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Corporations Bill 2001

Part 2J.3 Financial assistance

   

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

             (1)  A company may financially assist a person to acquire shares (or units of shares) in the company or a holding company of the company only if:

                     (a)  giving the assistance does not materially prejudice:

                              (i)  the interests of the company or its shareholders; or

                             (ii)  the company’s ability to pay its creditors; or

                     (b)  the assistance is approved by shareholders under section 260B (that section also requires advance notice to ASIC); or

                     (c)  the assistance is exempted under section 260C.

             (2)  Without limiting subsection (1), financial assistance may:

                     (a)  be given before or after the acquisition of shares (or units of shares); and

                     (b)  take the form of paying a dividend.

             (3)  Subsection (1) extends to the acquisition of shares (or units of shares) by:

                     (a)  issue; or

                     (b)  transfer; or

                     (c)  any other means.

260B   Shareholder approval

Approval by company’s own shareholders

             (1)  Shareholder approval for financial assistance by a company must be given by:

                     (a)  a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by the person acquiring the shares (or units of shares) or by their associates; or

                     (b)  a resolution agreed to, at a general meeting, by all ordinary shareholders.

Approval by shareholders of listed holding corporation

             (2)  If the company will be a subsidiary of a listed domestic corporation immediately after the acquisition referred to in section 260A occurs, the financial assistance must also be approved by a special resolution passed at a general meeting of that corporation.

Approval by shareholders in ultimate Australian holding company

             (3)  If, immediately after the acquisition, the company will have a holding company that:

                     (a)  is a domestic corporation but not listed; and

                     (b)  is not itself a subsidiary of a domestic corporation;

the financial assistance must also be approved by a special resolution passed at a general meeting of the body corporate that will be the holding company.

Information to accompany the notice of meeting

             (4)  A company or other body that calls a meeting for the purpose of subsection (1), (2) or (3) must include with the notice of the meeting a statement setting out all the information known to the company or body that is material to the decision on how to vote on the resolution. However, the company or body does not have to disclose information if it would be unreasonable to require the company or body to do so because the company or body had previously disclosed the information to its members.

Documents to be lodged with the ASIC before notice of meeting is sent out

             (5)  Before the notice of a meeting for the purpose of subsection (1), (2) or (3) is sent to members of a company or other body, the company or body must lodge with ASIC a copy of:

                     (a)  the notice of the meeting; and

                     (b)  any document relating to the financial assistance that will accompany the notice of the meeting sent to the members.

             (6)  The company must lodge with ASIC, at least 14 days before giving the financial assistance, a notice in the prescribed form stating that the assistance has been approved under this section.

Lodgment of special resolutions

             (7)  A special resolution passed for the purpose of subsection (1), (2) or (3) must be lodged with ASIC by the company, listed domestic corporation or holding company within 14 days after it is passed.

260C   Exempted financial assistance

General exemptions based on ordinary course of commercial dealing

             (1)  Financial assistance is exempted from section 260A if it is given in the ordinary course of commercial dealing and consists of:

                     (a)  acquiring or creating a lien on partly-paid shares in the company for amounts payable to the company on the shares; or

                     (b)  entering into an agreement with a person under which the person may make payments to the company on shares by instalments.

Special exemptions for financial institutions

             (2)  Financial assistance is exempted from section 260A if:

                     (a)  the company’s ordinary business includes providing finance; and

                     (b)  the financial assistance is given in the ordinary course of that business and on ordinary commercial terms.

Special exemptions for subsidiaries of debenture issuers

             (3)  Financial assistance is exempted from section 260A if:

                     (a)  the company is a subsidiary of a borrower in relation to debentures; and

                     (b)  the financial assistance is a guarantee or other security given by the company for the repayment by the borrower of money that it is or will be liable to repay; and

                     (c)  the borrower is a borrower in relation to the debentures because it is or will be liable to repay the money; and

                     (d)  the guarantee or security is given by the company in the ordinary course of commercial dealing.

Special exemption for approved employee share schemes

             (4)  Financial assistance is exempted from section 260A if it is given under an employee share scheme that has been approved by:

                     (a)  a resolution passed at a general meeting of the company; and

                     (b)  if the company is a subsidiary of a listed domestic corporation—a resolution passed at a general meeting of the listed domestic corporation; and

                     (c)  if paragraph (b) does not apply but the company has a holding company that is a domestic corporation and that is not itself a subsidiary of a domestic corporation—a resolution passed at a general meeting of that holding company.

Other exemptions

             (5)  The following types of financial assistance are exempted from section 260A:

                     (a)  a reduction of share capital in accordance with Division 1 of Part 2J.1;

                     (b)  a share buy-back in accordance with Division 2 of Part 2J.1;

                     (c)  assistance given under a court order;

                     (d)  a discharge on ordinary commercial terms of a liability that the company incurred as a result of a transaction entered into on ordinary commercial terms.

260D   Consequences of failing to comply with section 260A

             (1)  If a company provides financial assistance in contravention of section 260A:

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

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

             (2)  Any person who is involved in a company’s contravention of section 260A contravenes this subsection.

Note 1:       Subsection (2) is a civil penalty provision (see section 1317E).

Note 2:       Section 79 defines involved .

             (3)  A person commits an offence if they are involved in a company’s contravention of section 260A and the involvement is dishonest.