First Corporate Law Simplification Act 1995 (Cth)
The Parliament of Australia enacts:
[
(1) This Act may be cited as the
(2) In this Act:
“Corporations Law” means the Corporations Law set out in section 82 of theCorporations Act 1989 1 .
(1) Sections 1 and 2 commence on the day on which this Act receives the Royal Assent.
(2) Subject to subsection (3), the rest of this Act commences on a day or days to be fixed by Proclamation. Different days may be fixed for sections, Schedules and items within Schedules.
(3) If a section, a Schedule or an item of a Schedule 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.
(1)
New share buy-backs Division Division 4B of Part 2.4 of the Corporations Law is repealed and the Division set out in Schedule 1 to this Act is substituted.
(2)
Other share buy-back amendments The Corporations Law is amended as set out in Schedule 2 to this Act.
(1)
Small business guide After Part 1.3 of the Corporations Law the Parts set out in Schedule 3 to this Act are inserted in Chapter 1 of that Law.
(2)
Other proprietary company amendments The Corporations Law is amended as set out in Schedule 4 to this Act.
Formal parts of Act
(1)
New company registers Division After Part 2.4 of the Corporations Law the Part set out in Schedule 5 to this Act is inserted in Chapter 2 of that Law.
(2)
Other company registers amendments The Corporations Law is amended as set out in Schedule 6 to this Act.
(3) The
Australian Securities Commission Act 1989 2 is amended as set out in Schedule 7 to this Act.
The following Acts are repealed:
(a)
(b)
(c)
(d)
Division 4B—Share buy-backs
206A Purpose
206B The company’s power to buy back its own shares
206C Buy-back procedure—general
206D Buy-back procedure—shareholder approval if the 10% in 12 months limit exceeded
206E Buy-back procedure—special shareholder approval for selective buy-back
206F Buy-back procedure—lodgment of offer documents with the ASC
206G Notice of intended buy-back
206H Buy-back procedure—disclosure of relevant information when offer made
206I Acceptance of offer and transfer of shares to the company
206J Buy-back procedure—notice to ASC of cancellation of shares
206K Signposts to other relevant provisions
Division 4B—Share buy-backs
This Division states the rules to be followed by a company when buying back its own shares. These rules are designed to protect the interests of shareholders and creditors by:
(a) addressing the risk of buy-back activity leading to the company’s insolvency
(b) seeking to ensure fairness between the company’s shareholders
(c) requiring the company to disclose all material information.
A company may buy back its own shares (other than redeemable preference shares) if it follows the procedures laid down in this Division.
Note 1: A company may include provisions in its articles that preclude the company buying back its own shares or impose restrictions on the exercise of the company’s power to buy back its own shares.
Note 2: For the redemption of redeemable preference shares see section 192.
(1) The following table specifies the steps required for, and the sections that apply to, the different types of buy-back.
| ||||||||
| - | - | yes | yes | - | yes | - | |
| - | - | - | - | - | - | - | yes |
| - | - | - | - | yes | yes | yes | |
| - | yes | yes | yes | yes | yes | yes | yes |
| - | - | - | - | - | yes | yes | yes |
| yes | yes | yes | yes | yes | yes | yes | yes |
| yes | yes | yes | yes | yes | yes | yes | yes |
Note: Subsections (2) and (3) of this section explain what an equal access scheme is. The 10/12 limit is the 10% in 12 months limit laid down in subsections (4) and (5). See section 9 for definitions of “odd lot buy-back”, “employee share scheme buy-back”, “on-market buy-back” and “selective buy-back”.
(2)
Equal access scheme An equal access buy-back scheme is a scheme that satisfies all the following conditions:
(a) the offers under the scheme relate only to ordinary shares
(b) offers are to be made to every person who holds ordinary shares to buy back the same percentage of their ordinary shares
(c) all of those persons have a reasonable opportunity to accept the offers made to them
(d) buy-back agreements are not entered into until a specified time for acceptances of offers has closed
(e) the terms of all the offers are the same.
(3) In applying subsection (2), disregard:
(a) any difference in consideration attributable to the fact that the offers relate to shares having different accrued dividend entitlements
(b) any difference in consideration attributable to the fact that the offers relate to shares on which different amounts are paid up or on which different amounts remain unpaid
(c) any difference in the offers introduced solely for the purpose of avoiding shareholders being left with odd lots
(d) any difference in the exact percentage of shares bought back introduced solely for the purpose of ensuring that only whole numbers of shares are bought back.
(4)
10/12 limit The 10/12 limit for a company proposing to make a buy-back is 10% of the smallest number, at any time during the last 12 months, of votes attaching to voting shares of the company.
(5)
Exceeding the 10/12 limit A proposed buy-back would exceed the 10/12 limit if the number of votes attaching to:
(a) all the voting shares in the company that have been bought back during the last 12 months; and
(b) the voting shares that will be bought back if the proposed buy-back is made;
would exceed the 10/12 limit.
(1)
Ordinary resolution required If section 206C applies this section to a buy-back, the terms of the buy-back agreement must be approved before it is entered into by a resolution passed at a general meeting of the company, or the agreement must be conditional on such an approval.
(2)
Information to accompany the notice of meeting The company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision whether to vote in favour of the resolution. However, the company does not have to disclose information if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders.
(3)
Documents to be lodged with the ASC Before the notice of the meeting is sent to shareholders, the company must lodge with the ASC a copy of:
(a) the notice of the meeting; and
(b) any document relating to the buy-back that will accompany the notice of the meeting sent to shareholders.
(1)
Selective buy-back requires special or unanimous resolution If section 206C applies this section to a buy-back, the terms of the buy-back agreement must be approved before it is entered into by either:
(a) a special resolution passed at a general meeting of the company with no votes being cast in favour of the resolution by any person whose shares are proposed to be bought back or their associates; or
(b) a resolution agreed to by all ordinary shareholders at a general meeting;
or the agreement must be conditional on such an approval.
(2)
Information to accompany the notice of meeting The company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision whether to vote in favour of the resolution. However, the company does not have to disclose information if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders.
(3)
Documents to be lodged with the ASC Before the notice of the meeting is sent to shareholders, the company must lodge with the ASC a copy of:
(a) the notice of the meeting; and
(b) any document relating to the buy-back that will accompany the notice of the meeting sent to shareholders.
(4) The ASC may exempt a company from the operation of this section. The exemption:
(a) must be in writing; and
(b) must be granted before the buy-back agreement is entered into; and
(c) may be granted subject to conditions.
If section 206C applies this section to a buy-back, the company must lodge with the ASC, before the buy-back agreement is entered into, a copy of:
(a) a document setting out the terms of the offer; and
(b) any document that is to accompany the offer.
(1) If section 206C applies this section to a buy-back, the company must satisfy the lodgment requirement in subsection (2) at least 14 days before:
(a) if the buy-back agreement is conditional on the passing of a resolution under subsection 206D(1) or 206E(1)—the resolution is passed; or
(b) if it is not—the agreement is entered into.
(2) The company satisfies the lodgment requirement when it lodges with the ASC:
(a) documents under subsection 206D(3) or 206E(3) or section 206F; or
(b) a notice that the company intends to carry out the buy-back.
Note 1: A company that has to lodge documents under section 206D, 206E or 206F needs to lodge a notice under paragraph (2)(b) only if it wants for some reason to have less than 14 days between lodging the section 206D, 206E or 206F documents and entering into the buy-back agreement or the passing of the resolution.
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.
If section 206C 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 a shareholder’s decision whether to accept the offer.
(1)
Effect of acceptance of the buy-back offer on share rights 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.
(2)
Shares transferred to the company and cancelled A company must not deal in shares it buys back. An agreement entered into in contravention of this subsection is void.
(3) Immediately after the registration of the transfer to the company of the shares bought back, the shares are cancelled. This cancellation does not reduce the company’s nominal share capital.
