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Papua New Guinea Consolidated Legislation |
No. 10 of 1997.
Certified on: / /20 .
INDEPENDENT
STATE OF PAPUA NEW GUINEA.
No. 10 of 1997.
ARRANGEMENT OF SECTIONS.
1. Compliance with Constitutional requirements.
2. Interpretation.
3. Public notice.
4. Meaning of “solvency test”.
5. Meaning of “holding company” and “subsidiary”.
6. “Control” defined.
7. Certain matters to be disregarded.
8. Other interpretation provisions.
9. Application of Act to banks and financial institutions.
10. Act binds the State.
11. Essential requirements.
12. Right to apply for registration.
13. Application for registration.
14. Registration.
15. Certificate of incorporation.
16. Separate legal personality.
17. Capacity and powers.
18. Validity of actions.
19. Dealings between company and other persons.
20. No constructive notice.
21. Name to be reserved.
22. Requirements relating to names of companies.
23. Application for reservation of name.
24. Change of name.
25. Direction to change name.
26. Use of company name.
27. No requirement for company to have constitution.
28. Effect of Act on company having constitution.
29. Effect of Act on company not having constitution.
30. Form of constitution.
31. Contents of constitution.
32. Effect of constitution.
33. Adoption, alteration, and revocation of constitution.
34. New form of constitution.
35. Court may alter constitution.
36. Legal nature of shares.
37. Rights and powers attaching to shares.
38. Types of shares.
39. No nominal value.
40. Transferability of shares.
41. Contracts for issue of shares.
42. Issue of shares on registration and amalgamation.
43. Issue of other shares.
44. Notice of share issue.
45. Pre-emptive rights.
46. Consideration for issue of shares.
47. Consideration to be decided by board.
48. Consent to issue of shares.
49. Time of issue of shares.
50. Board may authorize distributions.
51. Dividends.
52. Shares in lieu of dividends.
53. Shareholder discounts.
54. Recovery of distributions.
55. Distribution includes reduction of shareholder liability.
56. Company may acquire or redeem its own shares.
57. Offer to purchase shares.
58. Enforceability of contract to purchase shares.
59. Meaning of “redeemable”.
60. Redemption at option of company.
61. Redemption at option of shareholder.
62. Redemption on fixed date.
63. Company may give financial assistance.
64. Subsidiary may not hold shares in holding company.
65. Transfer of shares.
66. Transfer of shares by operation of law.
67. Company to maintain share register.
68. Place of share register.
69. Share register as evidence of legal title.
70. Directors’ duty to supervise share register.
71. Power to rectify share register.
72. Trusts not to be entered on register.
73. Personal representative may be registered.
74. Trustee of bankrupt may be registered.
75. Share certificates.
76. Loss or destruction of share certificates.
77. Exemptions from share transfer provisions.
78. Meaning of “shareholder”.
79. Liability of shareholders.
80. Liability of former shareholders.
81. Additional provisions relating to liability of shareholders and former shareholders.
82. Liability for calls.
83. Shareholders not required to acquire shares by alteration to constitution.
84. Liability of personal representative.
85. Liability of a trustee.
86. Exercise of powers reserved to shareholders.
87. Exercise of powers by ordinary resolution.
88. Powers exercised by special resolution.
89. Unanimous agreement by shareholders.
90. Management review by shareholders.
91. Shareholder may require company to purchase shares.
92. Notice requiring purchase.
93. Purchase by company.
94. Purchase of shares by third party.
95. Court may grant exemption.
96. Court may grant exemption where company insolvent.
97. Meaning of “classes” and “interest groups”.
98. Alteration of shareholder rights.
99. Shareholder may require company to purchase shares.
100. Actions not invalid.
101. Annual meeting of shareholders.
102. Special meetings of shareholders.
103. Resolution in lieu of meeting.
104. Court may call meeting of shareholders.
105. Proceedings at meetings.
106. Shareholders entitled to receive distributions, attend meetings, and exercise rights.
107. Meaning of “director”.
108. Meaning of “board”.
109. Management of company.
110. Major transactions.
111. Delegation of powers.
112. Duty of directors to act in good faith and in best interests of company.
113. Exercise of powers in relation to employees.
114. Directors to comply with Act and constitution.
115. Director’s duty of care.
116. Use of information and advice.
117. Meaning of “interested”.
118. Disclosure of interest.
119. Avoidance of transactions.
120. Effect on third parties.
121. Sections 118 and 119 do not apply in certain cases.
122. Interested director may vote.
123. Use of company information.
124. Meaning of “relevant interest”.
125. Relevant interests to be disregarded in certain cases.
126. Disclosure of share dealing by directors.
127. Restrictions on share dealing by directors and employees.
128. Number of directors and residence.
129. Qualifications of directors.
130. Director’s consent required.
131. Appointment of first and subsequent directors.
132. Court may appoint directors.
133. Appointment of directors to be voted on individually.
134. Removal of directors.
135. Director ceasing to hold office.
136. Validity of director’s acts.
137. Notice of change of directors.
138. Proceedings of board.
139. Remuneration and other benefits.
140. Indemnity and insurance.
141. Interpretation.
142. Injunctions.
143. Derivative actions.
144. Costs of derivative action to be met by company.
145. Powers of court where leave granted.
146. Compromise, settlement, or withdrawal of derivative action.
147. Personal actions by shareholders against directors.
148. Actions by shareholders to require directors to act.
149. Personal actions by shareholders against company.
150. Actions by shareholders to require company to act.
151. Representative actions.
152. Prejudiced shareholders.
153. Alteration to constitution.
154. Ratification of certain actions of directors.
155. Method of contracting.
156. Attorneys.
157. Pre-incorporation contracts may be ratified.
158. Warranties implied in pre-incorporation contracts.
159. Failure to ratify.
160. Breach of pre-incorporation contract.
161. Registered office.
162. Change of registered office.
163. Requirement to change registered office.
164. Company records.
165. Form of records.
166. Inspection of records by directors.
167. Address for service.
168. Change of address for service.
169. Secretary.
170. Appointment and removal of secretary.
171. Interpretation.
172. Meaning of “generally accepted accounting practice”.
173. Meaning of “issuer”.
174. Companies ceasing to be issuers during accounting period.
175. Certain companies not issuers.
176. Meaning of “balance date”.
177. Meaning of “financial statements”.
178. Meaning of “group financial statements”.
179. Obligation to prepare financial statements.
180. Content of financial statements.
181. Obligation to prepare group financial statements.
182. Content of group financial statements.
183. Registration of financial statements by companies.
184. Accounts complying with Banks and Financial Institutions Act.
185. Offences by directors of reporting companies.
186. Offences by directors of exempt companies.
187. Offences by directors of companies required to have financial statements audited.
188. Accounting records to be kept.
189. Place accounting records to be kept.
190. Appointment of auditors.
191. Auditors’ fees and expenses.
192. Appointment of partnership.
193. Qualifications of auditors.
194. Automatic reappointment.
195. Appointment of first auditor.
196. Replacement of auditor.
197. Auditor not seeking reappointment.
198. Auditor to avoid conflict of interest.
199. Auditor’s report.
200. Auditor’s report on reporting entities.
201. Auditor’s report on exempt companies.
202. Access to information.
203. Auditor’s attendance at shareholders’ meeting.
204. Accounting Standards Board.
205. Functions and powers of Accounting Standards Board.
206. Approval of financial reporting standards.
207. Revocation of approval.
208. Certificates of Accounting Standards Board.
209. Obligation to prepare annual report.
210. Sending of annual report to shareholders.
211. Sending of financial statements to shareholders who elect not to receive annual report.
212. Contents of annual report.
213. Shareholders may elect not to receive documents.
214. Failure to disclose.
215. Annual return.
216. Inspection of company records by shareholders.
217. Manner of inspection.
218. Copies of documents.
219. Information for shareholders.
220. Investigation of records.
221. Application of this Part.
222. Registration of charges.
223. Registration of charges on property acquired.
224. Assignment and variation of charges.
225. Register of charges.
226. Endorsement of certificate of registration on debentures.
227. Registration of satisfaction and release.
228. Extension of time and rectification of register.
229. Documents made outside Papua New Guinea.
230. Interested persons may register documents.
231. Priorities of charges.
232. Amalgamations.
233. Amalgamation proposal.
234. Approval of amalgamation proposal.
235. Short form amalgamation.
236. Registration of amalgamation proposal.
237. Certificate of amalgamation.
238. Effect of certificate of amalgamation.
239. Effect on registers.
240. Powers of Court in other cases.
241. Interpretation.
242. Compromise proposal.
243. Notice of proposed compromise.
244. Effect of compromise.
245. Variation of compromise.
246. Powers of Court.
247. Effect of compromise in liquidation of company.
248. Costs of compromise.
249. Interpretation.
250. Approval of arrangements, amalgamations, and compromises.
251. Court may make additional orders.
252. Parts XIV and XV not affected.
253. Application of Section 247.
254. Interpretation.
255. Application of this Part.
256. Qualifications of receivers.
257. Appointment of receivers under deeds and agreements.
258. Extent of power to appoint receiver.
259. Notice of appointment.
260. Notice of receivership.
261. Vacancy in office of receiver.
262. Power to obtain documents and information.
263. Execution of documents.
264. Powers of receivers.
265. Power to make calls on shares.
266. Validity of acts of receivers.
267. Consent of mortgagee to sale of property.
268. General duties of receivers.
269. Duty of receiver selling property.
270. No defence or indemnity.
271. Duty in relation to money.
272. Accounting records.
273. First report by receiver.
274. Further reports by receiver.
275. Extension of time for preparing reports.
276. Persons entitled to receive reports.
277. Duty to notify breaches of Act.
278. Notice of end of receivership.
279. Preferential claims.
280. Powers of receiver on liquidation.
281. Liabilities of receiver.
282. Relief from liability.
283. Court supervision of receiver.
284. Court may terminate or limit receivership.
285. Meaning of “failure to comply”.
286. Orders to enforce receiver’s duties.
287. Special provisions relating to evidence.
288. Orders protecting property in receivership.
289. Refusal to supply essential services prohibited.
290. Interpretation.
291. Commencement of liquidation.
292. Liquidators to act jointly unless otherwise stated.
293. Liquidator to summon meeting of creditors.
294. Liquidator to summon meeting of creditors in other cases.
295. Liquidator may dispense with meetings of creditors.
296. Interim liquidator.
297. Power to stay or restrain certain proceedings against company.
298. Effect of commencement of liquidation.
299. Completion of liquidation.
300. Court may terminate liquidation.
301. Restriction on rights of creditors to complete execution, distraint, or attachment.
302. Duties of officer in execution process.
303. Principal duty of liquidator.
304. Liquidator not required to act in certain cases.
305. Other duties of liquidator.
306. Duties in relation to accounts.
307. Duties in relation to final report and accounts.
308. Duty to have regard to views of creditors and shareholders.
309. Documents to state company in liquidation.
310. Powers of liquidator.
311. Power to obtain documents and information.
312. Documents in possession of receiver.
313. Restriction on enforcement of lien over documents.
314. Giving of document creating charge over property.
315. Powers of Court.
316. Examination before Court.
317. Self incrimination.
318. Power of liquidator to enforce liability of shareholders and former shareholders.
319. Power to disclaim onerous property.
320. Liquidator may be required to elect whether to disclaim onerous property.
321. Certain conduct prohibited.
322. Duty to identify and give property.
323. Refusal to supply essential services prohibited.
324. Remuneration of liquidators.
325. Rates of remuneration.
326. Expenses and remuneration payable out of assets of company.
327. Liquidator ceases to hold office on completion of liquidation.
328. Qualifications of liquidators.
329. Validity of acts of liquidators.
330. Consent to appointment.
331. Vacancies in office of liquidator.
332. Court supervision of liquidation.
333. Meaning of “failure to comply”.
334. Orders to enforce liquidator’s duties.
335. Meaning of “inability to pay debts”.
336. Evidence and other matters.
337. Statutory demand.
338. Court may set aside statutory demand.
339. Additional powers of Court on application to set aside statutory demand.
340. Transactions having preferential effect.
341. Setting aside voidable transactions.
342. Additional provisions relating to setting aside transactions.
343. Uncommercial transactions.
344. Transactions for inadequate or excessive consideration with directors and certain other persons.
345. Charges in favour of certain persons void in certain cases.
346. Liquidator may recover from related entity benefit resulting from voidable transaction.
347. Floating charge created within six months before commencement of liquidation.
348. Liability where failure to prevent insolvent trading.
349. Liability of company for insolvent trading of subsidiary.
350. Power of Court to require persons to repay money or return property.
351. Admissible claims.
352. Claims by unsecured creditors.
353. Rights and duties of secured creditors.
354. Ascertainment of amount of claim.
355. Claim not of an ascertained amount.
356. Fines and penalties.
357. Claims relating to debts payable after commencement of liquidation.
358. Mutual credit and set-off.
359. Interest on claims.
360. Preferential claims.
361. Claims of other creditors and distribution of surplus assets.
362. Meetings of creditors or shareholders.
363. Liquidation committees.
364. Establishment of liquidation surplus account.
365. Removal from register.
366. Grounds for removal from register.
367. Notice of intention to remove where company has ceased to carry on business.
368. Notice of intention to remove in other cases.
369. Proceeding to removal from register.
370. Registrar not to remove company from the register.
371. Powers of Court.
372. Registrar as representative of defunct company.
373. Property of company removed from register.
374. Disclaimer of property by the registrar.
375. Liability as to property vested in registrar.
376. Liability of directors, shareholders, and others to continue.
377. Liquidation of company removed from register.
378. Registrar may restore company to register.
379. Court may restore company to register.
380. Restoration to register.
381. Vesting of property in company on restoration to register.
382. Meaning of “carrying on business”.
383. Overseas companies to register under this Act.
384. Overseas companies may register for name protection purposes.
385. Validity of transactions not affected.
386. Application for registration.
387. Registration of overseas company.
388. Name of overseas company.
389. Alteration of constitution or other details.
390. Financial reporting by overseas companies.
391. Annual return of overseas company.
392. Overseas company ceasing to carry on business in Papua New Guinea.
393. Liquidation of assets in Papua New Guinea.
394. Registrar and Deputy Registrars of Companies.
395. Register.
396. Registration of documents.
397. Reregistration of lost documents.
398. Inspection and evidence of registers.
399. Notice by Registrar.
400. Registrar’s powers of inspection.
401. Explanation of any matter in relevant document.
402. Powers where relevant document not produced.
403. Examination of persons.
404. Self incrimination.
405. Examination to take place in private.
406. Record of examination.
407. Disclosure of relevant documents and records of examination.
408. Appeals from Registrar’s decisions.
409. Exercise of powers not affected by appeal.
410. Liability of Registrar.
411. Fees.
412. Relief from fees for certain companies.
413. Penalty for failure to comply with Act.
414. Penalties that may be imposed on directors or other persons in cases of failure by board or company to comply with Act.
