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Corporate Law Economic Reform Program Act 1999

  • - C2004A00547
  • In force - Superseded Version
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Act No. 156 of 1999 as made
An Act to amend the Corporations Law and the Australian Securities and Investments Commission Act 1989, and for related purposes
Administered by: Treasury
Originating Bill: Corporate Law Economic Reform Program Bill 1998
Date of Assent 24 Nov 1999
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1 Short title
2 Commencement
Expand 3 Schedule(s)3 Schedule(s)
179 Background to duties of directors, other officers and employees
180 Care and diligence—civil obligation only
181 Good faith—civil obligations
182 Use of position—civil obligations
183 Use of information—civil obligations
184 Good faith, use of position and use of information—criminal offences
185 Interaction of sections 180 to 184 with other laws etc.
186 Territorial application of sections 180 to 184
187 Directors of wholly‑owned subsidiaries
188 Responsibility of secretaries and directors for certain contraventions
189 Reliance on information or advice provided by others
190 Responsibility for actions of delegate
191 Material personal interest—director’s duty to disclose
192 Director may give other directors standing notice about an interest
193 Interaction of sections 191 and 192 with other laws etc.
194 Voting and completion of transactions—directors of proprietary companies (replaceable rule—see section 135)
195 Restrictions on voting—directors of public companies only
196 ASIC power to make declarations and class orders
197 Directors liable for debts and other obligations incurred by corporation as trustee
198A Powers of directors (replaceable rule—see section 135)
198B Negotiable instruments (replaceable rule—see section 135)
198C Managing director (replaceable rule—see section 135)
198D Delegation
198E Single director shareholder proprietary companies
198F Right of access to company books
199A Indemnification and exemption of officer or auditor
199B Insurance premiums for certain liabilities of director, secretary, other officer or auditor
199C Certain indemnities, exemptions, payments and agreements not authorised and certain documents void
200A When benefit given in connection with retirement from office
200B Retirement benefits generally need membership approval
200C Benefits on transfer of undertaking or property need membership approval
200D Contravention to receive benefit without member approval
200E Approval by members
200F Exempt benefits and benefits given in certain circumstances
200G Genuine payments of pension and lump sum
200H Benefits required by law
200J Benefits to be held in trust for company
201A Minimum number of directors
201B Who can be a director
201C Directors of public companies, or subsidiaries, over 72
201D Consent to act as director
201E Special rules for the appointment of public company directors
201F Special rules for the appointment of directors for single director single shareholder proprietary companies
201G Company may appoint a director (replaceable rule—see section 135)
201H Directors may appoint other directors (replaceable rule—see section 135)
201J Appointment of managing directors (replaceable rule—see section 135)
201K Alternate directors (replaceable rule—see section 135)
201L Signpost—ASIC to be notified of appointment
201M Effectiveness of acts by directors
202A Remuneration of directors (replaceable rule—see section 135)
202B Members may obtain information about directors’ remuneration
202C Special rule for single director single shareholder proprietary companies
203A Director may resign by giving written notice to company (replaceable rule—see section 135)
203B Signpost to consequences of disqualification from managing corporations
203C Removal by members—proprietary companies (replaceable rule—see section 135)
203D Removal by members—public companies
203E Director cannot be removed by other directors—public companies
203F Termination of appointment of managing director (replaceable rule—see section 135)
204A Minimum number of secretaries
204B Who can be a secretary
204C Consent to act as secretary
204D How a secretary is appointed
204E Effectiveness of acts by secretaries
204F Terms and conditions of office for secretaries (replaceable rule—see section 135)
204G Signpost to consequences of disqualification from managing corporations
205A Director, secretary or alternate director may notify ASIC of resignation or retirement
205B Notice of name and address of directors and secretaries to ASIC
205C Director and secretary must give information to company
205D Address for officers
205E ASIC’s power to ask for information about person’s position as director or secretary
205F Director must give information to company
205G Listed company—director to notify securities exchange of shareholdings etc.
206A Disqualified person not to manage corporations
206B Automatic disqualification
206C Court power of disqualification—contravention of civil penalty provision
206D Court power of disqualification—insolvency and non‑payment of debts
206E Court power of disqualification—repeated contraventions of Law
206F ASIC’s power of disqualification
206G Court power to grant leave
206H Territorial application of this Part
207 Purpose
208 Need for member approval for financial benefit
209 Consequences of breach
210 Arm’s length terms
211 Remuneration and reimbursement for officer or employee
212 Indemnities, exemptions, insurance premiums and payment for legal costs for officers
213 Small amounts given to director or spouse
214 Benefit to or by closely‑held subsidiary
215 Benefits to members that do not discriminate unfairly
216 Court order
217 Resolution may specify matters by class or kind
218 Company must lodge material that will be put to members with ASIC
219 Requirements for explanatory statement to members
220 ASIC may comment on proposed resolution
221 Requirements for notice of meeting
222 Other material put to members
223 Proposed resolution cannot be varied
224 Voting by or on behalf of related party interested in proposed resolution
225 Voting on the resolution
226 Notice of resolution to be lodged
227 Declaration by court of substantial compliance
228 Related parties
229 Giving a financial benefit
230 General duties still apply
232 Grounds for Court order
233 Orders the Court can make
234 Who can apply for order
235 Requirement for person to lodge order
236 Bringing, or intervening in, proceedings on behalf of a company
237 Applying for and granting leave
238 Substitution of another person for the person granted leave
239 Effect of ratification by members
240 Leave to discontinue, compromise or settle proceedings brought, or intervened in, with leave
241 General powers of the Court
242 Power of the Court to make costs orders
260FA Requirement for trust deed and trustee
260FB Trust deed
260FC Who can be a trustee
260FD Existing trustee continues to act until new trustee takes office
260FE Replacement of trustee
260GA Duties of borrower
260GB General duties
260GC Duty to notify ASIC of name of trustee
260GD Duty to replace trustee
260GE Duty to inform trustee about charges
260GF Duty to give trustee and ASIC quarterly reports
260GG Exceptions
260GH How debentures may be described
260GI Offences for failure to comply with statutory duties
260HA Duties of guarantor
260HB General duties
260HC Duty to inform trustee about charges
260HD Exceptions
260HE Offences for failure to comply with statutory duties
260JA Trustee’s duties
260JB Exemptions and indemnifications of trustee from liability
260JC Indemnity
260KA Borrower’s duty to call meeting
260KB Trustee’s power to call meeting
260KC Court may order meeting
260L Civil liability for contravening this Chapter
260MA ASIC’s power to exempt and modify
260MB ASIC may approve body corporate to be trustee
260NA General Court power to give directions and determine questions
260NB Specific Court powers
260P Signpost to other debenture provisions
602 Purposes of Chapter
603 Chapter extends to some listed bodies that are not companies
604 Chapter extends to listed managed investment schemes
605 Classes of securities
606 Prohibition on certain acquisitions of relevant interests in voting shares
607 Effect on transactions
608 Relevant interests in securities
609 Situations not giving rise to relevant interests
610 Voting power in a body corporate
611 Exceptions to the prohibition
612 Effect of non‑compliance with takeover rules for exceptions 1 to 4
613 Bidder not to exercise voting rights if failure to send bids for off‑market acquisition—exception 2 or 3
615 Treatment of foreign holders under equal access issue—exception 10
616 Off‑market bids and market bids
617 Securities covered by the bid
618 Offers must be for all or a proportion of securities in the bid class
619 General terms of the offer
620 Off‑market bid (offer formalities)
621 Consideration offered
622 Escalation agreements
623 Collateral benefits not allowed
624 Offer period
625 Conditional offers—general
626 Maximum acceptance conditions in off‑market bids
627 Discriminatory conditions not allowed for off‑market bids
628 Conditions requiring payments to officers of target not allowed in off‑market bids
629 Conditions turning on bidder’s or associate’s opinion not allowed in off‑market bids
630 Defeating conditions
631 Proposing or announcing a bid
632 Overview of steps in an off‑market bid
633 Detailed steps in an off‑market bid
634 Overview of steps in a market bid
635 Detailed steps in a market bid
636 Bidder’s statement content
637 Bidder’s statement formalities
638 Target’s statement content
639 Target’s statement formalities
640 Expert’s report to accompany target’s statement if bidder connected with target
641 Target must inform bidder about securities holdings
642 Expenses of directors of target companies
643 Supplementary bidder’s statement
644 Supplementary target’s statement
645 Form of supplementary statement
646 Consequences of lodging a supplementary statement
647 To whom supplementary statement must be sent
648A Experts’ reports
648B Address at which bidder may send documents to holders of securities
648C Manner of sending documents to holders of securities
648D Constitution may contain proportional takeover approval provisions
648E Resolution to be put if proportional bid made
648F Effect of rejection of approval resolution
648G Including proportional takeover provisions in constitution
648H Effect of Subdivision
649A General
649B Market bids—raising bid price
649C Market bids—extending the offer period
650A General
650B Off‑market bids—consideration offered
650C Off‑market bids—extension of offer period
650D Off‑market bids—method of making variation
650E Right to withdraw acceptance
650F Freeing off‑market bids from defeating conditions
650G Contracts and acceptances void if defeating condition not fulfilled
651A Off‑market bid—effect on bid consideration of purchases made outside bid
651B How to make an election for new forms of consideration
651C Returning securities as part of election
652A Withdrawal of unaccepted offers under takeover bid
652B Withdrawal of takeover offers with ASIC consent
652C Withdrawal of market bids
653A Acceptance of offers made under off‑market bid
653B Acceptances by transferees and nominees of offers made under off‑market bid
654A Bidder not to dispose of securities during the bid period
654B Disclosures about substantial shareholdings in listed companies
654C Disclosures about substantial shareholdings in unlisted companies
655A ASIC’s power to exempt and modify
655B Notice of decision and review rights
656A Review of exercise of exemption or modification powers
656B Operation and implementation of a decision that is subject to review
657A Declaration of unacceptable circumstances
657B When Panel may make declaration
657C Applying for declarations and orders
657D Orders that Panel may make following declaration
657E Interim orders
657EA Internal Panel reviews
657EB References by Courts
657F Offence to contravene Panel order
657G Orders by the Court where contravention or proposed contravention of Panel order
657H ASIC may publish report about application to Panel or Court
658A Power of Panel where a proceeding is frivolous or vexatious
658B Evidentiary value of findings of fact by Panel
658C Panel’s power to make rules
658D Inconsistency between Panel and ASIC exemptions or modifications
659A Panel may refer questions of law to the Court
659AA Object of sections 659B and 659C
659B Court proceedings before end of bid period
659C Court proceedings after end of bid period
660A Chapter extends to some listed bodies that are not companies
660B Chapter extends to listed managed investment schemes
661A Compulsory acquisition power following takeover bid
661B Compulsory acquisition notice
661C Terms on which securities to be acquired
661D Holder may obtain names and addresses of other holders
661E Holder may apply to Court to stop acquisition
661F Signpost—completing the acquisition of the securities
662A Bidder must offer to buy out remaining holders of bid class securities
662B Bidder to tell remaining holders of their right to be bought out
662C Right of remaining holder of securities in the bid class to be bought out
663A Bidder must offer to buy out holders of convertible securities
663B Bidder to tell holders of convertible securities of their right to be bought out
663C Right of holders of convertible securities to be bought out
664A Threshold for general compulsory acquisition power
664AA Time limit on exercising compulsory acquisition power
664B The terms for compulsory acquisition
664C Compulsory acquisition notice
664D Benefits outside compulsory acquisition procedure
664E Holder’s right to object to the acquisition
664F The Court’s power to approve acquisition
664G Signpost—completing the acquisition of the securities
665A 100% holder must offer to buy out holders of convertible securities
665B 100% holder to tell holders of convertible securities of their right to be bought out
665C Right of holders of convertible securities to be bought out
665D Notice by 85% holder to company
665E Notice by company to other members
666A Completing the acquisition of securities
666B Statutory procedure for completion
667A Expert’s report
667AA Expert to be nominated
667B Expert must not be an associate and must disclose prior dealings and relationships
667C Valuation of securities
668A Company’s power to deal with unclaimed consideration for compulsory acquisition
668B Unclaimed consideration to be transferred to ASIC
669 ASIC’s power to exempt and modify
670A Misstatements in, or omissions from, takeover and compulsory acquisition and buy‑out documents
670B Right to recover for loss or damage resulting from contravention
670C People liable on takeover or compulsory acquisition statement to inform maker about deficiencies in the statement
670D Defences against prosecutions under subsection 670A(3) and actions under section 670B
670E Liability for proposing a bid or not carrying through with bid
670F Defences
671A Chapter extends to some listed bodies that are not companies
671B Information about substantial holdings must be given to company, responsible entity and relevant securities exchange
671C Civil liability
672A Disclosure notices
672B Disclosure by member of relevant interests and instructions
672C ASIC may pass information on to person who made request
672D Fee for complying with a direction given by a company or scheme under this Part
672E No notice of rights
672F Civil liability
673 ASIC’s power to exempt and modify
700 Coverage of the fundraising rules
701 Treatment of offers of interests in managed investment scheme
702 Treatment of offers of options over securities
703 Chapter may not be contracted out of
704 When disclosure to investors is needed
705 Types of disclosure document
706 Issue offers that need disclosure
707 Sale offers that need disclosure
708 Offers that do not need disclosure
709 Prospectuses, short‑form prospectuses, profile statements and offer information statements
710 Prospectus content—general disclosure test
711 Prospectus content—specific disclosures
712 Prospectus content—short form prospectuses
713 Special prospectus content rules for continuously quoted securities
714 Contents of profile statement
715 Contents of offer information statement
716 Disclosure document date and consents
717 Overview of procedure for offering securities
718 Lodging of disclosure document
719 Lodging supplementary or replacement document
720 Consents needed for lodgment
721 Offer must be made in, or accompanied by, the disclosure document
722 Application money to be held on trust
723 Issuing or transferring the securities under a disclosure document
724 Choices open to person making the offer if disclosure document condition not met or disclosure document defective
725 Expiration of disclosure document
726 Offering securities in a body that does not exist
727 Offering securities without a current disclosure document
728 Misstatement in, or omission from, disclosure document
729 Right to recover for loss or damage resulting from contravention
730 People liable on disclosure document to inform person making the offer about deficiencies in the disclosure document
731 Due diligence defence for prospectuses
732 Lack of knowledge defence for offer information statements and profile statements
733 General defences for all disclosure documents
734 Restrictions on advertising and publicity
735 Obligation to keep consents and other documents
736 Securities hawking prohibited
737 Remedies for investors
738 Securities may be returned and refund obtained
739 ASIC stop orders
740 Anti‑avoidance determinations
741 ASIC’s power to exempt and modify
1317E Declarations of contravention
1317F Declaration of contravention is conclusive evidence
1317G Pecuniary penalty orders
1317H Compensation orders
1317J Who may apply for a declaration or order
1317K Time limit for application for a declaration or order
1317L Civil evidence and procedure rules for declarations of contravention and civil penalty orders
1317M Civil proceedings after criminal proceedings
1317N Criminal proceedings during civil proceedings
1317P Criminal proceedings after civil proceedings
1317Q Evidence given in proceedings for penalty not admissible in criminal proceedings
1317R ASIC requiring person to assist
1317S Relief from liability for contravention of civil penalty provision
1325A Orders if contravention of Chapter 6, 6A, 6B or 6C
1325B Court may order bidder to make offers
1325C Unfair or unconscionable agreements, payments or benefits
1325D Contravention due to inadvertence etc.
1325E Orders to secure compliance
1466 Meaning of commencement, new Law and old Law
1467 General—references to provisions of old Law in laws and other documents
1468 General—references to old Law expressions used in existing laws and documents
1469 Directors’ duties—application and transitional arrangements
1470 Related party transactions—continued application of old Law
1471 Oppressive conduct of affairs—applications made before commencement
1472 Proceedings on behalf of a company—intervention in proceedings started before commencement
1473 Civil penalty provisions—application of new Law
1474 Civil penalty orders made under old Law
1475 Fundraising—general application
1476 Fundraising—application of new section 712
1477 Fundraising—registration of managed investment schemes
1478 Fundraising—saving orders, notices etc. given under old law
1479 Continued operation of some provisions of the old Law
1480 Fundraising—application of section 111AF of the new Law
1481 Debentures—application and transitional provisions
1482 Debentures—saving orders, notices etc. given under old Law
1483 Takeovers—general rule (takeovers started before new provisions commence covered by old law)
1484 Takeovers—old Law continues to apply to certain Panel proceedings
1485 Takeovers—application of new provisions to interests acquired before commencement
1486 Takeovers—section 1043B notices
1487 Takeovers—saving orders, notices etc. given under old law
1488 Takeovers—notification obligations under Parts 6.7 and 6.8 of the old law
1489 Takeovers—ASIC power to pass on information obtained under the old Law
1490 Takeovers—application of section 111AG of the new Law
1491 Compulsory acquisitions—application of Part 6A.5 of the new Law
1492 Compulsory acquisitions—unclaimed moneys
Expand 1493 Accounting standards—standards in force before commencement1493 Accounting standards—standards in force before commencement
224 Main objects of this Part
225 Establishment, functions and powers of the Financial Reporting Council
226 Establishment of the Australian Accounting Standards Board
227 AASB’s functions and powers
228 Purposive interpretation of standards
229 Generic and specific standards
230 Comparative amounts
231 Cost benefit analysis
232 FRC views
233 International accounting standards
234 Validity of accounting standards
235A Membership of FRC
235B Annual report
235C Procedure
236A Procedure
236B Appointment of members of the AASB
236C Resignation and termination of appointment
236D Acting appointments
237 Confidentiality
Expand 238 Application of money238 Application of money
995A Application of State Fair Trading Act provisions
1324A Provisions relating to prosecutions
Expand 1324B Order to disclose information or publish advertisements1324B Order to disclose information or publish advertisements
65 Eligible money market dealer
111AI Debentures that need trustee appointed under section 260FA
601CZA Certain documents are debentures
601CZB Register of debenture holders to be maintained by non‑companies
601CZC Location of register
601CZD Application of sections 173 to 177
Expand 563AAA Redemption of debentures563AAA Redemption of debentures
1274AA Register of disqualified company directors and other officers
Expand 1274C ASIC certificate1274C ASIC certificate
50AA Control
601LB Replacement section 207
207 Purpose
601LC Replacement section 208
208 Need for member approval for financial benefit
601LD Omission of sections 213, 214 and 224
Expand 601LE Modification of section 225601LE Modification of section 225
Expand 137 Date of effect of adoption, modification or repeal of constitution137 Date of effect of adoption, modification or repeal of constitution
Expand 766E Unacceptable ownership situation766E Unacceptable ownership situation
193 Quorum
194 Legal representation in proceedings before the Panel
Expand 195 Procedure195 Procedure
21 Background to duties of directors, other officers and employees
22 Care and diligence—civil obligation only
23 Good faith—civil obligations
24 Use of position—civil obligations
25 Use of information—civil obligations
26 Good faith, use of position and use of information—criminal offences
27A Compliance with statutory duties
27B Interaction of sections 22 to 26 with other laws etc.
27C Disqualification order for contravention of civil penalty provision
27D Reliance on information or advice provided by others
27E Responsibility for actions of delegate
27F Material personal interest—director’s duty to disclose
27G Director may give other directors standing notice about an interest
27H Interaction of sections 27F and 27G with other laws etc.
27J Restrictions on voting
27K Minister’s power to make declarations and class orders
27L Right of access to authority’s books
27M Indemnification and exemption of officer
27N Insurance for certain liabilities of officers
27P Certain indemnities, exemptions, payments and agreements not authorised and certain documents void
1 Declarations of contravention
2 Declaration of contravention is conclusive evidence
3 Pecuniary penalty orders
4 Compensation orders
5 Effect of clause 4
6 Who may apply for a declaration or order
7 Time limit for application for a declaration or order
8 Civil evidence and procedure rules for declarations of contravention and civil penalty orders
9 Civil proceedings after criminal proceedings
10 Criminal proceedings during civil proceedings
11 Criminal proceedings after civil proceedings
12 Evidence given in proceedings for penalty not admissible in criminal proceedings
13 Finance Minister requiring person to assist
14 Relief from liability for contravention of civil penalty provision
15 Power to grant relief
1 Meaning of commencement, new Law and old Law
2 References to provisions of old Law in laws and other documents
3 Conduct of officers
4 Contraventions of, and offences against, civil penalty provisions
Expand 5 Civil penalty orders made under old Law5 Civil penalty orders made under old Law
Expand 123 Members to disclose certain interests to Minister123 Members to disclose certain interests to Minister

 

 

 

 

Corporate Law Economic Reform Program Act 1999

 

No. 156, 1999


 

 

 

 

Corporate Law Economic Reform Program Act 1999

 

No. 156, 1999

 

 

 

 

An Act to amend the Corporations Law and the Australian Securities and Investments Commission Act 1989, and for related purposes

  

  

  

  

  


Contents

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

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

3  Schedule(s)..................................................................................................... 3

Schedule 1—Main amendments of the Corporations Law                       4

Chapter 2D—Officers and employees                                4

Part 2D.1—Duties and powers                                                                  4

179  Background to duties of directors, other officers and employees............. 4

Division 1—General duties                                                                  4

180  Care and diligence—civil obligation only................................................... 4

181  Good faith—civil obligations..................................................................... 5

182  Use of position—civil obligations............................................................. 6

183  Use of information—civil obligations........................................................ 6

184  Good faith, use of position and use of information—criminal offences.... 7

185  Interaction of sections 180 to 184 with other laws etc............................. 8

186  Territorial application of sections 180 to 184........................................... 8

187  Directors of wholly‑owned subsidiaries.................................................... 9

188  Responsibility of secretaries and directors for certain contraventions...... 9

189  Reliance on information or advice provided by others............................ 10

190  Responsibility for actions of delegate..................................................... 11

Division 2—Disclosure of, and voting on matters involving, material personal interests        11

191  Material personal interest—director’s duty to disclose.......................... 11

192  Director may give other directors standing notice about an interest....... 14

193  Interaction of sections 191 and 192 with other laws etc......................... 15

194  Voting and completion of transactions—directors of proprietary companies (replaceable rule—see section 135)      16

195  Restrictions on voting—directors of public companies only.................. 16

196  ASIC power to make declarations and class orders................................. 18

Division 3—Duty to discharge certain trust liabilities                       19

197  Directors liable for debts and other obligations incurred by corporation as trustee       19

Division 4—Powers                                                                            19

198A  Powers of directors (replaceable rule—see section 135)...................... 19

198B  Negotiable instruments (replaceable rule—see section 135)................ 20

198C  Managing director (replaceable rule—see section 135)........................ 20

198D  Delegation............................................................................................. 20

198E  Single director/shareholder proprietary companies............................... 21

198F  Right of access to company books........................................................ 21

Part 2D.2—Restrictions on indemnities, insurance and termination payments     23

Division 1—Indemnities and insurance for officers and auditors      23

199A  Indemnification and exemption of officer or auditor............................ 23

199B  Insurance premiums for certain liabilities of director, secretary, other officer or auditor            24

199C  Certain indemnities, exemptions, payments and agreements not authorised and certain documents void  25

Division 2—Termination payments                                                    25

200A  When benefit given in connection with retirement from office............. 25

200B  Retirement benefits generally need membership approval................... 26

200C  Benefits on transfer of undertaking or property need membership approval              27

200D  Contravention to receive benefit without member approval................ 28

200E  Approval by members.......................................................................... 28

200F  Exempt benefits and benefits given in certain circumstances................ 29

200G  Genuine payments of pension and lump sum...................................... 30

200H  Benefits required by law....................................................................... 32

200J  Benefits to be held in trust for company............................................... 32

Part 2D.3—Appointment, remuneration and cessation of appointment of directors         34

Division 1—Appointment of directors                                               34

201A  Minimum number of directors.............................................................. 34

201B  Who can be a director............................................................................ 34

201C  Directors of public companies, or subsidiaries, over 72....................... 34

201D  Consent to act as director..................................................................... 37

201E  Special rules for the appointment of public company directors........... 37

201F  Special rules for the appointment of directors for single director/single shareholder proprietary companies             38

201G  Company may appoint a director (replaceable rule—see section 135) 39

201H  Directors may appoint other directors (replaceable rule—see section 135)               39

201J  Appointment of managing directors (replaceable rule—see section 135) 40

201K  Alternate directors (replaceable rule—see section 135)....................... 40

201L  Signpost—ASIC to be notified of appointment................................... 40

201M  Effectiveness of acts by directors........................................................ 41

Division 2—Remuneration of directors                                             41

202A  Remuneration of directors (replaceable rule—see section 135)........... 41

202B  Members may obtain information about directors’ remuneration........ 42

202C  Special rule for single director/single shareholder proprietary companies 42

Division 3—Resignation, retirement or removal of directors           43

203A  Director may resign by giving written notice to company (replaceable rule—see section 135) 43

203B  Signpost to consequences of disqualification from managing corporations 43

203C  Removal by members—proprietary companies (replaceable rule—see section 135) 43

203D  Removal by members—public companies........................................... 43

203E  Director cannot be removed by other directors—public companies..... 45

203F  Termination of appointment of managing director (replaceable rule—see section 135)              45

Part 2D.4—Appointment of secretaries                                                  46

204A  Minimum number of secretaries........................................................... 46

204B  Who can be a secretary......................................................................... 46

204C  Consent to act as secretary................................................................... 46

204D  How a secretary is appointed............................................................... 46

204E  Effectiveness of acts by secretaries....................................................... 47