Within 1 month after registering the transfer, the company must lodge with the ASC a notice that states:
(a) the number of shares transferred; and
(b) the class of shares transferred; and
(c) the consideration paid for the shares.
The following table sets out other provisions of the Law that are relevant to buy-backs.
section 588G section 1317HA |
|
section 1324 |
|
section 733 |
|
section 42A section 632A |
|
section 205 |
|
subsection 206(1A) |
|
sections 1001A-1001D |
|
Part 3.2A |
|
section 162 |
|
section 197 |
|
Other share buy-back amendments
Insert the following definitions:
“ASC” means the Australian Securities Commission;
“buy-back” by a company means the acquisition by the company of shares in itself;
“buy-back agreement” by a company means an agreement by the company to buy back its own shares (whether the agreement is conditional or not);
“employee share scheme buy-back” means a buy-back under a scheme that:(a) has as its purpose the acquisition of shares in a company by or on behalf of participating employees; and
(b) has been approved by the company in general meeting;
Note: “participating employee" is defined below in this section.
“equal access scheme” has the meaning given by subsections 206C(2) and (3);
“marketable parcel” of shares in a listed corporation means a marketable parcel within the meaning of the rules of the relevant securities exchange;
“odd lot buy-back” means a buy-back of shares in a listed corporation if the parcel of shares bought back is smaller than a marketable parcel;
“on-market buy-back” means a buy-back by a listed corporation at an official meeting of a securities exchange in the ordinary course of trading on a stock market of the exchange;“
selective buy-back” means a buy-back that is none of the following:(a) a buy-back under an equal access scheme within the meaning of subsections 206C(2) and (3)
(b) an odd lot buy-back
(c) an on-market buy-back
(d) an employee share scheme buy-back;
2. Section 9 ( paragraph (b) of the definition of “voting share” )
After the paragraph, insert:
(ba) on a resolution to approve the terms of a buy-back agreement;
Other share buy-back amendments
For the purposes of Chapter 6, disregard any effect that a buy-back agreement has on relevant interests in the shares being bought back.
Note: This section docs not deal with the effect on relevant interests of the cancellation of shares under subsection 206I(3).
(ea) in providing for consideration payable by the company on a buy-back of its shares; or
(1A) A buy-back authorised by section 206B does not contravene subparagraph (1)(b)(i).
(1) Except as provided by this section, the validity of a contract or transaction is not affected by a contravention of:
(a) paragraph 205(1)(a); or
(b) paragraph 205(1)(b)—unless the contract or transaction effects the acquisition that constitutes the contravention; or
(c) paragraph 205(1)(c)—unless the contract or transaction effects the acquisition that constitutes the contravention.
(1A) If the contract or transaction is constituted by:
(a) a buy-back of shares by a company; or
(b) the transfer of shares to a company under a buy-back;
Other share buy-back amendments
paragraph (1)(b) does not apply and the validity of a contract or transaction is not affected by a contravention of paragraph 205(1)(b) (even if the contract or transaction is the one that effects the acquisition that constitutes the contravention).
Insert:
The selling shareholder in a share buy-back may claim in a winding up of the company but is not entitled to a distribution of money or property unless the shareholder has discharged the shareholder’s obligations to give documents in connection with the buy-back.
Note: The selling shareholder’s claim ranks after those of non-member creditors and before those of other member creditors (see section 563AA).
(1) The selling shareholder’s claim under a buy-back agreement is postponed until all debts owed to people otherwise than as members of the company have been satisfied.
(2) The shareholder’s claim is not a debt owed by the company to the seller in the shareholder’s capacity as a member of the company for the purposes of section 563A.
(1AA) This section does not apply to an agreement by the company to buy back its own shares.
Other share buy-back amendments
(1A) For the purposes of this section, a company that buys back shares incurs a debt (even if the consideration is not a sum certain in money). The debt is incurred at the time when the buy-back agreement is entered into.
(ba) the target company or a subsidiary:
(i) entering into a buy-back agreement; or
(ii) resolving to approve the terms of a buy-back agreement under subsection 206D(1) or 206E(1);
Section 615 does not apply to a buy-back authorised by section 206B.
; or (e) a company carries out, or proposes to carry out, a buy-back that is unreasonable having regard to:
(i) the effect of the buy-back on the control of that company or of another company; and
(ii) the fact that the disclosure and other procedural safeguards of this Chapter do not apply to the buy-back because of section 632A.
(1A) For the purposes of subsection (1), a contravention of the Law affects the interests of a creditor or member of a company if the insolvency of the company is an element of the contravention. This subsection does not limit subsection (1) in any way.
Part 1.4—Technical provisions about aids for readers
111J Small business guide
Part 1.5—Small business guide
1 What incorporation means
2 The company structure for small business
3 Setting up a new company
4 Continuing obligations after the company is set up
5 Company directors and company secretaries
6 Shares and shareholders
7 Funding the company’s operations
8 Returns to shareholders
9 Accounts and audit for small proprietary companies
10 Disagreements within the company
11 Companies in trouble
(1) The regulations may amend the small business guide in Part 1.5 if the amendments are necessary to reflect the regulations or instruments issued by the ASC under this Law.
(2) The small business guide is divided into sections (numbered 1, 2, 3 ...) and the sections are divided into paragraphs (numbered 1.1, 1.2, 1.3 ...). For example, a reference in the guide to 3.1 is a reference to paragraph 3.1 of the guide.
This guide summarises the main rules in the Corporations Law that apply to proprietary companies limited by shares—the most common type of company used by small business. The guide gives a general overview of the Corporations Law as it applies to those companies and directs readers to the operative provisions in the Law.
The notes in square brackets at the end of paragraphs in the guide indicate the main provisions of the Corporations Law, the regulations made under the Law, and Australian Securities Commission Practice Notes that are relevant to the information in the paragraphs.
Other Commonwealth, State and Territory laws also impose obligations on proprietary companies and their operators.
As far as the law is concerned, a company has a separate legal existence that is distinct from that of its owners, managers, operators, employees and agents. A company has its own property, its own rights and its own obligations. A company’s money and other assets belong to the company and must be used for the company’s purposes.
A company has the powers of an individual, including the powers to:
• own and dispose of property and other assets
• enter into contracts
• sue and be sued.
Once a company is incorporated, its separate legal status, property, rights and liabilities continue until the ASC (Australian Securities Commission) cancels the company’s registration.
[sections 123,161,162,574]
Shareholders of a company are not liable (in their capacity as shareholders) for the company’s debts. As shareholders, their only obligation is to pay the company any amount unpaid on their shares if they are called upon to do so. However, particularly if a shareholder is also a director, this limitation may be affected by other laws and the commercial practices discussed in 1.3 and 1.4.
[sections 124, 516, regulation 12 of Table A Schedule 1]
A director of a company may be liable for debts incurred by the company at a time when the company itself is unable to pay those debts as they fall due.
A director of a company may be liable to compensate the company for any losses the company suffers from a breach of certain of the director’s duties to the company (see 5.3).
In addition to having liability for the company’s debts or to pay compensation to the company, a director may also be subject to a civil penalty.
If a company holds property on trust, a director of the company may be liable in some circumstances for liabilities incurred by the company.
[sections 232, 233, 318, 588G, 588J, 588M, 1317HA, 1317HD]
1.4 director’s liability as guarantor/security over personal assets As a matter of commercial practice, a bank, trade creditor or anyone else providing finance or credit to a company may ask a director of the company:
• for a personal guarantee of the company’s liabilities; and
• for some form of security over their house or personal assets to secure the performance by the company of its obligations.
The director of a company may, for example, be asked by a bank to give a mortgage over their house to secure the company’s repayment of a loan. If the company does not repay the loan as agreed with the bank, the director may lose the house.