415. Additional penalty where offence committed to derive benefits.
416. General penalty provisions.
417. Proceedings for offences.
418. Prosecutions.
419. Defences.
420. False statements.
421. Fraudulent use or destruction of property.
422. Falsification of records.
423. Carrying on business fraudulently.
424. Improper use of “limited”.
425. Persons prohibited from managing companies.
426. Court may disqualify persons from managing companies.
427. Liability for contravening Sections 425 and 426.
428. Registrar may prohibit persons from managing companies.
429. Liability for contravening Section 428.
430. Notices etc., to be in English.
431. Service of documents on companies in legal proceedings.
432. Service of other documents on companies.
433. Service of documents on overseas companies in legal proceedings.
434. Service of other documents on overseas companies.
435. Service of documents on shareholders and creditors.
436. Additional provisions relating to service.
437. Privileged communications.
438. Directors’ certificates.
439. Regulations.
440. Repeals.
441. Transitional provisions for existing companies.
442. Election to register as company under this Act.
443. Deemed registration of existing companies.
444. Effect of registration of existing companies.
445. Transitional provisions for overseas companies.
446. Existing documents etc., to continue.
447. Reservation of names under the repealed Act.
448. Application of Act to receivers holding office at commencement.
449. Transitional provisions applying to liquidation of companies.
450. Transitional provisions in relation to voidable transactions.
451. Proceedings under repealed Act.
452. Existing causes of action.
453. Transitional provisions in relation to company charges.
454. Transitional provisions for companies in official management.
455. Transitional provisions for Registrar.
456. Transitional provisions for inspections.
457. Further transitional provisions.
INDEPENDENT STATE OF PAPUA NEW GUINEA.
AN ACT
entitled
Being an Act to reform the law relating to companies and to repeal the Companies Act (Chapter 146) and for related purposes,
MADE by the National Parliament to come into operation in accordance with a notice in the National Gazette by the Head of State, acting with, and in accordance with the advice of the Minister.
PART I. – PRELIMINARY.
1. COMPLIANCE WITH CONSTITUTIONAL REQUIREMENTS.
(2) This Act, to the extent that it regulates or restricts a right or freedom referred to in Subdivision III.3.C. (qualified rights) of the Constitution, namely–
(a) the right to freedom from arbitrary search and entry conferred by Section 44 of the Constitution; and
(b) the right to freedom of employment conferred by Section 48 of the Constitution; and
(c) the right to privacy conferred by Section 49 of the Constitution; and
(d) the right to freedom of information conferred by Section 51 of the Constitution,
is a law that is made for the purpose of giving effect to the public interest in public welfare.
2. INTERPRETATION.
“accounting period”, in relation to a company, means a year ending on a balance date of the company and, where as a result of the date of the registration or incorporation of the company or a change of the balance date of the company, the period ending on that date is longer or shorter than a year, that longer or shorter period is an accounting period;
“Accounting Standards Board” means the body established by Section 204;
“address for service” in relation to a company, means the company’s address for service adopted in accordance with Section 167;
“agent”, in relation to an overseas company, means a person named on the register as a person who is–
(a) authorized to accept service in the country of documents on behalf of the overseas company; and
(b) responsible for submitting to the Registrar the documents required by this Act to be submitted in respect of the overseas company;
“annual meeting” means a meeting required to be held by Section 101, and includes a resolution in lieu of meeting under Section 103;
“balance date” has the meaning set out in Section 176;
“banking corporation” means a bank as defined in Section 3 of the Banks and Financial Institutions Act 2000;
“board” and “board of directors” have the meanings set out in Section 108;
“certified” means certified in accordance with Regulations made under this Act;
“charge” includes a right or interest in relation to property owned by a company, by virtue of which a creditor of the company is entitled to claim payment in priority to creditors entitled to be paid under Section 361, but does not include a charge under a charging order issued by a court in favour of a judgment creditor;
“class” has the meaning set out in Section 97;
“company” means a company registered under Part II and includes an existing company registered under this Act in accordance with Section 442 or deemed to be registered under this Act in accordance with Section 443;
“constitution” means a document referred to in Section 30;
“Court” means the National Court;
“debenture” includes debenture stock, bonds, notes, certificates of deposit and convertible notes;
“director” has the meaning set out in Section 107;
“distribution”, in relation to a distribution by a company to a shareholder, means–
(a) the direct or indirect transfer of money or property, other than the company’s own shares, to or for the benefit of the shareholder; or
(b) the incurring of a debt to or for the benefit of the shareholder,
in relation to shares held by that shareholder, and whether by means of a purchase of property, the redemption or other acquisition of shares, a distribution of indebtedness, or by some other means;
“dividend” has the meaning set out in Section 51;
“document” means a document in any form, and includes–
(a) any writing on any material; and
(b) information recorded or stored by means of a tape-recorder, computer, or other device, and material subsequently derived from information so recorded or stored; and
(c) a book, graph, or drawing; and
(d) a photograph, film, negative, tape, or other device in which one or more visual images are embodied so as to be capable (with or without the aid of equipment) of being reproduced;
“entitled person”, in relation to a company, means–
(a) a shareholder; and
(b) a person upon whom the constitution confers any of the rights and powers of a shareholder;
“existing company” means a body corporate registered or deemed to be registered under the repealed Act or any corresponding previous law;
“financial statements” has the meaning set out in Section 177;
“foreign company” means a body corporate registered under Division XII.3 of the repealed Act or any corresponding law;
“group financial statements” has the meaning set out in Section 178;
“group of companies” has the meaning set out in Section 171;
“holding company” has the meaning set out in Section 5;
“interested”, in relation to a director, has the meaning set out in Section 117;
“interest group” has the meaning set out in Section 97;
“interests register” means the register kept under Section 164(1)(c);
“major transaction” has the meaning set out in Section 110(2);
“ordinary resolution” has the meaning set out in Section 87(2);
“overseas company” means a body corporate that is incorporated outside of Papua New Guinea;
“personal representative”, in relation to a person, means the executor, administrator, or trustee of the estate of that person;
“pre-emptive rights” means the rights conferred on shareholders under Section 45;
“prescribed form” means a form prescribed by Regulation that contains, or has attached to it, such information or documents as that Regulation may require;
“property” means property of every kind whether tangible or intangible, real or personal, corporeal or incorporeal, and includes rights, interests, and claims of every kind in relation to property however they arise;
“receiver” has the meaning set out in Section 254;
“records” means the documents required to be kept by a company under Section 164(1);
“redeemable” has the meaning set out in Section 59;
“register” means the register kept pursuant to Section 395(1) of–
(a) companies incorporated in Papua New Guinea that are registered or deemed to be registered under Part II; and
(b) bodies corporate incorporated outside Papua New Guinea that are registered or deemed to be registered under Part XX.
“registered office” has the meaning set out in Section 161;
“Registrar” means the Registrar of Companies appointed in accordance with Section 394(1);
“related company” and “related corporation” have the meaning set out in Subsection (3);
“relative”, in relation to any person, means–
(a) any parent or spouse or child, or brother or sister of that person; or
(b) any parent or child or brother or sister of a spouse of that person; or
(c) a nominee or trustee for any of those persons;
“relevant interest” has the meaning set out in Section 124;
“repealed Act” means the Companies Act (Chapter 146) and other Acts repealed by Section 440;
“resident agent” means the person referred to in Section 386(2)(e);
“secured creditor”, in relation to a company, means a person entitled to a charge on or over property owned by that company;
“Securities Commission of Papua New Guinea” means the Securities Commission of Papua New Guinea established under the Securities Act 1997;
“security” means any interest or right to participate in any capital, assets, earnings, royalties, or other property of any person; and includes–
(a) any interest in or right to be paid money that is, or is to be, deposited with, lent to, or otherwise owing by, any person (whether or not the interest or right is secured by a charge over property); and
(b) any renewal or variation of the terms or conditions of any existing security;
“share” has the meaning set out in Section 36;
“shareholder” has the meaning set out in Section 78;
“share register” means the share register required to be kept under Section 67;
“solvency test” has the meaning set out in Section 4;
“special meeting” means a meeting called in accordance with Section 102;
“special resolution” means a resolution approved by a majority of 75% or, where a higher majority is required by the constitution, that higher majority, of the votes of those shareholders entitled to vote and voting on the question;
“spouse”, in relation to a person, includes a person with whom that person has a relationship in the nature of marriage;
“stockbroker” means any person who is in the business of, whether as principal or agent, dealing in securities;
“stock exchange” means a stock exchange that is a member of the Federation International des Bourses de Valeurs;
“subsidiary” has the meaning set out in Section 5;
“surplus assets” means the assets of a company remaining after the payment of creditors’ claims and available for distribution in accordance with Section 361 prior to the removal of the company from the register;
“this Act” includes the regulations made under this Act.
(2) Where–
(a) in relation to a company or an overseas company, any document is required to be submitted or any thing is required to be done in regard to the Registrar within a period specified by this Act; and
(b) the last day of that period falls on a day when the office of the Registrar is not open for business,
the document may be submitted or that thing may be done in regard to the Registrar on the next day on which the office is open for business.
(3) In this Act, a corporation is related to another corporation where–
(a) the other corporation is its holding corporation or subsidiary; or
(b) more than half of the issued shares of the corporation, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital, is held by the other corporation and corporations related to that other corporation (whether directly or indirectly, but other than in a fiduciary capacity); or
(c) more than half of the issued shares, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital, of each of them is held by members of the other (whether directly or indirectly, but other than in a fiduciary capacity); or
(d) the businesses of the corporations have been so carried on that the separate business of each corporation, or a substantial part of it, is not readily identifiable; or
(e) there is another corporation to which both corporations are related,
and “related company” and “related corporation” have a corresponding meaning.
(4) A reference in this Act to an address means–
(a) in relation to a natural person, the full address of the place where that person usually lives; and
(b) in relation to any other person, its registered office or, where it does not have a registered office, its principal place of business.
(5) In relation to banks and financial institutions within the meaning of the Central Banking Act 2000, this Act shall be read subject to that Act and the Banks and Financial Institutions Act 2000.
3. PUBLIC NOTICE.
(a) the National Gazette; and
(b) a newspaper circulating throughout the country.
4. MEANING OF “SOLVENCY TEST”.
(a) the company is able to pay its debts as they become due in the ordinary course of business; and
(b) the value of the company’s assets is greater than the value of its liabilities, including contingent liabilities.
(2) Without limiting Sections 50 and 53(3), in determining for the purposes of this Act (other than Sections 234 and 235 which relate to amalgamations) whether the value of a company’s assets is greater than the value of its liabilities, including contingent liabilities, the directors–
(a) shall have regard to–
(i) the most recent financial statements of the company that comply with Section 179; and
(ii) all other circumstances that the directors know or ought to know affect, or may affect, the value of the company’s assets and the value of its liabilities, including its contingent liabilities; and
(b) may rely on valuations of assets or estimates of liabilities that are reasonable in the circumstances.
(3) Without limiting Sections 234 and 235, in determining for the purposes of this Act whether the value of an amalgamated company’s assets will be greater than the value of its liabilities, including contingent liabilities, the directors of each amalgamating company–
(a) shall have regard to–
(i) financial statements that comply with Section 179 and that are prepared as if the amalgamation had become effective; and
(ii) all other circumstances that the directors know or ought to know would affect, or may affect, the value of the amalgamated company’s assets and the value of its liabilities, including contingent liabilities; and
(b) may rely on valuations of assets or estimates of liabilities that are reasonable in the circumstances.
(4) In determining, for the purposes of this Act, the value of a contingent liability, account may be taken of–
(a) the likelihood of the contingency occurring; and
(b) any claim the company is entitled to make and can reasonably expect to be met to reduce or extinguish the contingent liability.
5. MEANING OF “HOLDING COMPANY” AND “SUBSIDIARY”.
(a) that other company–
(i) controls the composition of the board of the company; or
(ii) is in a position to exercise, or control the exercise of, more than one-half of the maximum number of votes that can be exercised at a meeting of the company; or
(iii) holds more than one-half of the issued shares of the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital; or
(iv) is entitled to receive more than one-half of every dividend paid on shares issued by the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital; or
(b) the company is a subsidiary of a company that is that other company’s subsidiary.
(2) For the purposes of this Act, a company is another company’s holding company, where, but only where, that other company is its subsidiary.
(3) In this section and Sections 6 and 7, the expression
“company” includes a body corporate.