204F  Terms and conditions of office for secretaries (replaceable rule—see section 135)     47

204G  Signpost to consequences of disqualification from managing corporations 47

Part 2D.5—Public information about directors and secretaries             48

205A  Director, secretary or alternate director may notify ASIC of resignation or retirement              48

205B  Notice of name and address of directors and secretaries to ASIC........ 48

205C  Director and secretary must give information to company.................. 49

205D  Address for officers.............................................................................. 50

205E  ASIC’s power to ask for information about person’s position as director or secretary              51

205F  Director must give information to company......................................... 51

205G  Listed company—director to notify securities exchange of shareholdings etc.           52

Part 2D.6—Disqualification from managing corporations                      54

206A  Disqualified person not to manage corporations.................................. 54

206B  Automatic disqualification.................................................................... 55

206C  Court power of disqualification—contravention of civil penalty provision                56

206D  Court power of disqualification—insolvency and non‑payment of debts  57

206E  Court power of disqualification—repeated contraventions of Law...... 58

206F  ASIC’s power of disqualification.......................................................... 59

206G  Court power to grant leave................................................................... 60

206H  Territorial application of this Part........................................................ 61

Chapter 2E—Related party transactions                          62

207  Purpose.................................................................................................... 62

Part 2E.1—Member approval needed for related party benefit            62

Division 1—Need for member approval                                            62

208  Need for member approval for financial benefit...................................... 62

209  Consequences of breach........................................................................... 63

Division 2—Exceptions to the requirement for member approval   63

210  Arm’s length terms.................................................................................. 63

211  Remuneration and reimbursement for officer or employee..................... 64

212  Indemnities, exemptions, insurance premiums and payment for legal costs for officers                65

213  Small amounts given to director or spouse.............................................. 66

214  Benefit to or by closely‑held subsidiary................................................. 67

215  Benefits to members that do not discriminate unfairly........................... 68

216  Court order.............................................................................................. 68

Division 3—Procedure for obtaining member approval                    68

217  Resolution may specify matters by class or kind................................... 68

218  Company must lodge material that will be put to members with ASIC. 68

219  Requirements for explanatory statement to members............................. 69

220  ASIC may comment on proposed resolution.......................................... 70

221  Requirements for notice of meeting......................................................... 71

222  Other material put to members................................................................ 71

223  Proposed resolution cannot be varied...................................................... 72

224  Voting by or on behalf of related party interested in proposed resolution 72

225  Voting on the resolution.......................................................................... 73

226  Notice of resolution to be lodged............................................................. 74

227  Declaration by court of substantial compliance...................................... 74

Part 2E.2—Related parties and financial benefits                                  75

228  Related parties......................................................................................... 75

229  Giving a financial benefit......................................................................... 76

Part 2E.3—Interaction with other rules                                                   78

230  General duties still apply........................................................................ 78

Part 2F.1—Oppressive conduct of affairs                                               78

232  Grounds for Court order.......................................................................... 78

233  Orders the Court can make...................................................................... 79

234  Who can apply for order......................................................................... 80

235  Requirement for person to lodge order.................................................... 81

Part 2F.1A—Proceedings on behalf of a company by members and others           82

236  Bringing, or intervening in, proceedings on behalf of a company............ 82

237  Applying for and granting leave.............................................................. 82

238  Substitution of another person for the person granted leave................... 84

239  Effect of ratification by members............................................................ 85

240  Leave to discontinue, compromise or settle proceedings brought, or intervened in, with leave     85

241  General powers of the Court................................................................... 85

242  Power of the Court to make costs orders................................................ 86

Chapter 2L—Debentures                                                   87

Part 2L.1—Requirement for trust deed and trustee                               87

260FA  Requirement for trust deed and trustee.............................................. 87

260FB  Trust deed........................................................................................... 88

260FC  Who can be a trustee........................................................................... 88

260FD  Existing trustee continues to act until new trustee takes office......... 89

260FE  Replacement of trustee....................................................................... 89

Part 2L.2—Duties of borrower                                                                 91

260GA  Duties of borrower............................................................................ 91

260GB  General duties.................................................................................... 91

260GC  Duty to notify ASIC of name of trustee........................................... 91

260GD  Duty to replace trustee...................................................................... 92

260GE  Duty to inform trustee about charges................................................ 92

260GF  Duty to give trustee and ASIC quarterly reports.............................. 92

260GG  Exceptions......................................................................................... 95

260GH   How debentures may be described................................................... 95

260GI  Offences for failure to comply with statutory duties......................... 97

Part 2L.3—Duties of guarantor                                                               98

260HA  Duties of guarantor............................................................................ 98

260HB  General duties.................................................................................... 98

260HC  Duty to inform trustee about charges................................................ 98

260HD  Exceptions......................................................................................... 99

260HE  Offences for failure to comply with statutory duties........................ 99

Part 2L.4—Trustee                                                                                 100

260JA  Trustee’s duties................................................................................ 100

260JB  Exemptions and indemnifications of trustee from liability............... 101

260JC  Indemnity.......................................................................................... 102

Part 2L.5—Meetings of debenture holders                                           103

260KA  Borrower’s duty to call meeting...................................................... 103

260KB  Trustee’s power to call meeting....................................................... 104

260KC  Court may order meeting................................................................. 105

Part 2L.6—Civil liability                                                                         106

260L  Civil liability for contravening this Chapter........................................ 106

Part 2L.7—ASIC powers                                                                        107

260MA  ASIC’s power to exempt and modify............................................ 107

260MB  ASIC may approve body corporate to be trustee.......................... 108

Part 2L.8—Court                                                                                     109

260NA  General Court power to give directions and determine questions... 109

260NB  Specific Court powers..................................................................... 109

Part 2L.9—Location of other debenture provisions                              111

260P  Signpost to other debenture provisions.............................................. 111

Chapter 6—Takeovers                                                      111

602  Purposes of Chapter.............................................................................. 111

603  Chapter extends to some listed bodies that are not companies............. 112

604  Chapter extends to listed managed investment schemes....................... 112

605  Classes of securities............................................................................... 113

Part 6.1—Prohibited acquisitions of relevant interests in voting shares 114

606  Prohibition on certain acquisitions of relevant interests in voting shares 114

607  Effect on transactions............................................................................ 116

608  Relevant interests in securities.............................................................. 117

609  Situations not giving rise to relevant interests....................................... 119

610  Voting power in a body corporate......................................................... 122

Part 6.2—Exceptions to the prohibition                                                 124

611  Exceptions to the prohibition................................................................ 124

612  Effect of non‑compliance with takeover rules for exceptions 1 to 4..... 129

613  Bidder not to exercise voting rights if failure to send bids for off‑market acquisition—exception 2 or 3      129

615  Treatment of foreign holders under equal access issue—exception 10.. 129

Part 6.3—The different types of takeover bid                                       131

616  Off‑market bids and market bids........................................................... 131

Part 6.4—Formulating the takeover offer                                              132

Division 1—General                                                                          132

617  Securities covered by the bid................................................................. 132

618  Offers must be for all or a proportion of securities in the bid class...... 133

619  General terms of the offer...................................................................... 133

620  Off‑market bid (offer formalities).......................................................... 134

Division 2—Consideration for the offer                                           135

621  Consideration offered............................................................................ 135

622  Escalation agreements............................................................................ 137

623  Collateral benefits not allowed.............................................................. 138

Division 3—The offer period                                                            138

624  Offer period........................................................................................... 138

Division 4—Conditional offers                                                          139

625  Conditional offers—general................................................................... 139

626  Maximum acceptance conditions in off‑market bids............................. 140

627  Discriminatory conditions not allowed for off‑market bids.................. 141

628  Conditions requiring payments to officers of target not allowed in off‑market bids      141

629  Conditions turning on bidder’s or associate’s opinion not allowed in off‑market bids  142

630  Defeating conditions.............................................................................. 142

Part 6.5—The takeover procedure                                                         144

Division 1—The overall procedure                                                  144

631  Proposing or announcing a bid............................................................... 144

632  Overview of steps in an off‑market bid................................................. 145

633  Detailed steps in an off‑market bid....................................................... 146

634  Overview of steps in a market bid......................................................... 150

635  Detailed steps in a market bid............................................................... 151

Division 2—The bidder’s statement                                                153

636  Bidder’s statement content.................................................................... 153

637  Bidder’s statement formalities............................................................... 157

Division 3—The target’s response                                                  157

638  Target’s statement content.................................................................... 157

639  Target’s statement formalities............................................................... 159

640  Expert’s report to accompany target’s statement if bidder connected with target         159

641  Target must inform bidder about securities holdings............................. 160

642  Expenses of directors of target companies............................................ 161

Division 4—Updating and correcting the bidder’s statement and target’s statement  162

643  Supplementary bidder’s statement........................................................ 162

644  Supplementary target’s statement......................................................... 162

645  Form of supplementary statement........................................................ 163

646  Consequences of lodging a supplementary statement........................... 164

647  To whom supplementary statement must be sent................................ 165

Division 5—General rules on takeover procedure                          165

Subdivision A—Experts’ reports                                                                          165

648A  Experts’ reports.................................................................................. 165

Subdivision B—Sending documents to holders of securities                         166

648B  Address at which bidder may send documents to holders of securities 166

648C  Manner of sending documents to holders of securities....................... 166

Subdivision C—Effect of proportional takeover approval provisions             167

648D  Constitution may contain proportional takeover approval provisions 167

648E  Resolution to be put if proportional bid made.................................... 168

648F  Effect of rejection of approval resolution........................................... 169

648G  Including proportional takeover provisions in constitution............... 170

648H  Effect of Subdivision.......................................................................... 172

Part 6.6—Variation of offers                                                                  173

Division 1—Market bids                                                                  173

649A  General................................................................................................ 173

649B  Market bids—raising bid price........................................................... 173

649C  Market bids—extending the offer period............................................ 173

Division 2—Off‑market bids (express variation by bidder)             174

650A  General................................................................................................ 174

650B  Off‑market bids—consideration offered............................................. 174

650C  Off‑market bids—extension of offer period....................................... 176

650D  Off‑market bids—method of making variation................................... 176

650E  Right to withdraw acceptance............................................................. 178

650F  Freeing off‑market bids from defeating conditions.............................. 179

650G  Contracts and acceptances void if defeating condition not fulfilled... 180

Division 3—Off‑market bids (automatic variations)                         180

651A  Off‑market bid—effect on bid consideration of purchases made outside bid              180

651B  How to make an election for new forms of consideration.................. 182

651C  Returning securities as part of election............................................... 182

Part 6.7—Withdrawal and suspension of offers                                     183

652A  Withdrawal of unaccepted offers under takeover bid......................... 183

652B  Withdrawal of takeover offers with ASIC consent............................. 183

652C  Withdrawal of market bids.................................................................. 183

Part 6.8—Acceptances                                                                            185

653A  Acceptance of offers made under off‑market bid............................... 185

653B  Acceptances by transferees and nominees of offers made under off‑market bid         185

Part 6.9—Other activities during the bid period                                    188

654A  Bidder not to dispose of securities during the bid period................... 188

654B  Disclosures about substantial shareholdings in listed companies....... 188

654C  Disclosures about substantial shareholdings in unlisted companies... 188

Part 6.10—Review and intervention                                                      190

Division 1—ASIC’s power to exempt and modify                            190

655A  ASIC’s power to exempt and modify................................................ 190

655B  Notice of decision and review rights................................................... 191

Division 2—The Corporations and Securities Panel                        191

Subdivision A—Review of ASIC’s exercise of its exemption or modification powers         191

656A  Review of exercise of exemption or modification powers.................. 191

656B  Operation and implementation of a decision that is subject to review 193

Subdivision B—Unacceptable circumstances                                                    194

657A  Declaration of unacceptable circumstances........................................ 194

657B  When Panel may make declaration...................................................... 196

657C  Applying for declarations and orders................................................. 196

657D  Orders that Panel may make following declaration............................ 197

657E  Interim orders...................................................................................... 199

657EA  Internal Panel reviews...................................................................... 199

657EB  References by Courts....................................................................... 200

657F  Offence to contravene Panel order...................................................... 201

657G  Orders by the Court where contravention or proposed contravention of Panel order                201

657H  ASIC may publish report about application to Panel or Court......... 201

Subdivision C—General provisions                                                                     202

658A  Power of Panel where a proceeding is frivolous or vexatious............. 202

658B  Evidentiary value of findings of fact by Panel.................................... 202

658C  Panel’s power to make rules............................................................... 203

658D  Inconsistency between Panel and ASIC exemptions or modifications 204

Division 3—Court powers                                                                204

659A  Panel may refer questions of law to the Court................................... 204

659AA  Object of sections 659B and 659C.................................................. 204

659B  Court proceedings before end of bid period........................................ 204

659C  Court proceedings after end of bid period.......................................... 206

Chapter 6A—Compulsory acquisitions and buy‑outs      207

660A  Chapter extends to some listed bodies that are not companies.......... 207

660B  Chapter extends to listed managed investment schemes..................... 207

Part 6A.1—Compulsory acquisitions and buy‑outs following takeover bid            208

Division 1—Compulsory acquisition of bid class securities            208

661A  Compulsory acquisition power following takeover bid..................... 208

661B  Compulsory acquisition notice........................................................... 210

661C  Terms on which securities to be acquired........................................... 212

661D  Holder may obtain names and addresses of other holders.................. 213

661E  Holder may apply to Court to stop acquisition................................. 213

661F  Signpost—completing the acquisition of the securities...................... 213

Division 2—Compulsory buy‑out of bid class securities                  214

662A  Bidder must offer to buy out remaining holders of bid class securities 214

662B  Bidder to tell remaining holders of their right to be bought out.......... 214

662C  Right of remaining holder of securities in the bid class to be bought out 216

Division 3—Compulsory buy‑out of convertible securities             216

663A  Bidder must offer to buy out holders of convertible securities.......... 216

663B  Bidder to tell holders of convertible securities of their right to be bought out             217

663C  Right of holders of convertible securities to be bought out................ 218

Part 6A.2—General compulsory acquisitions and buy‑outs                  220

Division 1—Compulsory acquisition of securities by 90% holder  220

664A  Threshold for general compulsory acquisition power........................ 220

664AA  Time limit on exercising compulsory acquisition power................. 221

664B  The terms for compulsory acquisition................................................ 222

664C  Compulsory acquisition notice........................................................... 222

664D  Benefits outside compulsory acquisition procedure.......................... 224

664E  Holder’s right to object to the acquisition........................................... 225

664F  The Court’s power to approve acquisition......................................... 226

664G  Signpost—completing the acquisition of the securities...................... 227

Division 2—Compulsory buy‑out of convertible securities by 100% holder    227

665A  100% holder must offer to buy out holders of convertible securities 227

665B  100% holder to tell holders of convertible securities of their right to be bought out   227

665C  Right of holders of convertible securities to be bought out................ 229

Division 3—Notice that person has become 85% holder of a class of securities         230

665D  Notice by 85% holder to company.................................................... 230

665E  Notice by company to other members................................................ 231

Part 6A.3—Completion of compulsory acquisition of securities           233

666A  Completing the acquisition of securities............................................. 233

666B  Statutory procedure for completion................................................... 234

Part 6A.4—Experts’ reports and valuations                                          235

667A  Expert’s report................................................................................... 235

667AA  Expert to be nominated.................................................................... 235

667B  Expert must not be an associate and must disclose prior dealings and relationships   236

667C  Valuation of securities......................................................................... 237

Part 6A.5—Records of unclaimed consideration                                   238

668A  Company’s power to deal with unclaimed consideration for compulsory acquisition               238

668B  Unclaimed consideration to be transferred to ASIC........................... 239

Part 6A.6—ASIC powers                                                                        240

669  ASIC’s power to exempt and modify................................................... 240

Chapter 6B—Rights and liabilities in relation to Chapter 6 and 6A matters    241

670A  Misstatements in, or omissions from, takeover and compulsory acquisition and buy‑out documents      241

670B  Right to recover for loss or damage resulting from contravention...... 242

670C  People liable on takeover or compulsory acquisition statement to inform maker about deficiencies in the statement........................................................................................................ 245

670D  Defences against prosecutions under subsection 670A(3) and actions under section 670B       246

670E  Liability for proposing a bid or not carrying through with bid........... 247

670F  Defences.............................................................................................. 248

Chapter 6C—Information about ownership of listed companies and managed investment schemes                                       249

671A  Chapter extends to some listed bodies that are not companies.......... 249

Part 6C.1—Substantial holding information                                           249

671B  Information about substantial holdings must be given to company, responsible entity and relevant securities exchange........................................................................................................ 249

671C  Civil liability....................................................................................... 252

Part 6C.2—Tracing beneficial ownership of shares                              254

672A  Disclosure notices............................................................................... 254

672B  Disclosure by member of relevant interests and instructions............. 254

672C  ASIC may pass information on to person who made request............ 255

672D  Fee for complying with a direction given by a company or scheme under this Part   256

672E  No notice of rights............................................................................... 256

672F  Civil liability........................................................................................ 256

Part 6C.3—ASIC powers                                                                        258

673  ASIC’s power to exempt and modify................................................... 258

Chapter 6D—Fundraising                                                260

Part 6D.1—Application of the fundraising provisions                           260

700  Coverage of the fundraising rules........................................................... 260

701  Treatment of offers of interests in managed investment scheme........... 261

702  Treatment of offers of options over securities...................................... 261

703  Chapter may not be contracted out of................................................... 261

Part 6D.2—Disclosure to investors about securities                            263

Division 1—Overview                                                                       263

704  When disclosure to investors is needed................................................. 263

705  Types of disclosure document.............................................................. 263

Division 2—Offers that need disclosure to investors                      264

706  Issue offers that need disclosure............................................................ 264

707  Sale offers that need disclosure.............................................................. 265

708  Offers that do not need disclosure......................................................... 267

Division 3—Types of disclosure documents                                    273

709  Prospectuses, short‑form prospectuses, profile statements and offer information statements     273

Division 4—Disclosure requirements                                              275

710  Prospectus content—general disclosure test......................................... 275

711  Prospectus content—specific disclosures............................................. 277

712  Prospectus content—short form prospectuses..................................... 280

713  Special prospectus content rules for continuously quoted securities... 281

714  Contents of profile statement................................................................ 283

715  Contents of offer information statement............................................... 284

716  Disclosure document date and consents................................................ 285

Division 5—Procedure for offering securities                                  286

717  Overview of procedure for offering securities....................................... 286

718  Lodging of disclosure document............................................................ 288

719  Lodging supplementary or replacement document................................ 288

720  Consents needed for lodgment............................................................... 291

721  Offer must be made in, or accompanied by, the disclosure document.. 292

722  Application money to be held on trust................................................. 294

723  Issuing or transferring the securities under a disclosure document........ 294

724  Choices open to person making the offer if disclosure document condition not met or disclosure document defective........................................................................................................ 296

725  Expiration of disclosure document........................................................ 298

Part 6D.3—Prohibitions, liabilities and remedies                                  300

Division 1—Prohibitions and liabilities                                            300

726  Offering securities in a body that does not exist................................... 300

727  Offering securities without a current disclosure document................... 300

728  Misstatement in, or omission from, disclosure document..................... 301

729  Right to recover for loss or damage resulting from contravention......... 303

730  People liable on disclosure document to inform person making the offer about deficiencies in the disclosure document........................................................................................................ 304

731  Due diligence defence for prospectuses................................................. 305

732  Lack of knowledge defence for offer information statements and profile statements    305

733  General defences for all disclosure documents...................................... 306

734  Restrictions on advertising and publicity.............................................. 307

735  Obligation to keep consents and other documents................................ 311

736  Securities hawking prohibited................................................................ 311

Division 2—Remedies                                                                      312

737  Remedies for investors.......................................................................... 312

738  Securities may be returned and refund obtained.................................... 312

Part 6D.4—ASIC’s powers                                                                     313

739  ASIC stop orders................................................................................... 313

740  Anti‑avoidance determinations.............................................................. 314

741  ASIC’s power to exempt and modify................................................... 314

Part 9.4B—Civil consequences of contravening civil penalty provisions 315

1317E  Declarations of contravention........................................................... 316

1317F  Declaration of contravention is conclusive evidence......................... 316

1317G  Pecuniary penalty orders.................................................................. 317

1317H  Compensation orders........................................................................ 317

1317J  Who may apply for a declaration or order......................................... 318

1317K  Time limit for application for a declaration or order........................ 319

1317L  Civil evidence and procedure rules for declarations of contravention and civil penalty orders  319

1317M  Civil proceedings after criminal proceedings................................... 319

1317N  Criminal proceedings during civil proceedings.................................. 319

1317P  Criminal proceedings after civil proceedings..................................... 320

1317Q  Evidence given in proceedings for penalty not admissible in criminal proceedings   320

1317R  ASIC requiring person to assist........................................................ 321

1317S  Relief from liability for contravention of civil penalty provision..... 322

1325A  Orders if contravention of Chapter 6, 6A, 6B or 6C........................ 324

1325B  Court may order bidder to make offers............................................. 325

1325C  Unfair or unconscionable agreements, payments or benefits............ 325

1325D  Contravention due to inadvertence etc............................................. 327

1325E  Orders to secure compliance............................................................. 328

Division 12—Changes resulting from the Corporate Law Economic Reform Program Act 1999        328

1466  Meaning of commencement, new Law and old Law............................ 328

1467  General—references to provisions of old Law in laws and other documents               328

1468  General—references to old Law expressions used in existing laws and documents     329

1469  Directors’ duties—application and transitional arrangements............ 330

1470  Related party transactions—continued application of old Law.......... 334

1471  Oppressive conduct of affairs—applications made before commencement 335

1472  Proceedings on behalf of a company—intervention in proceedings started before commencement             335

1473  Civil penalty provisions—application of new Law............................ 335

1474  Civil penalty orders made under old Law............................................ 335

1475  Fundraising—general application........................................................ 336

1476  Fundraising—application of new section 712..................................... 336

1477  Fundraising—registration of managed investment schemes................ 337

1478  Fundraising—saving orders, notices etc. given under old law............. 337

1479  Continued operation of some provisions of the old Law.................... 337

1480  Fundraising—application of section 111AF of the new Law............. 338

1481  Debentures—application and transitional provisions......................... 338

1482  Debentures—saving orders, notices etc. given under old Law............ 339

1483  Takeovers—general rule (takeovers started before new provisions commence covered by old law)           339

1484  Takeovers—old Law continues to apply to certain Panel proceedings 340

1485  Takeovers—application of new provisions to interests acquired before commencement            340

1486  Takeovers—section 1043B notices..................................................... 340

1487  Takeovers—saving orders, notices etc. given under old law............... 340

1488  Takeovers—notification obligations under Parts 6.7 and 6.8 of the old law                341

1489  Takeovers—ASIC power to pass on information obtained under the old Law           341

1490  Takeovers—application of section 111AG of the new Law............... 341

1491  Compulsory acquisitions—application of Part 6A.5 of the new Law 342

1492  Compulsory acquisitions—unclaimed moneys................................... 342

1493  Accounting standards—standards in force before commencement..... 342

Schedule 2—Main amendments of the Australian Securities and Investments Commission Act 1989   343

Part 12—Accounting standards                                                              343

224  Main objects of this Part....................................................................... 343

Division 1—The Australian financial reporting system                   344

225  Establishment, functions and powers of the Financial Reporting Council 344

226  Establishment of the Australian Accounting Standards Board.............. 346

227  AASB’s functions and powers.............................................................. 346

Division 2—Accounting standards                                                   348

228  Purposive interpretation of standards................................................... 348

229  Generic and specific standards.............................................................. 349

230  Comparative amounts............................................................................ 349

231  Cost/benefit analysis............................................................................. 349

232  FRC views............................................................................................. 350

233  International accounting standards........................................................ 350

234  Validity of accounting standards........................................................... 350

Division 3—Administrative provisions                                            351

Subdivision A—The Financial Reporting Council                                            351

235A  Membership of FRC.......................................................................... 351

235B  Annual report...................................................................................... 351

235C  Procedure............................................................................................ 352

Subdivision B—The Australian Accounting Standards Board                      352

236A  Procedure............................................................................................ 352

236B  Appointment of members of the AASB............................................. 353

236C  Resignation and termination of appointment...................................... 354

236D  Acting appointments.......................................................................... 355

Subdivision C—Confidentiality                                                                            356

237  Confidentiality....................................................................................... 356

Subdivision D—Financial matters                                                                       357

238  Application of money........................................................................... 357

Schedule 3—Consequential amendments of the Corporations Law     358

Part 1—Amendments relating to new Chapter 6D (Fundraising)           358

Part 2—Amendments relating to new Chapter 2L (Debentures)            371

Part 3—Amendments relating to new Chapter 2D (Officers)                379

Part 4—Amendments relating to new Chapter 2E (Related Parties)      392

Part 5—Amendments relating to new Part 2F.1 (Oppressive conduct of affairs)      398

Part 6—Amendments relating to new Part 2F.1A (Proceedings on behalf of a company by members and others)                                                                                             400

Part 7—Amendments relating to new Part 9.4B (Civil penalty provisions) 402

Part 8—Amendments relating to new Part 12 of the ASIC Act (Accounting standards)       409

Part 9—Amendments relating to new Chapters 6 to 6C

(Takeovers)                                                                                        410

Schedule 4—Consequential amendments of Australian Securities and Investments Commission Act 1989                                                                                                                  435

Part 1—Amendments relating to new Chapter 6D (Fundraising)           435

Part 2—Amendments relating to new Chapter 2F.1 (Oppression)        436

Part 3—Amendments relating to new accounting standards provisions in ASIC Act            437