A company continues to exist even if one or more of its shareholders or directors sells their shares, dies or leaves the company. If a company has only one shareholder who is also the only director of the company and that person dies, their personal representative is able to ensure that the company continues to operate.
[sections 123, 224A]
A company does not have a physical existence. It must act through other people.
The directors of a company are responsible for managing the company’s business. The company’s articles of association (see 3.2) usually provide details of how meetings of directors are to be called and conducted. Directors must keep a written record (minutes) of their meetings.
A company’s articles may also allow individual directors, the company secretary, company employees or agents to enter into contracts that bind the company.
In some circumstances, a company will be bound by something done by another person (see 1.7).
The shareholders of a company own the company, but the company has a separate legal existence and the company’s assets belong to the company.
Shareholders can make decisions about the company by passing a resolution, usually at a meeting. The 2 main types of resolutions are
ordinary resolutions andspecial resolutions . Special resolutions usually involve the more important questions that affect the company as a whole or the rights of some or all of its shareholders.Shareholders may pass an ordinary resolution at a meeting or without holding a meeting if all shareholders sign a minute (a written record) setting out the terms of the resolution.
If a meeting is held, an ordinary resolution must be passed by a majority of the shareholders who vote at the meeting in person or by proxy (if proxies are allowed). A special resolution must be passed by at least 75% of the shareholders who are entitled to vote on the resolution and who vote at the meeting in person or by proxy (if proxies are allowed).
[sections 250, 253, 255, 255A, 258, regulations 66, 69, 70, 73, 75, 77 of Table A Schedule 1]
Anyone who does any business with the company is entitled to assume that the company has a legal right to conduct that business unless the person knows, or ought to know, otherwise. For example, an outsider dealing with the company is entitled to assume:
• that a person who is shown in a notice lodged with the ASC as being the director or company secretary of a company has been properly appointed and is authorised to act for the company; and
• that a person who is held out by the company to be a director, company secretary or agent of the company has been properly appointed and is authorised to act for the company.
[section 164]
Generally, a proprietary company limited by shares is the most suitable company for use by small business. Such a proprietary company must have at least one shareholder but no more than 50 shareholders (not counting employee shareholders).
[sections 114, 116]
The operators of small businesses can either buy “shelf” companies or set up new companies themselves.
The operator of a small business may find it more convenient to buy a “shelf’ company (a company that has already been incorporated but has not traded) from businesses which set up companies for this purpose or from some legal or accounting firms.
To set up a new company, the operator must apply to the ASC for registration of the company.
A proprietary company limited by shares must have at least one initial shareholder. That person (or if there are 2 or more initial shareholders—all of them) must comply with a number of formalities before the company is registered as an Australian company. The formalities include preparing a memorandum of association and preparing or adopting articles of association.
To obtain registration, the initial shareholders must lodge an application form (Form 201) with the ASC.
The company is registered when the ASC registers the application.
memorandum The
memorandum sets out:
• the name of the company; and
• the names and addresses of the initial shareholders; and
• the amount of the company’s share capital; and
• a statement that the share capital is divided into shares of a fixed amount; and
• a statement that the liability of shareholders is limited.
articles The
articles govern the relationships between the company, its shareholders and its directors, For example, they deal with the transfer of shares, the appointment of directors and procedures at meetings.
Instead of preparing articles, the operator may adopt the standard articles set out in Table A of Schedule 1 to the Corporations Law.
A shareholder of a company can ask the company for a copy of articles prepared by the company.
[sections 117, 118, 120, 123, 175, 176, 180, 181, Table A Schedule 1]
When a company is registered, the ASC allocates to it a unique 9 digit number called the Australian Company Number (ACN). (For use of the ACN see 4.1).
A new company must have a name that is different from the name of a company that is already registered. A proprietary company limited by shares must have the words “Proprietary Limited” as part of its name. Those words can be abbreviated to “Pty. Ltd.”.
A proprietary company may adopt its ACN and the words “Proprietary Limited” (or “Pty. Ltd.”) as its name.
A company has a common seal. It shows the company’s name and its ACN and is equivalent to the company’s signature. It is used on important company documents such as share certificates and mortgages. Its use must be witnessed by:
• a director of the company and its company secretary; or
• 2 directors of the company; or
• if the company has only one director who is also the only company secretary—that person.
[sections 99A, 123, 219, 240, Division 1 of Part 4.2]
If someone enters a contract on behalf of a company before it is incorporated, the company can ratify the contract within a reasonable period after the company is formed. If the company does not ratify the contract, the person who entered the contract may be personally liable to carry it out.
[section 183]
After the company is set up, it may issue other shares. The company’s memorandum sets out a limit on the number of shares that may be issued.
[section 117, regulation 2 of Table A Schedule 1]
The initial shareholders usually appoint the company’s first director or directors.
A director must consent in writing to holding the position of director.
See 5.1 and 5.2 for the removal of directors and the appointment of later directors.
[sections 221, 222A, regulations 57, 58, 59 of Table A Schedule 1]
The directors appoint the first company secretary.
A company secretary must consent in writing to holding the position of company secretary.
The same person may be both a director of the company and the company secretary.
See 5.4 for the removal of secretaries and the appointment of later secretaries.
[sections 222A, 240]
A company must have a registered office in Australia and must inform the ASC of the location of the office. A post office box cannot be the registered office of a company. The purpose of the registered office is to have a place where official forms and notices can be sent to the company.
If the company does not occupy the premises where its registered office is located, the occupier of the premises must agree in writing to having the company’s registered office located there.
The company’s name and the words “Registered Office” must be shown outside the office.
A company can notify the ASC of the opening hours of its registered office. The company can choose any 3 or more hours between 9a.m. and 5p.m. each business day as the opening hours of its registered office. If the company does not notify the ASC of the opening hours of its registered office, the office must be open for at least 5 hours between 10a.m. and 4p.m. each business day.
[sections 100, 217, 219, Form 203]
A company must keep registers, including a register of shareholders and a register of charges. A company must keep its registers at:
• the company’s registered office; or
• an office at the company’s principal place of business; or
• an office where the work in maintaining the register is done (the office need not be an office of the company); or
• another office approved by the ASC.
A register may be kept either in a bound or looseleaf book or on computer.
If a register is kept on computer, its contents must be capable of being printed out in hard copy.
[sections 216E, 1302, 1306]
register, of shareholders A company must keep in its register of shareholders such information as:
• the names and addresses of its shareholders; and
• details of shares held by individual shareholders.
[sections 216A, 216B]
register of charges A company must keep a register of charges if the company gives a bank, trade creditor or anybody else a charge over company assets.
[section 271]
The Corporations Law and other laws impose obligations on companies themselves and on their directors and company secretaries. Some of the more important obligations imposed under the Corporations Law are discussed below.
The name of a company must be shown outside all the company’s business premises (including its registered office) that are open to the public.
The company’s name and its ACN must appear on its seal, some of its public documents, its cheques and on all documents lodged with the ASC.
[section 219, Australian Securities Commission Practice Note 47]
A company must lodge with the ASC an annual return which contains such information as:
• names and addresses of each director and company secretary; and
• issued shares; and
• details of its shareholders; and
• address of its registered office.
For convenience, the ASC may send a partially completed annual return to each company for the company to check, amend if necessary, verify and send back to the ASC. However, a company must lodge an annual return with the ASC even if the ASC does not send a partially completed annual return to the company.
[section 335, regulations 3.8.01, 3.8.02, Form 316]
A company must pay an annual fee to the ASC on lodgment of the annual return.
[Corporations (Fees) Regulations]
The company must notify the ASC if certain basic changes to the company occur. The table sets out these notification requirements.
| within 1 month after the change | 207 | section 187 | |
| within 7 days after the location is changed | 909 | section 216G section 1302 | |
| within 7 days after the change | 203 | section 218 | |
| within 7 days after the change | 203 | section 218 | |
| within 1 month after the change | 304 | section 242 | |
| within 1 month after the change | 304 | section 242 | |
| within 45 days after the charge is created | 309 | section 263 |
Only an individual who is at least 18 years old can be a director. If a proprietary company has only one director, they must ordinarily reside in Australia. If a proprietary company has more than one director, at least one of the directors must ordinarily reside in Australia.