6. “CONTROL” DEFINED.
(a) a person cannot be appointed as a director of the company without the exercise by the other company of such a power in the person’s favour; or
(b) a person’s appointment as a director of the company follows necessarily from the person being a director or other officer of the other company.
7. CERTAIN MATTERS TO BE DISREGARDED.
(a) shares held or a power exercisable by that other company in a fiduciary capacity are not to be treated as held or exercisable by that other company; and
(b) subject to Paragraphs (c) and (d), shares held or a power exercisable–
(i) by a person as a nominee for that other company, except where that other company is concerned only in a fiduciary capacity; or
(ii) by, or by a nominee for, a subsidiary of that other company, not being a subsidiary which is concerned only in a fiduciary capacity,
are to be treated as held or exercisable by that other company; and
(c) shares held or a power exercisable by a person under the provisions of debentures of the company or of a trust deed for securing an issue of debentures shall be disregarded; and
(d) shares held or a power exercisable by, or by a nominee for, that other company or its subsidiary (not being held or exercisable in the manner described in Paragraph (c)) are not to be treated as held or exercisable by that other company where–
(i) the ordinary business of that other company or its subsidiary, as the case may be, includes the lending of money; and
(ii) the shares are held or the power is exercisable by way of security only for the purposes of a transaction entered into in good faith in the ordinary course of that business.
8. OTHER INTERPRETATION PROVISIONS.
(2) Some sections also contain their own interpretation provisions, not necessarily at the beginning.
9. APPLICATION OF ACT TO BANKS AND FINANCIAL INSTITUTIONS.
10. ACT BINDS THE STATE.
PART II. – INCORPORATION.
Division 1.
Essential Requirements.
11. ESSENTIAL REQUIREMENTS.
(a) a name; and
(b) one or more shares; and
(c) one or more shareholders, having limited or unlimited liability for the obligations of the company; and
(d) one or more directors.
Division 2.
Method of Incorporation.
12. RIGHT TO APPLY FOR REGISTRATION.
13. APPLICATION FOR REGISTRATION.
(a) in the prescribed form; and
(b) accompanied by a document in the prescribed form signed by every person named as a director, containing his consent to being a director and a certificate that he is not disqualified from being appointed or holding office as a director of a company; and
(c) accompanied by a document in the prescribed form signed by any person named as a secretary, containing his consent to being the secretary; and
(d) accompanied by–
(i) a document in the prescribed form signed by every person named as a shareholder, or by an agent of that person authorized in writing, containing his consent to being a shareholder and to taking the class and number of shares specified in the document; and
(ii) where the document has been signed by an agent, the instrument authorizing the agent to sign it; and
(e) accompanied by a notice reserving a name for the proposed company; and
(f) where the proposed company is to have a constitution, accompanied by a certified copy of the company’s constitution.
(2) Without limiting Subsection (1), an application under Subsection (1) shall state–
(a) the number of persons named as directors of the proposed company; and
(b) the number of persons (if any) named as secretaries of the proposed company; and
(c) the postal address of the proposed company; and
(d) the registered office of the proposed company; and
(e) the address for service of the proposed company.
14. REGISTRATION.
(a) register the application; and
(b) issue a certificate of incorporation in the prescribed form.
15. CERTIFICATE OF INCORPORATION.
(a) all the requirements of this Act as to registration have been complied with; and
(b) on and from the date of incorporation stated in the certificate, the company is incorporated under this Act.
Division 3.
Separate Legal Personality.
16. SEPARATE LEGAL PERSONALITY.
PART III. – CAPACITY, POWERS, AND VALIDITY OF ACTIONS.
Division 1.
Capacity and Powers.
17. CAPACITY AND POWERS.
(a) full capacity to carry on or undertake any business or activity, do any act, or enter into any transaction; and
(b) for the purposes of Paragraph (a), full rights, powers, and privileges.
(2) The constitution of a company may contain a provision relating to the capacity, rights, powers, or privileges of the company only where the provision restricts the capacity of the company or those rights, powers, and privileges.
Division 2.
Validity of Actions.
18. VALIDITY OF ACTIONS.
(2) Subsection (1) does not limit any of Sections 142, 143, 147, and 148.
(3) The fact that an act is not, or would not be, in the best interests of a company does not affect the capacity of the company to do the act.
19. DEALINGS BETWEEN COMPANY AND OTHER PERSONS.
(a) this Act or the constitution of the company has not been complied with; or
(b) a person named as a director of the company in the most recent notice received by the Registrar under Section 137–
(i) is not a director of a company; or
(ii) has not been duly appointed; or
(iii) does not have authority to exercise a power which a director of a company carrying on business of the kind carried on by the company customarily has authority to exercise; or
(c) a person held out by the company as a director, employee, or agent of the company–
(i) has not been duly appointed; or
(ii) does not have authority to exercise a power which a director, employee, or agent of a company carrying on business of the kind carried on by the company customarily has authority to exercise; or
(d) a person held out by the company as a director, employee, or agent of the company with authority to exercise a power which a director, employee, or agent of a company carrying on business of the kind carried on by the company does not customarily have authority to exercise, does not have authority to exercise that power; or
(e) a document issued on behalf of a company by a director, employee, or agent of the company with actual or usual authority to issue the document is not valid or not genuine,
unless the person has, or ought to have, by virtue of his position with or relationship to the company, knowledge of the matters referred to in any of Paragraphs (a), (b), (c), (d), or (e), as the case may be.
(2) Subsection (1) applies even though a person of the kind referred to in any of Paragraphs (b) to (e) (inclusive) of that subsection acts fraudulently or forges a document that appears to have been signed on behalf of the company, unless the person dealing with the company or with a person who has acquired property, rights, or interests from the company has actual knowledge of the fraud or forgery.
20. NO CONSTRUCTIVE NOTICE.
(a) registered on the register; or
(b) available for inspection at an office of the company.
PART IV. – COMPANY NAMES.
21. NAME TO BE RESERVED.
22. REQUIREMENTS RELATING TO NAMES OF COMPANIES.
(2) A company shall not be registered by a name–
(a) the use of which would contravene any law; or
(b) that is identical or almost identical to the name of another company; or
(c) that is identical or almost identical to a name that the Registrar has already reserved and that is still available for registration.
(3) Except with the consent of the Minister, a company shall not be registered by a name that is, in the opinion of the Registrar–
(a) undesirable; or
(b) misleading, deceptive or offensive; or
(c) a name, or a name of a kind, that the Minister has directed the Registrar not to accept for registration.
23. APPLICATION FOR RESERVATION OF NAME.
(2) The Registrar shall not reserve a name where Section 22 prohibits the registration of a company with that name.
(3) The Registrar shall advise the applicant by notice in writing–
(a) whether or not the Registrar has reserved the name; and
(b) where the name has been reserved, that, unless the reservation is sooner revoked by the Registrar, the name is available for registration of a company with that name or on a change of name for three months after the date stated in the notice.
24. CHANGE OF NAME.
(a) shall be in the prescribed form; and
(b) shall be accompanied by a notice reserving the name; and
(c) may only be made after the shareholders of the company approve the change of name by special resolution.
(2) Subject to its constitution, an application to change the name of a company is not an amendment of the constitution of the company for the purposes of this Act.
(3) After the Registrar receives a properly completed application to change the name of a company, the Registrar shall–
(a) enter the new name of the company on the register; and
(b) issue a certificate of incorporation in the prescribed form for the company recording the change of name of the company.
(4) A change of name of a company–
(a) takes effect on and from the date stated on the certificate issued under Subsection (3); and
(b) does not affect the identity of the company, or the rights or obligations of the company, or legal proceedings by or against the company, and legal proceedings that might have been continued or commenced against the company under its former name may be continued or commenced against it under its new name.
25. DIRECTION TO CHANGE NAME.
(2) Where the company does not change its name within the period specified in the notice under Subsection (1), the Registrar may enter on the register a new name for the company selected by the Registrar, being a name under which the company may be registered under this Part.
(3) Where the Registrar registers a new name under Subsection (2), the Registrar shall issue a certificate of incorporation in the prescribed form for the company recording the new name of the company, and Section 24(4) applies in relation to the registration of the new name as if the name of the company had been changed under that section.
26. USE OF COMPANY NAME.
(a) every written communication sent by, or on behalf of, the company; and
(b) every document issued or signed by, or on behalf of, the company that evidences or creates a legal obligation of the company.
(2) Where–
(a) a document that evidences or creates a legal obligation of a company is issued or signed by or on behalf of the company; and
(b) the name of the company is incorrectly stated in the document,
every person who issued or signed the document is liable to the same extent as the company where the company fails to discharge the obligation unless–
(c) the person who issued or signed the document proves that the person in whose favour the obligation was incurred was aware at the time the document was issued or signed that the obligation was incurred by the company; or
(d) the Court is satisfied that it would not be just and equitable for the person who issued or signed the document to be so liable.
(3) For the purposes of Subsections (1) and (2) and of Section 155, a company may use any of the following abbreviations in its name:–
(a) “Co” or “Coy” instead of the word “Company”;
(b) “Ltd” instead of the word “Limited”;
(c) “&” instead of the word “and”.
(4) Where, within the period of 12 months immediately preceding the giving by a company of any public notice, the name of the company was changed, the company shall ensure that the notice states–
(a) that the name of the company was changed in that period; and
(b) the former name or names of the company.
(5) Where a company fails to comply with Subsection (1) or (4)–
(a) the company commits an offence and is liable on conviction to the penalty set out in Section 413(1); and
(b) every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(1).
PART V. – COMPANY CONSTITUTION.
27. NO REQUIREMENT FOR COMPANY TO HAVE CONSTITUTION.
28. EFFECT OF ACT ON COMPANY HAVING CONSTITUTION.
29. EFFECT OF ACT ON COMPANY NOT HAVING CONSTITUTION.
30. FORM OF CONSTITUTION.
(a) in the case of a company registered under Part II, the certified copy of the company’s constitution submitted to the Registrar under Section 13 or Section 442; or
(b) a document that is adopted by the company as its constitution under Section 33; or
(c) a document described in Section 34; or
(d) a document described in Paragraph (a), (b) or (c) as altered by the company under Section 33 or varied by the Court under Section 35.
31. CONTENTS OF CONSTITUTION.
(a) matters contemplated by this Act for inclusion in the constitution of a company; and
(b) such other matters as the company wishes to include in its constitution.
32. EFFECT OF CONSTITUTION.
(a) the company and each shareholder; and
(b) each shareholder,
in accordance with its terms.
(2) The constitution of a company has no effect to the extent that it contravenes, or is inconsistent with, this Act or any other Act.
33. ADOPTION, ALTERATION, AND REVOCATION OF CONSTITUTION.
(2) Without limiting Section 98 or Section 152, but subject to Section 55, the shareholders of a company may, by special resolution, alter or revoke the constitution of the company.
(3) Within one month of the adoption of a constitution by a company, or the alteration or revocation of the constitution of a company, as the case may be, the board shall ensure that a notice in the prescribed form of the adoption of the constitution, or of the alteration or revocation of the constitution, is submitted to the Registrar for registration.
(4) Where the board of a company fails to comply with Subsection (3), every director of the company commits an offence and is liable, on conviction, to the penalty set out in Section 414(2).
34. NEW FORM OF CONSTITUTION.
(2) The Registrar may, where the Registrar considers that by reason of the number of amendments to a company’s constitution it would be desirable for the constitution to be contained in a single document, by notice in writing, require a company to submit to the Registrar a single document that incorporates the provisions of a document referred to in Section 30(a) or (b) or (c), together with all amendments to it.
(3) Within one month of receipt by a company of a notice under Subsection (2), the board shall ensure that the document required by that subsection is submitted.
(4) The board shall ensure that a document submitted to the Registrar under this section is accompanied by a certificate signed by a director to the effect that the document complies with Subsection (1) or (2), as the case may be.
(5) After the Registrar receives a document certified in accordance with Subsection (4), the Registrar shall–
(a) register the document; and
(b) give written advice of the registration to the person from whom the document was received.
(6) Where the board of a company fails to comply with Subsection (3) or (4), every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).
35. COURT MAY ALTER CONSTITUTION.
(2) The applicant for an order under Subsection (1) shall ensure that a certified copy of the order, together with a certified copy of the constitution as altered, is submitted to the Registrar for registration within one month.
(3) A person who fails to comply with Subsection (2) commits an offence and is liable on conviction to the penalty set out in Section 413(2).
PART VI. – SHARES.
Division 1.
Attributes of Shares.
36. LEGAL NATURE OF SHARES.
37. RIGHTS AND POWERS ATTACHING TO SHARES.
(a) the right to one vote on a poll at a meeting of the company on any resolution, including any resolution to–
(i) appoint or remove a director or auditor; or
(ii) adopt a constitution; or
(iii) alter the company’s constitution, where it has one; or
(iv) approve a major transaction; or
(v) approve an amalgamation of the company under Section 234; or
(vi) put the company into liquidation; and
(b) the right to an equal share in dividends authorized by the board; and
(c) the right to an equal share in the distribution of the surplus assets of the company.
(2) Subject to Section 51, the rights specified in Subsection (1) may be negated, altered, or added to by the constitution of the company.
38. TYPES OF SHARES.
(2) Without limiting Subsection (1), shares in a company may–
(a) be redeemable within the meaning of Section 59; or
(b) confer preferential rights to distributions of capital or income; or
(c) confer special, limited, or conditional voting rights; or
(d) not confer voting rights.
39. NO NOMINAL VALUE.
(2) Nothing in Subsection (1) prevents the issue by a company of a redeemable share.
