financial records are kept in electronic form, they must be convertible into hard copy. Hard copy must be made available within a reasonable time to a person who is entitled to inspect the records.

289  Place where records are kept

             (1)  A company, registered scheme or disclosing entity may decide where to keep the financial records.

Records kept outside Australia

             (2)  If financial records about particular matters are kept outside Australia, sufficient written information about those matters must be kept in Australia to enable true and fair financial statements to be prepared. The company, registered scheme or disclosing entity must give the ASC written notice in the prescribed form of the place where the information is kept.

             (3)  The ASC may direct a company, registered scheme or disclosing entity to produce specified financial records that are kept outside Australia.

             (4)  The direction must:

                     (a)  be in writing; and

                     (b)  specify a place in Australia where the records are to be produced (the place must be reasonable in the circumstances); and

                     (c)  specify a day (at least 14 days after the direction is given) by which the records are to be produced.

290  Director access

Personal access

             (1)  A director of a company, registered scheme or disclosing entity has a right of access to the financial records at all reasonable times.

Court order for inspection on director’s behalf

             (2)  On application by a director, the Court may authorise a person to inspect the financial records on the director’s behalf.

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

             (4)  The Court may make any other orders it consider appropriate, including either or both of the following:

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

                     (b)  an order limiting the right of a person who inspects the records to make copies in accordance with subsection (3).

291  Signposts to other relevant provisions

                   The following table sets out other provisions that are relevant to access to financial records.

 

Other provisions relevant to access to financial records

 

 

 

1

 

section 247A

members

A member may apply to the Court for an order to inspect the records.

 

2

 

section 310

auditor

The auditor has a right of access to the records.

 

3

 

section 431

controllers

A controller of a corporation’s property (for example, a receiver or receiver and manager) has a right of access to the records.

 

4

 

sections 28 to 39 of the Australian Securities Commission Act 1989

ASC

The ASC has power to inspect the records. It also has power under subsection 289(3) of this Law to call for the production of financial records kept outside Australia.


 

Part 2M.3Financial reporting

Division 1Annual financial reports and directors’ reports

292  Who has to prepare annual financial reports and directors’ reports

             (1)  A financial report and a directors’ report must be prepared for each financial year by:

                     (a)  all disclosing entities; and

                     (b)  all public companies; and

                     (c)  all large proprietary companies; and

                     (d)  all registered schemes.

Note:          This Chapter only applies to disclosing entities incorporated or formed in Australia (see subsection 285(2)).

             (2)  A small proprietary company has to prepare the financial report and directors’ report only if:

                     (a)  it is directed to do so under section 293 or 294; or

                     (b)  it was controlled by a foreign company for all or part of the year and it is not consolidated for that period in financial statements for that year lodged with the ASC by:

                              (i)  a registered foreign company; or

                             (ii)  a company, registered scheme or disclosing entity.

The rest of this Part does not apply to any other small proprietary company.

293  Small proprietary company—shareholder direction

             (1)  Shareholders with at least 5% of the votes in a small proprietary company may give the company a direction to:

                     (a)  prepare a financial report and directors’ report for a financial year; and

                     (b)  send them to all shareholders.

             (2)  The direction must be:

                     (a)  signed by the shareholders giving the direction; and

                     (b)  made no later than 12 months after the end of the financial year concerned.

             (3)  The direction may specify all or any of the following:

                     (a)  that the financial report does not have to comply with some or all of the accounting standards

                     (b)  that a directors’ report or a part of that report need not be prepared

                     (c)  that the financial report is to be audited.

294  Small proprietary company—ASC direction

             (1)  The ASC may give a small proprietary company a direction to comply with requirements of this Division and Divisions 3, 4, 5 and 6 for a financial year.

             (2)  The direction may be general or may specify the particular requirements that the company is to comply with.

             (3)  The direction must specify the date by which the documents have to be prepared, sent or lodged. The date must be a reasonable one in view of the nature of the direction.

             (4)  The direction must:

                     (a)  be made in writing; and

                     (b)  specify the financial year concerned; and

                     (c)  be made no later than 6 years after the end of that financial year.

295  Contents of annual financial report

Basic contents

             (1)  The financial report for a financial year consists of:

                     (a)  the financial statements for the year; and

                     (b)  the notes to the financial statements; and

                     (c)  the directors’ declaration about the statements and notes.