A director must consent in writing to holding the position of director.
The company must keep the consent and must notify the ASC of the appointment.
In some circumstances, the Corporations Law imposes the duties and obligations of a director on a person who, although not formally appointed as a director of a company, nevertheless acts as a director or gives instructions to the formally appointed directors as to how they should act.
The Court or the ASC may prohibit a person from being a director or from otherwise being involved in the management of a company if, for example, the person has breached the Corporations Law.
A person needs the Court’s permission to be a director if the person has been convicted of certain offences or is, in some circumstances, unable to pay their debts as they fall due.
Generally, a director may resign by giving written notice of the resignation to the company. The company must notify the ASC of a director’s resignation. A director who resigns may also notify the ASC of the resignation.
The articles may also deal with the process of changing directors.
[sections 60, 221, 222A, 224, 228, 229, 230, 242, 242C, 599, 600]
A company’s articles usually allow existing directors of a company to appoint a new director if a casual vacancy occurs. Shareholders in general meeting may also have the power to appoint new directors.
[section 242, regulations 60, 61 of Table A Schedule 1]
In managing the business of a company (see 1.6), each of its directors is subject to a wide range of duties under the Corporations Law and other laws. Some of the more important duties are:
• to act in good faith
• to act in the best interests of the company
• to avoid conflicts between the interests of the company and the directors’ interests
• to act honestly
• to exercise care and diligence
• to prevent the company trading while it is unable to pay its debts
• if the company is being wound up—to report to the liquidator on the affairs of the company
• if the company is being wound up—to help the liquidator (by, for example, giving to the liquidator any records of the company that the director has).
A director who fails to perform their duties:
• may be guilty of a criminal offence with a penalty of $200,000 or imprisonment for up to 5 years, or both; and
• may contravene a civil penalty provision (and the Court may order the person to pay to the Commonwealth an amount of up to $200,000); and
• may be personally liable to compensate the company or others for any loss or damage they suffer; and
• may be prohibited from managing a company.
A director’s obligations may continue even after the company has been dissolved.
[sections 232, 475, 530A, 574, 588G, 596, 1317HA, 1317HB, 1317HD]
A company must have a company secretary. The directors appoint the company secretary. A company secretary must be at least 18 years old. If a company has only one company secretary, they must ordinarily reside in Australia. If a company has more than one company secretary, at least one of them must ordinarily reside in Australia.
A company secretary must consent in writing to holding the position of company secretary. The company must keep the consent and must notify the ASC of the appointment.
The same person may be both a director of a company and the company secretary.
Generally, a company secretary may resign by giving written notice of the resignation to the company. The company must notify the ASC of a company secretary’s resignation. A company secretary who resigns may also notify the ASC of the resignation.
The company secretary is an officer of the company and, in that capacity, may be subject to the requirements imposed by the Corporations Law on company officers. The company secretary also has specific responsibilities under the Corporations Law, including responsibility for ensuring that:
• the company notifies the ASC about changes to the identities, names and addresses of the company’s directors and company secretaries
• the company keeps its registered office open during its opening hours
• the company lodges its annual return.
A company secretary’s obligations may continue even after the company has been dissolved.
[sections 83, 217, 222A, 240, 242, 242C, 335, 574]
A proprietary company must have a share capital and at least one shareholder.
A person may become a shareholder of a company in several ways, including the following:
• the person being an initial shareholder of the company
• the company allotting shares to the person
• the person buying shares in the company from an existing shareholder and the company registering the transfer.
[sections 117, 124, 184]
Some of the ways in which a person ceases to be a shareholder are:
• the person sells all of their shares in the company and the company registers the transfer of the shares
• the company buys back all the person’s shares
• the ASC cancels the company’s registration.
[sections 206I, 574, regulation 19 of Table A Schedule 1]
A proprietary company must have at least one share. It may have different classes of shares. Usually the articles set out the rights that attach to each class of shares. Those rights distinguish the classes of shares from each other.
[sections 116, 118, regulation 2 of Table A Schedule 1]
Directors have the power to convene (call) meetings of all shareholders or meetings of only those shareholders who hold a particular class of shares.
Shareholders who hold at least 5% of the issued share capital of a company have the power to convene a meeting themselves or to require the directors to convene a meeting.
Meetings may be held regularly or to resolve specific questions about the management or business of the company.
The Corporations Law and the company’s articles set out rules about meetings including minimum notice periods and who can attend and vote.
A company must keep a written record of each meeting. The record usually includes information such as where and when the meeting was held and the results of any voting.
[sections 246, 247, 253, 258, regulations 40 to 56 of Table A Schedule 1]
Different rights to vote at meetings of shareholders may attach to different classes of shares. The entitlement to vote is usually set out in the company’s articles.
[regulation 2 of Table A Schedule 1]
A shareholder may sell their shares but only if the sale would not breach the company’s articles. A company’s articles may give the company’s directors the discretion to refuse to register the transfer of the shares between the seller and the buyer.
[regulations 19 to 21 of Table A Schedule 1]
The initial shareholders may fund the company’s operations by lending money to the company or by taking up other shares in the company. Except if it is raising funds from its own employees or shareholders, a company must not engage in any fundraising activity that would require the company to lodge a prospectus with the ASC (for example, advertising in a newspaper inviting people to invest in a company).
The company may also borrow money from banks and other financial organisations.
Anyone who has lent money, or provided credit, to the company may ask for a mortgage or charge over the company’s assets to secure the performance by the company of its obligations.
[sections 116, 161, regulation 66 of Table A Schedule 1]
Shareholders can take money out of the company in a number of ways but only if the company complies with its articles, the Corporations Law and all other relevant laws. A director of a company that pays out money causing the company to be unable to pay its debts as they fall due may be liable:
• to pay compensation; and
• for criminal and civil penalties.
[sections 588G, 1317HA, 1317HB, 1317HD]
Dividends are payments to shareholders out of the company’s after tax profits. The directors of the company decide whether the payment of dividends is appropriate.
[section 201, regulation 86 of Table A Schedule 1]
A company can buy back shares from shareholders.
[Division 4B of Part 2.4]
If a company is wound up and there are any assets left over after all the company’s debts have been paid, the surplus is distributed to shareholders in accordance with the company’s articles.
[section 563A, regulation 97 of Table A Schedule 1]
The accounting requirements imposed on a proprietary company under the Corporations Law depend on whether the company is classified as small or large. A company’s classification can change from one financial year to another as its circumstances change.
A company is classified as small for a financial year if it satisfies at least 2 of the following tests:
• gross operating revenue of less than $10 million for the year
• gross assets of less than $5 million at the end of the year
• fewer than 50 employees at the end of the year.
A company that does not satisfy at least 2 of these tests is classified as large.
[section 45A]
As the great majority of proprietary companies are small under these tests, the discussion below deals mainly with the accounting requirements for small proprietary companies. If a company becomes large, the accounting requirements imposed on it are more extensive.
[section 315]
Under the Corporations Law, all proprietary companies must keep sufficient accounting records to allow annual accounts to be prepared and audited. “Accounting record” here means some kind of systematic record of the company’s financial transactions—not merely a collection of receipts, invoices, bank statements and cheque butts. Accounting records may be kept on computer.
[sections 283, 283A, 283B, 283C, 289]
The Corporations Law does not require a small proprietary company to prepare formal accounts (an annual profit and loss account and a balance sheet) or have them audited unless the company is asked to do so by:
• shareholders holding at least 5% of the voting shares in the company; or
• the ASC.