40. TRANSFERABILITY OF SHARES.
(2) A share is transferred–
(a) by entry in the share register in accordance with Section 65; or
(b) in accordance with the terms of any exemption given by the Registrar under Section 77.
(3) The personal representative of a deceased shareholder may transfer a share even though the personal representative is not a shareholder at the time of transfer.
41. CONTRACTS FOR ISSUE OF SHARES.
(a) has authorized the issue of the shares under Section 43; and
(b) has complied with Section 47.
(2) Nothing in Subsection (1) applies to a contract or deed which provides that the obligation of the company to issue shares is conditional on the board–
(a) authorizing the issue of the shares under Section 43; and
(b) complying with Section 47.
Division 2.
Issue of Shares.
42. ISSUE OF SHARES ON REGISTRATION AND AMALGAMATION.
(a) forthwith after the registration of the company, issue to any person or persons named in the application for registration as a shareholder or shareholders, the number of shares specified in the application as being the number of shares to be issued to that person or those persons; and
(b) in the case of an amalgamated company, forthwith after the amalgamation is effective, issue to any person entitled to a share or shares under the amalgamation proposal, the share or shares to which that person is entitled.
43. ISSUE OF OTHER SHARES.
(2) Where the board authorizes the issue of shares which confer rights other than those set out in Section 37(1), or which impose any obligation on the holder, the board shall approve terms of issue which set out the rights and obligations attached to the shares.
(3) Terms of issue approved by the board under Subsection (2)–
(a) shall be consistent with the constitution of the company, and to the extent that they are not so consistent are invalid and of no effect; and
(b) are deemed to form part of the constitution, and may be amended in accordance with Section 33.
44. NOTICE OF SHARE ISSUE.
(a) the number of shares issued; and
(b) the names and other prescribed details of the shareholders; and
(c) the class of shares issued; and
(d) the consideration for which the shares were issued.
(2) The requirement of Subsection (1)(b) need not be included in that notice of issue of shares where the company complies with Sections 67 and 68, and–
(a) the number of shareholders who have been issued shares the subject of the notice of issue of shares exceeds 100; or
(b) the company is subject to a listing agreement with a stock exchange.
(3) The notice of issue of shares shall have attached–
(a) any terms of issue of the shares approved by the board under Section 43(2); and
(b) where the shares were issued for a consideration (whether totally or partially) other than cash, a copy of the certificate required under Section 47(2).
(4) Where the board of a company fails to comply with Subsection (1) or (2) or (3), every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).
45. PRE-EMPTIVE RIGHTS.
(2) An offer under Subsection (1) shall remain open for acceptance for a reasonable time.
(3) The constitution of a company may negate, limit, or modify the requirements of this section.
46. CONSIDERATION FOR ISSUE OF SHARES.
47. CONSIDERATION TO BE DECIDED BY BOARD.
(a) decide the consideration for which the shares will be issued; and
(b) resolve that, in its opinion, the consideration for and terms of the issue are fair and reasonable to the company and to all existing shareholders.
(2) The directors who vote in favour of a resolution required by Subsection (1) shall forthwith sign a certificate–
(a) stating the consideration for the issue of the shares; and
(b) stating that, in their opinion, the consideration for the issue is fair and reasonable to the company and to all existing shareholders.
48. CONSENT TO ISSUE OF SHARES.
(a) increases a liability of a person to the company; or
(b) imposes a new liability on a person to the company,
is void if that person or an agent of that person authorized in writing does not consent in writing to becoming the holder of the share before it is issued.
49. TIME OF ISSUE OF SHARES.
Division 3.
Distributions to Shareholders.
50. BOARD MAY AUTHORIZE DISTRIBUTIONS.
(2) The directors who vote in favour of a distribution shall forthwith sign a certificate stating that, in their opinion, the company will, immediately after the distribution, satisfy the solvency test and the grounds for that opinion.
(3) Where, after a distribution is authorized and before it is made, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the distribution is made, satisfy the solvency test, any distribution made by the company is deemed not to have been authorized.
(4) In applying the solvency test for the purposes of this section and Section 54–
(a) “debts” includes fixed preferential returns on shares ranking ahead of those in respect of which a distribution is made (except where that fixed preferential return is expressed in the constitution as being subject to the power of the directors to make distributions), but does not include debts arising by reason of the authorization; and
(b) “liabilities” includes the amount that would be required, if the company were to be removed from the register after the distribution, to repay all fixed preferential amounts payable by the company to shareholders, at that time, or on earlier redemption (except where such fixed preferential amounts are expressed in the constitution as being subject to the power of directors to make distributions); but, subject to Paragraph (a), does not include dividends payable in the future.
(5) Every director who fails to comply with Subsection (2) commits an offence and is liable on conviction to the penalty set out in Section 413(1).
51. DIVIDENDS.
(2) The board of a company shall not authorize a dividend–
(a) in respect of some but not all the shares in a class; or
(b) that is of a greater value per share in respect of some shares of a class than it is in respect of other shares of that class,
unless the amount of the dividend in respect of a share of that class is in proportion to the amount paid to the company in satisfaction of the liability of the shareholder under the constitution of the company or under the terms of issue of the share.
(3) Notwithstanding Subsection (2), a shareholder may waive his entitlement to receive a dividend by notice in writing to the company signed by or on behalf of the shareholder.
52. SHARES IN LIEU OF DIVIDENDS.
(a) the right to receive shares, wholly or partly, in lieu of the proposed dividend or proposed future dividends has been offered to all shareholders of the same class on the same terms; and
(b) if all shareholders elected to receive the shares in lieu of the proposed dividend, relative voting or distribution rights, or both, would be maintained; and
(c) the shareholders to whom the right is offered are afforded a reasonable opportunity of accepting it; and
(d) the shares issued to each shareholder are issued on the same terms and subject to the same rights as the shares issued to all shareholders in that class who agree to receive the shares; and
(e) the provisions of Section 47 are complied with by the board.
53. SHAREHOLDER DISCOUNTS.
(2) The board may approve a discount scheme under Subsection (1) only where it has previously resolved that the proposed discounts are–
(a) fair and reasonable to the company and to all shareholders; and
(b) to be available to all shareholders or all shareholders of the same class on the same terms.
(3) A discount scheme may not be approved or continued by the board unless it is satisfied on reasonable grounds that the company satisfies the solvency test.
(4) Subject to Subsection (5), a discount accepted by a shareholder under a discount scheme approved under this section is not a distribution.
(5) Where–
(a) a discount is accepted by a shareholder under a scheme approved or continued by the board; and
(b) at the time the scheme was approved or the discount was offered, the board ceased to be satisfied on reasonable grounds that the company would satisfy the solvency test,
the provisions of Section 54 shall apply in relation to the discount with such modifications as may be necessary as if the discount were a distribution that is deemed not to have been authorized.
54. RECOVERY OF DISTRIBUTIONS.
(a) the shareholder received the distribution in good faith and without knowledge of the company’s failure to satisfy the solvency test; and
(b) the shareholder has altered the shareholder’s position in reliance on the validity of the distribution; and
(c) it would be unfair to require repayment in full or at all.
(2) Where, in relation to a distribution made to shareholders–
(a) the procedure set out in Section 50 or Section 63, as the case may be, has not been followed; or
(b) reasonable grounds for believing that the company would satisfy the solvency test in accordance with Section 50 or Section 63, as the case may be, did not exist at the time the relevant resolution was passed,
a director who–
(c) failed to take reasonable steps to ensure the procedure was followed; or
(d) voted for the resolution, as the case may be,
is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders.
(3) Where by virtue of Section 50(3) a distribution is deemed not to have been authorized, a director who–
(a) ceased after authorization but before the making of the distribution to be satisfied on reasonable grounds for believing that the company would satisfy the solvency test immediately after the distribution is made; and
(b) failed to take reasonable steps to prevent the distribution being made,
is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders.
(4) Where, by virtue of Section 53(5), a distribution is deemed not to have been authorized, a director who failed to take reasonable steps to prevent the distribution being made is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders.
(5) Where, in an action brought against a director or shareholder under this section, the Court is satisfied that the company could, by making a distribution of a lesser amount, have satisfied the solvency test, the Court may–
(a) permit the shareholder to retain; or
(b) relieve the director from liability in respect of,
an amount equal to the value of any distribution that could properly have been made.
55. DISTRIBUTION INCLUDES REDUCTION OF SHAREHOLDER LIABILITY.
(a) for the purposes of Section 50, as if it were a distribution; and
(b) for the purposes of Section 51(2) and (3), as if it were a dividend.
(2) Where a company has altered its constitution, or acquired shares, or redeemed shares under Section 60, as the case may be, in a manner which cancels or reduces the liability of a shareholder to the company in relation to a share held prior to that alteration, acquisition, or redemption, that cancellation or reduction of liability is to be treated for the purposes of Section 54 as a distribution of the amount by which that liability was reduced.
(3) Where the liability of a shareholder of an amalgamating company to that company in relation to a share held before the amalgamation is–
(a) greater than the liability of that shareholder to the amalgamated company in relation to a share or shares into which that share is converted; or
(b) cancelled by the cancellation of that share in the amalgamation,
the reduction of liability effected by the amalgamation is to be treated for the purposes of Section 54(1) and (5) as a distribution by the amalgamated company to that shareholder, whether or not that shareholder becomes a shareholder of the amalgamated company of the amount by which that liability was reduced.
Division 4.
Company May Acquire Its Own Shares.
56. COMPANY MAY ACQUIRE OR REDEEM ITS OWN SHARES.
(2) A company may redeem a share which is a redeemable share in accordance with Section 59, but not otherwise.
(3) A share that is acquired or redeemed by a company is deemed to be cancelled immediately upon acquisition or redemption, as the case may be.
(4) Immediately following the acquisition or redemption of shares by a company, the company shall submit a notice in the prescribed form to the Registrar of the number and class of shares acquired or redeemed.
(5) Where a company fails to comply with Subsection (4) every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).
57. OFFER TO PURCHASE SHARES.
(2) Before a company offers or agrees to purchase its own shares the board shall resolve that–
(a) the acquisition is in the best interests of the company; and
(b) the terms of the offer or agreement and the consideration to be paid for the shares are fair and reasonable to the company; and
(c) it is not aware of any information that has not been disclosed to shareholders which is material to an assessment of the value of the shares, and as a result of which the terms of an offer or the consideration offered for shares are unfair to shareholders accepting the offer.
(3) Before a company–
(a) makes an offer to acquire shares other than in a manner which will, if it is accepted in full, leave unaffected the relative voting and distribution rights of all shareholders; or
(b) agrees to acquire shares other than in a manner which leaves unaffected the relative voting and distribution rights of all shareholders,
the board shall resolve that the making of the offer or entry into the agreement, as the case may be, is fair to those to whom the offer is not made or with whom no agreement is entered into.
58. ENFORCEABILITY OF CONTRACT TO PURCHASE SHARES.
(2) A company has the burden of proving that after performance of the contract it would be unable to satisfy the solvency test.
(3) Until a company has fully performed a contract referred to in Subsection (1), the other party to the contract retains the status of a claimant entitled to be paid as soon as the company is lawfully able to do so or, in a liquidation, to be ranked subordinate to the rights of creditors but in priority to the other shareholders.
Division 5.
Redemption of Shares.
59. MEANING OF “REDEEMABLE”.
(a) at the option of the company; or
(b) at the option of the holder of the share; or
(c) on a date specified in the constitution,
for a consideration that is–
(d) specified; or
(e) to be calculated by reference to a formula; or
(f) required to be fixed by a suitably qualified person who is not associated with or interested in the company.
60. REDEMPTION AT OPTION OF COMPANY.
(a) an acquisition by the company of the share, for the purposes of Section 57(2) and (3); and
(b) a distribution, for the purposes of Section 50.
61. REDEMPTION AT OPTION OF SHAREHOLDER.
(a) the company shall redeem the share on the date specified in the notice, or where no date is specified, on the date of receipt of the notice; and
(b) the share is deemed to be cancelled on the date of redemption; and
(c) from the date of redemption the former shareholder ranks as an unsecured creditor of the company for the sum payable on redemption.
(2) A redemption under this section–
(a) is not a distribution for the purposes of Sections 50 and 51; but
(b) is deemed to be a distribution for the purposes of Section 54(1) and (5).
62. REDEMPTION ON FIXED DATE.
(a) the company shall redeem the share on that date; and
(b) the share is deemed to be cancelled on that date; and
(c) from that date the former shareholder ranks as an unsecured creditor of the company for the sum payable on redemption.
(2) A redemption under this section–
(a) is not a distribution for the purposes of Sections 50 and 51; but
(b) is deemed to be a distribution for the purposes of Section 54(1) and (5).
(3) Where a company–
(a) has issued shares that are redeemable on a specified date; and
(b) does not redeem those shares by that date,
the company shall, immediately after that date, submit a notice in the prescribed form to the Registrar of the number of shares that have not been redeemed.
(4) Where a company does not comply with Subsection (3), every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).
Division 6.
Assistance by a Company in the Purchase of Its Own Shares.
63. COMPANY MAY GIVE FINANCIAL ASSISTANCE.
(2) Before a company gives financial assistance under this section, the board shall resolve that–
(a) giving the assistance is in the interests of the company; and
(b) the terms and conditions on which the assistance is given are fair and reasonable to the company and to any shareholders not receiving that assistance; and
(c) immediately after giving the assistance, the company will satisfy the solvency test.
(3) The giving of financial assistance under this section is not a distribution for the purposes of Section 50.
(4) For the purposes of this section, the term
“financial assistance”–
(a) includes giving a loan or guarantee, or the provision of security; but
(b) does not include entering into a transaction (including a loan or guarantee, or the provision of security)–
(i) in good faith in the ordinary course of business and on usual terms and conditions; or
(ii) in which the company receives fair value.