Part 4—Amendments relating to new Chapter 6 (Takeovers)               439

Schedule 5—Consequential amendment of other Acts                         445

Air Navigation Act 1920                                                                                        445

Commonwealth Authorities and Companies Act 1997                                    445

Commonwealth Serum Laboratories Act 1961                                                  475

Corporations Act 1989                                                                                           475

Income Tax Assessment Act 1997                                                                          476

Life Insurance Act 1995                                                                                          476

Qantas Sale Act 1992                                                                                             477

Schedule 6—Miscellaneous amendments of the Corporations Law    479

Schedule 7—Miscellaneous amendments of other Acts                       483

Australian Securities and Investments Commission Act 1989                        483

Financial Sector Reform (Consequential Amendments) Act 1998                489

Schedule 8—Further amendment of the Corporations Law                  490

Schedule 9—Further amendment of other legislation                           493

Company Law Review Act 1998                                                                           493

Managed Investments Act 1998                                                                            493

Schedule 10—Amendments consequential on amendment of the Commonwealth Authorities and Companies Act 1997                                                                                494

Aboriginal and Torres Strait Islander Commission Act 1989                        494

Agricultural and Veterinary Chemicals (Administration) Act 1992             495

Australia Council Act 1975                                                                                   495

Australia New Zealand Food Authority Act 1991                                            495

Australian Broadcasting Corporation Act 1983                                              496

Australian Communications Authority Act 1997                                              496

Australian Film Commission Act 1975                                                                496

Australian Film, Television and Radio School Act 1973                                496

Australian Heritage Commission Act 1975                                                        497

Australian Horticultural Corporation Act 1987                                               497

Australian Institute of Aboriginal and Torres Strait Islander Studies Act 1989 497

Australian Institute of Health and Welfare Act 1987                                        498

Australian Institute of Marine Science Act 1972                                              498

Australian Law Reform Commission Act 1996                                                   498

Australian Maritime Safety Authority Act 1990                                                498

Australian National Maritime Museum Act 1990                                             498

Australian National University Act 1991                                                           499

Australian Nuclear Science and Technology Organisation Act 1987          499

Australian Postal Corporation Act 1989                                                           499

Australian Prudential Regulation Authority Act 1998                                    500

Australian Securities and Investments Commission Act 1989                        500

Australian Sports Commission Act 1989                                                            500

Australian Tourist Commission Act 1987                                                           500

Australian Trade Commission Act 1985                                                             501

Australian War Memorial Act 1980                                                                     501

Australian Wine and Brandy Corporation Act 1980                                        501

Australian Wool Research and Promotion Organisation Act 1993              501

Broadcasting Services Act 1992                                                                           502

Civil Aviation Act 1988                                                                                          502

Coal Mining Industry (Long Service Leave Funding) Act 1992                    502

Dairy Produce Act 1986                                                                                         502

Defence Housing Authority Act 1987                                                                  503

Employment Services Act 1994                                                                             503

Export Finance and Insurance Corporation Act 1991                                    503

Family Law Act 1975                                                                                              503

Fisheries Administration Act 1991                                                                      503

Great Barrier Reef Marine Park Act 1975                                                          504

Health Insurance Commission Act 1973                                                             504

Hearing Services Act 1991                                                                                    504

Horticultural Research and Development Corporation Act 1987                 504

Maritime College Act 1978                                                                                   505

National Gallery Act 1975                                                                                    505

National Health Act 1953                                                                                      505

National Library Act 1960                                                                                    505

National Measurement Act 1960                                                                          506

National Museum of Australia Act 1980                                                             506

National Occupational Health and Safety Commission Act 1985                 506

National Parks and Wildlife Conservation Act 1975                                       506

Pig Industry Act 1986                                                                                             506

Primary Industries and Energy Research and Development Act 1989         507

Reserve Bank Act 1959                                                                                           507

Safety, Rehabilitation and Compensation Act 1988                                        507

Science and Industry Research Act 1949                                                            507

Snowy Mountains Hydro‑electric Power Act 1949                                           508

Special Broadcasting Service Act 1991                                                              508

Wheat Marketing Act 1989                                                                                    508

Schedule 11—Amendment of the Corporations Law to deal with ASC Law and ASC Regulations references                                                                                                                  509

Schedule 12—Amendment of other Acts to deal with ASC Law and ASC Regulation references           511

Acts Interpretation Act 1901                                                                                 511

Administrative Appeals Tribunal Act 1975                                                        511

Australian Securities and Investments Commission Act 1989                        511

Corporations Act 1989                                                                                           512

Evidence Act 1995                                                                                                   512

Financial Transaction Reports Act 1988                                                           513

Acts Interpretation Act 1901                                                                                 513

Australian Securities and Investments Commission Act 1989                        513

Corporations Act 1989                                                                                           513

 


Corporate Law Economic Reform Program Act 1999

No. 156, 1999

 

 

 

An Act to amend the Corporations Law and the Australian Securities and Investments Commission Act 1989, and for related purposes

[Assented to 24 November 1999]

The Parliament of Australia enacts:

1  Short title

                         This Act may be cited as the Corporate Law Economic Reform Program Act 1999.

2  Commencement

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

             (2)  The following provisions commence on a day or days to be fixed by Proclamation:

                     (a)  section 3;

                     (b)  the items in Schedules 1 to 7 (other than item 18 of Schedule 7);

                     (c)  the items in Schedules 10, 11 and 12.

             (3)  If any of the following provisions does not commence under subsection (2) within the period of 6 months beginning on the day on which this Act receives the Royal Assent, it commences on the first day after the end of that period:

                     (a)  section 3;

                     (b)  an item in Schedules 1 to 7 (other than item 18 of Schedule 7);

                     (c)  an item in Schedule 10.

             (4)  If an item in Schedule 11 or 12 does not commence under subsection (2) within the period of 12 months beginning on the day on which this Act receives the Royal Assent, it commences on the first day after the end of that period.

             (5)  Item 18 of Schedule 7 is taken to have commenced on the day on which the Financial Sector Reform (Consequential Amendments) Act 1998 received the Royal Assent.

             (6)  The items in Schedule 8 (other than item 3) are taken to have commenced immediately after the Managed Investments Act 1998.

             (7)  Item 3 of Schedule 8 is taken to have commenced immediately after section 27 of the Corporate Law Reform Act 1992.

             (8)  Item 1 of Schedule 9 is taken to have commenced on the day on which the Company Law Review Act 1998 received the Royal Assent.

             (9)  Item 2 of Schedule 9 is taken to have commenced on the day on which the Managed Investments Act 1998 received the Royal Assent.

3  Schedule(s)

             (1)  Subject to section 2, the Corporations Law set out in section 82 of the Corporations Act 1989 is amended as set out in Schedules 1, 3, 6, 8 and 11 to this Act, and any other item in those Schedules has effect according to its terms.

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


 

Schedule 1Main amendments of the Corporations Law

1  Chapters 2D and 2E

Repeal the Chapters, substitute:

Chapter 2DOfficers and employees

Part 2D.1Duties and powers

  

179  Background to duties of directors, other officers and employees

             (1)  This Part sets out some of the most significant duties of directors, secretaries, other officers and employees of corporations. Other duties are imposed by other provisions of this Law and other laws (including the general law).

             (2)  Section 9 defines both director and officer. Officer includes, as well as directors and secretaries, some other people who manage the corporation or its property (such as receivers and liquidators).

Division 1General duties

180  Care and diligence—civil obligation only

Care and diligence—directors and other officers

             (1)  A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

                     (a)  were a director or officer of a corporation in the corporation’s circumstances; and

                     (b)  occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

Note:          This subsection is a civil penalty provision (see section 1317E).

Business judgment rule

             (2)  A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they:

                     (a)  make the judgment in good faith for a proper purpose; and

                     (b)  do not have a material personal interest in the subject matter of the judgment; and

                     (c)  inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and

                     (d)  rationally believe that the judgment is in the best interests of the corporation.

The director’s or officer’s belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.

Note:          This subsection only operates in relation to duties under this section and their equivalent duties at common law or in equity (including the duty of care that arises under the common law principles governing liability for negligence)—it does not operate in relation to duties under any other provision of this Law or under any other laws.

             (3)  In this section:

business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation.

181  Good faith—civil obligations

Good faith—directors and other officers

             (1)  A director or other officer of a corporation must exercise their powers and discharge their duties:

                     (a)  in good faith in the best interests of the corporation; and

                     (b)  for a proper purpose.

Note 1:       This subsection is a civil penalty provision (see section 1317E).

Note 2:       Section 187 deals with the situation of directors of wholly‑owned subsidiaries.

             (2)  A person who is involved in a contravention of subsection (1) contravenes this subsection.

Note 1:       Section 79 defines involved.

Note 2:       This subsection is a civil penalty provision (see section 1317E).

182  Use of position—civil obligations

Use of position—directors, other officers and employees

             (1)  A director, secretary, other officer or employee of a corporation must not improperly use their position to:

                     (a)  gain an advantage for themselves or someone else; or

                     (b)  cause detriment to the corporation.

Note:          This subsection is a civil penalty provision (see section 1317E).

             (2)  A person who is involved in a contravention of subsection (1) contravenes this subsection.

Note 1:       Section 79 defines involved.

Note 2:       This subsection is a civil penalty provision (see section 1317E).

183  Use of information—civil obligations

Use of information—directors, other officers and employees

             (1)  A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

                     (a)  gain an advantage for themselves or someone else; or

                     (b)  cause detriment to the corporation.

Note 1:       This duty continues after the person stops being an officer or employee of the corporation.

Note 2:       This subsection is a civil penalty provision (see section 1317E).

             (2)  A person who is involved in a contravention of subsection (1) contravenes this subsection.

Note 1:       Section 79 defines involved.

Note 2:       This subsection is a civil penalty provision (see section 1317E).

184  Good faith, use of position and use of information—criminal offences

Good faith—directors and other officers

             (1)  A director or other officer of a corporation commits an offence if they:

                     (a)  are reckless; or

                     (b)  are intentionally dishonest;

and fail to exercise their powers and discharge their duties:

                     (c)  in good faith in the best interests of the corporation; or

                     (d)  for a proper purpose.

Note:          Section 187 deals with the situation of directors of wholly-owned subsidiaries.

Use of position—directors, other officers and employees

             (2)  A director, other officer or employee of a corporation commits an offence if they use their position dishonestly:

                     (a)  with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or

                     (b)  recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.

Use of information—directors, other officers and employees

             (3)  A person who obtains information because they are, or have been, a director or other officer or employee of a corporation commits an offence if they use the information dishonestly:

                     (a)  with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or

                     (b)  recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.

185  Interaction of sections 180 to 184 with other laws etc.

                   Sections 180 to 184:

                     (a)  have effect in addition to, and not in derogation of, any rule of law relating to the duty or liability of a person because of their office or employment in relation to a corporation; and

                     (b)  do not prevent the commencement of civil proceedings for a breach of a duty or in respect of a liability referred to in paragraph (a).

This section does not apply to subsections 180(2) and (3) to the extent to which they operate on the duties at common law and in equity that are equivalent to the requirements of subsection 180(1).

186  Territorial application of sections 180 to 184

                   Sections 180 to 184 do not apply to an act or omission by a director or other officer or employee of a foreign company unless the act or omission occurred in connection with:

                     (a)  the foreign company carrying on business in Australia; or

                     (b)  an act that the foreign company does, or proposes to do, in Australia; or

                     (c)  a decision by the foreign company whether or not to do, or refrain from doing, an act in Australia.

187  Directors of wholly‑owned subsidiaries

                   A director of a corporation that is a wholly‑owned subsidiary of a body corporate is to be taken to act in good faith in the best interests of the subsidiary if:

                     (a)  the constitution of the subsidiary expressly authorises the director to act in the best interests of the holding company; and

                     (b)  the director acts in good faith in the best interests of the holding company; and

                     (c)  the subsidiary is not insolvent at the time the director acts and does not become insolvent because of the director’s act.

188  Responsibility of secretaries and directors for certain contraventions

Secretary’s functions

             (1)  A secretary of a company contravenes this subsection if the company contravenes:

                     (a)  section 142 (requirement for companies to have registered office); or

                     (b)  section 145 (requirement for registered office of public company to be open to public); or

                     (c)  section 345 (annual returns); or

                     (d)  section 205B (lodgment of notices with ASIC).

Note:          See section 203C for the circumstances in which a company must have a secretary.

Consequence if director of proprietary company without secretary does not fulfil secretary’s function

             (2)  Each director of a proprietary company contravenes this subsection if:

                     (a)  the proprietary company contravenes section 142, 145, 205B or 345; and

                     (b)  the proprietary company does not have a secretary when it contravenes that section.

Defence

             (3)  A person does not contravene subsection (1) or (2) if they show that they took all reasonable steps to ensure that the company complied with the section.

189  Reliance on information or advice provided by others

                   If:

                     (a)  a director relies on information, or professional or expert advice, given or prepared by:

                              (i)  an employee of the corporation whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned; or

                             (ii)  a professional adviser or expert in relation to matters that the director believes on reasonable grounds to be within the person’s professional or expert competence; or

                            (iii)  another director or officer in relation to matters within the director’s or officer’s authority; or

                            (iv)  a committee of directors on which the director did not serve in relation to matters within the committee’s authority; and

                     (b)  the reliance was made:

                              (i)  in good faith; and

                             (ii)  after making an independent assessment of the information or advice, having regard to the director’s knowledge of the corporation and the complexity of the structure and operations of the corporation; and

                     (c)  the reasonableness of the director’s reliance on the information or advice arises in proceedings brought to determine whether a director has performed a duty under this Part or an equivalent general law duty;

the director’s reliance on the information or advice is taken to be reasonable unless the contrary is proved.

190  Responsibility for actions of delegate

             (1)  If the directors delegate a power under section 198D, a director is responsible for the exercise of the power by the delegate as if the power had been exercised by the directors themselves.

             (2)  A director is not responsible under subsection (1) if:

                     (a)  the director believed on reasonable grounds at all times that the delegate would exercise the power in conformity with the duties imposed on directors of the company by this Law and the company’s constitution (if any); and

                     (b)  the director believed:

                              (i)  on reasonable grounds; and

                             (ii)  in good faith; and

                            (iii)  after making proper inquiry if the circumstances indicated the need for inquiry;

                            that the delegate was reliable and competent in relation to the power delegated.

Division 2Disclosure of, and voting on matters involving, material personal interests

191  Material personal interest—director’s duty to disclose

Director’s duty to notify other directors of material personal interest when conflict arises

             (1)  A director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest unless subsection (2) says otherwise.

             (2)  The director does not need to give notice of an interest under subsection (1) if:

                     (a)  the interest:

                              (i)  arises because the director is a member of the company and is held in common with the other members of the company; or

                             (ii)  arises in relation to the director’s remuneration as a director of the company; or

                            (iii)  relates to a contract the company is proposing to enter into that is subject to approval by the members and will not impose any obligation on the company if it is not approved by the members; or

                            (iv)  arises merely because the director is a guarantor or has given an indemnity or security for all or part of a loan (or proposed loan) to the company; or

                             (v)  arises merely because the director has a right of subrogation in relation to a guarantee or indemnity referred to in subparagraph (iv); or

                            (vi)  relates to a contract that insures, or would insure, the director against liabilities the director incurs as an officer of the company (but only if the contract does not make the company or a related body corporate the insurer); or

                           (vii)  relates to any payment by the company or a related body corporate in respect of an indemnity permitted under section 199A or any contract relating to such an indemnity; or

                           (viii)  is in a contract, or proposed contract, with, or for the benefit of, or on behalf of, a related body corporate and arises merely because the director is a director of the related body corporate; or

                     (b)  the company is a proprietary company and the other directors are aware of the nature and extent of the interest and its relation to the affairs of the company; or

                     (c)  all the following conditions are satisfied:

                              (i)  the director has already given notice of the nature and extent of the interest and its relation to the affairs of the company under subsection (1)

                             (ii)  if a person who was not a director of the company at the time when the notice under subsection (1) was given is appointed as a director of the company—the notice is given to that person

                            (iii)  the nature or extent of the interest has not materially increased above that disclosed in the notice; or

                     (d)  the director has given a standing notice of the nature and extent of the interest under section 192 and the notice is still effective in relation to the interest.

Note:          Subparagraph (c)(ii)—the notice may be given to the person referred to in this subparagraph by someone other than the director to whose interests it relates (for example, by the secretary).

             (3)  The notice required by subsection (1) must:

                     (a)  give details of:

                              (i)  the nature and extent of the interest; and

                             (ii)  the relation of the interest to the affairs of the company; and

                     (b)  be given at a directors’ meeting as soon as practicable after the director becomes aware of their interest in the matter.

The details must be recorded in the minutes of the meeting.

Effect of contravention by director

             (4)  A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing.

Section does not apply to single director proprietary company

             (5)  This section does not apply to a proprietary company that has only 1 director.

192  Director may give other directors standing notice about an interest

Power to give notice

             (1)  A director of a company who has an interest in a matter may give the other directors standing notice of the nature and extent of the interest in the matter in accordance with subsection (2). The notice may be given at any time and whether or not the matter relates to the affairs of the company at the time the notice is given.

Note:          The standing notice may be given to the other directors before the interest becomes a material personal interest.

             (2)  The notice under subsection (1) must:

                     (a)  give details of the nature and extent of the interest; and

                     (b)  be given:

                              (i)  at a directors’ meeting (either orally or in writing); or

                             (ii)  to the other directors individually in writing.

The standing notice is given under subparagraph (b)(ii) when it has been given to every director.

Standing notice must be tabled at meeting if given to directors individually

             (3)  If the standing notice is given to the other directors individually in writing, it must be tabled at the next directors’ meeting after it is given.

Nature and extent of interest must be recorded in minutes

             (4)  The director must ensure that the nature and extent of the interest disclosed in the standing notice is recorded in the minutes of the meeting at which the standing notice is given or tabled.

Dates of effect and expiry of standing notice

             (5)  The standing notice:

                     (a)  takes effect as soon as it is given; and

                     (b)  ceases to have effect if a person who was not a director of the company at the time when the notice was given is appointed as a director of the company.

A standing notice that ceases to have effect under paragraph (b) commences to have effect again if it is given to the person referred to in that paragraph.

Note:          The notice may be given to the person referred to in paragraph (b) by someone other than the director to whose interests it relates (for example, by the secretary).

Effect of material increase in nature or extent of interest

             (6)  The standing notice ceases to have effect in relation to a particular interest if the nature or extent of the interest materially increases above that disclosed in the notice.

Effect of contravention by director

             (7)  A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing.

193  Interaction of sections 191 and 192 with other laws etc.

                   Sections 191 and 192 have effect in addition to, and not in derogation of:

                     (a)  any general law rule about conflicts of interest; and

                     (b)  any provision in a company’s constitution (if any) that restricts a director from:

                              (i)  having a material personal interest in a matter; or

                             (ii)  holding an office or possessing property;

                            involving duties or interests that conflict with their duties or interests as a director.

194  Voting and completion of transactions—directors of proprietary companies (replaceable rule—see section 135)

                   If a director of a proprietary company has a material personal interest in a matter that relates to the affairs of the company and:

                     (a)  under section 191 the director discloses the nature and extent of the interest and its relation to the affairs of the company at a meeting of the directors; or

                     (b)  the interest is one that does not need to be disclosed under section 191;

then:

                     (c)  the director may vote on matters that relate to the interest; and

                     (d)  any transactions that relate to the interest may proceed; and

                     (e)  the director may retain benefits under the transaction even though the director has the interest; and

                      (f)  the company cannot avoid the transaction merely because of the existence of the interest.

If disclosure is required under section 191, paragraphs (e) and (f) apply only if the disclosure is made before the transaction is entered into.

Note:          A director may need to give notice to the other directors if the director has a material personal interest in a matter relating to the affairs of the company (see section 191).

195  Restrictions on voting—directors of public companies only

Restrictions on voting and being present

             (1)  A director of a public company who has a material personal interest in a matter that is being considered at a directors’ meeting must not:

                     (a)  be present while the matter is being considered at the meeting; or

                     (b)  vote on the matter;

unless:

                     (c)  subsection (2) or (3) allows the director to be present; or

                     (d)  the interest does not need to be disclosed under section 191.

Participation with approval of other directors

             (2)  The director may be present and vote if directors who do not have a material personal interest in the matter have passed a resolution that:

                     (a)  identifies the director, the nature and extent of the director’s interest in the matter and its relation to the affairs of the company; and

                     (b)  states that those directors are satisfied that the interest should not disqualify the director from voting or being present.

Participation with ASIC approval

             (3)  The director may be present and vote if they are so entitled under a declaration or order made by ASIC under section 196.

Director may consider or vote on resolution to deal with matter at general meeting

             (4)  If there are not enough directors to form a quorum for a directors’ meeting because of subsection (1), 1 or more of the directors (including those who have a material personal interest in that matter) may call a general meeting and the general meeting may pass a resolution to deal with the matter.

Effect of contravention by director

             (5)  A contravention by a director of:

                     (a)  this section; or

                     (b)  a condition attached to a declaration or order made by ASIC under section 196;

does not affect the validity of any resolution.

196  ASIC power to make declarations and class orders

ASIC’s power to make specific declarations

             (1)  ASIC may declare in writing that a director of a public company who has a material personal interest in a matter that is being, or is to be, considered at a directors’ meeting may, despite the director’s interest, be present while the matter is being considered at the meeting, vote on the matter, or both be present and vote. However, ASIC may only make the declaration if:

                     (a)  the number of directors entitled to be present and vote on the matter would be less than the quorum for a directors’ meeting if the director were not allowed to vote on the matter at the meeting; and

                     (b)  the matter needs to be dealt with urgently, or there is some other compelling reason for the matter being dealt with at the directors’ meeting, rather than by a general meeting called under subsection 195(4).

             (2)  The declaration may:

                     (a)  apply to all or only some of the directors; or

                     (b)  specify conditions that the company or director must comply with.

ASIC’s power to make class orders

             (3)  ASIC may make an order in writing that enables directors who have a material personal interest in a matter to be present while the matter is being considered at a directors’ meeting, vote on that matter, or both be present and vote. The order may be made in respect of a specified class of public companies, directors, resolutions or interests.

             (4)  The order may be expressed to be subject to conditions.

             (5)  Notice of the making, revocation or suspension of the order must be published in the Gazette.

Division 3Duty to discharge certain trust liabilities

197  Directors liable for debts and other obligations incurred by corporation as trustee

             (1)  A person who is a director of a corporation when it incurs a liability while acting, or purporting to act, as trustee, is liable to discharge the whole or a part of the liability if the corporation:

                     (a)  has not, and cannot, discharge the liability or that part of it; and

                     (b)  is not entitled to be fully indemnified against the liability out of trust assets.

This is so even if the trust does not have enough assets to indemnify the trustee. The person is liable both individually and jointly with the corporation and anyone else who is liable under this subsection.

             (2)  The person is not liable under subsection (1) if the person would be entitled to have been fully indemnified by 1 of the other directors against the liability had all the directors of the corporation been trustees when the liability was incurred.

             (3)  This section does not apply to a liability incurred outside Australia by a foreign company.

Division 4Powers

198A  Powers of directors (replaceable rule—see section 135)

             (1)  The business of a company is to be managed by or under the direction of the directors.

Note:          See section 198E for special rules about the powers of directors who are the single director/shareholder of proprietary companies.

             (2)  The directors may exercise all the powers of the company except any powers that this Law or the company’s constitution (if any) requires the company to exercise in general meeting.

Note:          For example, the directors may issue shares, borrow money and issue debentures.

198B  Negotiable instruments (replaceable rule—see section 135)

             (1)  Any 2 directors of a company that has 2 or more directors, or the director of a proprietary company that has only 1 director, may sign, draw, accept, endorse or otherwise execute a negotiable instrument.

             (2)  The directors may determine that a negotiable instrument may be signed, drawn, accepted, endorsed or otherwise executed in a different way.

198C  Managing director (replaceable rule—see section 135)

             (1)  The directors of a company may confer on a managing director any of the powers that the directors can exercise.

             (2)  The directors may revoke or vary a conferral of powers on the managing director.

198D  Delegation

             (1)  Unless the company’s constitution provides otherwise, the directors of a company may delegate any of their powers to:

                     (a)  a committee of directors; or

                     (b)  a director; or

                     (c)  an employee of the company; or

                     (d)  any other person.

Note:          The delegation must be recorded in the company’s minute book (see section 251A).

             (2)  The delegate must exercise the powers delegated in accordance with any directions of the directors.

             (3)  The exercise of the power by the delegate is as effective as if the directors had exercised it.

198E  Single director/shareholder proprietary companies

Powers of director

             (1)  The director of a proprietary company who is its only director and only shareholder may exercise all the powers of the company except any powers that this Law or the company’s constitution (if any) requires the company to exercise in general meeting. The business of the company is to be managed by or under the direction of the director.

Note:          For example, the director may issue shares, borrow money and issue debentures.

Negotiable instruments

             (2)  The director of a proprietary company who is its only director and only shareholder may sign, draw, accept, endorse or otherwise execute a negotiable instrument. The director may determine that a negotiable instrument may be signed, drawn, accepted, endorsed or otherwise executed in a different way.

198F  Right of access to company books

Right while director

             (1)  A director of a company may inspect the books of the company (other than its financial records) at all reasonable times for the purposes of a legal proceeding:

                     (a)  to which the person is a party; or

                     (b)  that the person proposes in good faith to bring; or

                     (c)  that the person has reason to believe will be brought against them.