Unless the shareholders’ request specifies otherwise, the company must prepare its accounts in accordance with the applicable accounting standards.
Although the Corporations Law itself may not require a small proprietary company to prepare accounts except in the circumstances mentioned, the company may need to prepare the accounts for the purposes of other laws (for example, income tax laws). Moreover, good business practice may also make it advisable for the company to prepare the accounts so that it can monitor and better manage its financial position.
[sections 283A, 283C, 289, 292 to 294, 317, 317B]
There are remedies available to a shareholder of a company if:
• the affairs of the company are being conducted in a way that is unfair to that shareholder or to other shareholders of the company; or
• the affairs of the company are being conducted in a way that is against the interests of the company as a whole.
A Court may, for example, order the winding up of a company or the appointment of a receiver.
[sections 260, 461]
A company may buy back the shares of a shareholder who wants to sever their relationship with the company.
[Division 4B of Part 2.4]
A shareholder in a proprietary company who wants to sever their relationship with the company may decide to sell their shares. However, the shareholder may not be able to sell their shares readily—particularly if they want to sell their shares to someone who is not an existing shareholder. Some of the difficulties they may face in that case are:
• restrictions in the company’s articles on transferring shares; and
• the restrictions in the Law on offering shares to the public.
If a company experiences financial problems, the directors may appoint an administrator to take over the operations of the company to see if the company’s creditors and the company can work out a solution to the company’s problems.
If the company’s creditors and the company cannot agree, the company will be wound up (see 11.3).
[Part 5.3A]
A receiver, or receiver and manager, may be appointed by order of a Court or under an agreement with a secured creditor to take over some or all of the assets of a company. Generally this would occur if the company is in financial difficulty. A receiver may be appointed, for example, because an amount owed to a secured creditor is overdue.
[Part 5.2]
A company may be wound up by order of a Court, or voluntarily if the shareholders of the company pass a special resolution to do so.
A liquidator is appointed:
• when a Court orders a company to be wound up; or
• the shareholders of a company pass a resolution to wind up a company.
[Part 5.2, section 495]
A liquidator is appointed to administer the winding up of a company. A liquidator’s main functions are:
• to take possession of the company’s assets; and
• to determine debts owed by the company and pay the company’s creditors; and
• to distribute to shareholders any assets of the company left over after paying creditors (any distribution to shareholders is made according to the rights attaching to their shares); and
• finally, to dissolve the company.
[Parts 5.4B, 5.5]
Generally, creditors who hold security over company assets are paid first.
[Division 6 of Part 5.6]
If a company has ceased trading or has been wound up, it remains on the register until the ASC cancels the company’s registration.
[sections 573, 574]
Other proprietary company amendments
Division 5A—Types of company
(1)
A proprietary company is a company that:
(a) is registered as a proprietary company under section 120, 129, 137 or 145; or
(b) converts to a proprietary company under section 168.
Note: A proprietary company must:
• be limited by shares or be an unlimited company with a share capital
• have no more than 50 non-employee shareholders
• not do anything that would require lodgment of a prospectus under Part 7.12 (except in limited circumstances).
(see section 116)
Other proprietary company amendments
(2)
A proprietary company is a small proprietary company for a financial year if it satisfies at least 2 of the following paragraphs:
(a) the consolidated gross operating revenue for the financial year of the company and the entities it controls (if any) is less than $10 million
(b) the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) is less than $5 million
(c) the company and the entities it controls (if any) have fewer than 50 employees at the end of the financial year.
Note: A small proprietary company generally has reduced financial reporting requirements (see section 283C).
(3)
A proprietary company is a large proprietary company for a financial year if it satisfies at least 2 of the following paragraphs:
(a) the consolidated gross operating revenue for the financial year of the company and the entities it controls (if any) is $10 million or more
(b) the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) is $5 million or more
(c) the company and the entities it controls (if any) have 50 or more employees at the end of the financial year.
(4)
In this section, “entity” has the meaning given by section 294A. Apply section 243E to decide whether a proprietary company controls another entity.
(5)
In counting employees for the purposes of subsections (2) and (3), take part-time employees into account as an appropriate fraction of a full-time equivalent.
(6)
Consolidated gross operating revenue and the value of consolidated gross assets are to be calculated for the purposes of this section in accordance with accounting standards in force at the relevant time (even if the standard does not otherwise apply to the financial year of some or all of the companies concerned).
Other proprietary company amendments
Add at the end: Note: See also section 283D.
Repeal.
Repeal, substitute:
114 Formation of companies (1)
Proprietary companies One or more persons may form a proprietary company by:
(a) subscribing their name to a memorandum; and
(b) complying with the registration requirements for proprietary companies set out in this Division.
(2)
Public companies Five or more persons may form a public company by:
(a) subscribing their names to a memorandum; and
(b) complying with the registration requirements for public companies set out in this Division.
Repeal, substitute:
116 Proprietary companies (1) A company must comply with subsection (2) if it is to:
(a) be registered as a proprietary company; or
(b) convert to a proprietary company; or
(c) remain registered as a proprietary company.
(2) A proprietary company:
(a) must be either:
(i) limited by shares; or
(ii) an unlimited company that has a share capital; and
(b) must have no more than 50 non-employee shareholders.
Other proprietary company amendments
A company limited both by shares and by guarantee cannot be a proprietary company. A no liability company cannot be a proprietary company.
Note 1: If a proprietary company contravenes this subsection, one consequence is that the ASC may require it to convert to a public company (see section 170).
Note 2: See section 1407 for the application of subparagraph (2)(a)(i) to proprietary companies that are limited both by shares and by guarantee under this Law as in force immediately before the commencement of this section.
(3) In applying paragraph (2)(b):
(a) count joint holders of a particular parcel of shares as one person; and
(b) an employee shareholder is:
(i) a shareholder who is an employee of the company or of a subsidiary of the company; or
(ii) a shareholder who was an employee of the company, or of a subsidiary of the company, when they became a shareholder.
(4) Subject to subsection (5), a proprietary company must not engage in any activity that would require the lodgment of a prospectus under Part 7.12 or a corresponding law.
Note: If a proprietary company contravenes this subsection, one consequence is that the ASC may require it to convert to a public company (see section 170).
(5) Subsection (4) does not apply to an offer of shares to:
(a) existing shareholders of the company; or
(b) employees of the company or a subsidiary of the company.
(6)
Effect of breaching prospectus limitations An act or transaction is not invalid merely because of a contravention of subsection (4).
(3) If:
(a) the proposed company’s memorandum states the matters that are required to be stated under paragraphs 117(1)(a), (b), (c) and (g); and
(b) the company is to be registered as a proprietary company;
the application must also set out those matters.
Other proprietary company amendments
(2) The Commission must not register a company under this Division by a particular name unless that name is available within the meaning of section 367.
(4) The application may ask for registration as a proprietary company.
(4) The Commission must register the applicant as a proprietary company if:
(a) it is limited by shares or is an unlimited company that has a share capital; and
(b) it has no more than 50 non-employee shareholders; and
(c) its application asks for registration as a proprietary company.
(4A) In applying paragraph (4)(b):
(a) count joint holders of a particular parcel of shares as one person; and
(b) an employee shareholder is:
(i) a shareholder who is an employee of the company or of a subsidiary of the company; or
Other proprietary company amendments
(ii) a shareholder who was an employee of the company, or of a subsidiary of the company, when they became a shareholder.
Omit, substitute: (e) that a document has been duly sealed by the company if it bears what appears to be an impression of the company’s seal and either:
(i) the sealing of the document appears to be witnessed by 2 people, one of whom may be assumed to be a director of the company because of paragraph (b) or (c) and the other of whom may be assumed to be a director or a secretary of the company because of those paragraphs; or
(ii) the sealing of the document appears to be witnessed by one person who may be assumed to be a director and a secretary of the company because of paragraph (b) or (c) but only if it is stated next to the signature that the person witnesses the sealing in the capacity of sole director and sole secretary of the company; and
Omit, substitute:
(1) A public company may convert to a proprietary company if it:
(a) lodges with the ASC a copy of a special resolution determining to convert to a proprietary company and specifying an appropriate alteration to its name; and
(b) complies with subsection 116(2).