Financial statements

             (2)  The financial statements for the year are:

                     (a)  a profit and loss statement for the year; and

                     (b)  a balance sheet as at the end of the year; and

                     (c)  a statement of cash flows for the year; and

                     (d)  if required by the accounting standards—a consolidated profit and loss statement, balance sheet and statement of cash flows.

Notes to financial statements

             (3)  The notes to the financial statements are:

                     (a)  disclosures required by the regulations; and

                     (b)  notes required by the accounting standards; and

                     (c)  any other information necessary to give a true and fair view (see section 297).

Directors’ declaration

             (4)  The directors’ declaration is a declaration by the directors:

                     (a)  that the financial statements, and the notes referred to in paragraph (3)(b), comply with the accounting standards; and

                     (b)  that the financial statements and notes give a true and fair view (see section 297); and

                     (c)  whether, in the directors’ opinion, there are reasonable grounds to believe that the company, registered scheme or disclosing entity will be able to pay its debts as and when they become due and payable; and

                     (d)  whether, in the directors’ opinion, the financial statement and notes are in accordance with this law, including:

                              (i)  section 296 (compliance with accounting standards); and

                             (ii)  section 297 (true and fair view).

Note:          See paragraph 285(3)(c) for the reference to the debts of a registered scheme.

             (5)  The declaration must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the date on which the declaration is made; and

                     (c)  be signed by a director.

296  Compliance with accounting standards and regulations

             (1)  The financial report for a financial year must comply with the accounting standards. However, a small proprietary company’s report does not have to comply with particular accounting standards if:

                     (a)  the report is prepared in response to a shareholder direction under section 293; and

                     (b)  the direction specifies that the report does not have to comply with those accounting standards.

             (2)  The financial report must comply with any further requirements in the regulations.

297  True and fair view

                   The financial statements and notes for a financial year must give a true and fair view of:

                     (a)  the financial position and performance of the company, registered scheme or disclosing entity; and

                     (b)  if consolidated financial statements are required—the financial position and performance of the consolidated entity.

This section does not affect the obligation under section 296 for a financial report to comply with accounting standards.

Note:          If the financial statements and notes prepared in compliance with the accounting standards would not give a true and fair view, additional information must be included in the notes to the financial statements under paragraph 295(3)(c).

298  Annual directors’ report

             (1)  The company, registered scheme or disclosing entity must prepare a directors’ report for each financial year. The report must include:

                     (a)  the general information required by section 299; and

                     (b)  the specific information required by section 300.

             (2)  The report must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the date on which the report is made; and

                     (c)  be signed by a director.

             (3)  A small proprietary company does not have to comply with subsection (1) for a financial year if:

                     (a)  it is preparing financial statements for that year in response to a shareholder direction under section 293; and

                     (b)  the direction specified that a directors’ report need not be prepared.

299  Annual directors’ report—general information

General information about operations and activities

             (1)  The directors’ report for a financial year must:

                     (a)  contain a review of operations during the year of the entity reported on and the results of those operations; and

                     (b)  give details of any significant changes in the entity’s state of affairs during the year; and

                     (c)  state the entity’s principal activities during the year and any significant changes in the nature of those activities during the year; and

                     (d)  give details of any matter or circumstance that has arisen since the end of the year that has significantly affected, or may significantly affect:

                              (i)  the entity’s operations in future financial years; or

                             (ii)  the results of those operations in future financial years; or

                            (iii)  the entity’s state of affairs in future financial years; and

                     (e)  refer to likely developments in the entity’s operations in future financial years and the expected results of those operations; and

                      (f)  if the entity’s operations are subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory—details of the entity’s performance in relation to environmental regulation.

             (2)  The entity reported on is:

                     (a)  the company, registered scheme or disclosing entity (if consolidated financial statements are not required); or

                     (b)  the consolidated entity (if consolidated financial statements are required).

Prejudicial information need not be disclosed

             (3)  The report may omit material that would otherwise be included under paragraph (1)(e) if it is likely to result in unreasonable prejudice to:

                     (a)  the company, registered scheme or disclosing entity; or

                     (b)  if consolidated financial statements are required—the consolidated entity or any entity (including the company, registered scheme or disclosing entity) that is part of the consolidated entity.

If material is omitted, the report must say so.