Note:          Section 290 gives the director a right of access to financial records.

Right during 7 years after ceasing to be director

             (2)  A person who has ceased to be a director of a company may inspect the books of the company (including its financial records) at all reasonable times for the purposes of a legal proceeding:

                     (a)  to which the person is a party; or

                     (b)  that the person proposes in good faith to bring; or

                     (c)  that the person has reason to believe will be brought against them.

This right continues for 7 years after the person ceased to be a director of the company.

Right to take copies

             (3)  A person authorised to inspect books under this section for the purposes of a legal proceeding may make copies of the books for the purposes of those proceedings.

Company not to refuse access

             (4)  A company must allow a person to exercise their rights to inspect or take copies of the books under this section.

Interaction with other rules

             (5)  This section does not limit any right of access to company books that a person has apart from this section.


 

Part 2D.2Restrictions on indemnities, insurance and termination payments

Division 1Indemnities and insurance for officers and auditors

199A  Indemnification and exemption of officer or auditor

Exemptions not allowed

             (1)  A company or a related body corporate must not exempt a person (whether directly or through an interposed entity) from a liability to the company incurred as an officer or auditor of the company.

When indemnity for liability (other than for legal costs) not allowed

             (2)  A company or a related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer or auditor of the company:

                     (a)  a liability owed to the company or a related body corporate

                     (b)  a liability for a pecuniary penalty order under section 1317G or a compensation order under section 1317H

                     (c)  a liability that is owed to someone other than the company or a related body corporate and did not arise out of conduct in good faith.

This subsection does not apply to a liability for legal costs.

When indemnity for legal costs not allowed

             (3)  A company or related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against legal costs incurred in defending an action for a liability incurred as an officer or auditor of the company if the costs are incurred:

                     (a)  in defending or resisting proceedings in which the person is found to have a liability for which they could not be indemnified under subsection (2); or

                     (b)  in defending or resisting criminal proceedings in which the person is found guilty; or

                     (c)  in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for making the order are found by the court to have been established; or

                     (d)  in connection with proceedings for relief to the person under this Law in which the Court denies the relief.

Paragraph (c) does not apply to costs incurred in responding to actions taken by ASIC or a liquidator as part of an investigation before commencing proceedings for the court order.

Note 1:       Paragraph (c)—This includes proceedings by ASIC for an order under section 206C, 206D or 206E (disqualification), section 232 (oppression), section 1317E, 1317G or 1317H (civil penalties) or section 1324 (injunction).

Note 2:       The company may be able to give the person a loan or advance in respect of the legal costs (see section 212).

             (4)  For the purposes of subsection (3), the outcome of proceedings is the outcome of the proceedings and any appeal in relation to the proceedings.

199B  Insurance premiums for certain liabilities of director, secretary, other officer or auditor

                   A company or a related body corporate must not pay, or agree to pay, a premium for a contract insuring a person who is or has been an officer or auditor of the company against a liability (other than one for legal costs) arising out of:

                     (a)  conduct involving a wilful breach of duty in relation to the company; or

                     (b)  a contravention of section 182 or 183.

This section applies to a premium whether it is paid directly or through an interposed entity.

199C  Certain indemnities, exemptions, payments and agreements not authorised and certain documents void

             (1)  Sections 199A and 199B do not authorise anything that would otherwise be unlawful.

             (2)  Anything that purports to indemnify or insure a person against a liability, or exempt them from a liability, is void to the extent that it contravenes section 199A or 199B.

Division 2Termination payments

200A  When benefit given in connection with retirement from office

             (1)  For the purposes of this Division:

                     (a)  a benefit is given in connection with a person’s retirement from an office if the benefit is given:

                              (i)  by way of compensation for, or otherwise in connection with, the loss by the person of the office; or

                             (ii)  in connection with the person’s retirement from the office; and

                     (b)  giving a benefit includes:

                              (i)  if the benefit is a payment—making the payment; and

                             (ii)  if the benefit is an interest in property—transferring the interest; and

                     (c)  a person gives a benefit even if the person is obliged to give the benefit under a contract; and

                     (d)  a pension or lump sum is paid or payable in connection with the person’s retirement from an office if the pension or lump sum is paid or payable:

                              (i)  by way of compensation for, or otherwise in connection with, the loss by the person of the office; or

                             (ii)  in connection with the person’s retirement from the office; and

                     (e)  retirement from an office includes:

                              (i)  loss of the office; and

                             (ii)  resignation from the office; and

                            (iii)  death of a person at a time when they hold the office.

             (2)  For the purposes of this Division, if:

                     (a)  a person (person A) gives another person a benefit (benefit A); and

                     (b)  person A gives benefit A for the purpose, or for purposes including the purpose, of enabling or assisting someone to give a person a benefit in connection with the retirement of a person (person B) from an office;

person A is taken to give benefit A in connection with the person B’s retirement from that office.

200B  Retirement benefits generally need membership approval

Benefits in connection with retirement from board or managerial office

             (1)  The following must not give a person a benefit in connection with that person’s, or someone else’s, retirement from a board or managerial office in a company, or a related body corporate, without member approval under section 200E:

                     (a)  the company

                     (b)  an associate of the company (other than a body corporate that is related to the company and is itself a company)

                     (c)  a prescribed superannuation fund in relation to the company.

Note 1:       Sections 200F, 200G and 200H provide for exceptions to this rule.

Note 2:       Section 9 defines board or managerial office.

Prescribed superannuation funds

             (2)  For the purposes of this section:

                     (a)  a superannuation fund is taken to be a prescribed superannuation fund in relation to a company if the company, or an associate of the company, gives a benefit to the superannuation fund in prescribed circumstances; and

                     (b)  if a prescribed superannuation fund in relation to a company gives a benefit to another superannuation fund in prescribed circumstances, the other superannuation fund is taken to be a prescribed superannuation fund in relation to the company.

Prescribed circumstances

             (3)  For the purposes of this section, if:

                     (a)  a company, or an associate of a company, gives a benefit to a superannuation fund solely for the purpose of enabling or assisting the superannuation fund to give to a person a benefit in connection with a person’s retirement from an office in the company or a related body corporate; or

                     (b)  a superannuation fund gives a benefit to another superannuation fund solely for the purpose of enabling or assisting the other superannuation fund to give to a person a benefit in connection with a person’s retirement from an office in a company or a related body corporate;

the benefit first referred to in paragraph (a) or (b) is taken to be given in prescribed circumstances.

             (4)  In this section:

superannuation fund means a provident, benefit, superannuation or retirement fund.

200C  Benefits on transfer of undertaking or property need membership approval

                   A person must not give a benefit to a person who:

                     (a)  holds, or has at any previous time held, a board or managerial office in a company or a related body corporate; or

                     (b)  is the spouse of a person referred to in paragraph (a); or

                     (c)  is a relative of a person referred to in paragraph (a) or of the spouse of such a person; or

                     (d)  is an associate of a person referred to in paragraph (a) or the spouse of an associate of such a person;

in connection with the transfer of the whole or any part of the undertaking or property of the company without member approval under section 200E.

Note:          Section 9 defines board or managerial office.

200D  Contravention to receive benefit without member approval

                   A person who:

                     (a)  holds, or has at any previous time held, a board or managerial office in a company or related body corporate; or

                     (b)  is the spouse of a person referred to in paragraph (a); or

                     (c)  is a relative of a person referred to in paragraph (a) or of the spouse of such a person; or

                     (d)  is an associate of a person referred to in paragraph (a) or the spouse of an associate of such a person;

must not receive a benefit if the giving of the benefit contravenes section 200B or 200C.

Note:          Section 9 defines board or managerial office.

200E  Approval by members

             (1)  If section 200B or 200C requires member approval for giving a person a benefit, it must be approved by a resolution passed at a general meeting of:

                     (a)  the company; and

                     (b)  if the company is a subsidiary of a listed domestic corporation—the listed corporation; and

                     (c)  if the company has a holding company that:

                              (i)  is a domestic corporation that is not listed; and

                             (ii)  is not itself a subsidiary of a domestic corporation—the holding company.

             (2)  Details of the benefit must be set out in, or accompany, the notice of the meeting at which the resolution is to be considered. The details must include:

                     (a)  if the proposed benefit is a payment:

                              (i)  the amount of the payment; or

                             (ii)  if that amount cannot be ascertained at the time of the disclosure—the manner in which that amount is to be calculated and any matter, event or circumstance that will, or is likely to, affect the calculation of that amount; and

                     (b)  otherwise:

                              (i)  the money value of the proposed prescribed benefit; or

                             (ii)  if that value cannot be ascertained at the time of the disclosure—the manner in which that value is to be calculated and any matter, event or circumstance that will, or is likely to, affect the calculation of that value.

These requirements are in addition to, and not in derogation of, any other law that requires disclosure to be made with respect to giving or receiving a benefit.

             (3)  The approval extends to the giving of another benefit to the person if:

                     (a)  the other benefit is given to the person instead of the proposed benefit; and

                     (b)  the amount or money value of the benefit is less than the amount or money value of the proposed benefit.

             (4)  The approval does not relieve a director of a body corporate from any duty to the body corporate (whether under section 180,181,182,183 or 184 or otherwise and whether of a fiduciary nature or not) in connection with the giving of the benefit.

200F  Exempt benefits and benefits given in certain circumstances

                   Subsection 200B(1) does not apply to:

                     (a)  a benefit given in connection with a person’s retirement from an office in relation to a company if the benefit is:

                              (i)  given under an agreement entered into before 1 January 1991 if giving the benefit in accordance with the agreement would have been lawful if the benefit were given when the agreement was entered into; or

                             (ii)  a genuine payment by way of damages for breach of contract; or

                            (iii)  given to the person under an agreement made between the company and the person before the person became the holder of the office as the consideration, or part of the consideration, for the person agreeing to hold the office; or

                            (iv)  a payment made in respect of leave of absence to which the person is entitled under an industrial instrument; or

                     (b)  a benefit given in prescribed circumstances.

200G  Genuine payments of pension and lump sum

             (1)  Subsection 200B(1) does not apply to a benefit if:

                     (a)  the benefit is a payment in connection with a person’s retirement from a board or managerial office (the relevant office) in a company or a related body corporate; and

                     (b)  the payment is for past services the person rendered to:

                              (i)  the company; or

                             (ii)  a related body corporate; or

                            (iii)  a body that was a related body corporate of the company when the past services were rendered; and

                     (c)  the value of the benefit, when added to the value of all other payments (if any) already made or payable in connection with the person’s retirement from board or managerial offices in the company and related bodies corporate does not exceed the payment limit set by subsection (1A).

In applying paragraph (c), disregard any pensions or lump sums that section 200F applies to.

             (2)  The payment limit is:

                     (a)  the amount worked out under subsection (3) if the person:

                              (i)  was an eligible employee in relation to the company at the time when the person retired from the relevant office; and

                             (ii)  has been an eligible employee in relation to the company throughout a period (the relevant period), or throughout periods totalling a period (also the relevant period), of more than 3 years; or

                     (b)  otherwise—the total remuneration of the person from the company and related bodies corporate during the period of 3 years ending when the person retired from the relevant office.

Note:          Section 9 defines remuneration.

             (3)  The amount worked out under this subsection is the amount worked out using the formula:

where:

total remuneration is the amount of the total remuneration of the person from the company and related bodies corporate during the last 3 years of the relevant period.

relevant period is the number of years in the relevant period or 7, whichever is the lesser number.

             (4)  In determining for the purposes of paragraph (1)(c) the value of a pension or lump sum payment, disregard any part of the pension or lump sum payment that is attributable to:

                     (a)  a contribution made by the person; or

                     (b)  a contribution made by a person other than:

                              (i)  the company; or

                             (ii)  a body corporate (a relevant body corporate) that is a related body corporate of the company, or that was, when the contribution was made, such a related body corporate; or

                            (iii)  an associate of the company, or of a relevant body corporate, in respect of:

                                        (A)  the payment of the pension, or the making of the lump sum payment, as the case may be; or

                                        (B)  the making of the contribution.

             (5)  For the purposes of subparagraph (2)(a), a person is taken to have been an eligible employee in relation to a company at a particular time if:

                     (a)  the person was a genuine full‑time employee of the company at that time; or

                     (b)  the person was a genuine full‑time employee of a body corporate at that time and the body corporate was related to the company at that time.

             (6)  In this section:

payment means a payment by way of pension or lump sum and includes a superannuation, retiring allowance, superannuation gratuity or similar payment.

200H  Benefits required by law

                   Subsection 200B(1) does not apply to a benefit given by a person if failure to give the benefit would constitute a contravention of a law in force in Australia or elsewhere (otherwise than because of breach of contract or breach of trust).

200J  Benefits to be held in trust for company

             (1)  If giving a benefit to a person contravenes section 200B, then:

                     (a)  if the benefit is a payment—the amount of the payment; or

                     (b)  otherwise—the money value of the prescribed benefit;

is taken to be received by the person in trust for the company concerned.

             (2)  Subsection (1) applies to the whole of the amount of a payment or of the money value of the benefit even though giving the benefit would not have contravened section 200B if that amount or value of the benefit had been less.


 

Part 2D.3Appointment, remuneration and cessation of appointment of directors

Division 1Appointment of directors

201A  Minimum number of directors

Proprietary companies

             (1)  A proprietary company must have at least 1 director. That director must ordinarily reside in Australia.

Public companies

             (2)  A public company must have at least 3 directors (not counting alternate directors). At least 2 directors must ordinarily reside in Australia.

201B  Who can be a director

             (1)  Only an individual who is at least 18 may be appointed as a director of a company.

             (2)  A person who is disqualified from managing corporations under Part 2D.6 may only be appointed as director of a company if the appointment is made with permission granted by ASIC under section 206F or leave granted by the Court under section 206G.

201C  Directors of public companies, or subsidiaries, over 72

             (1)  A person who has turned 72 may only be appointed or act as a director of:

                     (a)  a public company; or

                     (b)  a company that is a subsidiary of a public company;

if authorised to do so under this section.

             (2)  A person may act as a director of a company during the period that:

                     (a)  starts on the day on which they turn 72; and

                     (b)  ends at the conclusion of the AGM beginning next after that day.

             (3)  The office of a director of a public company, or of a subsidiary of a public company, becomes vacant at the conclusion of the AGM of the public company, or the subsidiary, beginning next after the director turns 72.

             (4)  If a proprietary company is a subsidiary of a public company:

                     (a)  subsection (3) does not apply to it; and

                     (b)  a person may continue to act as a director of the proprietary company until the next AGM of the public company after the person turns 72; and

                     (c)  the person’s office of director becomes vacant at the end of that meeting.

Note:          Proprietary companies do not need to hold annual general meetings (see section 250N).

             (5)  An act done by a person as a director is valid even if it is afterwards discovered that they had turned 72 at the time when they were appointed or that their appointment had terminated under subsection (3) or (4).

             (6)  If the office of a director has become vacant under subsection (3) or (4), no provision for the automatic re‑appointment of retiring directors in default of another appointment applies in relation to that director.

             (7)  If a vacancy created under subsection (3) or (4) is not filled at the meeting at which the office became vacant, the office may be filled as a casual vacancy.

             (8)  Subject to subsections (9) and (10), a person who has turned 72 may by special resolution be appointed or re‑appointed as a director of that company to hold office until the conclusion of the company’s next AGM company if:

                     (a)  the resolution states the person’s age; and

                     (b)  the notice of meeting states that the person is a candidate for election who has turned 72 and states the person’s age.

             (9)  If the company is a subsidiary of a public company, the appointment or re‑appointment referred to in subsection (8) does not have effect unless:

                     (a)  the person appointed or re‑appointed is a director of the public company; or

                     (b)  the appointment or re‑appointment of the person as a director of the company has been approved by a special resolution of the public company and the notice of meeting states that the person is a candidate for election as a director of the company who has turned 72 and states the person’s age.

           (10)  If the subsidiary is a proprietary company:

                     (a)  the person may be appointed or re‑appointed as a director of the subsidiary until the end of the next AGM of the holding company; and

                     (b)  the appointment does not need a resolution under subsection (8); and

                     (c)  the appointment must satisfy either paragraph (9)(a) or (b).

           (11)  If:

                     (a)  the constitution of a company limited by guarantee provides for the holding of postal ballots for the election of a director or directors; and

                     (b)  a postal ballot for the election of a director or directors is held and in the ballot:

                              (i)  the members entitled to vote have been given notice in writing by the company stating that a candidate for election has turned 72 and stating the age of the candidate; and

                             (ii)  that candidate is elected by a majority of not less than 75% of the members who, being entitled to vote, vote in the ballot;

that candidate may be appointed or re‑appointed as a director to hold office until the conclusion of the next AGM of the company.

           (12)  If:

                     (a)  the constitution of a company limited by guarantee provides for the election or appointment of a director or directors otherwise than by members at a general meeting or by postal ballot of members; and

                     (b)  ASIC declares in writing that this section does not apply to the company or its directors;

then, subject to the conditions (if any) that ASIC specifies in the declaration, this section does not so apply.

           (13)  A vacancy in the office of a director occurring under subsection (3) or (4) is not to be taken into account in determining when other directors are to retire.

           (14)  Nothing in this section limits, or affects the operation of, any provision of a company’s constitution that prevents any person from being appointed as a director or requiring any director to vacate their office at any age less than 72 years.

201D  Consent to act as director

             (1)  A company contravenes this subsection if a person does not give the company a signed consent to act as a director of the company before being appointed.

             (2)  The company must keep the consent.

201E  Special rules for the appointment of public company directors

             (1)  A resolution passed at a general meeting of a public company appointing or confirming the appointment of 2 or more directors is void unless:

                     (a)  the meeting has resolved that the appointments or confirmations may be voted on together; and

                     (b)  no votes were cast against the resolution.

             (2)  This section does not affect:

                     (a)  a resolution to appoint directors by an amendment to the company’s constitution (if any); or

                     (b)  a ballot or poll to elect 2 or more directors if the ballot or poll does not require members voting for 1 candidate to vote for another candidate.

             (3)  For the purposes of paragraph (2)(b), a ballot or poll does not require a member to vote for a candidate merely because the member is required to express a preference among individual candidates in order to cast a valid vote.

201F  Special rules for the appointment of directors for single director/single shareholder proprietary companies

             (1)  The director of a proprietary company who is its only director and only shareholder may appoint another director by recording the appointment and signing the record.

Appointment of new director on death, mental incapacity or bankruptcy

             (2)  If a person who is the only director and the only shareholder of a proprietary company:

                     (a)  dies; or

                     (b)  cannot manage the company because of the person’s mental incapacity;

and a personal representative or trustee is appointed to administer the person’s estate or property, the personal representative or trustee may appoint a person as the director of the company.

             (3)  If:

                     (a)  the office of the director of a proprietary company is vacated under subsection 206B(3) or (4) because of the bankruptcy of the director; and

                     (b)  the person is the only director and the only shareholder of the company; and

                     (c)  a trustee in bankruptcy is appointed to the person’s property;

the trustee may appoint a person as the director of the company.

             (4)  A person who has a power of appointment under subsection (2) or (3) may appoint themselves as director.

             (5)  A person appointed as a director of a company under subsection (2), (3) or (4) holds office as if they had been appointed in the usual way.

201G  Company may appoint a director (replaceable rule—see section 135)

                   A company may appoint a person as a director by resolution passed in general meeting.

201H  Directors may appoint other directors (replaceable rule—see section 135)

Appointment by other directors

             (1)  The directors of a company may appoint a person as a director. A person can be appointed as a director in order to make up a quorum for a directors’ meeting even if the total number of directors of the company is not enough to make up that quorum.

Proprietary company—confirmation by meeting within 2 months

             (2)  If a person is appointed under this section as a director of a proprietary company, the company must confirm the appointment by resolution within 2 months after the appointment is made. If the appointment is not confirmed, the person ceases to be a director of the company at the end of those 2 months.

Public company—confirmation by next AGM

             (3)  If a person is appointed by the other directors as a director of a public company, the company must confirm the appointment by resolution at the company’s next AGM. If the appointment is not confirmed, the person ceases to be a director of the company at the end of the AGM.

201J  Appointment of managing directors (replaceable rule—see section 135)

                   The directors of a company may appoint 1 or more of themselves to the office of managing director of the company for the period, and on the terms (including as to remuneration), as the directors see fit.

201K  Alternate directors (replaceable rule—see section 135)

             (1)  With the other directors’ approval, a director may appoint an alternate to exercise some or all of the director’s powers for a specified period.

             (2)  If the appointing director requests the company to give the alternate notice of directors’ meetings, the company must do so.

             (3)  When an alternate exercises the director’s powers, the exercise of the powers is just as effective as if the powers were exercised by the director.

             (4)  The appointing director may terminate the alternate’s appointment at any time.

             (5)  An appointment or its termination must be in writing. A copy must be given to the company.

Note:          ASIC must be given notice of the appointment and termination of appointment of an alternate (see subsections 205B(2) and (5)).

201L  Signpost—ASIC to be notified of appointment

                   Under section 205B, a company must notify ASIC within 14 days if a person is appointed as a director or as an alternate director.

201M  Effectiveness of acts by directors

             (1)  An act done by a director is effective even if their appointment, or the continuance of their appointment, is invalid because the company or director did not comply with the company’s constitution (if any) or any provision of this Law.

             (2)  Subsection (1) does not deal with the question whether an effective act by a director:

                     (a)  binds the company in its dealings with other people; or

                     (b)  makes the company liable to another person.

Note:          The kinds of acts that this section validates are those that are only legally effective if the person doing them is a director (for example, calling a meeting of the company’s members or signing a document to be lodged with ASIC or minutes of a meeting). Sections 128‑130 contain rules about the assumptions people are entitled to make when dealing with a company and its officers.

Division 2Remuneration of directors

202A  Remuneration of directors (replaceable rule—see section 135)

             (1)  The directors of a company are to be paid the remuneration that the company determines by resolution.

Note:          Chapter 2E makes special provision for the payment of remuneration to the directors of public companies.

             (2)  The company may also pay the directors’ travelling and other expenses that they properly incur:

                     (a)  in attending directors’ meetings or any meetings of committees of directors; and

                     (b)  in attending any general meetings of the company; and

                     (c)  in connection with the company’s business.

202B  Members may obtain information about directors’ remuneration

             (1)  A company must disclose the remuneration paid to each director of the company or a subsidiary (if any) by the company or by an entity controlled by the company if the company is directed to disclose the information by:

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

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

The company must disclose all remuneration paid to the director, regardless of whether it is paid to the director in relation to their capacity as director or another capacity.

             (2)  The company must comply with the direction as soon as practicable by:

                     (a)  preparing a statement of the remuneration of each director of the company or subsidiary for the last financial year before the direction was given; and

                     (b)  having the statement audited; and

                     (c)  sending a copy of the audited statement to each person entitled to receive notice of general meetings of the company.

202C  Special rule for single director/single shareholder proprietary companies

                   A person who is the only director and the only shareholder of a proprietary company is to be paid any remuneration for being a director that the company determines by resolution. The company may also pay the director’s travelling and other expenses properly incurred by the director in connection with the company’s business.

Division 3Resignation, retirement or removal of directors

203A  Director may resign by giving written notice to company (replaceable rule—see section 135)

                   A director of a company may resign as a director of the company by giving a written notice of resignation to the company at its registered office.

203B  Signpost to consequences of disqualification from managing corporations

                   A person ceases to be a director of a company if the person becomes disqualified from managing corporations under Part 2D.6 (see subsection 206A(2)) unless ASIC or the Court allows them to manage the company (see sections 206F and 206G).

203C  Removal by members—proprietary companies (replaceable rule—see section 135)

                   A proprietary company:

                     (a)  may by resolution remove a director from office; and

                     (b)  may by resolution appoint another person as a director instead.

203D  Removal by members—public companies

Resolution for removal of director

             (1)  A public company may by resolution remove a director from office despite anything in:

                     (a)  the company’s constitution (if any); or

                     (b)  an agreement between the company and the director; or

                     (c)  an agreement between any or all members of the company and the director.

If the director was appointed to represent the interests of particular shareholders or debenture holders, the resolution to remove the director does not take effect until a replacement to represent their interests has been appointed.

Note:          See sections 249C to 249G for the rules on who may call meetings, sections 249H to 249M on how to call meetings and sections 249N to 249Q for rules on members’ resolutions.

Notice of intention to move resolution for removal of director

             (2)  Notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held. However, if the company calls a meeting after the notice of intention is given under this subsection, the meeting may pass the resolution even though the meeting is held less than 2 months after the notice of intention is given.

Note:          Short notice of the meeting cannot be given for this resolution (see subsection 249H(3)).

Director to be informed

             (3)  The company must give the director a copy of the notice as soon as practicable after it is received.

Director’s right to put case to members

             (4)  The director is entitled to put their case to members by:

                     (a)  giving the company a written statement for circulation to members (see subsections (5) and (6)); and

                     (b)  speaking to the motion at the meeting (whether or not the director is a member of the company).

             (5)  The written statement is to be circulated by the company to members by:

                     (a)  sending a copy to everyone to whom notice of the meeting is sent if there is time to do so; or

                     (b)  if there is not time to comply with paragraph (a)—having the statement distributed to members attending the meeting and read out at the meeting before the resolution is voted on.

             (6)  The director’s statement does not have to be circulated to members if it is more than 1,000 words long or defamatory.