(2) A proprietary company may convert to a public company by lodging with the ASC:
(a) a copy of a special resolution determining to convert to a public company and specifying an appropriate alteration to its name; and
(b) in the case of a Table A proprietary company—a copy of its memorandum and its articles (if any).
Other proprietary company amendments
Repeal, substitute:
170 ASC may order a proprietary company to convert to a public company in certain circumstances (1) The ASC may order a proprietary company to convert to a public company under section 168 if it is satisfied that the company has contravened subsection 116(2) or (4).
(2) The order:
(a) must be in writing; and
(b) must be given to the company; and
(c) must specify that the company must comply with the order within 2 months after the date on which the order is given to the company.
(3) A company must comply with an order given to it under subsection (1) within 2 months after the date on which the order is given to the company.
170A ASC may determine that a proprietary company is a public company in certain circumstances (1) If a proprietary company contravenes subsection 170(3), the ASC may determine that the company ceases to be a proprietary company on the date specified in the determination.
(2) A determination:
(a) must be in writing; and
(b) must be given to the company; and
(c) must specify the date on which the company ceases to be a proprietary company.
(3) The effects of a determination are:
(a) the company is a public company on and from the date specified in the determination; and
(b) the company is taken to have omitted “Proprietary” or “Pty.”, as the case requires, from its name on and from that date.
Other proprietary company amendments
186 Consequences for members of public company if the company carries on business with fewer than 5 members
(1) This section applies to a person who is a member of a public company if:
(a) the company carries on business for more than 6 months while it has fewer than 5 members; and
(b) the company incurs a debt after those 6 months; and
(c) the person:
(i) is a member of the company at any time after those 6 months; and
(ii) is aware that the company is carrying on business with fewer than 5 members.
(2) The person:
(a) is individually liable for debts of the company referred to in subsection (1) incurred while the person is a member; and
(b) may be individually sued for payment of those debts; and
(c) contravenes this subsection.
(3) In counting the members of a company for the purposes of subsection (1), count joint holders of a particular parcel of shares as one person.
(4) This section does not apply to a person who is a member of a public company all of whose shares are held by a holding company that is a company or a recognised company.
Other proprietary company amendments
(10A) If a company is a proprietary company and has only one director, the signature requirement in paragraph (10)(c) is satisfied if the director signs the statement referred to in that paragraph.
(4A) Without limiting the operation of subsection (1), a document may be served on a proprietary company that has only one director by delivering a copy personally to that director.
(1)
A proprietary company must have at least one director. At least one director must ordinarily reside in Australia.
(2)
A public company must have at least 3 directors. At least 2 of them must ordinarily reside in Australia.
(3)
A body corporate cannot be appointed as a director.
224A Appointment of new director on death, mental incapacity or bankruptcy of single director/shareholder of proprietary company
(1)
If a person who is the only director and the only shareholder of a proprietary company:
(a) dies; or
Other proprietary company amendments
(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.
(2)
Bankruptcy If:
(a) the office of the director of a proprietary company is vacated under paragraph 224(1)(c) because of the bankruptcy of the director; and
(b) the person is the only director and also 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.
(3) A person who has a power of appointment under this section may appoint themselves as director.
(4) A person appointed as a director of a company under this section holds that office as if they had been properly appointed in accordance with the company’s articles of association.
(3A) If a proprietary company is a subsidiary of a public company:
(a) subsection (3) does not apply to it; and
(b) a person can continue to act as a director of the proprietary company until the next annual general meeting 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 subsection 245(2A)).
Other proprietary company amendments
(8A) 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 annual general meeting of the holding company; and
(b) the appointment does not need a resolution under subsection (7); and
(c) the appointment must satisfy either paragraph (8)(a) or paragraph (8)(b).
(10) This section does not apply to a director of a proprietary company if the director is the only director and only shareholder of that company.
(7A) Subject to subsection (7B), subsection (7) does not apply if the only director of a proprietary company is also the only secretary of the company.
(7B) Subsection (7) does not apply to the witnessing of the use of the company seal of a proprietary company if:
(a) the only director of the company is also the only secretary of the company; and
(b) that person witnesses the use of the company seal; and
(c) it is stated next to the signature that the person witnesses the sealing in the capacity of sole director and sole secretary of the company.
Omit “, or, in the case of an exempt proprietary company, within 6 months,”.
Omit “(or, in the case of an exempt proprietary company, not more than 6 months)”.
Other proprietary company amendments
(2A) Subsections (1) and (2) do not apply to a proprietary company.
(a) a quorum is constituted by:
(i) in the case of a proprietary company with a single member—that member; and
(ii) in the case of a proprietary company with 2 or more members—2 members personally present; and
(iii) in the case of a public company—3 members personally present; and
(1) If a proprietary company has only one shareholder and the shareholder records the shareholder’s decision to a particular effect, the recording of the decision counts as the passing by the shareholder of a resolution to that effect.
(2) If a proprietary company has only one director and the director records the director’s decision to a particular effect, the recording of the decision counts as the passing by the director of a resolution to that effect.
(3) A record made for the purposes of subsection (1) or (2) also has effect as minutes of the passing of the resolution.
Note: Section 258 deals with minutes.
Other proprietary company amendments
(4) If a proprietary company has only one director and the director records the director’s declaration to a particular effect, the recording of the declaration counts as the making of a declaration to that effect made at a meeting of the company’s directors.
(5) A declaration has effect as minutes that record the making of the declaration.
Note: Section 258 deals with minutes.
(6) A record made for the purposes of subsection (1), (2) or (4) must be made in writing.
Note: See section 255A for single shareholder/single director proprietary companies.
This Part applies to a disclosing entity for all its accounting periods.
Note: For “disclosing entity” see section 111AC.
This Part applies to a public company or a large proprietary company for all its accounting periods.
This Part applies to a small proprietary company for an accounting period if:
(a) the company is controlled by a foreign company for all or a part of the period; and
(b) the company’s profit or loss for the period is not covered by accounts lodged with the ASC by the foreign company.
Note 1: For the concept of one company controlling another see section 243G.
Note 2: For “foreign company” see section 9.
Other proprietary company amendments
(1)
This section covers a small proprietary company that is neither:
(a) a disclosing entity; nor
(b) dealt with by section 283B.
(2)
Sections 289, 315, 317, 319 and 320 apply to the small proprietary company for all of its financial years. The other provisions of this Part will only apply to a particular financial year of a small proprietary company if:
(a) they are applied to that financial year by subsection (3) (shareholders’ request); or
(b) they are applied to that financial year by subsection (7) (ASC request).
(3)
If shareholders holding 5% or more of the voting shares in the company request the company to do so, the company must prepare the following for the financial year specified in the request:
(a) the financial statements
(b) the Division 5 statements
(c) the Division 6 report.
Subject to subsections (5) and (6), all of this Part (except section 317B) applies to the company for that financial year.
Note 1: For “financial statements” see section 9.
Note 2: Although the shareholders cannot require the company to lodge the documents with the ASC, the ASC itself may ask the company to lodge them (see section 317).
(4)
The request must be:
(a) served on the company; and
(b) signed by the shareholders making the request; and
(c) made no later than 12 months after the end of the financial year concerned.
Other proprietary company amendments
(5)
If the request specifies that the financial statements do not have to be made out in accordance with the applicable accounting standards (see section 298), the financial statements do not have to be made out in accordance with those standards.
(6)
The financial statements must be audited only if the request asks for an audit.
(7)
If the ASC makes a request under subsection 317(1) to a small proprietary company for a financial year, the provisions of this Part apply to the company for that year in accordance with the request.