300  Annual directors’ report—specific information

             (1)  The directors’ report for a financial year must include details of:

                     (a)  dividends or distributions paid to members during the year; and

                     (b)  dividends or distributions recommended or declared for payment to members, but not paid, during the year; and

                     (c)  the name of each person who has been a director of the company, registered scheme or disclosing entity at any time during or since the end of the year and the period for which they were a director; and

                     (d)  options that are:

                              (i)  granted over unissued shares or unissued interests during or since the end of the year; and

                             (ii)  granted to any of the directors or any of the 5 most highly remunerated officers of the company; and

                            (iii)  granted to them as part of their remuneration;

                            (see subsections (3), (4) and (5)); and

                     (e)  unissued shares or interests under option as at the day the report is made (see subsections (3) and (6)); and

                      (f)  shares or interests issued during or since the end of the year as a result of the exercise of an option over unissued shares or interests (see subsections (3) and (7)); and

                     (g)  indemnities given and insurance premiums paid during or since the end of the year for a person who is or has been an officer or auditor (see subsections (8) and (9)).

Public companies, listed companies and registered schemes must include additional information under subsections (10), (11), (12) and (13).

             (2)  Details do not have to be included in the directors’ report under this section if they are included in the company’s financial report for the financial year.

             (3)  Paragraphs (1)(d), (e) and (f) cover:

                     (a)  options over unissued shares and interests of the company, registered scheme or disclosing entity; and

                     (b)  if consolidated financial statements are required—options over unissued shares and interests of any controlled entity that is a company, registered scheme or disclosing entity.

             (4)  For the purpose of paragraph (1)(d), remuneration includes anything that would be remuneration for the purposes of subsections 243K(4), (5), (6), (7) and (7B).

Note:          The rules in subsections 243K(4) to (7B) deal with related party benefits such as fringe benefits, superannuation contributions, retirement benefits and indemnities.

Options details

             (5)  The details of an option granted are:

                     (a)  the company, registered scheme or disclosing entity granting the option; and

                     (b)  the name of the person to whom the option is granted; and

                     (c)  the number and class of shares or interests over which the option is granted.

             (6)  The details of unissued shares or interests under option are:

                     (a)  the company, registered scheme or disclosing entity that will issue shares or interests when the options are exercised; and

                     (b)  the number and classes of those shares or interests; and

                     (c)  the issue price, or the method of determining the issue price, of those shares or interests; and

                     (d)  the expiry date of the options; and

                     (e)  any rights that option holders have under the options to participate in any share issue or interest issue of the company, registered scheme or disclosing entity or of any other body corporate or registered scheme.

Shares or interests issued as a result of exercise of option

             (7)  The details of shares or interests issued as a result of the exercise of an option are:

                     (a)  the company, registered scheme or disclosing entity issuing the shares or interests; and

                     (b)  the number of shares or interests issued; and

                     (c)  if the company, registered scheme or disclosing entity has different classes of shares or interests—the class to which each of those shares or interests belongs; and

                     (d)  the amount unpaid on each of those shares or interests; and

                     (e)  the amount paid, or agreed to be considered as paid, on each of those shares or interests.

Indemnities and insurance premiums for officers or auditors

             (8)  The report for a company must include details of:

                     (a)  any indemnity that is given to a current or former officer or auditor against a liability and that is covered by subsection 241(2) or (3), or any relevant agreement under which an officer or auditor may be given an indemnity of that kind; and

                     (b)  any premium that is paid, or agreed to be paid, for insurance against a current or former officer’s or auditor’s liability and that is covered by subsection 241A(3).

For the purposes of this subsection, officer has the same meaning as in section 241.

Note:          Sections 241 and 241A contain general prohibitions against giving certain indemnities and paying certain insurance premiums. This subsection requires transactions that are exceptions to these prohibitions to be reported.

             (9)  The details required under subsection (8) are:

                     (a)  for an officer—their name or the class of officer to which they belong or belonged; and

                     (b)  for an auditor—their name; and

                     (c)  the nature of the liability; and

                     (d)  for an indemnity given—the amount the company paid and any other action the company took to indemnify the officer or auditor; and

                     (e)  for an agreement to indemnify—the amount that the relevant agreement requires the company to pay and any other action the relevant agreement requires the company to take to indemnify the officer or auditor; and

                      (f)  for an insurance premium—the amount of the premium.

The report need not give details of the nature of the liability covered by, or the amount of the premium payable under, a contract of insurance to the extent that disclosure of those details is prohibited by the insurance contract.

Special rules for public companies

           (10)  The report for a public company that is not a wholly-owned subsidiary of another company or of a recognised company must also include details of:

                     (a)  each director’s qualifications, experience and special responsibilities; and

                     (b)  the number of meetings of the board of directors held during the year and each director’s attendance at those meetings; and

                     (c)  the number of meetings of each board committee held during the year and each director’s attendance at those meetings.