Time of retirement

             (7)  If a person is appointed to replace a director removed under this section, the time at which:

                     (a)  the replacement director; or

                     (b)  any other director;

is to retire is to be worked out as if the replacement director had become director on the day on which the replaced director was last appointed a director.

203E  Director cannot be removed by other directors—public companies

                   A resolution, request or notice of any or all of the directors of a public company is void to the extent that it purports to:

                     (a)  remove a director from their office; or

                     (b)  require a director to vacate their office.

203F  Termination of appointment of managing director (replaceable rule—see section 135)

             (1)  A person ceases to be managing director if they cease to be a director.

             (2)  The directors may revoke or vary an appointment of a managing director.


 

Part 2D.4Appointment of secretaries

  

204A  Minimum number of secretaries

Proprietary companies

             (1)  A proprietary company is not required to have a secretary but, if it does have 1 or more secretaries, at least 1 of them must ordinarily reside in Australia.

Public companies

             (2)  A public company must have at least 1 secretary. At least 1 of them must ordinarily reside in Australia.

204B  Who can be a secretary

             (1)  Only an individual who is at least 18 may be appointed as a secretary of a company.

             (2)  A person who is disqualified from managing corporations under Part 2D.6 may only be appointed as a secretary of a company if the appointment is made with permission granted by ASIC under section 206F or leave granted by the Court under section 206G.

204C  Consent to act as secretary

             (1)  A company contravenes this subsection if a person does not give the company a signed consent to act as secretary of the company before being appointed.

             (2)  The company must keep the consent.

204D  How a secretary is appointed

                   A secretary is to be appointed by the directors.

Note 1:       The company must notify ASIC of the appointment within 14 days (see subsection 205B(1)).

Note 2:       Section 188 deals with the responsibilities of secretaries for contraventions by the company.

204E  Effectiveness of acts by secretaries

             (1)  An act done by a secretary is effective even if their appointment, or the continuance of their appointment, is invalid because the company or secretary did not comply with the company’s constitution (if any) or any provision of this Law.

             (2)  Subsection (1) does not deal with the question whether an effective act by a secretary:

                     (a)  binds the company in its dealings with other people; or

                     (b)  makes the company liable to another person.

Note:          The kinds of acts that this section validates are those that are only legally effective if the person doing them is a secretary (for example, signing and sending out a notice of a meeting of directors if the company’s constitution authorises the secretary to do so or signing a document to be lodged with ASIC). Sections 128‑130 contain rules about the assumptions people are entitled to make when dealing with a company and its officers.

204F  Terms and conditions of office for secretaries (replaceable rule—see section 135)

                   A secretary holds office on the terms and conditions (including as to remuneration) that the directors determine.

204G  Signpost to consequences of disqualification from managing corporations

                   A person ceases to be a secretary of a company if the person becomes disqualified from managing corporations under Part 2D.6 (see subsection 206A(2)) unless ASIC or the Court allows them to manage the company (see sections 206F and 206G).


 

Part 2D.5Public information about directors and secretaries

  

205A  Director, secretary or alternate director may notify ASIC of resignation or retirement

             (1)  If a director, secretary or alternate director retires or resigns, they may give ASIC written notice of the retirement or resignation. The notice must be in the prescribed form.

             (2)  To be effective, a notice of resignation must be accompanied by a copy of the letter of resignation given to the company.

             (3)  Nothing in this section affects the company’s obligations to notify ASIC of the resignation or retirement.

205B  Notice of name and address of directors and secretaries to ASIC

New directors or secretaries

             (1)  A company must lodge with ASIC a notice of the personal details of a director or secretary within 14 days after they are appointed. The notice must be in the prescribed form.

Note 1:       If a person becomes a director under subsection 120(1) there is no appointment and no notice is required under this subsection.

Note 2:       If a person who was appointed as an alternate director becomes a director under the terms of their appointment as an alternate director, there is no appointment as a director and no notice is required under this subsection.

New alternate directors

             (2)  A company must lodge with ASIC a notice of:

                     (a)  the personal details of a person who is appointed as an alternate director; and

                     (b)  the terms of their appointment (including terms about when the alternate director is to act as a director);

within 14 days after their appointment as an alternate director. The notice must be in the prescribed form.

Personal details

             (3)  The personal details of a director, alternate director, or secretary are:

                     (a)  their given and family names; and

                     (b)  all of their former given and family names; and

                     (c)  their date and place of birth; and

                     (d)  their address.

Note:          For address see section 205D.

Changes in details

             (4)  The company must lodge with ASIC notice of any change in the personal details of a director, alternate director or secretary within 14 days after the change. The notice must be in the prescribed form.

Notice required if person stops being a director or secretary

             (5)  If a person stops being a director, alternate director or secretary of the company, the company must lodge with ASIC notice of the fact within 14 days. The notice must be in the prescribed form. However, the company does not need to lodge a notice if the person was an alternate director who stopped being a director in accordance with the terms of their appointment as an alternate director.

205C  Director and secretary must give information to company

             (1)  A director, alternate director or secretary must give the company any information the company needs to comply with subsection 205B(1) or (2) within 7 days after their initial appointment unless they have previously given the information to the company.

             (2)  A director, alternate director or secretary must give the company any information the company needs to comply with subsection 205B(4) within 7 days after any change in their personal details.

205D  Address for officers

Address is normally residential address

             (1)  A person’s address for the purposes of a notice or application under subsection 205B(1), (2), (3) or (5) or 117(2) or 601BC(2) must be their usual residential address unless they are entitled to have an alternative address substituted for their usual residential address under subsection (2).

Entitlement to have alternative address

             (2)  The person is entitled to have an alternative address substituted for their usual residential address if:

                     (a)  their name, but not their residential address, is on an electoral roll under the Commonwealth Electoral Act 1918 because of section 104 of that Act; or

                     (b)  their name is not on an electoral roll under that Act and ASIC determines, in writing, that including their residential address in the notice or application would put at risk their personal safety or the personal safety of members of their family.

This alternative address must be in Australia and be one at which documents can be served on the person. At any particular time, a person is entitled to have only 1 alternative address under this section.

Note:          See subsection 109X(2) on the status of the alternative address as an address for service.

             (3)  A person who takes advantage of subsection (2) must:

                     (a)  before or at the same time as the alternative address is first included in a notice or application, lodge with ASIC notice of the person’s usual residential address; and

                     (b)  lodge with ASIC notice of any change in the person’s usual residential address within 14 days after the change.

A notice under this subsection must be in the prescribed form.

             (4)  If a court gives a judgment for payment of a sum of money against a person who is taking advantage of subsection (2), ASIC may give details of the person’s usual residential address to an officer of the court for the purposes of enforcing the judgment debt.

205E  ASIC’s power to ask for information about person’s position as director or secretary

             (1)  ASIC may ask a person, in writing, to inform ASIC:

                     (a)  whether the person is a director or secretary of a particular company; and

                     (b)  if the person is no longer a director or secretary of the company—the date on which the person stopped being a director or secretary.

             (2)  The person must give the information to ASIC in writing by the date specified in the request.

205F  Director must give information to company

                   A director must give the company any information affecting or relating to the director that the company needs, or will need, to comply with Chapter 6. The director must give the information to the company as soon as practicable after becoming aware that the company needs, or will need, the information. The company must give the information to each of the other directors of the company within 7 days of receiving it.

205G  Listed company—director to notify securities exchange of shareholdings etc.

Notifiable interests

             (1)  A director of a listed public company must notify the relevant securities exchange under subsections (3) and (4) of the following interests of the director:

                     (a)  relevant interests in securities of the company or a related body corporate

                     (b)  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, debentures of, or interests in a collective investment scheme made available by, the company or a related body corporate.

             (2)  A notice of a relevant interest in securities under paragraph (1)(a) must give details of:

                     (a)  the number of securities; and

                     (b)  the circumstances giving rise to the relevant interest.

Occasions for initial notification

             (3)  The director must notify the exchange within 14 days after each of the following occasions:

                     (a)  appointment as a director of the company

                     (b)  the listing of the company.

Paragraph (a) does not apply to a director who retires and is then reappointed at the same meeting.

Updating notices

             (4)  The director must notify the exchange within 14 days after any change in the director’s interests.

             (5)  The director need not give the information to the exchange under this section if the director has already given the information to the exchange.

ASIC’s power to make class orders

             (6)  ASIC may make an order in writing relieving a director of the obligation to notify the relevant securities exchange of an interest in a security or contract. The order may be made in respect of a specified class of companies, directors, securities or contracts.

             (7)  The order may be expressed to be subject to conditions.

             (8)  Notice of the making, revocation or suspension of the order must be published in the Gazette.


 

Part 2D.6Disqualification from managing corporations

  

206A  Disqualified person not to manage corporations

             (1)  A person who is disqualified from managing corporations under this Part commits an offence if:

                     (a)  they make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

                     (b)  they exercise the capacity to affect significantly the corporation’s financial standing; or

                     (c)  they communicate instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation) to the directors of the corporation:

                              (i)  knowing that the directors are accustomed to act in accordance with the person’s instructions or wishes; or

                             (ii)  intending that the directors will act in accordance with those instructions or wishes.

It is a defence to the contravention if the person had permission to manage the corporation under either section 206F or 206G and their conduct was within the terms of that permission.

Note:          Under section 1274AA, ASIC is required to keep a record of persons disqualified from managing corporations.

             (2)  A person ceases to be a director, alternate director or a secretary of a company if:

                     (a)  the person becomes disqualified from managing corporations under this Part; and

                     (b)  they are not given permission to manage the corporation under section 206F or 206G.

Note:          If a person ceases to be a director, alternate director or a secretary under subsection (2) the company must notify ASIC (see subsection 205B(1)).

206B  Automatic disqualification

Convictions

             (1)  A person becomes disqualified from managing corporations if the person:

                     (a)  is convicted on indictment of an offence that:

                              (i)  concerns the making, or participation in making, of decisions that affect the whole or a substantial part of the business of the corporation; or

                             (ii)  concerns an act that has the capacity to affect significantly the corporation’s financial standing; or

                     (b)  is convicted of an offence that:

                              (i)  is a contravention of the Corporations Law and is punishable by imprisonment for a period greater than 12 months; or

                             (ii)  involves dishonesty and is punishable by imprisonment for at least 3 months; or

                     (c)  is convicted of an offence against the law of a foreign country that is punishable by imprisonment for a period greater than 12 months.

The offences covered by paragraph (a) and subparagraph (b)(ii) include offences against the law of a foreign country.

             (2)  The period of disqualification under subsection (1) starts on the day the person is convicted and lasts for:

                     (a)  if the person does not serve a term of imprisonment—5 years after the day on which they are convicted; or

                     (b)  if the person serves a term of imprisonment—5 years after the day on which they are released from prison.

Bankruptcy, deed of arrangement or composition with creditors

             (3)  A person is disqualified from managing corporations if the person is an undischarged bankrupt under the law of Australia, its external territories or another country.

             (4)  A person is disqualified from managing corporations if:

                     (a)  the person has executed a deed of arrangement under Part X of the Bankruptcy Act 1966 (or a similar law of an external territory or another country) and the terms of the deed have not been fully complied with; or

                     (b)  the person’s creditors have accepted a composition under Part X of the Bankruptcy Act 1966 (or a similar law of an external territory or another country) and final payment has not been made under the composition.

206C  Court power of disqualification—contravention of civil penalty provision

             (1)  On application by ASIC, the Court may disqualify a person from managing corporations for a period that the Court considers appropriate if:

                     (a)  a declaration is made under section 1317E (civil penalty provision) that the person has contravened a civil penalty provision; and

                     (b)  the Court is satisfied that the disqualification is justified.

Note:          The civil penalty provisions are subsection 180(1) and (2), 181(1) and (2), 182(1) and (2), 183(1) and (2), 209(2), 254L(2), 256D(3), 259F(2), 260D(2) or 344(1) or section 588G.

             (2)  In determining whether the disqualification is justified, the Court may have regard to:

                     (a)  the person’s conduct in relation to the management, business or property of any corporation; and

                     (b)  any other matters that the Court considers appropriate.

206D  Court power of disqualification—insolvency and non‑payment of debts

             (1)  On application by ASIC, the Court may disqualify a person from managing corporations for up to 10 years if:

                     (a)  within the last 7 years, the person has been an officer of 2 or more corporations when they have failed; and

                     (b)  the Court is satisfied that:

                              (i)  the manner in which the corporation was managed was wholly or partly responsible for the corporation failing; and

                             (ii)  the disqualification is justified.

             (2)  For the purposes of subsection (1), a corporation fails if:

                     (a)  a Court orders the corporation to be wound up under section 459B because the Court is satisfied that the corporation is insolvent; or

                     (b)  the corporation enters into voluntary liquidation and creditors are not fully paid or are unlikely to be fully paid; or

                     (c)  the corporation executes a deed of company arrangement and creditors are not fully paid or are unlikely to be fully paid; or

                     (d)  the corporation ceases to carry on business and creditors are not fully paid or are unlikely to be fully paid; or

                     (e)  a levy of execution against the corporation is not satisfied; or

                      (f)  a receiver, receiver and manager, or provisional liquidator is appointed in relation to the corporation; or

                     (g)  the corporation enters into a compromise or arrangement with its creditors under Part 5.1; or

                     (h)  the corporation is wound up and a liquidator lodges a report under subsection 533(1) about the corporation’s inability to pay its debts.

Note:          To satisfy paragraph (h), a corporation must begin to be wound up while the person is an officer or within 12 months after the person ceases to be an officer. However, the report under subsection 533(1) may be lodged by the liquidator at a time that is more than 12 months after the person ceases to be an officer. Sections 513A to 513D contain rules about when a company begins to be wound up.

             (3)  In determining whether the disqualification is justified, the Court may have regard to:

                     (a)  the person’s conduct in relation to the management, business or property of any corporation; and

                     (b)  any other matters that the Court considers appropriate.

206E  Court power of disqualification—repeated contraventions of Law

             (1)  On application by ASIC, the Court may disqualify a person from managing corporations for the period that the Court considers appropriate if:

                     (a)  the person:

                              (i)  has at least twice been an officer of a body corporate that has contravened this Law while they were an officer of the body corporate and each time the person has failed to take reasonable steps to prevent the contravention; or

                             (ii)  has at least twice contravened this Law while they were an officer of a body corporate; or

                            (iii)  has been an officer of a body corporate and has done something that would have contravened subsection 180(1) or section 181 if the body corporate had been a corporation; and

                     (b)  the Court is satisfied that the disqualification is justified.

             (2)  In determining whether the disqualification is justified, the Court may have regard to:

                     (a)  the person’s conduct in relation to the management, business or property of any corporation; and

                     (b)  any other matters that the Court considers appropriate.

206F  ASIC’s power of disqualification

Power to disqualify

             (1)  ASIC may disqualify a person from managing corporations for up to 5 years if:

                     (a)  within 7 years immediately before ASIC gives a notice under paragraph (b)(i):

                              (i)  the person has been an officer of 2 or more corporations; and

                             (ii)  while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) about the corporation’s inability to pay its debts; and

                     (b)  ASIC has given the person:

                              (i)  a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and

                             (ii)  an opportunity to be heard on the question; and

                     (c)  ASIC is satisfied that the disqualification is justified.

Grounds for disqualification

             (2)  In determining whether disqualification is justified, ASIC:

                     (a)  must have regard to whether any of the corporations mentioned in subsection (1) were related to one another; and

                     (b)  may have regard to:

                              (i)  the person’s conduct in relation to the management, business or property of any corporation; and

                             (ii)  any other matters that ASIC considers appropriate.

Notice of disqualification

             (3)  If ASIC disqualifies a person from managing corporations under this section, ASIC must serve a notice on the person advising them of the disqualification. The notice must be in the prescribed form.

Start of disqualification

             (4)  The disqualification takes effect from the time when a notice referred to in subsection (3) is served on the person.

ASIC power to grant leave

             (5)  ASIC may give a person who it has disqualified from managing corporations under this Part written permission to manage a particular corporation or corporations. The permission may be expressed to be subject to conditions and exceptions determined by ASIC.

206G  Court power to grant leave

             (1)  A person who is disqualified from managing corporations may apply to the Court for leave to manage:

                     (a)  corporations; or

                     (b)  a particular class of corporations; or

                     (c)  a particular corporation;

if the person was not disqualified by ASIC.

             (2)  The person must lodge a notice with ASIC at least 21 days before commencing the proceedings. The notice must be in the prescribed form.

             (3)  The order granting leave may be expressed to be subject to exceptions and conditions determined by the Court.

Note:          If the Court grants the person leave to manage the corporation, the person may be appointed as a director (see section 201B) or secretary (see section 204B) of a company.

             (4)  The person must lodge with ASIC a copy of any order granting leave within 14 days after the order is made.

             (5)  On application by ASIC, the Court may revoke the leave. The order revoking leave does not take effect until it is served on the person.

206H  Territorial application of this Part

                   Part 2D.6 does not apply in respect of an act or omission by a person while they are managing a corporation that is a foreign company unless the act or omission occurred in connection with:

                     (a)  the foreign company carrying on business in Australia; or

                     (b)  an act that the foreign company does, or proposes to do, in Australia; or

                     (c)  a decision by the foreign company whether or not to do, or refrain from doing, an act in Australia.


 

Chapter 2ERelated party transactions

  

  

207  Purpose

                   The rules in this Chapter are designed to protect the interests of a public company’s members as a whole, by requiring member approval for giving financial benefits to related parties that could endanger those interests.

Part 2E.1Member approval needed for related party benefit

Division 1Need for member approval

208  Need for member approval for financial benefit

             (1)  For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company:

                     (a)  the public company or entity must:

                              (i)  obtain the approval of the public company’s members in the way set out in sections 217 to 227; and

                             (ii)  give the benefit within 15 months after the approval; or

                     (b)  the giving of the benefit must fall within an exception set out in sections 210 to 216.

Note:          Section 228 defines related party, section 9 defines entity, section 55AA defines control and section 229 affects the meaning of giving a financial benefit.

             (2)  If:

                     (a)  the giving of the benefit is required by a contract; and

                     (b)  the making of the contract was approved in accordance with subparagraph (1)(a)(i) as a financial benefit given to the related party; and

                     (c)  the contract was made:

                              (i)  within 15 months after that approval; or

                             (ii)  before that approval, if the contract was conditional on the approval being obtained;

member approval for the giving of the benefit is taken to have been given and the benefit need not be given within the 15 months.

209  Consequences of breach

             (1)  If the public company or entity contravenes section 208:

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

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

Note:          A Court may order an injunction to stop the company or entity giving the benefit to the related party (see section 1324).

             (2)  A person contravenes this subsection if they are involved in a contravention of section 208 by a public company or entity.

Note 1:       This subsection is a civil penalty provision.

Note 2:       Section 79 defines involved.

             (3)  A person commits an offence if they are involved in a contravention of section 208 by a public company or entity and the involvement is dishonest.

Division 2Exceptions to the requirement for member approval

210  Arm’s length terms

                   Member approval is not needed to give a financial benefit on terms that:

                     (a)  would be reasonable in the circumstances if the public company or entity and the related party were dealing at arm’s length; or

                     (b)  are less favourable to the related party than the terms referred to in paragraph (a).

211  Remuneration and reimbursement for officer or employee

Benefits that are reasonable remuneration

             (1)  Member approval is not needed to give a financial benefit if:

                     (a)  the benefit is remuneration to a related party as an officer or employee of the following:

                              (i)  the public company

                             (ii)  an entity that the public company controls

                            (iii)  an entity that controls the public company

                            (iv)  an entity that is controlled by an entity that controls the public company; and

                     (b)  to give the remuneration would be reasonable given:

                              (i)  the circumstances of the public company or entity giving the remuneration; and

                             (ii)  the related party’s circumstances (including the responsibilities involved in the office or employment).

Benefits that are payments of expenses incurred

             (2)  Member approval is not needed to give a financial benefit if:

                     (a)  the benefit is payment of expenses incurred or to be incurred, or reimbursement for expenses incurred, by a related party in performing duties as an officer or employee of the following:

                              (i)  the public company

                             (ii)  an entity that the public company controls

                            (iii)  an entity that controls the public company

                            (iv)  an entity that is controlled by an entity that controls the public company; and

                     (b)  to give the benefit would be reasonable in the circumstances of the public company or entity giving the remuneration.

             (3)  For the purposes of this section:

                     (a)  a contribution made by a body corporate to a fund for the purpose of making provision for, or obtaining, superannuation benefits for an officer of the body, or for dependants of an officer of the body, is remuneration provided by the body to the officer of the body; and

                     (b)  a financial benefit given to a person because of the person ceasing to hold an office or employment as an officer or employee of a body corporate is remuneration paid or provided to the person in a capacity as an officer of the body.

212  Indemnities, exemptions, insurance premiums and payment for legal costs for officers

Indemnities, exemptions and insurance premiums

             (1)  Member approval is not needed to give a financial benefit if:

                     (a)  the benefit is for a related party who is an officer of the public company or entity; and

                     (b)  the benefit is:

                              (i)  an indemnity, exemption or insurance premium in respect of a liability incurred as an officer of the public company or entity; or

                             (ii)  an agreement to give an indemnity or exemption, or to pay an insurance premium, of that kind; and

                     (c)  to give the benefit would be reasonable in the circumstances of the public company or entity giving the benefit.

Note:          Sections 199A to 199C may prohibit giving an indemnity or exemption or paying an insurance premium for an officer.

Payments in respect of legal costs

             (2)  Member approval is not needed to give a financial benefit if:

                     (a)  the benefit is for a related party who is an officer of the public company or entity; and

                     (b)  the benefit is the making of, or an agreement to make, a payment (whether by way of advance, loan or otherwise) in respect of legal costs incurred by the officer in defending an action for a liability incurred as an officer of the public company or entity; and

                     (c)  either:

                              (i)  section 199A does not apply to the costs; or

                             (ii)  if section 199A applies to the costs—the officer must repay the amount paid if the costs become costs for which the company must not give the officer an indemnity under that section; and

                     (d)  to give the benefit would be reasonable in the circumstances of the public company or entity giving the benefit.

             (3)  In working out for the purposes of subsection (1) or (2) whether giving the benefit is reasonable in the circumstances:

                     (a)  assess whether it would be reasonable on the basis of the circumstances existing:

                              (i)  if the benefit is given under an agreement—at the time when the agreement is or was made; or

                             (ii)  if the benefit is not given under an agreement—at the time when the benefit is or was given; and

                     (b)  disregard any other financial benefit given or payable to the officer by the public company or entity.

213  Small amounts given to director or spouse

             (1)  Member approval is not needed to give a financial benefit that is an amount of money for a director of the public company or their spouse or de facto spouse if the amount does not exceed $2,000 or a greater amount as prescribed by the regulations.

             (2)  In working out the amount given:

                     (a)  add in all amounts previously given by the public company and any entities controlled by the public company to:

                              (i)  the director; or

                             (ii)  their spouse; or

                            (iii)  their de facto spouse; and

                     (b)  disregard:

                              (i)  amounts that have been repaid; and

                             (ii)  amounts that fall under any other exception in this Part or a corresponding previous law.

For the purposes of this subsection, the time at which the entity must be controlled by the public company is the time at which the amount is given.

214  Benefit to or by closely‑held subsidiary

             (1)  Member approval is not needed to give a financial benefit if the benefit is given:

                     (a)  by a body corporate to a closely‑held subsidiary of the body; or

                     (b)  by a closely‑held subsidiary of a body corporate to the body or an entity it controls.

             (2)  For the purposes of this section, a body corporate is a closely‑held subsidiary of another body corporate if, and only if, no member of the first‑mentioned body is a person other than:

                     (a)  the other body; or

                     (b)  a nominee of the other body; or

                     (c)  a body corporate that is a closely‑held subsidiary of the other body because of any other application or applications of this subsection; or

                     (d)  a nominee of a body referred to in paragraph (c).

             (3)  For the purposes of subsection (2), disregard shares that are not voting shares.

215  Benefits to members that do not discriminate unfairly

                   Member approval is not needed to give a financial benefit if:

                     (a)  the benefit is given to the related party in their capacity as a member of the public company; and

                     (b)  giving the benefit does not discriminate unfairly against the other members of the public company.

216  Court order

                   Member approval is not needed to give a financial benefit under an order of a court.

Division 3Procedure for obtaining member approval

217  Resolution may specify matters by class or kind

                   A resolution under this Division may specify anything either in particular or by reference to class or kind.

218  Company must lodge material that will be put to members with ASIC

             (1)  At least 14 days before the notice convening the relevant meeting is given, the public company must lodge:

                     (a)  a proposed notice of meeting setting out the text of the proposed resolution; and

                     (b)  a proposed explanatory statement satisfying section 219; and

                     (c)  any other document that is proposed to accompany the notice convening the meeting and that relates to the proposed resolution; and

                     (d)  any other document that any of the following proposes to give to members of the public company before or at the meeting:

                              (i)  the company;

                             (ii)  a related party of the company to whom the proposed resolution would permit a financial benefit to be given;

                            (iii)  an associate of the company or of such a related party;

                            and can reasonably be expected to be material to a member in deciding how to vote on the proposed resolution.

             (2)  If, when the notice convening the meeting is given, ASIC:

                     (a)  has approved in writing a period of less than 14 days for the purposes of subsection (1); and

                     (b)  has not revoked the approval by written notice to the public company;

subsection (1) applies as if the reference to 14 days were a reference to the approved period.

             (3)  ASIC may give and revoke approvals for the purposes of subsection (2).