Division 7.
Cross-holdings.
64. SUBSIDIARY MAY NOT HOLD SHARES IN HOLDING COMPANY.
(2) An issue of shares by a holding company to its subsidiary is void and of no effect.
(3) A transfer of shares in a holding company to its subsidiary is void and of no effect.
(4) Where a company that holds shares in another company becomes a subsidiary of that other company–
(a) the company may, notwithstanding Subsection (1), continue to hold those shares; but
(b) the exercise of any voting rights attaching to those shares shall be of no effect.
(5) Nothing in this section prevents a subsidiary holding shares in its holding company in its capacity as a personal representative or a trustee unless the holding company or another subsidiary has a beneficial interest under the trust other than an interest that arises by way of security for the purposes of a transaction made in good faith in the ordinary course of the business of lending money.
(6) This section applies to a nominee for a subsidiary in the same way as it applies to the subsidiary.
Division 8.
Transfer of Shares.
65. TRANSFER OF SHARES.
(2) For the purpose of transferring shares, a form of transfer signed by the present holder of the shares or by his personal representative shall be given to–
(a) the company; or
(b) an agent of the company who maintains the share register under Section 67(3).
(3) The form of transfer shall be signed by the transferee.
(4) On receipt of a form of transfer in accordance with Subsections (2) and (3), the company shall forthwith enter or cause to be entered the name of the transferee on the share register as holder of the shares, unless–
(a) the board resolves within one month of receipt of the transfer to refuse or delay the registration of the transfer, and the resolution sets out in full the reasons for doing so; and
(b) notice of the resolution, including those reasons, is sent to the transferor and to the transferee within five days of the resolution being passed by the board; and
(c) the Act or the constitution expressly permits the board to refuse or delay registration for the reasons stated.
(5) Subject to the constitution of a company, the board may refuse or delay the registration of a transfer of shares under Subsection (4) where the holder of the shares has failed to pay to the company an amount due in respect of those shares, whether by way of consideration for the issue of the shares or in respect of sums payable by the holder of the shares in accordance with the constitution.
(6) Following entry of the name or names of a transferee or transferees on the share register the company shall submit to the Registrar notice in the prescribed form of that entry unless–
(a) the company is subject to a listing agreement with a stock exchange; or
(b) the total number of shares transferred since the date of incorporation or the last annual return under Section 215 is less than 50% of the issued shares; or
(c) the company submits to the Registrar its annual return under Section 215 within one month of the date of entry of the transfer.
(7) Where a company fails to comply with Subsection (4) or (6)–
(a) the company commits an offence and is liable on conviction to the penalty set out in Section 413(1); and
(b) every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(1).
66. TRANSFER OF SHARES BY OPERATION OF LAW.
Division 9.
Share Register.
67. COMPANY TO MAINTAIN SHARE REGISTER.
(a) whether, under the constitution of the company or the terms of issue of the shares, there are any restrictions or limitations on their transfer; and
(b) where any document that contains the restrictions or limitations may be inspected.
(2) The share register shall state, with respect to each class of shares–
(a) the names, alphabetically arranged, and the latest known address of each person who is, or has within the last 10 years been, a shareholder; and
(b) the number of shares of that class held by each shareholder within the last 10 years; and
(c) the date of any–
(i) issue of shares to; or
(ii) repurchase or redemption of shares from; or
(iii) transfer of shares by or to,
each shareholder within the last 10 years, and in relation to the transfer, the name of the person to or from whom the shares were transferred.
(3) An agent may maintain the share register of a company.
(4) Where a company fails to comply with Subsection (1) or (2)–
(a) the company commits an offence and is liable on conviction to the penalty set out in Section 413(2); and
(b) every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).
68. PLACE OF SHARE REGISTER.
(2) The share register of a company whose shares are subject to a listing agreement with a stock exchange may, if expressly permitted by its constitution, be divided into two or more registers kept in different places.
(3) The principal register of a company shall be kept in the country.
(4) Where a share register is divided into two or more registers kept in different places–
(a) notice in the prescribed form of the place where each register is kept shall be submitted to the Registrar for registration within one month after the share register is divided or any place where a register is kept is altered; and
(b) a copy of every register shall be kept at the same place as the principal register; and
(c) where an entry is made in a register other than the principal register, a corresponding entry shall be made within one month in the copy of that register kept with the principal register.
(5) In this section,
“principal register”, in relation to a company, means–
(a) where the share register is not divided into two or more registers, the share register; and
(b) where the share register is divided into two or more registers, the register described as the principal register in the last notice sent to the Registrar.
(6) Where a company fails to comply with Subsection (3) or (4)–
(a) the company commits an offence and is liable on conviction to the penalty set out in Section 413(2); and
(b) every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).
69. SHARE REGISTER AS EVIDENCE OF LEGAL TITLE.
(2) A company may treat the registered holder of a share as the only person entitled to–
(a) exercise the right to vote attaching to the share; and
(b) receive notices; and
(c) receive a distribution in respect of the share; and
(d) exercise the other rights and powers attaching to the share.
70. DIRECTORS’ DUTY TO SUPERVISE SHARE REGISTER.
(2) A director who fails to comply with Subsection (1) commits an offence and is liable on conviction to the penalty set out in Section 413(2).
71. POWER TO RECTIFY SHARE REGISTER.
(a) for rectification of the share register; or
(b) for compensation for loss sustained; or
(c) for both rectification and compensation.
(2) On an application under this section the Court may order–
(a) rectification of the register; or
(b) payment of compensation by the company or a director of the company for any loss sustained; or
(c) rectification and payment of compensation.
(3) On an application under this section, the Court may decide–
(a) a question relating to the entitlement of a person who is a party to the application to have his name or other particulars entered in, or omitted from, the register; and
(b) a question necessary or expedient to be decided for rectification of the register.
(4) Any clerical or minor error in a share register of a company may be corrected where either the Registrar or every shareholder of the company at the time of correction, has agreed in writing to the correction.
72. TRUSTS NOT TO BE ENTERED ON REGISTER.
73. PERSONAL REPRESENTATIVE MAY BE REGISTERED.
(2) Notwithstanding Section 72, a personal representative of a deceased person beneficially entitled to a share in a company, being a share registered in a share register of that company, is with the consent of the company and the registered holder of that share, entitled to be registered as the holder of that share as personal representative.
(3) The registration of a personal representative pursuant to this section does not constitute notice of a trust.
74. TRUSTEE OF BANKRUPT MAY BE REGISTERED.
(2) Notwithstanding Section 72, the trustee of the property of a bankrupt beneficially entitled to a share in a company, being a share registered in a register of that company, is, with the consent of the company and the registered holder of that share, entitled to be registered as the holder of that share as the trustee of the property of the bankrupt.
Division 10.
Share Certificates.
75. SHARE CERTIFICATES.
(a) a share certificate signed under the common seal of the company stating–
(i) the name of the company; and
(ii) the class of shares held by that person; and
(iii) the number of shares held by that person; and
(b) a statement setting out–
(i) the rights, privileges, conditions, and limitations, including restrictions on transfer, attaching to the shares held by that person; and
(ii) the relationship of the shares held by that person to other classes of shares.
(2) Notwithstanding Section 65, where a share certificate has been issued, a transfer of the shares to which it relates shall not be registered by the company unless the form of transfer required by that section is accompanied by the share certificate relating to the share, or by evidence as to its loss or destruction and, where required, an indemnity in a form required by the board.
(3) Subject to Subsection (1), where shares to which a share certificate relates are to be transferred, and the share certificate is sent to the company to enable the registration of the transfer, the share certificate shall be cancelled and no further share certificate issued except at the request of the transferee.
(4) Where a company fails to comply with Subsection (1)–
(a) the company commits an offence and is liable on conviction to the penalty set out in Section 413(1); and
(b) every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(1).
76. LOSS OR DESTRUCTION OF SHARE CERTIFICATES.
(2) The application referred to in Subsection (1) shall be accompanied by–
(a) a statutory declaration that the share certificate–
(i) has been lost or destroyed; and
(ii) has not been pledged, sold, or otherwise disposed of; and
(iii) if lost, that proper searches have been made; and
(b) a written undertaking that if the holder of the shares finds or receives the share certificate he will return it to the company.
Division 11.
Exemption From Share Transfer Provisions.
77. EXEMPTIONS FROM SHARE TRANSFER PROVISIONS.
(a) any company or class of companies; or
(b) any transaction or class of transactions.
(2) Any person who breaches any term or condition imposed by the Registrar is guilty of an offence.
PART VII. – SHAREHOLDERS AND THEIR RIGHTS AND OBLIGATIONS.
Division 1.
Meaning of “Shareholder”.
78. MEANING OF “SHAREHOLDER”.
“shareholder”, in relation to a company, means–
(a) a person whose name is entered in the share register as the holder for the time being of one or more shares in the company; or
(b) until the person’s name is entered in the share register, a person named as a shareholder in an application for the registration of a company at the time of registration of the company; or
(c) until the person’s name is entered in the share register, a person who is entitled to have that person’s name entered in the share register under a registered amalgamation proposal as a shareholder in an amalgamated company.
Division 2.
Liability of Shareholders.
79. LIABILITY OF SHAREHOLDERS.
(2) Except where the constitution of a company provides that the liability of the shareholders of the company is unlimited, the liability of a shareholder to the company is limited to any liability expressly provided for in this Act or in the constitution of the company.
(3) Nothing in this section affects the liability of a shareholder to a company under a contract, including a contract for the issue of shares, or for any tort, or breach of a fiduciary duty, or other actionable wrong committed by the shareholder.
80. LIABILITY OF FORMER SHAREHOLDERS.
(2) A former shareholder is not liable under Subsection (1) for any debt or liability of the company contracted after ceasing to be a shareholder.
(3) Where a person ceased to be a shareholder of a company before the liability of the shareholders of the company ceased to be limited and became unlimited and that person has not since become a shareholder of the company, that person is liable to the company only to the same extent as if the liability of the shareholders had remained limited.
(4) For the purposes of Subsection (1),
“specified period” means–
(a) a period of one year before the commencement of the liquidation of the company; and
(b) in the case of a company that has been put into liquidation by the Court, the period of one year before the making of the application to the Court together with the period commencing on the date of the making of that application and ending on the date on which the order was made.
81. ADDITIONAL PROVISIONS RELATING TO LIABILITY OF SHAREHOLDERS AND FORMER SHAREHOLDERS.
(a) a shareholder or former shareholder of a company was, at any time, liable to the company in respect of a share held by that person; and
(b) that liability was cancelled or reduced by adoption or alteration of the constitution, repurchase or redemption of the share, amalgamation, or registration under this Act in accordance with Section 442 or deemed registration under this Act in accordance with Section 443, or change of registration under the repealed Act; and
(c) the company is, at the commencement of its liquidation, subject to liabilities incurred prior to the adoption or alteration of the constitution, repurchase or redemption of the share, amalgamation, or registration under this Act in accordance with Section 442 or deemed registration under this Act in accordance with Section 443, or change of registration under the repealed Act, as the case may be; and
(d) the assets of the company are not sufficient to discharge those liabilities in full,
that person is liable to the company for the amount specified in Subsection (2).
(2) A person is liable under Subsection (1) for the lesser of–
(a) the amount by which the liability in respect of that share was reduced; and
(b) the amount required to be contributed in respect of each such share in order to discharge those liabilities.
(3) The liability of a person under Subsection (1) is reduced by an amount received by that person as a distribution under Section 55 and recovered from that person by the company.
(4) The amount received by a person as a distribution under Section 55 is reduced by any amount recovered from that person pursuant to Subsection (1).
(5) For the purposes of this section–
(a) the term “company” includes an amalgamating company which amalgamated with one or more other amalgamating companies to continue as that company; and
(b) a member of a company limited by guarantee registered under the repealed Act is to be treated as if the member was the holder of a share which rendered the member liable to calls not exceeding the amount of contribution specified in the memorandum of association as the amount undertaken to be contributed by that member in a winding up; and
(c) a member of an unlimited company registered under the repealed Act is to be treated as if the member was the holder of a share which rendered the member liable to unlimited calls.
82. LIABILITY FOR CALLS.
(2) Where–
(a) all or part of the consideration payable in respect of the issue of a share remains unsatisfied; and
(b) the person to whom the share was issued no longer holds that share,
liability in respect of that unsatisfied consideration does not attach to subsequent holders of the share, but remains the liability of the person to whom the share was issued, or of any other person who assumed that liability at the time of issue.
83. SHAREHOLDERS NOT REQUIRED TO ACQUIRE SHARES BY ALTERATION TO CONSTITUTION.
(a) requires the shareholder to acquire or hold more shares in the company than the number held on the date the alteration is made; or
(b) increases the liability of the shareholder to the company,
unless the shareholder agrees in writing to be bound by the alteration either before, on, or after it is made.
84. LIABILITY OF PERSONAL REPRESENTATIVE.
(2) For the purposes of this section, “trust” extends to the duties of a personal representative.
85. LIABILITY OF A TRUSTEE.
(2) In this section, “trustee” means the trustee in whom the property of a bankrupt is vested pursuant to the Insolvency Act 1951.
Division 3.
Powers of Shareholders.
86. EXERCISE OF POWERS RESERVED TO SHAREHOLDERS.
(a) at a meeting of shareholders pursuant to Section 101 or Section 102; or
(b) by a resolution in lieu of a meeting pursuant to Section 103.
(2) Powers reserved to the shareholders of a company by the constitution of the company may, subject to the constitution, be exercised–
(a) at a meeting of shareholders pursuant to Section 101 or 102; or
(b) by a resolution in lieu of a meeting pursuant to Section 103.