Special rules for listed companies

           (11)  The report for a listed company must also include the following details for each director:

                     (a)  their relevant interests in shares of the company or a related body corporate

                     (b)  their relevant interests in debentures of, or interests in a registered scheme made available by, the company or a related body corporate

                     (c)  their rights or options over shares in, debentures of or interests in a registered scheme made available by, the company or a related body corporate

                     (d)  contracts:

                              (i)  to which the director is a party or under which the director is entitled to a benefit; and

                             (ii)  that confer a right to call for or deliver shares in, or debentures of or interests in a registered scheme made available by the company or a related body corporate.

Note:          Directors must also disclose interests of these kinds to the ASX under section 235 as they are acquired.

Special rules for listed registered schemes

           (12)  The report for a registered scheme whose interests are quoted on a stock market of a securities exchange must also include the following details for each director of the company that is the responsible entity for the scheme:

                     (a)  their relevant interests in interests in the scheme

                     (b)  their rights or options over interests in the scheme

                     (c)  contracts to which the director is a party or under which the director is entitled to a benefit and that confer a right to call for or deliver interests in the scheme.

Special rules for registered schemes

           (13)  The report for a registered scheme must also include details of:

                     (a)  the fees paid to the responsible entity and its associates out of scheme property during the financial year; and

                     (b)  the number of interests in the scheme held by the responsible entity or its associates as at the end of the financial year; and

                     (c)  interests in the scheme issued during the financial year; and

                     (d)  withdrawals from the scheme during the financial year; and

                     (e)  the value of the scheme’s assets as at the end of the financial year, and the basis for the valuation; and

                      (f)  the number of interests in the scheme as at the end of the financial year.

300A  Annual directors’ report—specific information to be provided by listed companies

             (1)  The directors’ report for a financial year for a company must also include:

                     (a)  discussion of broad policy for determining the nature and amount of emoluments of board members and senior executives of the company; and

                     (b)  discussion of the relationship between such policy and the company’s performance; and

                     (c)  details of the nature and amount of each element of the emolument of each director and each of the 5 named officers of the company receiving the highest emolument.

             (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.

301  Audit of annual financial report

             (1)  A company, registered scheme or disclosing entity must have the financial report for a financial year audited in accordance with Division 3 and obtain an auditor’s report.

             (2)  A small proprietary company’s financial report for a financial year does not have to be audited if:

                     (a)  the report is prepared in response to a direction under section 293; and

                     (b)  the direction did not ask for the financial report to be audited.

Division 2Half-year financial report and directors’ report

302  Disclosing entity must prepare half-year financial report and directors’ report

                   A disclosing entity must:

                     (a)  prepare a financial report and directors’ report for each half-year; and

                     (b)  have the financial report audited or reviewed in accordance with Division 3 and obtain an auditor’s report; and

                     (c)  lodge the financial report, the directors’ report and the auditor’s report on the financial report with the ASC;

unless the entity is not a disclosing entity when lodgment is due.

Note 1:       This Chapter only applies to disclosing entities incorporated or formed in Australia (see subsection 285(2)).

Note 2:       See section 320 for the time for lodgment with the ASC.

Note 3:       Subsection 318(4) requires disclosing entities that are borrowing corporations to also report to the trustee for debenture holders.

303  Contents of half-year financial report

Basic contents

             (1)  The financial report for a half-year consists of:

                     (a)  the financial statements for the half-year; and

                     (b)  the notes to the financial statements; and

                     (c)  the directors’ declaration about the statements and notes.

Financial statements

             (2)  The financial statements for the half-year are:

                     (a)  except where paragraph (b) applies:

                              (i)  a profit and loss statement for the half-year; and

                             (ii)  a balance sheet as at the end of the half-year; and

                            (iii)  a statement of cash flows for the half-year; and

                     (b)  if required by the accounting standards—a consolidated profit and loss statement, balance sheet and statement of cash flows.

Notes to financial statements

             (3)  The notes to the financial statements are:

                     (a)  disclosures required by the regulations; and

                     (b)  notes required by the accounting standards; and

                     (c)  any other information necessary to give a true and fair view (see section 305).