219  Requirements for explanatory statement to members

             (1)  The proposed explanatory statement lodged under section 218 must be in writing and set out:

                     (a)  the related parties to whom the proposed resolution would permit financial benefits to be given; and

                     (b)  the nature of the financial benefits; and

                     (c)  in relation to each director of the company:

                              (i)  if the director wanted to make a recommendation to members about the proposed resolution—the recommendation and his or her reasons for it; or

                             (ii)  if not—why not; or

                            (iii)  if the director was not available to consider the proposed resolution—why not; and

                     (d)  in relation to each such director:

                              (i)  whether the director had an interest in the outcome of the proposed resolution; and

                             (ii)  if so—what it was; and

                     (e)  all other information that:

                              (i)  is reasonably required by members in order to decide whether or not it is in the company’s interests to pass the proposed resolution; and

                             (ii)  is known to the company or to any of its directors.

             (2)  An example of the kind of information referred to in paragraph (1)(d) is information about what, from an economic and commercial point of view, are the true potential costs and detriments of, or resulting from, giving financial benefits as permitted by the proposed resolution, including (without limitation):

                     (a)  opportunity costs; and

                     (b)  taxation consequences (such as liability to fringe benefits tax); and

                     (c)  benefits forgone by whoever would give the benefits.

Note:          Sections 180 and 181 require an officer of a corporation to act honestly and to exercise care and diligence. These duties extend to preparing an explanatory statement under this section. Section 1309 creates offences where false and misleading material relating to a corporation’s affairs is made available or furnished to members.

220  ASIC may comment on proposed resolution

             (1)  Within 14 days after a public company lodges documents under section 218, ASIC may give to the company written comments on those documents (other than comments about whether the proposed resolution is in the company’s best interests).

             (2)  ASIC may consult with the Exchange for the purposes of giving comments to a company that is included in the official list of the Exchange.

             (3)  Subsection (2) does not limit the persons with whom ASIC may consult.

             (4)  ASIC must keep a copy of the written comments it gives to a company under subsection (1), and subsections 1274(2) and (5) apply to the copy as if it were a document lodged with ASIC.

             (5)  The fact that ASIC has given particular comments, or has declined to give comments, under subsection (1) does not in any way affect the performance or exercise of any of ASIC’s functions and powers.

221  Requirements for notice of meeting

                   The notice convening the meeting:

                     (a)  must be the same, in all material respects, as the proposed notice lodged under section 218; and

                     (b)  must be accompanied by an explanatory statement that is the same, in all material respects, as the proposed explanatory statement lodged under that section; and

                     (c)  must be accompanied by a document that is, or documents that are, the same, in all material respects, as the document or documents (if any) lodged under paragraph 218(1)(c); and

                     (d)  if ASIC has given to the public company, under section 220, comments on the documents lodged under section 218—must be accompanied by a copy of those comments; and

                     (e)  must not be accompanied by any other documents.

222  Other material put to members

                   Each document (if any) that:

                     (a)  did not accompany the notice convening the meeting; and

                     (b)  was given to members of the public company before or at the meeting by:

                              (i)  the public company; or

                             (ii)  a related party of the public company to whom the proposed resolution would permit a financial benefit to be given; or

                            (iii)  an associate of the public company or of such a related party; and

                     (c)  can reasonably be expected to have been material to a member in deciding how to vote on the proposed resolution;

must be the same, in all material respects, as a document lodged under paragraph 218(1)(d).

223  Proposed resolution cannot be varied

                   The resolution must be the same as the proposed resolution set out in the proposed notice lodged under section 218.

224  Voting by or on behalf of related party interested in proposed resolution

             (1)  At a general meeting, a vote on a proposed resolution under this Division must not be cast (in any capacity) by or on behalf of:

                     (a)  a related party of the public company to whom the resolution would permit a financial benefit to be given; or

                     (b)  an associate of such a related party.

             (2)  Subsection (1) does not prevent the casting of a vote if:

                     (a)  it is cast by a person as a proxy appointed by writing that specifies how the proxy is to vote on the proposed resolution; and

                     (b)  it is not cast on behalf of a related party or associate of a kind referred to in subsection (1).

             (3)  The regulations may prescribe cases where subsection (1) does not apply.

             (4)  ASIC may by writing declare that:

                     (a)  subsection (1) does not apply to a specified proposed resolution; or

                     (b)  subsection (1) does not prevent the casting of a vote, on a specified proposed resolution, by a specified entity, or on behalf of a specified entity;

but may only do so if satisfied that the declaration will not cause unfair prejudice to the interests of any member of the public company.

             (5)  A declaration in force under subsection (4) has effect accordingly.

             (6)  If a vote is cast in contravention of subsection (1), the related party or associate, as the case may be, contravenes this subsection, whether or not the proposed resolution is passed.

             (7)  For the purposes of this section, a vote is cast on behalf of an entity if, and only if, it is cast:

                     (a)  as proxy for the entity; or

                     (b)  otherwise on behalf of the entity; or

                     (c)  in respect of a share in respect of which the entity has:

                              (i)  power to vote; or

                             (ii)  power to exercise, or control the exercise of, a right to vote.

             (8)  Subject to subsection 225(1), a contravention of this section does not affect the validity of a resolution.

             (9)  This section has effect despite:

                     (a)  anything else in this Law or in any other law of this jurisdiction (including the general law); or

                     (b)  anything in a body corporate’s constitution.

225  Voting on the resolution

             (1)  If any votes on the resolution are cast in contravention of subsection 224(1), it must be the case that the resolution would still be passed even if those votes were disregarded.

             (2)  If a poll was duly demanded on the question that the resolution be passed, subsections (3) and (4) apply in relation to voting on the poll.

             (3)  In relation to each member of the public company who voted on the resolution in person, the public company must record in writing:

                     (a)  the member’s name; and

                     (b)  how many votes the member cast for the resolution and how many against.

             (4)  In relation to each member of the public company who voted on the resolution by proxy, or by a representative authorised under section 250D, the public company must record in writing:

                     (a)  the member’s name; and

                     (b)  in relation to each person who voted as proxy, or as such a representative, for the member:

                              (i)  the person’s name; and

                             (ii)  how many votes the person cast on the resolution as proxy, or as such a representative, for the member; and

                            (iii)  how many of those votes the person cast for the resolution and how many against.

             (5)  For 7 years after the day when a resolution under this Division is passed, the public company must retain the records it made under this section in relation to the resolution.

226  Notice of resolution to be lodged

                   The public company must lodge a notice setting out the text of the resolution within 14 days after the resolution is passed.

227  Declaration by court of substantial compliance

             (1)  The Court may declare that the conditions prescribed by this Division have been satisfied if it finds that they have been substantially satisfied.

             (2)  A declaration may be made only on the application of an interested person.


 

Part 2E.2Related parties and financial benefits

  

228  Related parties

Controlling entities

             (1)  An entity that controls a public company is a related party of the public company.

Directors and their spouses

             (2)  The following persons are related parties of a public company:

                     (a)  directors of the public company

                     (b)  directors (if any) of an entity that controls the public company

                     (c)  if the public company is controlled by an entity that is not a body corporate—each of the persons making up the controlling entity

                     (d)  spouses and de facto spouses of the persons referred to in paragraphs (a), (b) and (c).

Relatives of directors and spouses

             (3)  The following relatives of persons referred to in subsection (2) are related parties of the public company:

                     (a)  parents

                     (b)  children.

Entities controlled by other related parties

             (4)  An entity controlled by a related party referred to in subsection (1), (2) or (3) is a related party of the public company unless the entity is also controlled by the public company.

Related party in previous 6 months

             (5)  An entity is a related party of a public company at a particular time if the entity was a related party of the public company of a kind referred to in subsection (1), (2), (3) or (4) at any time within the previous 6 months.

Entity has reasonable grounds to believe it will become related party in future

             (6)  An entity is a related party of a public company at a particular time if the entity believes or has reasonable grounds to believe that it is likely to become a related party of the public company of a kind referred to in subsection (1), (2), (3) or (4) at any time in the future.

Acting in concert with related party

             (7)  An entity is a related party of a public company if the entity acts in concert with a related party of the public company on the understanding that the related party will receive a financial benefit if the public company gives the entity a financial benefit.

229  Giving a financial benefit

             (1)  In determining whether a financial benefit is given for the purposes of this Chapter:

                     (a)  give a broad interpretation to financial benefits being given, even if criminal or civil penalties may be involved; and

                     (b)  the economic and commercial substance of conduct is to prevail over its legal form; and

                     (c)  disregard any consideration that is or may be given for the benefit, even if the consideration is adequate.

             (2)  Giving a financial benefit includes the following:

                     (a)  giving a financial benefit indirectly, for example, through 1 or more interposed entities

                     (b)  giving a financial benefit by making an informal agreement, oral agreement or an agreement that has no binding force

                     (c)  giving a financial benefit that does not involve paying money (for example by conferring a financial advantage).

             (3)  The following are examples of giving a financial benefit to a related party:

                     (a)  giving or providing the related party finance or property

                     (b)  buying an asset from or selling an asset to the related party

                     (c)  leasing an asset from or to the related party

                     (d)  supplying services to or receiving services from the related party

                     (e)  issuing securities or granting an option to the related party

                      (f)  taking up or releasing an obligation of the related party.


 

Part 2E.3Interaction with other rules

  

230  General duties still apply

                   A director is not relieved from any of their duties under this Law (including sections 180 and 184), 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.

2  Section 246A

Renumber as section 231.

3  Part 2F.1

Repeal the Part, substitute:

  

Part 2F.1Oppressive conduct of affairs

  

232  Grounds for Court order

                   The Court may make an order under section 233 if:

                     (a)  the conduct of a company’s affairs; or

                     (b)  an actual or proposed act or omission by or on behalf of a company; or

                     (c)  a resolution, or a proposed resolution, of members or a class of members of a company;

is either:

                     (d)  contrary to the interests of the members as a whole; or

                     (e)  oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.

Note:          For affairs, see section 53.

233  Orders the Court can make

             (1)  The Court can make any order under this section that it considers appropriate in relation to the company, including an order:

                     (a)  that the company be wound up

                     (b)  that the company’s existing constitution be modified or repealed

                     (c)  regulating the conduct of the company’s affairs in the future

                     (d)  for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law

                     (e)  for the purchase of shares with an appropriate reduction of the company’s share capital

                      (f)  for the company to institute, prosecute, defend or discontinue specified proceedings

                     (g)  authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company

                     (h)  appointing a receiver or a receiver and manager of any or all of the company’s property

                      (i)  restraining a person from engaging in specified conduct or from doing a specified act

                      (j)  requiring a person to do a specified act.

Order that the company be wound up

             (2)  If an order that a company be wound up is made under this section, the provisions of this Law relating to the winding up of companies apply:

                     (a)  as if the order were made under section 461; and

                     (b)  with such changes as are necessary.

Order altering constitution

             (3)  If an order made under this section repeals or modifies a company’s constitution, or requires the company to adopt a constitution, the company does not have the power under section 136 to change or repeal the constitution if that change or repeal would be inconsistent with the provisions of the order, unless:

                     (a)  the order states that the company does have the power to make such a change or repeal; or

                     (b)  the company first obtains the leave of the Court.

234  Who can apply for order

                   An application for an order under section 233 in relation to a company may be made by:

                     (a)  a member of the company, even if the application relates to an act or omission that is against:

                              (i)  the member in a capacity other than as a member; or

                             (ii)  another member in their capacity as a member; or

                     (b)  a person who has been removed from the register of members because of a selective reduction; or

                     (c)  a person who has ceased to be a member of the company if the application relates to the circumstances in which they ceased to be a member; or

                     (d)  a person to whom a share in the company has been transmitted by will or by operation of law; or

                     (e)  a person whom ASIC thinks appropriate having regard to investigations it is conducting or has conducted into:

                              (i)  the company’s affairs; or

                             (ii)  matters connected with the company’s affairs.

Note 1:       If an application is made under this section, in certain cases the court may order that the company be wound up in insolvency (see section 459B).

Note 2:       For selective reduction, see subsection 256B(2).

235  Requirement for person to lodge order

                   If an order is made under section 233, the applicant must lodge a copy of the order with ASIC within 14 days after it is made.


 

Part 2F.1AProceedings on behalf of a company by members and others

  

236  Bringing, or intervening in, proceedings on behalf of a company

             (1)  A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:

                     (a)  the person is:

                              (i)  a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or

                             (ii)  an officer or former officer of the company; and

                     (b)  the person is acting with leave granted under section 237.

             (2)  Proceedings brought on behalf of a company must be brought in the company’s name.

             (3)  The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.

Note 1:       For the right to inspect company books, see subsections 247A(3) to (6).

Note 2:       For the requirements to disclose proceedings and leave applications in the annual directors’ report, see subsections 300(14) and (15).

Note 3:       This section does not prevent a person bringing, or intervening in, proceedings on their own behalf in respect of a personal right.

237  Applying for and granting leave

             (1)  A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.

             (2)  The Court must grant the application if it is satisfied that:

                     (a)  it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and

                     (b)  the applicant is acting in good faith; and

                     (c)  it is in the best interests of the company that the applicant be granted leave; and

                     (d)  if the applicant is applying for leave to bring proceedings—there is a serious question to be tried; and

                     (e)  either:

                              (i)  at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or

                             (ii)  it is appropriate to grant leave even though subparagraph (i) is not satisfied.

             (3)  A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:

                     (a)  the proceedings are:

                              (i)  by the company against a third party; or

                             (ii)  by a third party against the company; and

                     (b)  the company has decided:

                              (i)  not to bring the proceedings; or

                             (ii)  not to defend the proceedings; or

                            (iii)  to discontinue, settle or compromise the proceedings; and

                     (c)  all of the directors who participated in that decision:

                              (i)  acted in good faith for a proper purpose; and

                             (ii)  did not have a material personal interest in the decision; and

                            (iii)  informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and

                            (iv)  rationally believed that the decision was in the best interests of the company.

The director’s belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold.

             (4)  For the purposes of subsection (3):

                     (a)  a person is a third party if:

                              (i)  the company is a public company and the person is not a related party of the company; or

                             (ii)  the company is not a public company and the person would not be a related party of the company if the company were a public company; and

                     (b)  proceedings by or against the company include any appeal from a decision made in proceedings by or against the company.

Note:          Related party is defined in section 228.

238  Substitution of another person for the person granted leave

             (1)  Any of the following persons may apply to the Court for an order that they be substituted for a person to whom leave has been granted under section 237:

                     (a)  a member, former member, or a person entitled to be registered as a member, of the company or of a related body corporate

                     (b)  an officer, or former officer, of the company.

             (2)  The Court may make the order if it is satisfied that:

                     (a)  the applicant is acting in good faith; and

                     (b)  it is appropriate to make the order in all the circumstances.

             (3)  An order substituting one person for another has the effect that:

                     (a)  the grant of leave is taken to have been made in favour of the substituted person; and

                     (b)  if the other person has already brought the proceedings or intervened—the substituted person is taken to have brought those proceedings or to have made that intervention.

239  Effect of ratification by members

             (1)  If the members of a company ratify or approve conduct, the ratification or approval:

                     (a)  does not prevent a person from bringing or intervening in proceedings with leave under section 237 or from applying for leave under that section; and

                     (b)  does not have the effect that proceedings brought or intervened in with leave under section 237 must be determined in favour of the defendant, or that an application for leave under that section must be refused.

             (2)  If members of a company ratify or approve conduct, the Court may take the ratification or approval into account in deciding what order or judgment (including as to damages) to make in proceedings brought or intervened in with leave under section 237 or in relation to an application for leave under that section. In doing this, it must have regard to:

                     (a)  how well‑informed about the conduct the members were when deciding whether to ratify or approve the conduct; and

                     (b)  whether the members who ratified or approved the conduct were acting for proper purposes.

240  Leave to discontinue, compromise or settle proceedings brought, or intervened in, with leave

                   Proceedings brought or intervened in with leave must not be discontinued, compromised or settled without the leave of the Court.

241  General powers of the Court

             (1)  The Court may make any orders, and give any directions, that it considers appropriate in relation to proceedings brought or intervened in with leave, or an application for leave, including:

                     (a)  interim orders; and

                     (b)  directions about the conduct of the proceedings, including requiring mediation; and

                     (c)  an order directing the company, or an officer of the company, to do, or not to do, any act; and

                     (d)  an order appointing an independent person to investigate, and report to the Court on:

                              (i)  the financial affairs of the company; or

                             (ii)  the facts or circumstances which gave rise to the cause of action the subject of the proceedings; or

                            (iii)  the costs incurred in the proceedings by the parties to the proceedings and the person granted leave.

             (2)  A person appointed by the Court under paragraph (1)(d) is entitled, on giving reasonable notice to the company, to inspect any books of the company for any purpose connected with their appointment.

             (3)  If the Court appoints a person under paragraph (1)(d):

                     (a)  the Court must also make an order stating who is liable for the remuneration and expenses of the person appointed; and

                     (b)  the Court may vary the order at any time; and

                     (c)  the persons who may be made liable under the order, or the order as varied, are:

                              (i)  all or any of the parties to the proceedings or application; and

                             (ii)  the company; and

                     (d)  if the order, or the order as varied, makes 2 or more persons liable, the order may also determine the nature and extent of the liability of each of those persons.

             (4)  Subsection (3) does not affect the powers of the Court as to costs.

242  Power of the Court to make costs orders

                   The Court may at any time make any orders it considers appropriate about the costs of the following persons in relation to proceedings brought or intervened in with leave under section 237 or an application for leave under that section:

                     (a)  the person who applied for or was granted leave

                     (b)  the company

                     (c)  any other party to the proceedings or application.

An order under this section may require indemnification for costs.

4  After Chapter 2K

Insert:

Chapter 2LDebentures

Part 2L.1Requirement for trust deed and trustee

  

260FA  Requirement for trust deed and trustee

             (1)  Before a body:

                     (a)  makes an offer of debentures in this jurisdiction that needs disclosure to investors under Chapter 6D, or does not need disclosure to investors under Chapter 6D because of subsection 708(14) (disclosure document exclusion for debenture roll overs); or

                     (b)  makes an offer of debentures in this jurisdiction or elsewhere as consideration for the acquisition of securities under an off‑market takeover bid; or

                     (c)  issues debentures in this jurisdiction or elsewhere under a compromise or arrangement under Part 5.1 approved at a meeting held as a result of an order under subsection 411(1) or (1A);

regardless of where any resulting issue, sale or transfer occurs, the body must enter into a trust deed that complies with section 260FB and appoint a trustee that complies with section 260FC.

Note:          For rules about when an offer of debentures will need disclosure to investors under Chapter 6D, see sections 706, 707 and 708.

             (2)  The body may revoke the trust deed after it has repaid all amounts payable under the debentures in accordance with the debentures’ terms and the trust deed.

             (3)  The body must comply with this Chapter.

Note:          Sections 168 and 601CZB require a register of debenture holders to be set up and kept.

260FB  Trust deed

                   The trust deed must provide that the following are held in trust by the trustee for the benefit of the debenture holders:

                     (a)  the right to enforce the borrower’s duty to repay

                     (b)  any charge or security for repayment

                     (c)  the right to enforce any other duties that the borrower and any guarantor have under:

                              (i)  the terms of the debentures; or

                             (ii)  the provisions of the trust deed or this Chapter.

Note:          For information about the duties that the borrower and any guarantor body have under this Chapter, see sections 260GB to 260HE.

260FC  Who can be a trustee

Who can be trustee

             (1)  The trustee must be:

                     (a)  the Public Trustee of any State or Territory; or

                     (b)  a body corporate authorised by a law of any State or Territory to take in its own name a grant of probate of the will, or letters of administration of the estate, of a deceased person; or

                     (c)  a body corporate registered under the Life Insurance Act 1995; or

                     (d)  an Australian ADI; or

                     (e)  a body corporate, all of whose shares are held beneficially by a body corporate or bodies corporate of the kind referred to in paragraph (b), (c) or (d) if that body or those bodies:

                              (i)  are liable for all of the liabilities incurred, or to be incurred, by the trustee as trustee; or

                             (ii)  have subscribed for and beneficially hold shares in the trustee and there is an uncalled liability of at least $500,000 in respect of those shares that can only be called up if the trustee becomes an externally‑administered body corporate (see section 254N); or

                      (f)  a body corporate approved by ASIC (see section 260MB).

Note:          Section 260GD provides that if the borrower becomes aware that the trustee cannot be a trustee, the trustee must be replaced.

Circumstances in which a person cannot be trustee

             (2)  A person may only be appointed or act as trustee (except to the extent provided for by section 260FD) if the appointment or acting will not result in a conflict of interest or duty. This subsection is not intended to affect any rule of law or equity.

260FD  Existing trustee continues to act until new trustee takes office

                   An existing trustee continues to act as the trustee until a new trustee is appointed and has taken office as trustee, despite any rule of law or equity to the contrary.

Note:          This section applies even if the existing trustee resigns.

260FE  Replacement of trustee

Related party of existing trustee may be appointed as a new trustee

             (1)  In addition to any other powers of appointment under the terms of the debentures or provisions of the trust deed, the borrower may appoint a body corporate that is related to the existing trustee as trustee in place of the existing trustee if:

                     (a)  the body corporate can be a trustee under section 260FC; and

                     (b)  the existing trustee consents in writing to the appointment.

The appointment has effect despite any terms of the debentures or provisions of the trust deed.

Appointment by Court

             (2)  The Court may:

                     (a)  appoint a person who may be a trustee under section 260FC as trustee on the application of the borrower, a debenture holder or ASIC if:

                              (i)  a trustee has not been validly appointed; or

                             (ii)  the trustee has ceased to exist; or

                     (b)  terminate the existing trustee’s appointment and appoint a person who may be a trustee under section 260FC as trustee in the existing trustee’s place on the application of the borrower, the existing trustee, a debenture holder or ASIC if:

                              (i)  the existing trustee cannot be trustee under section 260FC; or

                             (ii)  the existing trustee fails, or refuses, to act.


 

Part 2L.2Duties of borrower

  

260GA  Duties of borrower

                   A borrower that is required to enter into a trust deed under section 260FA has the duties imposed by this Part.

260GB  General duties

                   The borrower must:

                     (a)  carry on and conduct its business in a proper and efficient manner; and

                     (b)  provide a copy of the trust deed to:

                              (i)  a debenture holder; or

                             (ii)  the trustee;

                            if they request a copy; and

                     (c)  make all of its financial and other records available for inspection by:

                              (i)  the trustee; or

                             (ii)  an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

                            (iii)  a registered company auditor appointed by the trustee to carry out the inspection;

                            and give them any information, explanations or other assistance that they require about matters relating to those records.

Note:          The borrower also has a duty to call a meeting of debenture holders in certain circumstances (see section 260KA).

260GC  Duty to notify ASIC of name of trustee

                   The borrower must lodge with ASIC a notice of the name of a trustee within 14 days after they are appointed. The notice must be in the prescribed form.

260GD  Duty to replace trustee

                   The borrower must take all reasonable steps to replace the trustee under section 260FE as soon as practicable after the borrower becomes aware that the trustee:

                     (a)  has ceased to exist; or

                     (b)  has not been validly appointed; or

                     (c)  cannot be a trustee under section 260FC; or

                     (d)  has failed or refused to act as trustee.

260GE  Duty to inform trustee about charges

                   If the borrower creates a charge, it must:

                     (a)  give the trustee written details of the charge within 21 days after it is created; and

                     (b)  if the total amount to be advanced on the security of the charge is indeterminate and the advances are not merged in a current account with bankers, trade creditors or anyone else—give the trustee written details of the amount of each advance within 7 days after it is made.

Note:          If the advances are merged in a current account the borrower must give the trustee the details in the quarterly report (see subsection 260GF(4)).

260GF  Duty to give trustee and ASIC quarterly reports

Quarterly reports

             (1)  Within 1 month after the end of each quarter, the borrower must:

                     (a)  give the trustee a quarterly report that sets out the information required by subsections (4), (5) and (6); and

                     (b)  lodge a copy of the report with ASIC (see section 351).

First quarter

             (2)  The first quarter is the period of 3 months ending on a day fixed by the borrower, by written notice to the trustee. The day must be less than 6 months after the first issue of a debenture under the trust deed.

Subsequent quarters

             (3)  Each of the subsequent quarters are periods of 3 months. The trustee may allow a particular quarter to be a period of less than 3 months if the trustee is satisfied that special circumstances justify doing so.

Content of quarterly report

             (4)  The report for a quarter must include details of:

                     (a)  any failure by the borrower and each guarantor to comply with the terms of the debentures or the provisions of the trust deed or this Chapter during the quarter; and

                     (b)  any event that has happened during the quarter that has caused, or could cause, 1 or more of the following:

                              (i)  any amount deposited or lent under the debentures to become immediately payable

                             (ii)  the debentures to become immediately enforceable

                            (iii)  any other right or remedy under the terms of the debenture or provisions of the trust deed to become immediately enforceable; and

                     (c)  any circumstances that have occurred during the quarter that materially prejudice:

                              (i)  the borrower, any of its subsidiaries, or any of the guarantors; or

                             (ii)  any security or charge included in or created by the debentures or the trust deed; and

                     (d)  any substantial change in the nature of the business of the borrower, any of its subsidiaries, or any of the guarantors that has occurred during the quarter; and

                     (e)  any of the following events that happened in the quarter:

                              (i)  the appointment of a guarantor

                             (ii)  the cessation of liability of a guarantor body for the payment of the whole or part of the money for which it was liable under the guarantee

                            (iii)  a change of name of a guarantor (if this happens, the report must also disclose the guarantor’s new name); and

                      (f)  the net amount outstanding on any advances at the end of the quarter if the borrower has created a charge where:

                              (i)  the total amount to be advanced on the security of the charge is indeterminate; and

                             (ii)  the advances are merged in a current account with bankers, trade creditors or anyone else; and

                     (g)  any other matters that may materially prejudice any security or the interests of the debenture holders.