(1) This section applies for the purposes of working out the deadlines that apply to the various kinds of company for the purposes of this Part.
(2) The deadline for an accounting period for a disclosing entity or a public company that is not a disclosing entity is the deadline for the period as defined in section 58C.
(3) The deadline for a financial year for a large proprietary company that is not a disclosing entity is 4 months after the end of the year.
(4) The deadline for a financial year for a small proprietary company referred to in section 283B is 4 months after the end of the year.
(5) The deadline for a financial year for a small proprietary company that has been given a request under subsection 283C(3) is worked out using subsections (6) and (7).
(6) If the request is made before the end of the financial year, the deadline is 4 months after the end of the year.
(7) If the request is made after the end of the financial year, the deadline is:
(a) 2 months after the date on which the request is made; or
(b) 4 months after the end of the financial year;
whichever ends later.
(8) The deadline for a financial year for a small proprietary company that has been given a request under subsection 317(1) is the date specified in the request.
Other proprietary company amendments
Omit all the words after “company,”,substitute: signed by:
(a) in the case of a proprietary company that has only one director—that director; or
(b) in any other case—at least 2 directors.
The notice must state the reasons for seeking the order.
Omit “, other than a company that pursuant to section 325 or 326 did not appoint an auditor to audit the financial statements concerned,”.
Omit.
Omit.
Omit ,substitute: (1) Subject to subsection (1A), a company’s directors must comply with section 301, section 302, or sections 301 and 302, as the case requires, in relation to an accounting period before the auditor reports under this Part on the financial statements.
(1A) If:
(a) a company is a small proprietary company; and
(b) either:
(i) the Commission has asked the company under section 317 to prepare accounts; or
(ii) the shareholders have asked the company under subsection 283C(3) to prepare accounts but have not asked the company to have the accounts audited;
the company’s directors must comply with section 301, section 302, or sections 301 and 302, as the case requires, in relation to a financial year before the deadline after the financial year.
Other proprietary company amendments
(3) If a company is a proprietary company and has only one director, the signature requirement in paragraph (2)(d) is satisfied if the director signs a statement referred to in subsection (2).
(3) If a company is a proprietary company and has only one director, the signature requirement in paragraph (2)(d) is satisfied if the director signs a report referred to in subsection (2).
signed by:
(a) in the case of a proprietary company that has only one director—that director; or
(b) in any other case—at least 2 directors.
The notice must state the reasons for seeking the order.
(11A) In deciding for the purposes of subsection (11) whether the audit requirements for a large proprietary company, or a class of large proprietary companies, would impose an unreasonable burden on the company or companies, the Commission is to have regard to:
Other proprietary company amendments
(a) the expected costs of complying with the audit requirements; and
(b) the expected benefits of having the company or companies comply with the audit requirements; and
(c) any practical difficulties that the company or companies face in complying effectively with the audit requirements (in particular, any difficulties that arise because a financial year is the first one for which the audit requirements apply or because the company or companies are likely to move frequently between the small and large proprietary company categories from one financial year to another); and
(d) any unusual aspects of the operation of the company or companies during the financial year concerned; and
(e) any other matters that the Commission considers relevant.
(11B) In assessing expected benefits under subsection (11A), the Commission is to take account of:
(a) the number of creditors and potential creditors; and
(b) the position of creditors and potential creditors (in particular, their ability to independently obtain financial information about the company or companies); and
(c) the nature and extent of the liabilities of the company or companies.
(3A) If a company is:
(a) a large proprietary company for a financial year; or
(b) a small proprietary company to which section 283B applies for a financial year; or
(c) a small proprietary company that receives a request under subsection 283C(3) for a financial year;
the company must send to each eligible person by the deadline for that year a copy of:
Other proprietary company amendments
(d) the company’s financial statements for that year; and
(e) each Division 5 statement for that year; and
(f) the Division 6 report for that year; and
(g) the auditor’s report (if any) about the financial statements for that year under section 331A.
(1) The ASC may ask a small proprietary company to comply with the provisions of this Part for a financial year.
(2) The request may be general or may specify the particular requirements of this Part that the company is to comply with.
(3) A request under subsection (1) must specify the date by which the documents have to be prepared, sent or lodged. The date must be a reasonable one in view of the nature of the request.
(4) The ASC may ask a company to lodge with the ASC a copy of any of the following documents prepared for a financial year:
(a) the financial statements
(b) the Division 5 statements
(c) the Division 6 report
(d) the auditor’s report on the financial statements.
(5) A request under subsection (4) must specify the date by which the documents have to be lodged. The date must be at least 14 days after the date on which the request is served on the company.
Other proprietary company amendments
(6) A request under subsection (1) or (4) must:
(a) be made in writing; and
(b) be served on the company; and
specify the financial year or years concerned; and
(d) be made no later than 7 years after the end of each financial year specified under paragraph (c).
(1)
Subject to subsection (3), this section applies to:
(a) a large proprietary company that is not a disclosing entity; and
(b) a small proprietary company to which section 283B applies.
(2)
A proprietary company to which this section applies must lodge a copy of the following documents with the ASC before the deadline for a financial year:
(a) the company’s financial statements for the year
(b) the Division 5 statements for the year
(c) the Division 6 report for the year
(d) the report about the financial statements that section 331A requires from the company’s auditor.
(3) Subsection (1) does not apply to a large proprietary company for a financial year if:
(a) the company was an exempt proprietary company on 30 June 1994; and
Company registers | ||
732 | Item 14 of Schedule 2 | Share buy-backs |
742 | Item 59 of Schedule 6 | Company registers |
857 | Item 80 of Schedule 4 | Proprietary companies |
858 | Item 81 of Schedule 4 | Proprietary companies |
1047 | Item 60 of Schedule 6 | Company registers |
1048 | Item 61 of Schedule 6 | Company registers |
1070 | Item 62 of Schedule 6 | Company registers |
1083 | Item 63 of Schedule 6 | Company registers |
1085 | Item 64 of Schedule 6 | Company registers |
1087 | Item 65 of Schedule 6 | Company registers |
1215 | Item 82 of Schedule 4 | Proprietary companies |
1216 | Item 83 of Schedule 4 | Proprietary companies |
1274 | Item 66 of Schedule 6 | Company registers |
1302 | Items 67 to 70 of Schedule 6 | Company registers |
1324 | Item 15 of Schedule 2 | Share buy-backs |
*1406 to 1410 | Item 84 of Schedule 4 | Proprietary companies |
Schedule 3 | Item 85 of Schedule 4 | Proprietary companies |
Item 71 of Schedule 6 | Company registers |
A reference to a provision consists of reference to either a clause number or to the relevant Schedule of the Bill followed by the section number.