Directors’ declaration

             (4)  The directors’ declaration is a declaration by the directors:

                     (a)  that the financial statements, and the notes referred to in paragraph (3)(b), comply with the accounting standards; and

                     (b)  that the financial statements and notes give a true and fair view (see section 305); and

                     (c)  whether, in the directors’ opinion, there are reasonable grounds to believe that the disclosing entity will be able to pay its debts as and when they become due and payable.

Note:          See paragraph 285(3)(c) for the reference to the debts of a disclosing entity that is a registered scheme.

             (5)  The declaration must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the day on which the declaration is made; and

                     (c)  be signed by a director.

304  Compliance with accounting standards and regulations

                   The financial report for a half-year must comply with the accounting standards and any further requirements in the regulations.

305  True and fair view

                   The financial statements and notes for a half-year must give a true and fair view of:

                     (a)  the financial position and performance of the disclosing entity; or

                     (b)  if consolidated financial statements are required—the financial position and performance of the consolidated entity.

This section does not affect the obligation under section 304 for financial reports to comply with accounting standards.

Note:          If the financial statements prepared in compliance with the accounting standards would not give a true and fair view, additional information must be included in the notes to the financial statements under paragraph 303(3)(c).

306  Half-year directors’ report

                   The directors of the disclosing entity must prepare a directors’ report for each half-year that consists of:

                     (a)  a review of the entity’s operations during the half-year and the results of those operations; and

                     (b)  the name of each person who has been a director of the disclosing entity at any time during or since the end of the half-year and the period for which they were a director.

If consolidated financial statements are required, the review under paragraph (a) must cover the consolidated entity.

Division 3Audit and auditor’s report

307  Audit

                   An auditor who conducts an audit of the financial report for a financial year or half-year must form an opinion about:

                     (a)  whether the financial report is in accordance with this Law, including:

                              (i)  section 296 or 304 (compliance with accounting standards); and

                             (ii)  section 297 or 305 (true and fair view); and

                     (b)  whether the auditor has been given all information, explanation and assistance necessary for the conduct of the audit; and

                     (c)  whether the company, registered scheme or disclosing entity has kept financial records sufficient to enable a financial report to be prepared and audited; and

                     (d)  whether the company, registered scheme or disclosing entity has kept other records and registers as required by this Law.

308  Auditor’s report on annual financial report

             (1)  An auditor who audits the financial report for a financial year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Law, including:

                     (a)  section 296 (compliance with accounting standards); and

                     (b)  section 297 (true and fair view).

If not of that opinion, the auditor’s report must say why.

             (2)  If the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor’s report must, to the extent it is practicable to do so, quantify the effect that non-compliance has on the financial report. If it is not practicable to quantify the effect fully, the report must say why.

             (3)  The auditor’s report must describe:

                     (a)  any defect or irregularity in the financial report; and

                     (b)  any deficiency, failure or shortcoming in respect of the matters referred to in paragraph 307(b), (c) or (d).

             (4)  The report must specify the date on which it is made.

309  Auditor’s report on half-year financial report

Audit of financial report

             (1)  An auditor who audits the financial report for a half-year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Law, including:

                     (a)  section 304 (compliance with accounting standards); and

                     (b)  section 305 (true and fair view).

If not of that opinion, the auditor’s report must say why.

             (2)  If the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor’s report must, to the extent that it is practicable to do so, quantify the effect that non-compliance has on the financial report. If it is not practicable to quantify the effect fully, the report must say why.

             (3)  The auditor’s report must describe:

                     (a)  any defect or irregularity in the financial report; and

                     (b)  any deficiency, failure or shortcoming in respect of the matters referred to in paragraph 307(d), (e) or (f).

Review of financial report

             (4)  An auditor who reviews the financial report for a half-year must report to members on whether the auditor became aware of any matter in the course of the review that makes the auditor believe that the financial report does not comply with Division 2.

             (5)  A report under subsection (4) must:

                     (a)  describe any matter referred to in subsection (4); and

                     (b)  say why that matter makes the auditor believe that the financial report does not comply with Division 2.

Report to specify day made

             (6)  A report under subsection (1) or (4) must specify the date on which it is made.

310  Auditor’s power to obtain information

                   The auditor:

                     (a)  has a right of access at all reasonable times to the books of the company, registered scheme or disclosing entity; and

                     (b)  may require any officer to give the auditor information, explanations or other assistance for the purposes of the audit or review.

A request under paragraph (b) must be a reasonable one.

311  Reporting to ASC

                   The auditor conducting an audit or review must, as soon as possible, notify the ASC in writing if the auditor:

                     (a)  has reasonable grounds to suspect that a contravention of this Law has occurred; and

                     (b)  believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor’s report or bringing it to the attention of the directors.