Note:          Paragraph (f)—the borrower has a duty to inform the trustee about charges as they are created (see section 260GE).

             (5)  If the borrower has deposited money with, or lent money to, a related body corporate during the quarter, the report must also include details of:

                     (a)  the total of the money deposited with, or lent to, the related body corporate during the quarter (see subsection (7)); and

                     (b)  the total amount of money owing to the borrower at the end of the quarter in respect of the deposits or loans to the related body corporate.

Disregard any amount that the borrower deposits with an ADI in the normal course of the borrower’s business.

             (6)  If the borrower has assumed a liability of a related body corporate during the quarter, the report must also include details of the extent of the liability assumed during the quarter and the extent of the liability as at the end of the quarter.

             (7)  For the purposes of subsections (5) and (6), the report:

                     (a)  must distinguish between deposits, loans and assumptions of liability that are secured and those that are unsecured; and

                     (b)  may exclude any deposit, loan or assumption of liability on behalf of the related body corporate if it has:

                              (i)  guaranteed the repayment of the debentures of the borrower; and

                             (ii)  secured the guarantee by a charge over all of its property in favour of the trustee.

Formalities

             (8)  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.

260GG  Exceptions

                   Sections 260GE and 260GF do not apply in respect of the borrower while:

                     (a)  it is under external administration; or

                     (b)  a receiver, or a receiver and manager, of property of the borrower has been appointed and has not ceased to act under that appointment.

260GH   How debentures may be described

             (1)  The borrower may describe or refer to the debentures in:

                     (a)  any disclosure in relation to the offer of the debentures; or

                     (b)  any other document constituting or relating to the offer of the debentures; or

                     (c)  the debentures themselves;

only in accordance with the following table:

 

How debentures may be described

Item

Description

When description may be used

1

mortgage debenture

only if the circumstances set out in subsection (2) are satisfied

2

debenture

only if the circumstances set out in subsection (2) or (3) are satisfied

3

unsecured note or unsecured deposit note

in any other case

When debentures can be called mortgage debentures or debentures

             (2)  The borrower may describe or refer to the debentures as:

                     (a)  mortgage debentures; or

                     (b)  debentures;

if:

                     (c)  the repayment of all money that has been, or may be, deposited or lent under the debentures is secured by a first mortgage given to the trustee over land vested in the borrower or in any of the guarantors; and

                     (d)  the mortgage has been registered, or is a registrable mortgage that has been lodged for registration, in accordance with the law relating to the registration of mortgages of land in the place where the land is situated; and

                     (e)  the total amount of that money and of all other liabilities (if any) secured by the mortgage of that land ranking equally with the liability to repay that money does not exceed 60% of the value of the borrower’s or guarantor’s interest in that land as shown in the valuation included in the disclosure document for the debentures.

When debentures can be called debentures

             (3)  The borrower may describe or refer to the debentures as debentures if:

                     (a)  the repayment of all money that has been, or may be, deposited or lent under the debentures has been secured by a charge in favour of the trustee over the whole or any part of the tangible property of the borrower or of any of the guarantors; and

                     (b)  the tangible property that constitutes the security for the charge is sufficient and is reasonably likely to be sufficient to meet the liability for the repayment of all such money and all other liabilities that:

                              (i)  have been or may be incurred; and

                             (ii)  rank in priority to, or equally with, that liability.

260GI  Offences for failure to comply with statutory duties

                   The borrower commits an offence if it intentionally or recklessly contravenes section 260GB, 260GC, 260GD, 260GE, 260GF or 260KA.


 

Part 2L.3Duties of guarantor

  

260HA  Duties of guarantor

                   If a borrower is required to enter into a trust deed under section 260FA in relation to debentures, a guarantor in respect of the debentures has the duties imposed by this Part.

260HB  General duties

                   The guarantor must:

                     (a)  carry on and conduct its business in a proper and efficient manner; and

                     (b)  make all of its financial and other records available for inspection by:

                              (i)  the trustee; or

                             (ii)  an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

                            (iii)  a registered company auditor appointed by the trustee to carry out the inspection;

                            and give them any information, explanations or other assistance that they require about matters relating to those records.

260HC  Duty to inform trustee about charges

                   If the guarantor creates a charge, it must:

                     (a)  give the trustee written details of the charge within 21 days after it is created; and

                     (b)  if the total amount to be advanced on the security of the charge is indeterminate, give the trustee written details of:

                              (i)  the amount of each advance made within 7 days after it is made; or

                             (ii)  where the advances are merged in a current account with bankers, trade creditors or anyone else—the net amount outstanding on the advances at the end of every 3 months.

260HD  Exceptions

                   Section 260HC does not apply in respect of the guarantor while:

                     (a)  it is under external administration; or

                     (b)  a receiver, or a receiver and manager, of property of the guarantor has been appointed and has not ceased to act under that appointment.

260HE  Offences for failure to comply with statutory duties

                   The guarantor commits an offence if it intentionally or recklessly contravenes paragraph 260HB(b) or section 260HC.


 

Part 2L.4Trustee

  

260JA  Trustee’s duties

                   The trustee of a trust deed entered into under section 260FA must:

                     (a)  exercise reasonable diligence to ascertain whether the property of the borrower and of each guarantor that is or should be available (whether by way of security or otherwise) will be sufficient to repay the amount deposited or lent when it becomes due; and

                     (b)  exercise reasonable diligence to ascertain whether the borrower or any guarantor has committed any breach of:

                              (i)  the terms of the debentures; or

                             (ii)  the provisions of the trust deed or this Chapter; and

                     (c)  do everything in its power to ensure that the borrower or a guarantor remedies any breach known to the trustee of:

                              (i)  any term of the debentures; or

                             (ii)  any provision of the trust deed or this Chapter;

                            unless the trustee is satisfied that the breach will not materially prejudice the debenture holders’ interests or any security for the debentures; and

                     (d)  ensure that the borrower and each guarantor complies with Part 2K to the extent that it applies to the debentures; and

                     (e)  notify ASIC as soon as practicable if:

                              (i)  the borrower has not complied with section 260GE, 260GF or subsection 318(1) or (4); or

                             (ii)  a guarantor has not complied with section 260HC; and

                      (f)  notify ASIC and the borrower as soon as practicable if the trustee discovers that it cannot be a trustee under section 260FC; and

                     (g)  give the debenture holders a statement explaining the effect of any proposal that the borrower submits to the debenture holders before any meeting that:

                              (i)  the Court calls in relation to a scheme under subsection 411(1) or (1A); or

                             (ii)  the trustee calls under subsection 260KB(1); and

                     (h)  comply with any directions given to it at a debenture holders’ meeting referred to in section 260KA, 260KB or 260KC unless:

                              (i)  the trustee is of the opinion that the direction is inconsistent with the terms of the debentures or the provisions of the trust deed or this Law or is otherwise objectionable; and

                             (ii)  has either obtained, or is in the process of obtaining, an order from the Court under section 260NA setting aside or varying the direction; and

                      (i)  apply to the Court for an order under section 260NB if the borrower requests it to do so.

Note 1:       Paragraph (g)—Section 411 relates to compromises and arrangements.

Note 2:       Section 260JC deals with indemnification in respect of a trustee’s liability to the debenture holders.

260JB  Exemptions and indemnifications of trustee from liability

             (1)  A term of a debenture, provision of a trust deed or a term of a contract with holders of debentures secured by a trust deed, is void in so far as the term or provision would have the effect of:

                     (a)  exempting a trustee from liability for breach of section 260JA for failure to show the degree of care and diligence required of it as trustee; or

                     (b)  indemnifying the trustee against that liability;

unless the term or provision:

                     (c)  releases the trustee from liability for something done or omitted to be done before the release is given; or

                     (d)  enables a meeting of debenture holders to approve the release of the trustee from liability for something done or omitted to be done before the release is given.

             (2)  For the purposes of paragraph (1)(d):

                     (a)  a release is approved if the debenture holders who vote for the resolution hold 75% of the nominal value of the debentures held by all the debenture holders who attend the meeting and vote on the resolution; and

                     (b)  a debenture holder attends the meeting and votes on the resolution if:

                              (i)  they attend the meeting in person and vote on the resolution; or

                             (ii)  if proxies are permitted—they are represented at the meeting by a proxy and the proxy votes on the resolution.

260JC  Indemnity

                   The trustee is not liable for anything done or omitted to be done in accordance with a direction given to it by the debenture holders at any meeting called under section 260KA, 260KB or 260KC.


 

Part 2L.5Meetings of debenture holders

  

260KA  Borrower’s duty to call meeting

Duty to call meeting

             (1)  The borrower must call a meeting of debenture holders if:

                     (a)  debenture holders who together hold 10% or more of the nominal value of the issued debentures to which the trust relates direct the borrower to do so; and

                     (b)  the direction is given to the borrower in writing at its registered office; and

                     (c)  the purpose of the meeting is to:

                              (i)  consider the financial statements that were laid before the last AGM of the borrower; or

                             (ii)  give the trustee directions in relation to the exercise of any of its powers.

Note:          The trustee usually must comply with any directions given to it by the debenture holders at the meeting (see paragraph 260JA(h)).

Duty to give notification of meeting

             (2)  If the borrower is required to call a meeting, it must give notice of the time and place of the meeting to:

                     (a)  the trustee; and

                     (b)  the borrower’s auditor; and

                     (c)  each of the debenture holders whose names are entered on the register of debenture holders.

Notice to joint holders of a debenture must be given to the joint holder named first in the register of debenture holders.

             (3)  The borrower may give the notice to a debenture holder:

                     (a)  personally; or

                     (b)  by sending it by post to the address for the debenture holder in the register of debenture holders; or

                     (c)  by sending it to the fax number or electronic address (if any) nominated by the debenture holder; or

                     (d)  by any other means that the trust deed or the terms of the debentures permit.

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

When notice by post or fax is given

             (4)  A notice of meeting sent to a debenture holder is taken to be given:

                     (a)  3 days after it is posted, if it is posted; or

                     (b)  on the business day after it is sent, if it is sent by fax or other electronic means;

unless the trust deed or the terms of the debentures provide otherwise.

260KB  Trustee’s power to call meeting

Trustee may call meeting in event of breach

             (1)  If the borrower or a guarantor fails to remedy any breach of the terms of the debentures or provisions of the trust deed or this Chapter when required by the trustee, the trustee may:

                     (a)  call a meeting of debenture holders; and

                     (b)  inform the debenture holders of the failure at the meeting; and

                     (c)  submit proposals for protection of the debenture holders’ interests to the meeting; and

                     (d)  ask for directions from the debenture holders in relation to the matter.

Trustee may appoint person to chair meeting

             (2)  The trustee may appoint a person to chair a meeting of debenture holders called under subsection (1). If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.

260KC  Court may order meeting

             (1)  Without limiting section 260NA or 260NB, the Court may make an order under either of those sections for a meeting of all or any of the debenture holders to be held to give directions to the trustee. The order may direct the trustee to:

                     (a)  place before the debenture holders any information concerning their interests; and

                     (b)  place before the debenture holders any proposals to protect their interests that the Court directs or the trustee considers appropriate; and

                     (c)  obtain the debenture holders’ directions concerning the protection of their interests.

             (2)  The meeting is to be held and conducted in the manner the Court directs. The trustee may appoint a person to chair the meeting. If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.


 

Part 2L.6Civil liability

  

260L  Civil liability for contravening this Chapter

             (1)  A person who suffers loss or damage because a person contravenes a provision of this Chapter may recover the amount of the loss or damage from:

                     (a)  the person who contravened the provision; or

                     (b)  a person involved in the contravention.

This is so even if the person did not commit, and was not involved in, the contravention.

             (2)  An action under subsection (1) may begin at any time within 6 years after the day on which the cause of action arose.

             (3)  This Part does not affect any liability that a person has under any other law.


 

Part 2L.7ASIC powers

  

260MA  ASIC’s power to exempt and modify

             (1)  ASIC may:

                     (a)  exempt a person from a provision of this Chapter; or

                     (b)  declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

             (2)  The exemption or declaration may do all or any of the following:

                     (a)  apply to all or specified provisions of this Chapter

                     (b)  apply to all persons, specified persons, or a specified class of persons

                     (c)  relate to all debentures, specified debentures or a specified class of debentures

                     (d)  relate to any other matter generally or as specified.

             (3)  An exemption may apply unconditionally or subject to specified conditions. A person to whom a condition specified in an exemption applies must comply with the condition. The Court may order the person to comply with the condition in a specified way. Only ASIC may apply to the Court for the order.

             (4)  The exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette.

             (5)  For the purposes of this section, the provisions of this Chapter include:

                     (a)  regulations made for the purposes of this Chapter; and

                     (b)  definitions in this Law or the regulations as they apply to references in:

                              (i)  this Chapter; or

                             (ii)  regulations made for the purposes of this Chapter; and

                     (c)  Division 12 of Part 11.2.

260MB  ASIC may approve body corporate to be trustee

             (1)  ASIC may approve a body corporate in writing to be a trustee for the purposes of paragraph 260FC(1)(f). The approval may allow the body corporate to act as trustee:

                     (a)  in any circumstances; or

                     (b)  in relation to a particular borrower or particular class of borrower; or

                     (c)  in relation to a particular trust deed;

and may be given subject to conditions.

             (2)  ASIC must publish notice of the approval in the Gazette.


 

Part 2L.8Court

  

260NA  General Court power to give directions and determine questions

                   If the trustee applies to the Court for any direction in relation to the performance of the trustee’s functions or to determine any question in relation to the interests of the debenture holders, the Court may give any direction and make any declaration or determination in relation to the matter that the Court considers appropriate. The Court may also make ancillary or consequential orders.

Note:          Under this section, the Court may order a meeting of debenture holders to be held, see section 260KC.

260NB  Specific Court powers

             (1)  If the trustee or ASIC applies to the Court, the Court may make any or all of the following orders:

                     (a)  an order staying an action or other civil proceedings before a court by or against the borrower or a guarantor body

                     (b)  an order restraining the borrower from paying any money to the debenture holders or any holders of any other class of debentures

                     (c)  an order that any security for the debentures be enforceable immediately or at the time the Court directs (even if the debentures are irredeemable or redeemable only on the happening of a contingency)

                     (d)  an order appointing a receiver of any property constituting security for the debentures

                     (e)  an order restricting advertising by the borrower for deposits or loans

                      (f)  an order restricting borrowing by the borrower

                     (g)  any other order that the Court considers appropriate to protect the interests of existing or prospective debenture holders.

             (2)  In deciding whether to make an order under subsection (1), the Court must have regard to:

                     (a)  the ability of the borrower and each guarantor to repay the amount deposited or lent as and when it becomes due; and

                     (b)  any contravention of section 260MA by the borrower; and

                     (c)  the interests of the borrower’s members and creditors; and

                     (d)  the interests of the members of each of the guarantors.

Note:          The Court may order a meeting of debenture holders to be held (see section 260KC).


 

Part 2L.9Location of other debenture provisions

  

260P  Signpost to other debenture provisions

                   There are other rules relating to debentures in paragraph 124(1)(b) and section 563AAA.

5  Chapter 6

Repeal the Chapter, substitute:

Chapter 6Takeovers

  

  

602  Purposes of Chapter

                   The purposes of this Chapter are to ensure that:

                     (a)  the acquisition of control over:

                              (i)  the voting shares in a listed company, or an unlisted company with more than 50 members; or

                             (ii)  the voting shares in a listed body; or

                            (iii)  the voting interests in a listed managed investment scheme;

                            takes place in an efficient, competitive and informed market; and

                     (b)  the holders of the shares or interests, and the directors of the company or body or the responsible entity for the scheme:

                              (i)  know the identity of any person who proposes to acquire a substantial interest in the company, body or scheme; and

                             (ii)  have a reasonable time to consider the proposal; and

                            (iii)  are given enough information to enable them to assess the merits of the proposal; and

                     (c)  as far as practicable, the holders of the relevant class of voting shares or interests all have a reasonable and equal opportunity to participate in any benefits accruing to the holders through any proposal under which a person would acquire a substantial interest in the company, body or scheme; and

                     (d)  an appropriate procedure is followed as a preliminary to compulsory acquisition of voting shares or interests or any other kind of securities under Part 6A.1.

Note 1:       To achieve the objectives referred to in paragraphs (a), (b) and (c), the prohibition in section 606 and the exceptions to it refer to interests in “voting shares”. To achieve the objective in paragraph (d), the provisions that deal with the takeover procedure refer more broadly to interests in “securities”.

Note 2:       Subsection 92(3) defines securities for the purposes of this Chapter.

603  Chapter extends to some listed bodies that are not companies

                   This Chapter applies to the acquisition of relevant interests in the securities of listed bodies that are not companies but are incorporated or formed in this jurisdiction in the same way as it applies to the acquisition of relevant interests in the securities of companies.

Note:          Section 9 defines company, jurisdiction and listed.

604  Chapter extends to listed managed investment schemes

             (1)  This Chapter applies to the acquisition of relevant interests in the interests in a listed managed investment scheme registered in this jurisdiction as if:

                     (a)  the scheme were a listed company; and

                     (b)  interests in the scheme were shares in the company; and

                     (c)  voting interests in the scheme were voting shares in the company; and

                     (d)  a meeting of the members of the scheme were a general meeting of the company; and

                     (e)  the obligations and powers that are imposed or conferred on the company were imposed or conferred on the responsible entity; and

                      (f)  the directors of the responsible entity were the directors of the company; and

                     (g)  the appointment of a responsible entity for the scheme were the election of a director of the company; and

                     (h)  the scheme’s constitution were the company’s constitution.

Note 1:       Paragraph (g): See subsection 610(2).

Note 2:       Section 9 defines voting interest in a managed investment scheme.

             (2)  The regulations may modify the operation of this Chapter as it applies in relation to the acquisition of interests in listed managed investment schemes.

605  Classes of securities

             (1)  Takeover bids are made for securities within a particular class. Similarly, compulsory acquisition and buy‑out rights operate on securities within a particular class.

             (2)  For the purposes of this Chapter and Chapters 6A and 6C, securities are not to be taken to be different classes merely because:

                     (a)  some of the securities are fully‑paid and others are partly‑paid; or

                     (b)  different amounts are paid up or remain unpaid on the securities.


 

Part 6.1Prohibited acquisitions of relevant interests in voting shares

  

606  Prohibition on certain acquisitions of relevant interests in voting shares

Acquisition of relevant interests in voting shares through transaction entered into by or on behalf of person acquiring relevant interest

             (1)  A person must not acquire a relevant interest in issued voting shares in a company if:

                     (a)  the company is:

                              (i)  a listed company; or

                             (ii)  an unlisted company with more than 50 members; and

                     (b)  the person acquiring the interest does so through a transaction in relation to securities entered into by or on behalf of the person; and

                     (c)  because of the transaction, that person’s or someone else’s voting power in the company increases:

                              (i)  from 20% or below to more than 20%; or

                             (ii)  from a starting point that is above 20% and below 90%.

However, the person may acquire the relevant interest under one of the exceptions set out in section 611 without contravening this subsection.

Note 1:       Section 9 defines company as meaning a company incorporated, or taken to have been incorporated, in this jurisdiction.

Note 2:       Section 607 deals with the effect of a contravention of this section on transactions. Sections 608 and 609 deal with the meaning of relevant interest. Section 610 deals with the calculation of a person’s voting power in a company.

Note 3:       If the acquisition of relevant interests in an unlisted company with 50 or fewer members leads to the acquisition of a relevant interest in another company that is an unlisted company with more than 50 members, or a listed company, the acquisition is caught by this section because of its effect on that other company.

Acquisition of legal or equitable interest giving rise to relevant interest for someone else

             (2)  A person must not acquire a legal or equitable interest in securities of a body corporate if, because of the acquisition:

                     (a)  another person acquires a relevant interest in issued voting shares in a company that is:

                              (i)  a listed company; or

                             (ii)  an unlisted company with more than 50 members; and

                     (b)  someone’s voting power in the company increases:

                              (i)  from 20% or below to more than 20%; or

                             (ii)  from a starting point that is above 20% and below 90%.

However, if the acquisition of the relevant interest is covered by one of the exceptions set out in section 611, the person may acquire the legal or equitable interest without contravening this subsection.

50 member threshold

             (3)  In determining whether the company has more than 50 members for the purposes of subsection (1) or (2), count joint holders of a particular parcel of shares as 1 person.

Offers and invitations

             (4)  A person must not:

                     (a)  make an offer, or cause an offer to be made on their behalf, if the person would contravene subsection (1) or (2) if the offer were accepted; or

                     (b)  issue an invitation, or cause an invitation to be issued on their behalf, if the person would contravene subsection (1) or (2) if:

                              (i)  an offer were made in response to the invitation; and

                             (ii)  the offer were accepted.

Defences

             (5)  It is a defence to the prosecution of a person for contravening subsection (1), (2) or (4) if the person proves that they contravened the subsection:

                     (a)  because of inadvertence or mistake; or

                     (b)  because the person was not aware of a relevant fact or occurrence.

In determining whether the defence is available, disregard the person’s ignorance of, or a mistake on the person’s part concerning, a matter of law.

Extended meaning of acquiring relevant interests—conversions and increases in voting rights

             (6)  A person is taken for the purposes of subsection (1) or (2) to acquire a relevant interest in voting shares in a company if:

                     (a)  securities in which the person already had a relevant interest become voting shares in the company; or

                     (b)  there is an increase in the number of votes that may be cast on a poll attached to voting shares that the person already had a relevant interest in.

The acquisition occurs when the securities become voting shares or the number of votes increases.

Note:          Some examples of cases to which this subsection applies are:

·       A person exercises a right to convert a non‑voting preference share into an ordinary share that carries votes.

·       A person pays up partly‑paid shares with limited votes and this leads to an increase in the number of votes attached to the shares.

607  Effect on transactions

                   A transaction is not invalid merely because it involves a contravention of section 606.

608  Relevant interests in securities

Basic rule—relevant interest is holding, or controlling voting or disposal of, securities

             (1)  A person has a relevant interest in securities if they:

                     (a)  are the holder of the securities; or

                     (b)  have power to exercise, or control the exercise of, a right to vote attached to the securities; or

                     (c)  have power to dispose of, or control the exercise of a power to dispose of, the securities.

It does not matter how remote the relevant interest is or how it arises. If 2 or more people can jointly exercise one of these powers, each of them is taken to have that power.

Extension to control exercisable through a trust, agreement or practice

             (2)  In this section, power or control includes:

                     (a)  power or control that is indirect; and

                     (b)  power or control that is, or can be, exercised as a result of, by means of or by the revocation or breach of:

                              (i)  a trust; or

                             (ii)  an agreement; or

                            (iii)  a practice; or

                            (iv)  any combination of them;

                            whether or not they are enforceable; and

                     (c)  power or control that is, or can be made, subject to restraint or restriction.

It does not matter whether the power or control is express or implied, formal or informal, exercisable alone or jointly with someone else. It does not matter that the power or control cannot be related to a particular security.

Extension to relevant interests held through bodies corporate

             (3)  A person has the relevant interests in any securities that any of the following has:

                     (a)  a body corporate, or managed investment scheme, in which the person’s voting power is above 20%

                     (b)  a body corporate, or managed investment scheme, that the person controls.

Paragraph (a) does not apply to a relevant interest that the body corporate or scheme itself has in the securities merely because of the operation of that paragraph in relation to another body corporate or managed investment scheme.

             (4)  For the purposes of paragraph (3)(b), a person controls a body corporate if the person has the capacity to determine the outcome of decisions about the body corporate’s financial and operating policies.

             (5)  In determining whether a person has this capacity:

                     (a)  the practical influence the person can exert (rather than the rights they can enforce) is the issue to be addressed; and

                     (b)  any practice or pattern of behaviour affecting the body corporate’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).

             (6)  The person does not control the body corporate merely because the person and an entity that is not an associate jointly have the capacity to determine the outcome of decisions about the body corporate’s financial and operating policies.

             (7)  A person is not to be taken to control a body corporate merely because of a capacity they have if they are under a legal obligation to exercise that capacity for the benefit of:

                     (a)  if the person is an individual—someone else; or

                     (b)  if the person is a body corporate—someone other than its members.

Extension to control in anticipation of performance of agreements etc.

             (8)  If at a particular time all the following conditions are satisfied:

                     (a)  a person has a relevant interest in issued securities

                     (b)  the person (whether before or after acquiring the relevant interest):

                              (i)  has entered or enters into an agreement with another person with respect to the securities; or

                             (ii)  has given or gives another person an enforceable right, or has been or is given an enforceable right by another person, in relation to the securities (whether the right is enforceable presently or in the future and whether or not on the fulfilment of a condition); or

                            (iii)  has granted or grants an option to, or has been or is granted an option by, another person with respect to the securities

                     (c)  the other person would have a relevant interest in the securities if the agreement were performed, the right enforced or the option exercised;

the other person is taken to already have a relevant interest in the securities.

Note:          Subsections 609(6) and (7) deal with specific situations in which the agreement will not give rise to a relevant interest.

Body corporate may have relevant interest in its own securities

             (9)  This section may result in a body corporate having a relevant interest in its own securities.