87. EXERCISE OF POWERS BY ORDINARY RESOLUTION.
(2) An ordinary resolution is a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question.
88. POWERS EXERCISED BY SPECIAL RESOLUTION.
(a) adopt a constitution or, if it has one, alter or revoke the company’s constitution; or
(b) approve a change in the company’s name; or
(c) approve a major transaction; or
(d) approve an amalgamation of the company under Section 234; or
(e) put the company into liquidation,
the power shall be exercised by special resolution.
(2) A special resolution pursuant to any of Subsections (1)(a) to (d) (inclusive) can be rescinded only by a special resolution.
(3) A special resolution pursuant to Subsection (1)(e) cannot be rescinded in any circumstances.
89. UNANIMOUS AGREEMENT BY SHAREHOLDERS.
(a) the taking of that action is deemed to be validly authorized by the company, notwithstanding any provision in the constitution of the company; and
(b) the provisions of this Act referred to in Schedule 1 do not apply in relation to that action.
(2) Without limiting Subsection (1), that subsection shall apply where all the shareholders of a company agree to or concur in–
(a) the issue of shares by the company; or
(b) the making of a distribution by the company; or
(c) the repurchase or redemption of shares in the company; or
(d) the giving of financial assistance by a company for the purpose of, or in connection with, the purchase of shares in the company; or
(e) the payment of remuneration to a director, or the making of a loan to a director, or the conferral of any other benefit on a director; or
(f) the making of a contract between an interested director and the company.
(3) Where–
(a) a distribution is made by a company under this section; and
(b) as a consequence of the making of the distribution, the company fails to satisfy the solvency test,
the distribution is deemed not to have been validly made.
(4) A distribution made to a shareholder which is deemed not to have been validly made may be recovered by the company from the shareholder unless–
(a) the shareholder received the distribution in good faith and without knowledge of the company’s failure to satisfy the solvency test; and
(b) the shareholder has altered his position in reliance on the validity of the distribution; and
(c) it would be unfair to require repayment in full or at all.
(5) Where reasonable grounds did not exist for believing that the company would satisfy the solvency test after the making of a distribution which is deemed not to have been validly made, each shareholder who agreed to or concurred in the making of the distribution is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from the shareholders to whom the distribution was made.
(6) Where, in an action brought against a shareholder under Subsection (4) or (5), the Court is satisfied that the company could, by making a distribution of a lesser amount, have satisfied the solvency test, the Court may–
(a) permit the shareholder to retain; or
(b) relieve the shareholder from liability in respect of,
an amount equal to the value of any distribution that could properly have been made.
90. MANAGEMENT REVIEW BY SHAREHOLDERS.
(2) Notwithstanding anything in this Act or the constitution of the company, but subject to Subsection (3), a meeting of shareholders may pass a resolution under this section relating to the management of a company.
(3) Unless the constitution provides that the resolution is binding, a resolution passed pursuant to Subsection (2) is not binding on the board.
Division 4.
Minority Buy-out Rights.
91. SHAREHOLDER MAY REQUIRE COMPANY TO PURCHASE SHARES.
(a) a shareholder is entitled to vote on the exercise of one or more of the powers set out in–
(i) Section 88(1)(a), and the proposed alteration imposes or removes a restriction on the activities of the company; or
(ii) Section 88(1)(c) or (d); and
(b) the shareholders resolved, pursuant to Section 88, to exercise the power; and
(c) the shareholder–
(i) casts all the votes attached to shares registered in the shareholder’s name and having the same beneficial owner against the exercise of the power; or
(ii) where the resolution to exercise the power was passed under Section 103, did not sign the resolution, or refrained from signing it in respect of all the shares registered in the shareholder’s name and having the same beneficial owner,
that shareholder is entitled to require the company to purchase those shares in accordance with Section 92.
92. NOTICE REQUIRING PURCHASE.
(a) within one month of the passing of the resolution at a meeting of shareholders; or
(b) where the resolution was passed under Section 103, before the expiration of one month after the date on which notice of the passing of the resolution is given to the shareholder,
give a written notice to the company requiring the company to purchase those shares.
(2) Within one month of receiving a notice under Subsection (1), the board shall–
(a) agree to the purchase of the shares by the company; or
(b) arrange for some other person to agree to purchase the shares; or
(c) apply to the Court for an order under Section 95 or Section 96; or
(d) arrange, before taking the action concerned, for the resolution to be rescinded in accordance with Section 88 or decide in the appropriate manner not to take the action concerned, as the case may be,
and give written notice to the shareholder of the board’s decision under this subsection.
93. PURCHASE BY COMPANY.
(a) nominate a fair and reasonable price for the shares to be acquired; and
(b) give notice of the price to the holder of those shares.
(2) A shareholder who considers that the price nominated by the board is not fair or reasonable shall forthwith give notice of objection to the company.
(3) The shares are deemed to have been purchased by the company upon receipt by the shareholder of a notice under Subsection (1).
(4) Where, within one month of giving notice to a shareholder under Subsection (1), no objection to the price has been received by the company–
(a) the company shall forthwith pay the nominated price to the shareholder; and
(b) the shareholder shall forthwith deliver any share certificate in respect of the shares to the company.
(5) Where, within one month of giving notice to a shareholder under Subsection (1), an objection to the price has been received by the company, the company shall within seven days–
(a) apply to the Court to appoint a person as arbitrator to determine what is a fair and reasonable price; and
(b) pay a provisional price in respect of the shares equal to the price nominated by the board.
(6) Upon payment of the provisional price by the company, the shareholder shall forthwith deliver any share certificate in respect of the shares to the company.
(7) The person appointed by the Court as arbitrator shall expeditiously determine a fair and reasonable price for the shares to be purchased.
(8) Where the price determined under Subsection (7)–
(a) exceeds the provisional price, the company shall forthwith pay the balance owing to the shareholder; or
(b) is less than the provisional price paid, the shareholder shall forthwith repay the excess to the company.
(9) The arbitrator may award interest on any balance payable or excess to be repaid under Subsection (8) at such rate as he thinks fit, having regard to whether the provisional price paid or the reference to arbitration, as the case may be, was reasonable.
94. PURCHASE OF SHARES BY THIRD PARTY.
(2) Every holder of shares that are to be purchased in accordance with the arrangement is indemnified by the company in respect of loss suffered by reason of the failure by the person who has agreed to purchase the shares to purchase them at the price nominated or fixed by arbitration, as the case may be.
95. COURT MAY GRANT EXEMPTION.
(a) the purchase would be disproportionately damaging to the company; or
(b) the company cannot reasonably be required to finance the purchase; or
(c) it would not be just and equitable to require the company to purchase the shares.
(2) On an application under this section, the Court may make an order exempting the company from the obligation to purchase the shares, and may make any other order it thinks fit, including an order–
(a) setting aside a resolution of the shareholders; or
(b) directing the company to take, or refrain from taking, any action specified in the order; or
(c) requiring the company to pay compensation to the shareholders affected; or
(d) that the company be put into liquidation.
(3) The Court shall not make an order under Subsection (2) on either of the grounds set out in Subsection (1)(a) or (b) unless it is satisfied that the company has made reasonable efforts to arrange for another person to purchase the shares in accordance with Section 92(2)(b).
96. COURT MAY GRANT EXEMPTION WHERE COMPANY INSOLVENT.
(a) a notice is given to a company under Section 92; and
(b) the board has resolved that the purchase by the company of the shares to which the notice relates would result in it failing to satisfy the solvency test; and
(c) the company has, having made reasonable efforts to do so, been unable to arrange for the shares to be purchased by another person in accordance with Section 92(2)(b),
the company shall apply to the Court for an order exempting it from the obligation to purchase the shares.
(2) The Court may, on an application under Subsection (1), where it is satisfied that–
(a) the purchase of the shares would result in the company failing to satisfy the solvency test; and
(b) the company has made reasonable efforts to arrange for the shares to be purchased by another person in accordance with Section 92(2)(b),
make–
(c) an order exempting the company from the obligation to purchase the shares; or
(d) an order suspending the obligation to purchase the shares; or
(e) such other order as it thinks fit, including any order referred to in Section 95(2).
Division 5.
Interest Groups.
97. MEANING OF “CLASSES” AND “INTEREST GROUPS”.
“class” means a class of shares having attached to them identical rights, privileges, limitations, and conditions;
“interest group”, in relation to any action or proposal affecting rights attached to shares, means a group of shareholders–
(a) whose affected rights are identical; and
(b) whose rights are affected by the action or proposal in the same way; and
(c) subject to Subsection (2)(b), who comprise the holders of one or more classes of shares in the company.
(2) For the purposes of this Act and the definition of the term “interest group”–
(a) one or more interest groups may exist in relation to any action or proposal; and
(b) where–
(i) action is taken in relation to some holders of shares in a class and not others; or
(ii) a proposal expressly distinguishes between some holders of shares in a class and other holders of shares of that class,
holders of shares in the same class may fall into two or more interest groups.
98. ALTERATION OF SHAREHOLDER RIGHTS.
(2) For the purposes of Subsection (1), the rights attached to a share include–
(a) the rights, privileges, limitations, and conditions attached to the share by this Act or the constitution, including voting rights and rights to distributions; and
(b) pre-emptive rights arising under Section 45; and
(c) the right to have the procedure set out in this section, and any further procedure required by the constitution for the amendment or alteration of rights, observed by the company; and
(d) the right that a procedure required by the constitution for the amendment or alteration of rights not be amended or altered.
(3) For the purposes of Subsection (1), the issue of further shares ranking equally with, or in priority to, existing shares, whether as to voting rights or distributions, is deemed to be action affecting the rights attached to the existing shares, unless–
(a) the constitution of the company expressly permits the issue of further shares ranking equally with, or in priority to, those shares; or
(b) the issue is made in accordance with the pre-emptive rights of shareholders under Section 45 or under the constitution of the company.
99. SHAREHOLDER MAY REQUIRE COMPANY TO PURCHASE SHARES.
(a) an interest group has, under Section 98, approved, by special resolution, the taking of action that affects the rights attached to shares; and
(b) the company becomes entitled to take the action; and
(c) a shareholder who was a member of the interest group–
(i) casts all the votes attached to the shares registered in that shareholder’s name and having the same beneficial owner against approving the action; or
(ii) where the resolution approving the taking of the action was passed under Section 103, did not sign the resolution,
that shareholder is entitled to require the company to purchase those shares in accordance with Section 92.
100. ACTIONS NOT INVALID.
Division 6.
Meetings of Shareholders.
101. ANNUAL MEETING OF SHAREHOLDERS.
(a) once in each calendar year; and
(b) not later than six months after the balance date of the company; and
(c) not later than 15 months after the previous annual meeting.
(2) A company is not required to hold its first annual meeting in the calendar year in which it was first incorporated (whether or not under this Act), but shall hold that meeting within 18 months of such incorporation.
(3) The Registrar may, on the application of the company, and for any special reason the Registrar thinks fit, extend any of the periods referred to in Subsection (1) or (2) even if, as a result, the period is extended beyond the calendar year.
(4) The company shall hold an annual meeting of shareholders on the date on which it is called to be held.
102. SPECIAL MEETINGS OF SHAREHOLDERS.
(a) may be called at any time by–
(i) the board; or
(ii) a person who is authorized by the constitution to call the meeting; and
(b) shall be called by the board on the written request of shareholders holding shares carrying together not less than 5% of the voting rights entitled to be exercised on the issue.
103. RESOLUTION IN LIEU OF MEETING.
(2) A resolution in writing that–
(a) relates to a matter that is required by this Act or by the constitution to be decided at a meeting of the shareholders of a company; and
(b) is signed by the shareholders specified in Subsection (3),
is made in accordance with this Act or the constitution of the company.
(3) For the purposes of Subsection (2)(b), the shareholders are the shareholders referred to in Subsection (1).
(4) A person who is registered as the holder of parcels of shares having different beneficial owners may expressly sign a resolution under this section in respect of shares having one beneficial owner and refrain from signing the resolution in respect of shares having another beneficial owner.
(5) It shall not be necessary for a company to hold an annual meeting of shareholders under Section 101 where everything required to be done at that meeting (by resolution or otherwise) is done by resolution in accordance with Subsections (2) and (3).
(6) Within five days of a resolution being passed under this section, the company shall send a copy of the resolution to every shareholder who did not sign the resolution or did not sign the resolution in respect of all the shares registered in that shareholder’s name.
(7) A resolution may be signed under Subsection (1) or Subsection (2) without any prior notice being given to shareholders.
(8) Where a company fails to comply with Subsection (6)–
(a) the company commits an offence and is liable on conviction to the penalty set out in Section 413(1); and
(b) every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(1).
104. COURT MAY CALL MEETING OF SHAREHOLDERS.
(a) it is impracticable to call or conduct a meeting of shareholders in the manner specified in this Act or the constitution; or
(b) it is in the interests of a company that a meeting of shareholders be held,
the Court may order a meeting of shareholders to be held or conducted in such manner as the Court directs.
(2) Application to the Court may be made by a director, or a shareholder, or a creditor of the company.
(3) The Court may make the order on such terms as to the costs of conducting the meeting and as to security for those costs as the Court thinks fit.
105. PROCEEDINGS AT MEETINGS.
Division 7.
Ascertaining Shareholders.
106. SHAREHOLDERS ENTITLED TO RECEIVE DISTRIBUTIONS, ATTEND MEETINGS, AND EXERCISE RIGHTS.
(a) entitled to receive distributions; or
(b) entitled to exercise pre-emptive rights to acquire shares in accordance with Section 45; or
(c) entitled to exercise any other right or receive any other benefit under this Act or the constitution,
are–
(d) where the board fixes a date for the purpose, those shareholders whose names are registered in the share register on that date; and
(e) where the board does not fix a date for the purpose, those shareholders whose names are registered in the share register on the day on which the board passes the resolution concerned.