Note:          Section 1289 gives an auditor qualified privilege for a notification to the ASC under this section.

312  Assisting auditor

                   An officer of a company, registered scheme or disclosing entity must:

                     (a)  allow the auditor access to the books of the company, scheme or entity; and

                     (b)  give the auditor any information, explanation or assistance required under section 310.

Note:          Books include registers and documents generally (not only the accounting “books”): see the definition of books in section 9.

313  Special provisions on audit of borrowing corporations and guarantor bodies

Auditor to give trustee for debenture holders copies of reports, certificates etc.

             (1)  A borrowing corporation’s auditor must give the trustee for debenture holders:

                     (a)  a copy of any report, certificate or other document that the auditor must give the borrowing corporation or its members under this Law, the debentures or the trust deed; and

                     (b)  a copy of any document that accompanies it.

The copies must be given within 7 days after the auditor gives the originals to the borrowing corporation or its members.

Auditor to report on matters prejudicial to debenture holders’ interests

             (2)  The auditor of a borrowing corporation or guarantor body must give the borrowing corporation or guarantor body a written report about any matter that:

                     (a)  the auditor became aware of in conducting the audit or review; and

                     (b)  in the auditor’s opinion, is or is likely to be prejudicial to the interests of debenture holders; and

                     (c)  in the auditor’s opinion, is relevant to the exercise of the powers of the trustee for debenture holders, or the performance of the trustee’s duties, under this Law or the trust deed.

The auditor must give a copy of the report to the trustee for debenture holders. The report and the copy must be given within 7 days after the auditor becomes aware of the matter.

Division 4Annual financial reporting to members

314  Annual financial reporting to members

Full or concise report to members

             (1)  A company, registered scheme or disclosing entity must report to members for a financial year by either:

                     (a)  sending members copies of:

                              (i)  the financial report for the year; and

                             (ii)  the directors’ report for the year (see sections 298-300); and

                            (iii)  the auditor’s report on the financial report; or

                     (b)  sending members a concise report for the year that complies with subsection (2).

Concise report

             (2)  A concise report for a financial year consists of:

                     (a)  a concise financial report for the year drawn up in accordance with accounting standards made for the purposes of this paragraph; and

                     (b)  the directors’ report for the year (see sections 298-300); and

                     (c)  a statement by the auditor:

                              (i)  that the financial report has been audited; and

                             (ii)  whether, in the auditor’s opinion, the concise financial report complies with the accounting standards made for the purposes of paragraph (a); and

                     (d)  a copy of any qualification in, and of any statements included in the emphasis of matter section of, the auditor’s report on the financial report; and

                     (e)  a statement that the report is a concise report and that the full financial report and auditor’s report will be sent to the member free of charge if the member asks for them.

315  Deadline for reporting to members

Public companies and disclosing entities that are not registered schemes

             (1)  A public company, or a disclosing entity that is not a registered scheme, must report to members under section 314 by the earlier of:

                     (a)  21 days before the next AGM after the end of the financial year; or

                     (b)  4 months after the end of the financial year.

Note:          For the deadline for holding an AGM, see section 250N.

Small proprietary companies (shareholder direction under section 293)

             (2)  If a shareholder direction is given to a small proprietary company under section 293 after the end of the financial year, the company must report to members under section 314 by the later of:

                     (a)  2 months after the date on which the direction is given; and

                     (b)  4 months after the end of the financial year.

Registered schemes

             (3)  A registered scheme must report to members under section 314 within 3 months after the end of the financial year.

Other proprietary companies

             (4)  A proprietary company that is not covered by subsection (1) or (2) must report to members under section 314 within 4 months after the end of the financial year.

316  Member’s choices for annual financial information

             (1)  A member may request the company, registered scheme or disclosing entity:

                     (a)  not to send them the material required by section 314; or

                     (b)  to send them a full financial report and the directors’ report and auditor’s report.

A request may be a standing request or for a particular financial year. The member is not entitled to a report for a financial year earlier than the one before the financial year in which the request is made.

             (2)  The time for complying with a request under paragraph (1)(b) is:

                     (a)  7 days after the request is received; or

                     (b)  the deadline for reporting under section 315;

whichever is later.

             (3)  A full financial report, directors’ report and auditor’s report are to be sent free of charge unless the member has already received a copy of them free of charge.

