Corporations Act - Australia

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a notice under paragraph (2)(b) of this section only if it wants for some reason to enter into the agreement or pass the resolution less than 14 days after lodging the section 257C, 257D or 257E documents.

      Note 2: The company may specify a buy‑back under paragraph (2)(b) in any way. It may, for instance, choose to lodge a notice covering buy‑backs to be carried out:

      · under a particular scheme; or

      · as part of particular on‑market buy‑back activity.

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

      If section 257B applies this section to a buy‑back, the company must include with the offer to buy back shares a statement setting out all information known to the company that is material to the decision whether to accept the offer.

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

      Effect of acceptance of the buy‑back offer on share rights

      (1) Once a company has entered into an agreement to buy back shares, all rights attaching to the shares are suspended. The suspension is lifted if the agreement is terminated.

      Shares transferred to the company and cancelled

      (2) A company must not dispose of shares it buys back. An agreement entered into in contravention of this subsection is void.

      (3) Immediately after the registration of the transfer to the company of the shares bought back, the shares are cancelled.

      Note: ASIC must be notified of the cancellation under section 254Y.

      257J Signposts to other relevant provisions

      The following table sets out other provisions of this Act that are relevant to buy‑backs.

      Other provisions relevant to buy‑backs

      provision

      comment

      1

      section 588G section 1317H

      liability of directors on insolvency

      The directors may have to compensate the company if the company is, or becomes, insolvent when the company enters into the buy‑back agreement.

      2

      section 1324

      injunctions to restrain contravention

      The Court may grant an injunction against conduct that constitutes, or would constitute, a contravention of this Act.

      4

      subsection 609(4) section 611 (item 19 of the table)

      application of takeover provisions

      These sections deal with the application of Chapter 6 to buy‑backs.

      5

      section 259A

      consequences of failure to follow procedures — the company and the officers

      If a company fails to follow the procedure in this Division, the company contravenes this section and the officers who are involved in the contravention are liable to a civil penalty under Part 9.4B and may commit an offence.

      6

      section 256D

      consequences of failure to follow procedures if reduction in share capital involved — the company and the officers

      If the buy‑back involves a reduction in share capital and the company fails to follow the procedures in this Division, the company contravenes this section and the officers who are involved in the contravention are liable to a civil penalty under Part 9.4B and may commit an offence.

      7

      section 256D

      consequences of failure to follow procedures if reduction in share capital involved — the transaction

      This section provides that a failure to follow the procedures for share capital reductions does not affect the validity of the buy‑back transaction itself.

      8

      Chapter 6CA

      continuous disclosure provisions

      Under this Chapter a disclosing entity is required to disclose information about its securities that is material and not generally available.

      9

      Chapter 2E

      benefits to related parties to be disclosed

      Under this Chapter, a financial benefit to a director or other related party may need to be approved at a general meeting before it is given.

      10

      section 125

      provisions in constitution

      This section deals with the way in which a company’s constitution may restrict the exercise of the company’s powers and the consequences of a failure to observe these restrictions.

      11

      sections 246B‑246G

      variation of class rights

      These sections deal with the variation of rights attached to a class of shares. This variation may be governed by the provisions of a company’s constitution.

      Division 3 — Other share capital reductions

      258A Unlimited companies

      An unlimited company may reduce its share capital in any way.

      258B Right to occupy or use real property

      (1) If a company has a constitution, under it the company may grant to a shareholder, as a shareholder, a right to occupy or use real property that the company owns or holds under lease, whether the right is a lease or licence or a contractual right.

      Note: Before the introduction of strata or unit titles systems, rights to occupy real property were sometimes based on a holding of shares in a company.

      (2) A company may transfer to a person an interest in land in exchange for, or in satisfaction of, a right to occupy or use the land of the kind referred to in subsection (1).

      Example: A person has a right to occupy an apartment in a block of units because they hold shares in a company. As part of converting the block of units to strata title, the person surrenders the shares in return for a transfer of strata title over the apartment. The capital reduction involved in the transfer is authorised under this subsection.

      258C Brokerage or commission

      A company may pay brokerage or commission to a person in respect of that person or another person agreeing to take up shares in the company.

      258D Cancellation of forfeited shares

      A company may, by resolution passed at a general meeting, cancel shares that have been forfeited under the terms on which the shares are on issue.

      258E

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