auditor
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proprietary company Sch 4 s 335(1A) public company Sch 4 s335 corrections of company registers Sch 5 s 216H(1)
synchronisation of financial years Sch 4 s 290(5) |
Index
buy-backs of shares Sch 1 | members Sch 6 s 214 |
notice of address Sch 6 s 1302(4), (5) | |
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insolvent trading and | |
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nominal share capital, effect on Sch 1 s 2061(3) | |
debenture holders Sch 6 s 1048 |
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definition Sch 6 s 9 | |
foreign companies Sch 6 s 352 | notices |
location Sch 6 s 1302(2), (3) |
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Index
odd lots |
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offer documents, lodgment with ASC Sch 1 s 206F | |
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on-market | |
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| Sch 1 s 2061(3) notice to ASC Sch 1 s 206J Sch 3 1.1, Sch 3 11.6
Sch 4 s 382(2), (3Xa)
voting rights Sch 3 6.4
company register
Sch 5 s 216A(1) note 2 copies from Sch 5 s 216F(3) inspection of Sch 5 s216F(l)
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Index
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and share buy-backs Sch 1 s 206K |
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proprietary companies Sch 4 s 45A(4) |
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from proprietary to public ASC order Sch 4 s 170 |
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voluntary Sch 4 s 168(2) |
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from public to proprietary company Sch 4 s 168(1), Sch 4 s 180(4) |
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Computerised registers Sch 5 s 216F(3) |
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age limitations | |
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Sch 4 s 228(3A) | |
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ASC Sch 2 s 9 |
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Australian register Sch 6 s 9 | |
branch register Sch 6 s 9 |
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buy-back Sch 2 s 9 | |
buy-back agreement Sch 2 s 9 |
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Index
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company, by Sch 3 5.1, |
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Sch 6 s 242(9), Sch 6 s242C(3) | |
director, by Sch 3 5.1, Sch 6 s 242C(1) |
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director, by Sch 6 s 242C(1), (2) |
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share issues by Sch 3 3.5 |
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shareholdings of |
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single director/shareholder proprietary | |
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Index
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definition Sch 1 s 9 |
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procedural table Sch 1 s 206C(1) |
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company registers Sch 5 s 2161 |
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Index
foreign companies Sch 6 s 356
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Index
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address | |
alternative Sch 6 s 242(5) |
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usual residential Sch 6 | |
s 242(4), (6), |
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Sch 6 s 1274(2)(a)(iaa) |
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on registration Sch 6 s 242(1) |
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on subsequent appointment Sch 6 s 242(2) |
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registered office | |
changes to Sch 3 4.4 |
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location Sch 3 3.8 |
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opening hours Sch 3 3.8 |
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registers, changes in location Sch 3 4,4 | |
resignation of directors |
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notice by director Sch 3 5.1, Sch 6 s 242C(1) |
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resignation of secretaries | |
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retirement of directors |
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retirement of secretaries |
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notice by secretary Sch 6 s 242C(2) |
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company, to
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Index
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directors’ breach of duties Sch 3 1.3, Sch 3 53 |
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buy-back provisions inapplicable Sch 1 s 206B |
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definition Sch 2 s 9 |
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definition Sch 6 s 9 |
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definition Sch 6 s 9 |
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definition Sch 6 s 9 |
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auditors |
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qualifications Sch 4 s 316(1) |
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resignation Sch 4 s 329(9) | |
vacancy Sch 4 s 327 |
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constitutive requirements Sch 4 s 116 | |
controlled entities Sch 4 s 45A(4) |
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conversion to public companies |
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ASC order Sch 4 s 170 |
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voluntary Sch 4 s 168(2) |
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definition Sch 4 ss 9,45A(1) |
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large |
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accounts and audit Sch 4 s 283A | |
| conversion from proprietary companies |
ASC order Sch 4 s 170 | |
| voluntary Sch 4 s 168(2) |
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alteration Sch 4 s 178 | |
deemed Sch 4 s 177 |
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definition Sch 4 s 9 | |
| directors’ reports |
Index
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financial statements and reports |
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4.6, Sch 5 s 216A(1) note 1 |
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Index
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inspection |
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agent’s obligations Sch 5 s 216G |
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entitlement Sch 5 s 216F(1) | |
fees Sch 5 s216F(2) |
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location Sch 5 s 216E |
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obligation to set up and maintain |
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Sch 5 s216A(i)(b) |
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time limits, date of grant of option entry | |
Sch 5 s 216C(2) |
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transfers of options Sch 5 s 216C(4) |
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location Sch 6 s 1302 |
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Sch 6 s 715 |
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civil remedy Sch 6 s 716(2), (3) |
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location Sch 6 s 1302 |
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notification of changes to ASC Sch 3 4.4 | |
registers kept at Sch 5 s 216E(1) | |
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Australian Sch 6 s 9 ’ |
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branch |
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debenture holders Sch 6 s 1048 | |
definition Sch 6 s 9 |
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foreign companies Sch 6 s 352 | |
location Sch 6 s 1302(2), (3) |
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members Sch 6 s 214 | |
notice of address Sch 6 s 1302(4), (5) |
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charges | |
computerised Sch 3 3.9, |
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Sch 5 s 216A(1) note 2 | |
copies from Sch 5 s 216F(3) |
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inspection of Sch 5 s 216F(1) |
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copies Sch 5 s 216F(3) |
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correction Sch 5 s 216H |
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directors, principal executive officers and |
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secretaries |
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evidentiary value Sch 5 s 216I form Sch 3 3.9 | |
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Index
companies Sch 4 s 255A special alteration of memorandum Sch 4 s 171(3) selective buy-backs Sch 1 s 206E(1) 75% or more shareholder approval Sch 3 1.6 unanimous selective buy-backs Sch 1 s 206E(1)
Sch 6 s 242B
Sch 4 s 240(7A)
Sch 3 4.2 address
on registration Sch 6 s 242(1) on subsequent appointment
personal details, meaning Sch 6 s 242(3)
assumptions of outsiders dealing with
re position as Sch 6 s 242A
notification to ASC
notification to ASC
service on Sch 6 s 109X
shares Sch 6 s 235
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Index
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death, mental incapacity or bankruptcy Sch 4 s 224A |
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Index
incorporation, effects |
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acts of company through natural persons Sch 3 1.6 |
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assumptions by outsiders dealing with company Sch 3 1.7 |
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continuous existence Sch 3 l.5 |
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directors’ personal liability |
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guarantees and third party mortgages Sch 3 1.4 |
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insolvent trading Sch 3 1.3 |
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powers of an individual Sch 3 1.1 |
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separate legal entity Sch 3 1.1 | |
shareholders’ limited liability Sch 3 1.2 |
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who may contract for company Sch 3 1.6 |
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liquidators Sch 3,11.3,11.4 | |
loans to company Sch 3 7 |
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meetings of shareholders Sch 3 63 | |
mortgages over company assets Sch 3 7 |
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name of company Sch 3 33 use of Sch 3 4.1 |
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order of payment of debts Sch 3 11.5 |
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pre-incorporation contracts Sch 3 3.4 | |
proprietary company structure suitable Sch 3 2.1 |
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“Pty Ltd", use of Sch 3 33 |
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receivers Sch 3 11.2 |
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receivers and managers Sch 3 11.2 |
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register of charges Sch 3 4.4 | |
registered office Sch 3 3.8 |
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notification of changes to ASC Sch 3 4.4 |
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registers, notice of changes in locations Sch 3 4.4 | |
registration of companies Sch 3 3.2 cancellation Sch 3 11.6 |
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returns to shareholders |
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buy-backs of shares Sch 3 8.2 |
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distribution on winding up Sch 3 8.3 | |
dividends Sch 3 8.1 |
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secretaries Sch 3 5.4 | |
directors as Sch 3 3.7 |
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initial appointments Sch 3 3.7 |
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notice of change in Sch 3 4.4 | |
notice of change of address Sch 3 4.4 |
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share issues Sch 3 3.5 |
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shareholders |
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becoming a shareholder Sch 3 6.1 |
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ceasing to be a shareholder Sch 3 6.1 |
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meetings Sch 3 63 | |
minimum number for proprietary companies Sch 3 6 |
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“shelf’ companies Sch 3 3.1 | |
voluntary administration Sch 3 11.1 |
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winding up Sch 3 113 |
Index
Sch 3 1.4
Sch 1 s 206I(2)
Sch 4 s 255(1)
selective buy-backs Sch 1 s 206E(1)
proprietary companies
liquidator, persons who may lie
Sch 4 s 532(4)
definition Sch 2 s 9
buy-backs of shares
disclaimer of onerous property
Sch 2 s 568(1AA)
proof of debt by selling shareholder
Sch 2 s 553AA
ranking of claim by selling shareholder
Sch 2 s 563AA
distribution of assets on Sch 3 8.3
effect of Sch 4 s 494
grounds Sch 4 s 461
[
House of Representatives on 8 February 1995 Senate on 23 March 1995
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