317  Consideration of reports at AGM

                   The directors of a public company that is required to hold an AGM must lay before the AGM:

                     (a)  the financial report; and

                     (b)  the directors’ report; and

                     (c)  the auditor’s report;

for the last financial year that ended before the AGM.

Note 1:       If the company’s first AGM is held before the end of its first financial year, there will be no reports to lay before the meeting.

Note 2:       A public company that has only 1 member is not required to hold an AGM (see section 250N).

318  Additional reporting by debenture issuers

             (1)  A company or disclosing entity that was a borrowing corporation at the end of a financial year must give a copy of the annual financial report, directors’ report and auditor’s report to the trustee for debenture holders by the deadline for the financial year set by section 315.

             (2)  A debenture holder may ask the company or disclosing entity that issued the debenture for copies of:

                     (a)  the last reports sent to members under section 314; or

                     (b)  the full financial report and the directors’ report and auditor’s report for the last financial year.

             (3)  The company or entity must give the debenture holder the copies as soon as practicable after the request and free of charge.

             (4)  A disclosing entity that was a borrowing corporation at the end of a half-year must give a copy of the half-year financial report, directors’ report and auditor’s report to the trustee for debenture holders within 75 days after the end of the half-year.

Division 5Lodging reports with the ASC

319  Lodgment of annual reports with the ASC

             (1)  A company, registered scheme or disclosing entity that has to prepare or obtain a report for a financial year under Division 1 must lodge the report with the ASC. This obligation extends to a concise report sent to members under section 314.

             (2)  Subsection (1) does not apply to a small proprietary company that prepares a report in response to a shareholder direction under section 293 or an ASC direction under section 294.

             (3)  The time for lodgment is:

                     (a)  within 3 months after the end of the financial year for a disclosing entity or registered scheme; and

                     (b)  within 4 months after the end of the financial year for anyone else.

             (4)  Subsection (1) does not apply to a large proprietary company that is not a disclosing entity if:

                     (a)  the company was an exempt proprietary company on 30 June 1994; and

                     (b)  the company has continued to meet the definition of exempt proprietary company (as in force at 30 June 1994) at all times since that date; and

                     (c)  the company was a large proprietary company at the end of the first financial year that ended after 9 December 1995; and

                     (d)  the company’s financial statements and financial reports for the financial year ending during 1993 and each later financial year have been audited before the deadline for reporting to members for that year; and

                     (e)  within 4 months after the end of the first financial year that ended after 9 December 1995, the company lodged with the ASC a notice that the company wanted subsection 317B(3), as in force at that time, to apply to the company. (The ASC may extend this period.)

Note:          9 December 1995 is the day on which the First Corporate Law Simplification Act 1995 commenced.

             (5)  A company that has the benefit of subsection (4) must lodge with the ASC notice of any of the following events:

                     (a)  the resignation or retirement of the company’s auditor

                     (b)  the appointment of a new auditor (including details of the new auditor).

The notice must be lodged within 14 days after the resignation, retirement or appointment.

             (6)  For the purposes of paragraph (4)(d), the deadline for reporting to members is:

                     (a)  for a financial year to which this Part applies—the deadline for reporting to members under section 315; and

                     (b)  for an earlier financial year—the deadline for that year within the meaning of this Law as in force immediately before the commencement of this Part.

320  Lodgment of half-year reports with the ASC

                   A disclosing entity that has to prepare or obtain a report for a half-year under Division 2 must lodge the report with the ASC within 75 days after the end of the half-year.

321  ASC power to require lodgment

             (1)  The ASC may give a company, registered scheme or disclosing entity a direction to lodge with the ASC a copy of reports prepared or obtained by it under Division 1 or 2.

             (2)  The direction must:

                     (a)  be made in writing; and

                     (b)  specify the period or periods concerned; and

                     (c)  be made no later than 6 years after the end of the period or periods; and

                     (d)  specify the date by which the documents have to be lodged.

The date specified under paragraph (d) must be at least 14 days after the date on which the direction is given.

322  Relodgment if financial statements or directors’ reports amended after lodgment

             (1)  If a financial report or directors’ report is amended after it is lodged with the ASC, the company, registered scheme or disclosing entity must:

                     (a)  lodge the amended report with the ASC within 14 days after the amendment; and

                     (b)  give a copy of the amended report free of charge to any member who asks for it.

             (2)  If the amendment is a material one, the company, registered scheme or disclosing entity must also notify members as soon as practicable of:

                     (a)  the nature of the amendment; and

                     (b)  their right to obtain a copy of the amended report under subsection (1).