(2) A date shall not be fixed under Subsection (1) that precedes by more than one month the date on which the proposed action will be taken.
(3) The shareholders who are entitled to receive notice of a meeting of shareholders are–
(a) where the board fixes a date for the purpose, those shareholders whose names are registered in the share register on that date; and
(b) where the board does not fix a date for the purpose, those shareholders whose names are registered in the share register at the close of business on the day immediately preceding the day on which the notice is given.
(4) The date fixed under Subsection (3) shall be–
(a) within one month of the date on which the meeting is to be held; and
(b) at least 14 days before the date on which the meeting is to be held.
PART VIII. – DIRECTORS AND THEIR POWERS AND DUTIES.
Division 1.
Meaning of “Director” and “Board”.
107. MEANING OF “DIRECTOR”.
(a) a person occupying the position of director of the company by whatever name called; and
(b) for the purposes of Sections 112 to 119 (inclusive), 123 to 127 (inclusive), 344 and 350–
(i) a person in accordance with whose directions or instructions a person referred to in Paragraph (a) may be required or is accustomed to act; and
(ii) a person in accordance with whose directions or instructions the board of the company may be required or is accustomed to act; and
(iii) a person who exercises or who is entitled to exercise or who controls or who is entitled to control the exercise of powers which, apart from the constitution of the company, would fall to be exercised by the board; and
(c) for the purposes of Sections 112 to 127 (inclusive), 344, and 350, a person to whom a power or duty of the board has been directly delegated by the board with that person’s consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the board; and
(d) for the purposes of Sections 123 to 127 (inclusive), a person in accordance with whose directions or instructions a person referred to in Paragraphs (a) to (c) (inclusive) may be required or is accustomed to act in respect of his duties and powers as a director.
(2) In this Act, “director”, in relation to a company, does not include a receiver.
(3) Where the constitution of a company confers a power on shareholders which would otherwise fall to be exercised by the board, any shareholder who exercises that power or who takes part in deciding whether to exercise that power is deemed, in relation to the exercise of the power or any consideration concerning its exercise, to be a director for the purposes of Sections 112 to 116 (inclusive).
(4) Where the constitution of a company requires a director or the board to exercise or refrain from exercising a power in accordance with a decision or direction of shareholders, any shareholder who takes part in–
(a) the making of any decision that the power should or should not be exercised; or
(b) the making of any decision whether to give a direction,
as the case may be, is deemed, in relation to making any such decision, to be a director for the purposes of Sections 112 to 116.
(5) Subsections (1)(b) to (d) (inclusive) do not include a person to the extent that the person acts only in a professional capacity.
108. MEANING OF “BOARD”.
(a) directors of the company who number not less than the required quorum acting together as a board of directors; or
(b) where the company has only one director, that director.
Division 2.
Powers of Management.
109. MANAGEMENT OF COMPANY.
(2) The board of a company has all the powers necessary for managing, and for directing and supervising the management of, the business and affairs of the company.
(3) Subsections (1) and (2) are subject to any modifications, exceptions, or limitations contained in this Act or in the company’s constitution.
110. MAJOR TRANSACTIONS.
(a) approved by special resolution; or
(b) contingent on approval by special resolution.
(2) In this section–
“assets” includes property of any kind, whether tangible or intangible;
“major transaction”, in relation to a company, means–
(a) the acquisition of, or an agreement to acquire, whether contingent or not, assets the value of which is more than half the value of the assets of the company before the acquisition; or
(b) the disposition of, or an agreement to dispose of, whether contingent or not, assets of the company the value of which is more than half the value of the assets of the company before the disposition; or
(c) a transaction which has or is likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities the value of which is more than half the value of the assets of the company before the transaction.
(3) Nothing in Paragraph (c) of the definition of the term “major transaction” in Subsection (2) applies by reason only of the company giving, or entering into an agreement to give, a floating charge secured over the assets of the company the value of which is more than half the value of the assets of the company for the purpose of securing the repayment of money or the performance of an obligation.
(4) Nothing in this section applies to a major transaction entered into by a receiver appointed pursuant to an instrument creating a charge over all or substantially all of the property of a company.
111. DELEGATION OF POWERS.
(2) A board that delegates a power under Subsection (1) is responsible for the exercise of the power by the delegate as if the power had been exercised by the board, unless the board–
(a) believed on reasonable grounds at all times before the exercise of the power that the delegate would exercise the power in conformity with the duties imposed on directors of the company by this Act and the company’s constitution; and
(b) has monitored, by means of reasonable methods properly used, the exercise of the power by the delegate.
Division 3.
Directors’ Duties.
112. DUTY OF DIRECTORS TO ACT IN GOOD FAITH AND IN BEST INTERESTS OF COMPANY.
(2) A director of a company that is a wholly owned subsidiary may, when exercising powers or performing duties as a director, where expressly permitted to do so by the constitution of the company, act in a manner which he believes is in the best interests of that company’s holding company even though it may not be in the best interests of the company.
(3) A director of a company that is a subsidiary, but not a wholly owned subsidiary may, when exercising powers or performing duties as a director, where expressly permitted to do so by the constitution of the company and with the prior agreement of the shareholders, other than its holding company, act in a manner which he believes is in the best interests of that company’s holding company or another company within the same group of companies even though it may not be in the best interests of the company.
(4) A director of a company incorporated to carry out a joint venture between the shareholders may, when exercising powers or performing duties as a director in connection with the carrying out of the joint venture, where expressly permitted to do so by the constitution of the company, act in a manner which he believes is in the best interests of a shareholder or shareholders, even though it may not be in the best interests of the company.
(5) Subject to Section 113, a director who acts in contravention of this section commits an offence and is liable on conviction to the penalty set out in Section 413(4).
113. EXERCISE OF POWERS IN RELATION TO EMPLOYEES.
(2) In Subsection (1)–
“employees” includes former employees and the dependants of employees or former employees; but does not include an employee or former employee who is or was a director of the company;
“company” includes a subsidiary of a company.
114. DIRECTORS TO COMPLY WITH ACT AND CONSTITUTION.
(2) A director who acts in contravention of Subsection (1) commits an offence and is liable on conviction to the penalty set out in Section 413(2).
115. DIRECTOR’S DUTY OF CARE.
(a) the nature of the company; and
(b) the nature of the decision; and
(c) the position of the director and the nature of the responsibilities undertaken by him.
(2) A director who acts in contravention of this section commits an offence and is liable on conviction to the penalty set out in Section 413(4).
116. USE OF INFORMATION AND ADVICE.
(a) an employee of the company whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned;
(b) a professional adviser or expert in relation to matters which the director believes on reasonable grounds to be within the person’s professional or expert competence;
(c) any other director or committee of directors upon which the director did not serve in relation to matters within the director’s or committee’s designated authority.
(2) Subsection (1) applies to a director only where the director–
(a) acts in good faith; and
(b) makes proper inquiry where the need for inquiry is indicated by the circumstances; and
(c) has no knowledge that such reliance is unwarranted.
Division 4.
Transactions Involving Self-Interest.
117. MEANING OF “INTERESTED”.
(a) is a party to, or will or may derive a material financial benefit from, the transaction; or
(b) has a material financial interest in another party to the transaction; or
(c) is a director, officer, or trustee of another party to, or person who will or may derive a material financial benefit from, the transaction, not being a party or person that is–
(i) the company’s holding company being a holding company of which the company is a wholly-owned subsidiary; or
(ii) a wholly-owned subsidiary of the company; or
(iii) a wholly-owned subsidiary of a holding company of which the company is also a wholly-owned subsidiary; or
(d) is the parent, child, or spouse of another party to, or person who will or may derive a material financial benefit from, the transaction; or
(e) is otherwise directly or indirectly materially interested in the transaction.
(2) For the purposes of this Act, a director of a company is not interested in a transaction to which the company is a party where the transaction comprises only the giving by the company of security to a third party which has no connection with the director, at the request of the third party, in respect of a debt or obligation of the company for which the director or another person has personally assumed responsibility in whole or in part under a guarantee, indemnity, or by the deposit of a security.
118. DISCLOSURE OF INTEREST.
(a) where the monetary value of the director’s interest is able to be quantified, the nature and monetary value of that interest; or
(b) where the monetary value of the director’s interest cannot be quantified, the nature and extent of that interest.
(2) For the purposes of Subsection (1), a general notice entered in the interests register or disclosed to the board to the effect that a director is a shareholder, director, officer, or trustee of another named company or other person and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into with that company or person, is a sufficient disclosure of interest in relation to that transaction.
(3) A failure by a director to comply with Subsection (1) does not affect the validity of a transaction entered into by the company or the director.
(4) Every director who fails to comply with Subsection (1) commits an offence and is liable on conviction to the penalty set out in Section 413(2).
119. AVOIDANCE OF TRANSACTIONS.
(2) A transaction cannot be avoided where the company receives fair value under it.
(3) For the purposes of Subsection (2), the question whether a company receives fair value under a transaction is to be determined on the basis of the information known to the company and to the interested director at the time the transaction is entered into.
(4) Where a transaction is entered into by a company in good faith in the ordinary course of its business and on usual terms and conditions, the company is presumed to receive fair value under the transaction.
(5) For the purposes of this Act–
(a) a person seeking to uphold a transaction and who knew or ought to have known of the director’s interest at the time the transaction was entered into has the onus of establishing fair value; and
(b) in any other case, the company has the onus of establishing that it did not receive fair value.
(6) A transaction in which a director is interested can only be avoided on the ground of the director’s interest in accordance with this section or the company’s constitution.
120. EFFECT ON THIRD PARTIES.
(a) from a person other than the company; and
(b) for valuable consideration; and
(c) without knowledge of the circumstances of the transaction under which the person referred to in Paragraph (a) acquired the property from the company.
121. SECTIONS 118 AND 119 DO NOT APPLY IN CERTAIN CASES.
(a) remuneration or any other benefit given to a director in accordance with Section 139; or
(b) an indemnity given or insurance provided in accordance with Section 140.
122. INTERESTED DIRECTOR MAY VOTE.
(a) vote on a matter relating to the transaction; and
(b) attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purpose of a quorum; and
(c) sign a document relating to the transaction on behalf of the company; and
(d) do any other thing in his capacity as a director in relation to the transaction,
as if the director were not interested in the transaction.
123. USE OF COMPANY INFORMATION.
(a) for the purposes of the company; or
(b) as required by law; or
(c) in accordance with Subsection (2) or (3); or
(d) in complying with Section 118.
(2) A director of a company may, unless prohibited by the board, disclose information to–
(a) a person whose interests the director represents; or
(b) a person in accordance with whose directions or instructions the director may be required or is accustomed to act in relation to the director’s powers and duties and, where the director discloses the information, the name of the person to whom it is disclosed shall be entered in the interests register.
(3) A director of a company may disclose, make use of, or act on the information where–
(a) particulars of the disclosure, use, or the act in question are entered in the interests register; and
(b) the director is first authorized to do so by the board; and
(c) the disclosure, use, or act in question will not, or will not be likely to, prejudice the company.
(4) A director who acts in contravention of Subsection (1) commits an offence and is liable on conviction to the penalty set out in Section 413(4).
124. MEANING OF “RELEVANT INTEREST”.
(a) is a beneficial owner of the share; or
(b) has the power to exercise any right to vote attached to the share; or
(c) has the power to control the exercise of any right to vote attached to the share; or
(d) has the power to acquire or dispose of the share; or
(e) has the power to control the acquisition or disposition of the share by another person; or
(f) under, or by virtue of, any trust, agreement, arrangement or understanding relating to the share (whether or not that person is a party to it)–
(i) may at any time have the power to exercise any right to vote attached to the share; or
(ii) may at any time have the power to control the exercise of any right to vote attached to the share; or
(iii) may at any time have the power to acquire or dispose of the share; or
(iv) may at any time have the power to control the acquisition or disposition of the share by another person.
(2) Where a person (whether or not a director of the company) has a relevant interest in a share by virtue of Subsection (1) and–
(a) that person or its directors are accustomed or under an obligation, whether legally enforceable or not, to act in accordance with the directions, instructions, or wishes of a director of the company in relation to–
(i) the exercise of any right to vote attached to the share; or
(ii) the control of the exercise of any right to vote attached to the share; or
(iii) the acquisition or disposition of the share; or
(iv) the exercise of the power to control the acquisition or disposition of the share by another person; or
(b) a director of the company has the power to exercise any right to vote attached to 20% or more of the shares of that person; or
(c) a director of the company has the power to control the exercise of any right to vote attached to 20% or more of the shares of that person; or
(d) a director of the company has the power to acquire or dispose of 20% or more of the shares of that person; or
(e) a director of the company has the power to control the acquisition or disposition of 20% or more of the shares of that person,
that director has a relevant interest in the share.
(3) A person who has, or may have, a power referred to in any of Subsection (1)(b) to (f) (inclusive), has a relevant interest in a share regardless of whether the power–
(a) is expressed or implied; or
(b) is direct or indirect; or
(c) is legally enforceable or not; or
(d) is related to a particular share or not; or
(e) is subject to restraint or restriction or is capable of being made subject to restraint or restriction; or
(f) is exercisable presently or in the future; or
(g) is exercisable only on the fulfilment of a condition; or
(h) is exercisable alone or jointly with another person or persons.
(4) A power referred to in Subsection (1) exercisable jointly with another person or persons is deemed to be exercisable by either or any of those persons.