609  Situations not giving rise to relevant interests

Money lending and financial accommodation

             (1)  A person does not have a relevant interest in securities merely because of a mortgage, charge or other security taken for the purpose of a transaction entered into by the person if:

                     (a)  the mortgage, charge or security is taken or acquired in the ordinary course of the person’s business of providing financial services and on ordinary commercial terms; and

                     (b)  the person whose property is subject to the mortgage, charge or security is not an associate of the person.

Note:          Sections 11 to 17 define associate.

Nominees and other trustees

             (2)  A person who would otherwise have a relevant interest in securities as a bare trustee does not have a relevant interest in the securities if a beneficiary under the trust has a relevant interest in the securities because of a presently enforceable and unconditional right of the kind referred to in subsection 608(8).

Note:          This subsection will often apply to a person who holds securities as a nominee.

Holding of securities by securities dealer

             (3)  A securities dealer does not have a relevant interest in securities merely because they hold securities on behalf of someone else in the ordinary course of their securities business.

Shares covered by buy‑backs

             (4)  A person does not have a relevant interest in a company’s shares if the relevant interest would arise merely because the company has entered into an agreement to buy back the shares.

Proxies

             (5)  A person does not have a relevant interest in securities merely because the person has been appointed to vote as a proxy or representative at a meeting of members, or of a class of members, of the company, body or managed investment scheme if:

                     (a)  the appointment is for one meeting only; and

                     (b)  neither the person nor any associate gives valuable consideration for the appointment.

Exchange traded options and futures contracts

             (6)  A person does not have a relevant interest in securities merely because of:

                     (a)  an exchange traded option over the securities; or

                     (b)  a right to acquire the securities given by a futures contract.

This subsection stops applying to the relevant interest when the obligation to make or take delivery of the securities arises.

Note:          Without this subsection, subsection 608(8) would create a relevant interest from the option or contract.

Conditional agreements

             (7)  A person does not have a relevant interest in securities merely because of an agreement if the agreement:

                     (a)  is conditional on:

                              (i)  a resolution under item 7 in the table in section 611 being passed; or

                             (ii)  ASIC exempting the acquisition under the agreement from the provisions of this Chapter under section 655A; and

                     (b)  does not confer any control over, or power to substantially influence, the exercise of a voting right attached to the securities; and

                     (c)  does not restrict disposal of the securities for more than 3 months from the date when the agreement is entered into.

The person acquires a relevant interest in the securities when the condition referred to in paragraph (a) is satisfied.

Pre‑emptive rights

             (8)  A member of a company, body or managed investment scheme does not have a relevant interest in securities of the company, body or scheme merely because the company’s, body’s or scheme’s constitution gives members pre‑emptive rights on the transfer of the securities if all members have pre‑emptive rights on the same terms.

Director of body corporate holding securities

             (9)  A person does not have a relevant interest in securities merely because:

                     (a)  the person is a director of a body corporate; and

                     (b)  the body corporate has a relevant interest in those securities.

Prescribed exclusions

           (10)  A person does not have a relevant interest in securities in the circumstances specified in the regulations. The regulations may provide that interests in securities are not relevant interests subject to specified conditions.

610  Voting power in a body corporate

Person’s voting power in a body corporate

             (1)  A person’s voting power in a body corporate is:

where:

person’s and associates’ votes is the total number of votes attached to all the voting shares in the body corporate (if any) that the person or an associate has a relevant interest in.

total votes in body corporate is the total number of votes attached to all voting shares in the body corporate.

Note:          Even if a person’s relevant interest in voting shares is based on control over disposal of the shares (rather than control over voting rights attached to the shares), their voting power in the body corporate is calculated on the basis of the number of votes attached to those shares.

Counting votes

             (2)  For the purposes of this section, the number of votes attached to a voting share in a body corporate is the maximum number of votes that can be cast in respect of the share on a poll:

                     (a)  if the election of directors is determined by the casting of votes attached to voting shares—on the election of a director of the body corporate; or

                     (b)  if the election of directors is not determined by the casting of votes attached to voting shares—on the adoption of a constitution for the body corporate or the amendment of the body corporate’s constitution.

Note:          The Corporations and Securities Panel may decide that the setting or varying of voting rights in a way that affects control of a body corporate is unacceptable circumstances under section 657A.

             (3)  If:

                     (a)  a transaction in relation to, or an acquisition of an interest in, securities occurs; and

                     (b)  before the transaction or acquisition, a person did not have a relevant interest in particular voting shares but an associate of the person did have a relevant interest in those shares; and

                     (c)  because of the transaction or acquisition, the person acquires a relevant interest in those shares;

then, for the purposes of applying section 606 to the transaction or acquisition, the person’s voting power is taken to have increased because of the transaction or acquisition from what it would have been before the transaction or acquisition if the votes attached to those shares were disregarded to what it was after the transaction or acquisition (taking the votes attached to those shares into account).

             (4)  Disregard the operation of section 613 in working out a person’s voting power in a body corporate.


 

Part 6.2Exceptions to the prohibition

  

611  Exceptions to the prohibition

                   The following table sets out:

                     (a)  acquisitions of relevant interests in a company’s voting shares that are exempt from the prohibition in subsection 606(1); and

                     (b)  acquisitions of relevant interests in a company’s voting shares resulting from acquisitions of legal or equitable interests in securities of a body corporate that are exempt from the prohibition in subsection 606(2).

Note:          Some of the items in the table cover only activities in relation to the company itself (items 7, 8, 12 and 13) while the other items cover acquisitions in that company that may occur through activities in relation to other companies.

 

Acquisitions that are exempt

[operative]

 

Takeover bids

 

Acceptance of takeover offer

1

An acquisition that results from the acceptance of an offer under a takeover bid.

See also section 612.

 

On‑market purchase during bid period

2

An acquisition in relation to bid class securities that results from an on‑market transaction if:

(a) the acquisition is by or on behalf of the bidder under a takeover bid; and

(b) the acquisition occurs during the bid period; and

(c) the bid is for all the voting shares in the bid class; and

 

(d) the bid is:

(i) unconditional; or

(ii) conditional only on the happening of an event referred to in subsection 652C(1) or (2).

See also sections 612 and 613.

 

On‑market purchase of convertible securities during bid period

3

An acquisition of bid class securities that results directly from the exercise of rights attached to convertible securities if:

(a) the acquisition is by or on behalf of the bidder under a takeover bid; and

(b) the bidder acquired a relevant interest in the convertible securities through an on‑market transaction during the bid period; and

(c) the bid is for all the voting shares in the bid class; and

(d) the bid is:

(i) unconditional; or

(ii) conditional only on the happening of an event referred to in subsection 652C(1) or (2).

See sections 612 and 613.

 

Acceptance of scrip offered as takeover consideration

4

An acquisition that results from the acceptance of:

(a) an offer under a takeover bid if the voting shares are included in the consideration for offers under the bid; or

(b) an offer that results in an acquisition to which item 5 applies.

See also section 612.

 

Nature of acquirer

6

An acquisition that results from the exercise by a person of a power, or appointment as a receiver, or receiver and manager, under a mortgage, charge or other security if:

(a) the person’s ordinary business includes providing financial services; and

(b) the person took or acquired the security in the ordinary course of their business of providing financial services and on ordinary commercial terms.

 

Approval by resolution of target

7

An acquisition approved previously by a resolution passed at a general meeting of the company in which the acquisition is made, if:

(a) no votes are cast in favour of the resolution by:

(i) the person proposing to make the acquisition and their associates; or

(ii) the persons (if any) from whom the acquisition is to be made and their associates; and

(b) the members of the company were given all information known to the person proposing to make the acquisition or their associates, or known to the company, that was material to the decision on how to vote on the resolution, including:

(i) the identity of the person proposing to make the acquisition and their associates; and

(ii) the maximum extent of the increase in that person’s voting power in the company that would result from the acquisition; and

 

(iii) the voting power that person would have as a result of the acquisition; and

(iv) the maximum extent of the increase in the voting power of each of that person’s associates that would result from the acquisition; and

(v) the voting power that each of that person’s associates would have as a result of the acquisition.

 

Target newly formed

8

An acquisition that results from an issue of securities of the company in which the acquisition is made if the company has not started to carry on any business and has not borrowed any money.

 

Manner of acquisition

 

3% creep in 6 months

9

An acquisition by a person if:

(a) throughout the 6 months before the acquisition that person, or any other person, has had voting power in the company of at least 19%; and

(b) as a result of the acquisition, none of the persons referred to in paragraph (a) would have voting power in the company more than 3 percentage points higher than they had 6 months before the acquisition.

 

Rights issues

10

An acquisition that results from an issue of securities that satisfies all of the following conditions:

(a) a company offers to issue securities in a particular class

(b) offers are made to every person who holds securities in that class to issue them with the percentage of the securities to be issued that is the same as the percentage of the securities in that class that they hold before the issue

(c) all of those persons have a reasonable opportunity to accept the offers made to them

 

(d) agreements to issue are not entered into until a specified time for acceptances of offers has closed

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

This extends to an acquisition by a person as underwriter to the issue or sub‑underwriter.

See section 615.

 

Dividend reinvestment etc.

11

An acquisition that results from an issue of:

(a) shares in a company to existing holders of shares in the company under a dividend reinvestment plan or bonus share plan; or

(b) interests in a managed investment scheme to existing holders of interests in the scheme under a distribution reinvestment plan or switching facility;

if the plan or facility is available to all members.

Disregard any unavailability to foreign holders in determining whether the plan or facility is available to all members.

 

Initial public offering (IPO) fundraising

12

An acquisition that results from an issue under a disclosure document of securities in the company in which the acquisition is made if:

(a) the issue is to a promoter; and

(b) the disclosure document is the first issued by the company; and

(c) the disclosure document disclosed the effect that the acquisition would have on the promoter’s voting power in the company.

 

Underwriting of fundraising

13

An acquisition that results from an issue under a disclosure document of securities in the company in which the acquisition is made if:

(a) the issue is to a person as underwriter to the issue or sub‑underwriter; and

(b) the disclosure document disclosed the effect that the acquisition would have on the person’s voting power in the company.

 

Acquisition through listed company

14

An acquisition that results from another acquisition of relevant interests in voting shares in a body corporate included in the official list of:

(a) a stock exchange; or

(b) a foreign body conducting a stock market that is a body approved in writing by ASIC for the purposes of this item.

 

Wills etc.

15

An acquisition through a will or through operation of law.

 

Forfeiture of shares

16

An acquisition that results from an auction of forfeited shares conducted on‑market.

 

Compromise, arrangement, liquidation or buy‑back

 

Part 5.1 compromise or arrangement

17

An acquisition that results from a compromise or arrangement approved by the Court under Part 5.1.

 

Section 507 arrangement

18

An acquisition that results from an arrangement entered into by a liquidator under section 507.

 

Buy‑back

19

An acquisition that results from a buy‑back authorised by section 257A.

 

Regulations

20

An acquisition made in a manner or in circumstances prescribed by the regulations. The circumstances may include acquisitions of relevant interests in voting shares in a specified body or class of bodies.

612  Effect of non‑compliance with takeover rules for exceptions 1 to 4

                   The exceptions in items 1 to 4 of the table in section 611 do not apply to a takeover bid if the bid is carried out in contravention of:

                     (a)  section 618 (full or proportionate bid); or

                     (b)  section 619 (offers to be the same); or

                     (c)  subsection 621(3) (minimum price); or

                     (d)  subsection 624(1) (minimum offer period); or

                     (e)  sections 625 to 630 (conditional offers); or

                      (f)  items 2, 3 and 6 in the table in subsection 633(1) (procedural steps for off‑market bid); or

                     (g)  items 3, 4 and 6 in the table in section 635 (procedural steps for market bid).

613  Bidder not to exercise voting rights if failure to send bids for off‑market acquisition—exception 2 or 3

                   If the exception in item 2 or 3 of the table in section 611 applies to an acquisition on‑market during a takeover bid, the bidder is not entitled to exercise the voting rights attached to the shares if:

                     (a)  the bid is an off‑market bid; and

                     (b)  the bidder fails to send offers under the bid within 28 days after giving the bidder’s statement to the target.

615  Treatment of foreign holders under equal access issue—exception 10

                   The exception in item 10 of the table in section 611 applies even though the conditions set out in the item are not satisfied in respect of foreign holders of the company’s securities if, under the terms of the offers:

                     (a)  the company must appoint a nominee for foreign holders of the company’s securities who is approved by ASIC; and

                     (b)  the company must transfer to the nominee:

                              (i)  the securities that would otherwise be issued to the foreign holders who accept the offer; or

                             (ii)  the right to acquire those securities; and

                     (c)  the nominee must sell the securities, or those rights, and distribute to each of those foreign holders their proportion of the proceeds of the sale net of expenses.


 

Part 6.3The different types of takeover bid

  

616  Off‑market bids and market bids

             (1)  There are 2 kinds of takeover bid:

                     (a)  an off‑market bid (for quoted or unquoted securities); or

                     (b)  a market bid (only available for quoted securities).

Note:          Although the prohibition in section 606 is against acquiring relevant interests in voting shares, a takeover bid may be made for any securities (for example, as a preliminary to compulsorily acquiring securities in that class under Part 6A.1).

             (2)  The following table shows where to find the provisions dealing with the main features of the offers that may be made under off‑market bids and market bids and the procedures to be followed:

 

Takeover bids

[signpost table]

 

Feature

Off‑market bid

Market bid

1

people to whom offers made

617(1)‑(2)

617(3)

2

securities covered

618(1)‑(2)

618(3)

3

consideration offered for the securities

621(1), (3)‑(5) and 651A

621(2), (3)‑(5)

4

escalation agreements and collateral benefits not allowed

622 and 623

622 and 623

5

offer period

624(1)‑(2) and 650C

624(1)‑(2) and 649C

6

conditional offers

625(2)‑(3) and 626‑630

625(1)

7

procedure to be followed in making bid

632 and 633

634 and 635

8

acceptances

650E and 653A‑653B

 ‑


 

Part 6.4Formulating the takeover offer

Division 1General

617  Securities covered by the bid

Off‑market bid

             (1)  An off‑market bid must relate to securities:

                     (a)  in a class of securities (the bid class); and

                     (b)  that exist or will exist as at the date set by the bidder under subsection 633(2).

Note:          Subsection 92(3) defines securities for the purposes of this Chapter.

             (2)  If other securities exist or will exist at that date that:

                     (a)  will convert, or may be converted, to securities in the bid class; or

                     (b)  confer rights to be issued securities in the bid class;

the bid may extend to securities that come to be in the bid class during the offer period due to a conversion or exercise of the rights.

Note:          The bidder’s statement must say if the bid is extended in this way (see paragraph 636(1)(j)).

Market bid

             (3)  A market bid must relate to securities:

                     (a)  in a class of quoted securities (the bid class); and

                     (b)  that exist or will exist at any time during the offer period.

618  Offers must be for all or a proportion of securities in the bid class

Off‑market bid

             (1)  An offer for securities under an off‑market bid must be an offer to buy:

                     (a)  all the securities in the bid class; or

                     (b)  a specified proportion of the securities in the bid class.

The proportion specified under paragraph (b) must be the same for all holders of securities in the bid class.

Off‑market bid—non‑marketable parcels

             (2)  If accepting an offer under an off‑market bid for quoted securities would leave a person with a parcel of the securities that is less than a marketable parcel (within the meaning of the rules of the relevant securities exchange), the offer extends to that parcel.

Market bid

             (3)  An offer for securities under a market bid must be an offer to buy all the securities in the bid class.

619  General terms of the offer

Off‑market bid

             (1)  All the offers made under an off‑market bid must be the same.

Note:          The offers may include alternative forms of consideration (see section 621).

             (2)  In applying subsection (1), disregard the following:

                     (a)  any differences in the offers attributable to the fact that the number of securities that may be acquired under each offer is limited by the number of securities held by the holder

                     (b)  any differences in the offers attributable to the fact that the offers relate to securities having different accrued dividend or distribution entitlements

                     (c)  any differences in the offers attributable to the fact that the offers relate to securities on which different amounts are paid up or remain unpaid

                     (d)  any differences in the offers attributable to the fact that the bidder may issue or transfer only whole numbers of securities as consideration for the acquisition

                     (e)  any additional cash amount offered to holders instead of the fraction of a security that they would otherwise be offered.

Foreign holders

             (3)  If the consideration for the bid includes an offer of securities, the securities do not need to be offered to foreign holders of the target’s securities if under the terms of the bid:

                     (a)  the bidder must appoint a nominee for foreign holders of the target’s securities who is approved by ASIC; and

                     (b)  the bidder must transfer to the nominee:

                              (i)  the securities that would otherwise be transferred to the foreign holders who accept the bid for that consideration; or

                             (ii)  the right to acquire those securities; and

                     (c)  the nominee must sell the securities, or those rights, and distribute to each of those foreign holders their proportion of the proceeds of the sale net of expenses.

620  Off‑market bid (offer formalities)

             (1)  Each offer under an off‑market bid must:

                     (a)  be in writing; and

                     (b)  have the same date; and

                     (c)  provide that, unless withdrawn, it will remain open until the end of the offer period (see section 624); and

                     (d)  state how, and when, the bidder is to satisfy their obligations.

             (2)  Each offer must provide that the bidder is to pay or provide the consideration for the offer:

                     (a)  if the bidder is given the necessary transfer documents with the acceptance—by the end of whichever of the following periods ends earlier:

                              (i)  1 month after the offer is accepted or, if the offer is subject to a defeating condition, within 1 month after the takeover contract becomes unconditional

                             (ii)  21 days after the end of the offer period; or

                     (b)  if the bidder is given the necessary transfer documents after the acceptance and before the end of the bid period—within 1 month after the bidder is given the necessary transfer documents; or

                     (c)  if the bidder is given the necessary transfer documents after the acceptance and after the end of the bid period—within 21 days after the bidder is given the necessary transfer documents.

Note:          Subsection 630(1) requires an offer that is subject to a defeating condition to specify a date for declaring whether the condition has been fulfilled or not.

             (3)  The offer may provide that the bidder may avoid the takeover contract if the bidder is not given the necessary transfer documents within 1 month after the end of the offer period.

Division 2Consideration for the offer

621  Consideration offered

Off‑market bid—general

             (1)  A bidder making an off‑market bid for securities may offer any form of consideration for the securities, including:

                     (a)  a cash sum; or

                     (b)  securities (including shares, debentures, interests in a managed investment scheme or options); or

                     (c)  a combination of a cash sum and securities.

Note:          Sections 650B and 651A deal with variations of the consideration offered under the bid.

Market bid—cash only

             (2)  As the offers under a market bid for securities are made through the stock market of a securities exchange, the bidder must offer to acquire the securities for a cash sum only for each security.

Note:          Section 649B deals with variations of the consideration offered under the bid.

All bids—minimum consideration if bidder purchased securities in the 4 months before the bid

             (3)  The consideration offered for securities in the bid class under a takeover bid must equal or exceed the maximum consideration that the bidder or an associate provided, or agreed to provide, for a security in the bid class under any purchase or agreement during the 4 months before the date of the bid.

             (4)  For the purposes of subsection (3), the consideration offered or provided for a security is:

                     (a)  if the consideration offered or provided is a cash sum only—the amount of that cash sum; or

                     (b)  if the consideration offered or provided does not include a cash sum—the value of that consideration; or

                     (c)  if the consideration offered or provided is a cash sum and other consideration—the sum of the amount of the cash sum and the value of the other consideration.

The value of consideration that is not a cash sum is to be ascertained as at the time the relevant offer, purchase or agreement is made.

             (5)  If:

                     (a)  a person agrees to buy a security in a company; and

                     (b)  the agreement provides that the price payable for the security is a price specified in the agreement but may be varied in accordance with the terms of the agreement;

any variation in price under the agreement is to be disregarded in working out, for the purposes of subsection (3), the price agreed to be paid for the security under the agreement.

622  Escalation agreements

Benefits linked to bids and proposed bids not allowed

             (1)  A person who makes or proposes to make a takeover bid for securities, or their associate, contravenes this section if:

                     (a)  a person acquires a relevant interest in securities in the bid class within the 6 months before the bid is made or proposed; and

                     (b)  at any time whatever, the bidder, proposed bidder or associate gives or agrees to give a benefit to, or receives or agrees to receive a benefit from:

                              (i)  a person who had a relevant interest in any of the paragraph (a) securities immediately before the acquisition; or

                             (ii)  an associate of a person who had a relevant interest in any of those securities at that time; and

                     (c)  the benefit is attributable to the acquisition or matters that include the acquisition; and

                     (d)  the amount or value of the benefit is, or is to be, determined by reference to or to matters that include either of the following:

                              (i)  the amount or value of the consideration for the securities under the bid or proposed bid

                             (ii)  the amount or value of the consideration for which the bidder or proposed bidder acquires, offers or proposes to offer to acquire, securities in the bid class during the offer period (whether or not under the bid) or under Chapter 6A.

Contravening agreements void

             (2)  An agreement is void to the extent that it purports to provide for:

                     (a)  a person to give a benefit to a person; or

                     (b)  a person to receive a benefit from a person;

in contravention of subsection (1).

623  Collateral benefits not allowed

             (1)  A bidder, or an associate, must not, during the offer period for a takeover bid, give, offer to give or agree to give a benefit to a person if:

                     (a)  the benefit is likely to induce the person or an associate to:

                              (i)  accept an offer under the bid; or

                             (ii)  dispose of securities in the bid class; and

                     (b)  the benefit is not offered to all holders of securities in the bid class under the bid.

             (2)  For the purpose of this section, a person does not receive a benefit that is not offered under a takeover bid merely because the person sells bid class securities on‑market and the takeover bid is an off‑market bid or a conditional bid.

             (3)  This section does not prohibit:

                     (a)  the variation of a takeover offer as provided by sections 649A to 650D; or

                     (b)  an acquisition of securities through an on‑market transaction; or

                     (c)  simultaneous takeover bids for different classes of securities in the target.

Division 3The offer period

624  Offer period

Offer period set in offer

             (1)  The offers under a takeover bid must remain open for the period stated in the offer. The period must:

                     (a)  start on the date the first offer under the bid is made; and

                     (b)  last for at least 1 month, and not more than 12 months.

However, the offer may be withdrawn during that period under section 652B.

Note:          Sections 649C (market bids) and 650C (off‑market bids) deal with variation of the offer period.

Automatic extension of offer period if bidder reaches 50% or consideration increased in last week

             (2)  If, within the last 7 days of the offer period:

                     (a)  for an off‑market bid—the offers under the bid are varied to improve the consideration offered; or

                     (b)  in any case—the bidder’s voting power in the target increases to more than 50%;

the offer period is extended so that it ends 14 days after the event referred to in paragraph (a) or (b). The bidder must give the target and everyone who has not accepted an offer under the bid written notice that the extension has occurred within 3 days after that event.

Note:          The consideration for a market bid cannot be increased in the last 5 trading days of the offer period (see section 649B).

Division 4Conditional offers

625  Conditional offers—general

Market bids

             (1)  Offers under a market bid must be unconditional.

Off‑market bids may generally be conditional

             (2)  Offers under an off‑market bid may be subject to conditions that are not prohibited by sections 626 to 629.

             (3)  If:

                     (a)  the consideration offered is or includes securities; and

                     (b)  the offer or the bidder’s statement states or implies that the securities are to be quoted on a stock market of a securities exchange (whether in Australia or elsewhere);

the following rules apply:

                     (c)  the offer is subject to a condition that:

                              (i)  an application for admission to quotation will be made within 7 days after the start of the bid period; and

                             (ii)  permission for admission to quotation will be granted no later than 7 days after the end of the bid period

                     (d)  the offer may not be freed from this condition.

Note:          Section 1325A provides that a Court may make a remedial order if the condition is not satisfied.

626  Maximum acceptance conditions in off‑market bids

Maximum acceptance conditions not allowed

             (1)  Offers under an off‑market bid must not be subject to a maximum acceptance condition. A maximum acceptance condition is one that provides that the offers will terminate, or the maximum consideration offered under the bid will be reduced, if one or more of the following occur:

                     (a)  the number of securities for which the bidder receives acceptances reaches or exceeds a particular number; or

                     (b)  the bidder’s voting power in the company reaches or exceeds a particular percentage; or

                     (c)  the percentage of securities the bidder has relevant interests in reaches or exceeds a particular percentage of securities in that class.

             (2)  For the purposes of subsection (1), it does not matter:

                     (a)  how the condition is expressed; or

                     (b)  how a particular number or percentage was, or is to be, determined; or

                     (c)  whether or not a particular number or percentage is specified in the condition and, if it is so specified, how it is expressed.

             (3)  For the purposes of subsection (1), an offer under an off‑market bid terminates if:

                     (a)  the offer lapses, is withdrawn or otherwise ceases to have effect; or

                     (b)  a binding takeover contract will not result from an acceptance of the offer; or

                     (c)  an obligation of the bidder will not arise under the takeover contract; or

                     (d)  the takeover contract is rescinded; or

                     (e)  the bidder is entitled to rescind the takeover contract; or

                      (f)  the bidder is relieved of an obligation arising under the takeover contract.

627  Discriminatory conditions not allowed for off‑market bids

                   Offers under an off‑market bid must not be subject to a condition that allows the bidder to acquire, or may result in the bidder acquiring, securities from some but not all of the people who accept the offers. It does not matter how the condition is expressed.

628  Conditions requiring payments to officers of target not allowed in off‑market bids

                   An offer to a person under an off‑market bid must not be made subject to a condition that requires the person to approve or consent to a payment or other benefit to a