Division 6Special provisions about consolidated financial statements

323  Directors and officers of controlled entity to give information

                   If a company, registered scheme or disclosing entity has to prepare consolidated financial statements, a director or officer of a controlled entity must give the company, registered scheme or disclosing entity all information requested that is necessary to prepare the consolidated financial statements and the notes to those statements.

323A  Auditor’s power to obtain information from controlled entity

             (1)  An auditor who audits or reviews a financial report that includes consolidated financial statements:

                     (a)  has a right of access at all reasonable times to the books of any controlled entity; and

                     (b)  may require any officer of the entity to give the auditor information, explanations or other assistance for the purposes of the audit or review.

A request under paragraph (b) must be a reasonable one.

             (2)  The information, explanations or other assistance required under paragraph (1)(b) is to be given at the expense of the company, registered scheme or disclosing entity whose financial report is being audited or reviewed.

323B  Controlled entity to assist auditor

                   If a company, registered scheme or disclosing entity has to prepare a financial report that includes consolidated financial statements, an officer or auditor of a controlled entity must:

                     (a)  allow the auditor for the company, scheme or entity access to the controlled entity’s books; and

                     (b)  give the auditor any information, explanation or assistance required under section 323A.

323C  Application of Division to entity that has ceased to be controlled

                   Sections 323, 323A and 323B apply to the preparation or audit of a financial report that covers a controlled entity even if the entity is no longer controlled by the company, registered scheme or disclosing entity whose financial report is being prepared or audited.

Division 7Financial years and half-years

323D  Financial years and half-years

First financial year

             (1)  The first financial year for a company, registered scheme or disclosing entity starts on the day on which it is registered or incorporated. It lasts for 12 months or the period (not longer than 18 months) determined by the directors.

Financial years after first year

             (2)  Subject to subsection (4), subsequent financial years must:

                     (a)  start at the end of the previous financial year; and

                     (b)  be 12 months long.

The directors may determine that the financial year is to be shorter or longer (but not by more than 7 days).

Synchronisation of financial years where consolidated financial statements are required

             (3)  A company, registered scheme or disclosing entity that has to prepare consolidated financial statements must do whatever is necessary to ensure that the financial years of the consolidated entities are synchronised with its own financial years. It must achieve this synchronisation by the end of 12 months after the situation that calls for consolidation arises.

             (4)  To facilitate this synchronisation, the financial year for a controlled entity may be extended or shortened. The extended financial year cannot be longer than 18 months.

Half-years

             (5)  A half-year for a company, registered scheme or disclosing entity is the first 6 months of a financial year. The directors may determine that the half-year is to be shorter or longer (but not by more than 7 days).

Division 8—Disclosure by listed companies of information filed overseas

323DA  Listed companies to disclose information filed overseas

             (1)  A company that discloses information to, or as required by:

                     (a)  the Securities and Exchange Commission of the United States of America; or

                     (b)  the New York Stock Exchange; or

                     (c)  a prescribed securities exchange in a foreign country;

must disclose that information in English to the Exchange on the next business day after doing so.

             (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.


 

6  Divisions 2 and 3 of Part 3.7 and Part 3.8

Repeal the Divisions and Part, substitute:

Part 2M.5Accounting standards

  

334  Accounting standards

AASB’s power to make accounting standards

             (1)  The AASB may make accounting standards for the purposes of this Law. The standards must be in writing and must not be inconsistent with this law or the Regulations.

             (2)  Section 46A of the Acts Interpretation Act 1901 of the Commonwealth applies to a standard made under subsection (1) as if it were a disallowable instrument for the purposes of that section.

Application of standards

             (3)  Accounting standards may:

                     (a)  be of general or limited application (including a limitation to specified bodies or undertakings); and

                     (b)  differ according to differences in time, place or circumstance.

             (4)  An accounting standard applies to:

                     (a)  periods ending after the commencement of the standard; or

                     (b)  periods ending on or after a later date specified in the standard.

             (5)  A company, registered scheme or disclosing entity may elect to apply the accounting standard to an earlier period unless the standard says otherwise. The election must be made in writing by the directors.

335  Equity accounting

                   This Chapter (and, in particular, the provisions on consolidation of financial statements) does not prevent accounting standards from incorporating equity accounting principles.

336  Comparative amounts

                   The accounting standards for the preparation of financial reports for a period may require the inclusion in those reports of comparative amounts for earlier periods.