(5) A reference to a power includes a reference to a power that arises from, or is capable of being exercised as the result of, a breach of any trust, agreement, arrangement, or understanding, or any of them, whether or not it is legally enforceable.
125. RELEVANT INTERESTS TO BE DISREGARDED IN CERTAIN CASES.
(a) the ordinary business of the person who has the relevant interest consists of, or includes, the lending of money or the provision of financial services, or both, and that person has the relevant interest only as security given for the purposes of a transaction entered into in good faith in the ordinary course of the business of that person; or
(b) that person has the relevant interest by reason only of acting for another person to acquire or dispose of that share on behalf of the other person in good faith in the ordinary course of business of a stockbroker and that person is a member of a stock exchange; or
(c) that person has the relevant interest solely by reason of being appointed as a proxy to vote at a particular meeting of members, or of a class of members, of the company and the instrument of that person’s appointment is produced before the start of the meeting in accordance with Section 6(4) of Schedule 2 to this Act or by a time specified in the company’s constitution, as the case may be; or
(d) that person–
(i) is a trustee corporation or a nominee company; and
(ii) has the relevant interest by reason only of acting for another person in good faith in the ordinary course of business of that trustee corporation or nominee company; or
(e) that person has the relevant interest by reason only that the person is a bare trustee of a trust to which the share is subject.
(2) For the purposes of Subsection (1)(e), a trustee may be a bare trustee notwithstanding that he is entitled as a trustee to be remunerated out of the income or property of the trust.
126. DISCLOSURE OF SHARE DEALING BY DIRECTORS.
(a) disclose to the board–
(i) the number and class of shares in which the relevant interest has been acquired or the number and class of shares in which the relevant interest was disposed of, as the case may be; and
(ii) the nature of the relevant interest; and
(iii) the consideration paid or received; and
(iv) the date of the acquisition or disposition; and
(b) ensure that the particulars disclosed to the board under Paragraph (a) are entered in the interests register.
(2) A director who acts in contravention of this section commits an offence and is liable on conviction to the penalty set out in Section 413(2).
127. RESTRICTIONS ON SHARE DEALING BY DIRECTORS AND EMPLOYEES.
(a) in the case of an acquisition, the consideration given for the acquisition is not less than the fair value of the shares or securities; or
(b) in the case of a disposition, the consideration received for the disposition is not more than the fair value of the shares or securities.
(2) For the purposes of Subsection (1), the fair value of shares or securities is to be determined on the basis of all information known to the director or employee or publicly available at the time.
(3) Subsection (1) does not apply in relation to a share or security that is acquired or disposed of by a director or employee only as a nominee for the company or a related company.
(4) Where a director or employee acquires shares or securities in contravention of Subsection (1)(a), the director or employee is liable to the person from whom the shares or securities were acquired for the amount by which the fair value of the shares or securities exceeds the amount paid by the director or employee.
(5) Where a director or employee disposes of shares or securities in contravention of Subsection (1)(b), the director or employee is liable to the person to whom the shares or securities were disposed of for the amount by which the consideration received by the director or employee exceeds the fair value of the shares or securities.
(6) A person who acts in contravention of Subsection (1) commits an offence and is liable on conviction to the penalty set out in Section 413(4).
Division 5.
Appointment and Removal of Directors.
128. NUMBER OF DIRECTORS AND RESIDENCE.
(2) At least one director of the company shall be ordinarily resident in the country.
129. QUALIFICATIONS OF DIRECTORS.
(2) The following persons are disqualified from being appointed or holding office as a director of a company:–
(a) a person who is under 18 years of age;
(b) a person who is prohibited from being a director or promoter of or being concerned or taking part in the management of a company under Section 425, 426 or 428;
(c) a person who is or becomes of unsound mind;
(d) in relation to any particular company, a person who does not comply with any qualifications for directors contained in the constitution of that company.
(3) A person that is not a natural person cannot be a director of a company.
(4) A person who is disqualified from being a director but who acts as a director is a director for the purposes of a provision of this Act that imposes a duty or an obligation on a director of a company.
130. DIRECTOR’S CONSENT REQUIRED.
131. APPOINTMENT OF FIRST AND SUBSEQUENT DIRECTORS.
(2) All subsequent directors of a company shall, unless the constitution of the company otherwise provides, be appointed by ordinary resolution.
132. COURT MAY APPOINT DIRECTORS.
(a) there are no directors of a company, or the number of directors is less than the quorum required for a meeting of the board; and
(b) it is not possible or practicable to appoint directors in accordance with the company’s constitution,
a shareholder or creditor of the company may apply to the Court to appoint one or more persons as directors of the company, and the Court may make an appointment where it considers that it is in the interests of the company to do so.
(2) An appointment under Subsection (1) may be made on such terms and conditions as the Court thinks fit.
133. APPOINTMENT OF DIRECTORS TO BE VOTED ON INDIVIDUALLY.
(a) the resolution is for the appointment of one director; or
(b) the resolution is a single resolution for the appointment of two or more persons as directors of the company and a separate resolution that it be so voted on has first been passed without a vote being cast against it.
(2) A resolution moved in contravention of Subsection (1) is void even though the moving of it was not objected to at the time.
(3) Subsection (2) does not limit the operation of Section 136.
(4) No provision for the automatic reappointment of retiring directors in default of another appointment applies on the passing of a resolution in contravention of Subsection (1).
(5) Nothing in this section prevents the election of two or more directors by ballot or poll.
134. REMOVAL OF DIRECTORS.
(2) The notice of a meeting referred to in Subsection (1) shall state that the purpose or a purpose of the meeting is the removal of the director.
135. DIRECTOR CEASING TO HOLD OFFICE.
(a) resigns in accordance with Subsection (2); or
(b) is removed from office in accordance with this Act or the constitution of the company; or
(c) becomes disqualified from being a director pursuant to Section 129; or
(d) dies; or
(e) otherwise vacates office in accordance with the constitution of the company.
(2) A director of a company may resign office by signing a written notice of resignation and sending it to the address for service of the company and such notice is effective when it is received at that address or at a later time specified in the notice.
(3) Notwithstanding the vacation of office, a person who held office as a director remains liable under the provisions of this Act that impose liabilities on directors in relation to acts and omissions and decisions made while that person was a director.
136. VALIDITY OF DIRECTOR’S ACTS.
(a) the person’s appointment was defective; or
(b) the person is not qualified for appointment.
137. NOTICE OF CHANGE OF DIRECTORS.
(a) a change in the directors of a company, whether as the result of a director ceasing to hold office or the appointment of a new director, or both; or
(b) a change in the name or the address or the postal address of a director of a company,
is submitted to the Registrar for registration.
(2) A notice under Subsection (1) shall–
(a) in the case of the appointment of a new director, have attached the form of consent and certificate required pursuant to Section 130; and
(b) be submitted to the Registrar within one month of–
(i) the change occurring, in the case of the appointment or resignation of a director; or
(ii) the company first becoming aware of the change, in the case of the death of a director or a change in the name, address, or postal address of a director.
(3) Where the board of a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).
Division 6.
Miscellaneous Provisions Relating to Directors.
138. PROCEEDINGS OF BOARD.
139. REMUNERATION AND OTHER BENEFITS.
(a) the payment of remuneration or the provision of other benefits by the company to a director for services as a director or in any other capacity; and
(b) the payment by the company to a director or former director of compensation for loss of office; and
(c) the making of loans by the company to a director; and
(d) the giving of guarantees by the company for debts incurred by a director; and
(e) the entering into of a contract to do any of the things set out in Paragraphs (a) to (d) (inclusive),
where the board is satisfied that to do so is fair to the company.
(2) The board shall ensure that, forthwith after authorizing the making of the payment or the provision of the benefit or the making of the loan or the giving of the guarantee or the entering into of the contract, as the case may be, particulars of the payment or benefit or loan or guarantee or contract are entered in the interests register.
(3) The payment of remuneration or the giving of any other benefit to a director in accordance with a contract authorized under Subsection (1) need not be separately authorized under that subsection.
(4) Directors who vote in favour of authorizing a payment, benefit, loan, guarantee, or contract under Subsection (1) shall forthwith sign a certificate stating that, in their opinion, the making of the payment or the provision of the benefit, or the making of the loan, or the giving of the guarantee, or the entering into of the contract is fair to the company, and the grounds for that opinion.
(5) Where a payment is made or other benefit provided or a guarantee is given to which Subsection (1) applies and either–
(a) the provisions of Subsections (1) and (4) have not been complied with; or
(b) reasonable grounds did not exist for the opinion set out in the certificate given under Subsection (4),
the director or former director to whom the payment is made or the benefit is provided, or in respect of whom the guarantee is given, as the case may be, is personally liable to the company for the amount of the payment, or the monetary value of the benefit, or any amount paid by the company under the guarantee, except to the extent to which he proves that the payment or benefit or guarantee was fair to the company at the time it was made, provided, or given.
(6) Where a loan is made to which Subsection (1) applies and either–
(a) the provisions of Subsections (1) and (4) have not been complied with; or
(b) reasonable grounds did not exist for the opinion set out in the certificate given under Subsection (4),
the loan becomes immediately repayable to the company by the director, notwithstanding the terms of any agreement relating to the giving of the loan, except to the extent to which he proves that the loan was fair to the company at the time it was given.
140. INDEMNITY AND INSURANCE.
(a) liability for any act or omission in his capacity as a director or employee; or
(b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability.
(2) An indemnity given in breach of this section is void.
(3) A company may, if expressly authorized by its constitution, indemnify a director or employee of the company or a related company for any costs incurred by him in any proceeding–
(a) that relates to liability for any act or omission in his capacity as a director or employee; and
(b) in which judgment is given in his favour, or in which he is acquitted, or which is discontinued.
(4) A company may, if expressly authorized by its constitution, indemnify a director or employee of the company or a related company in respect of–
(a) liability to any person other than the company or a related company for any act or omission in his capacity as a director or employee; or
(b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability,
not being criminal liability or liability in respect of a breach, in the case of a director, of the duty specified in Section 112 or, in the case of an employee, of any fiduciary duty owed to the company or related company.
(5) A company may, if expressly authorized by its constitution and with the prior approval of the board, effect insurance for a director or employee of the company or a related company in respect of–
(a) liability, not being criminal liability, for any act or omission in his capacity as a director or employee; or
(b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability; or
(c) costs incurred by that director or employee in defending any criminal proceedings in which he is acquitted.
(6) The directors who vote in favour of authorizing the effecting of insurance under Subsection (5) shall forthwith sign a certificate stating that, in their opinion, the cost of effecting the insurance is fair to the company.
(7) The board of a company shall ensure that particulars of any indemnity given to, or insurance effected for, any director or employee of the company or a related company are forthwith entered in the interests register.
(8) Where insurance is effected for a director or employee of a company or a related company and–
(a) the provisions of either Subsection (5) or (6) have not been complied with; or
(b) reasonable grounds did not exist for the opinion set out in the certificate given under Subsection (6),
the director or employee is personally liable to the company for the cost of effecting the insurance except to the extent that he proves that it was fair to the company at the time the insurance was effected.
(9) In this section–
“director” includes a former director;
“effect insurance” includes pay, whether directly or indirectly, the costs of the insurance;
“employee” includes a former employee;
“indemnify” includes relieve or excuse from liability, whether before or after the liability arises, and “indemnity” has a corresponding meaning.
PART IX. – ENFORCEMENT.
Division 1.
Interpretation.
141. INTERPRETATION.
“entitled person”, “former shareholder”, and “shareholder” include a reference to a personal representative of an entitled person, former shareholder, or shareholder and a person to whom shares of any of those persons have passed by operation of law.
Division 2.
Injunctions.
142. INJUNCTIONS.
(a) restraining a person who is engaging in or proposes to engage in conduct that is or would contravene the constitution of the company or this Act from engaging in that conduct; or
(b) requiring a person who has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that he is required to do by the constitution of the company or this Act, to do that act or thing.
(2) An application may be made by–
(a) the company; or
(b) a director or shareholder of the company; or
(c) an entitled person; or
(d) the Registrar.
(3) Where the Court makes an order under Subsection (1), it may also grant such consequential relief as it thinks fit.
(4) An order may not be made under this section in relation to conduct or a course of conduct that has been completed.
(5) The Court may, at any time before the final determination of an application under Subsection (1), make, as an interim order, any order that it is empowered to make under that subsection.
(6) Where an application is made to the Court under Subsection (1) for the grant of an injunction under this section, the Court shall not require the applicant, as a condition of granting an interim injunction, to give any undertakings as to damages.
Division 3.
Derivative Actions.
143. DERIVATIVE ACTIONS.
(a) bring proceedings in the name and on behalf of the company or any related company; or
(b) intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending, or discontinuing the proceedings on behalf of the company or related company, as the case may be.
(2) Without limiting Subsection (1), in determining whether to grant leave under that subsection, the Court shall have regard to–
(a) the likelihood of the proceedings succeeding; and
(b) the costs of the proceedings in relation to the relief likely to be obtained; and
(c) any action already taken by the company or related company to obtain relief; and
(d) the interests of the company or related company in the proceedings being commenced, continued, defended, or discontinued, as the case may be.
(3) Leave to bring proceedings or intervene in proceedings may be granted under Subsection (1), only where the Court is satisfied that either–
(a) the company or related company does not intend to bring, diligently continue or defend, or discontinue the proceedings, as the case may be; or
(b) it is in the interests of the company or related company that the conduct of the proceedings should not be left to the directors or to the determination of the shareholders as a whole.
(4) Notice of the application shall be served on the company or related company.
(5) The company or related company–
(a) may appear and be heard; and
(b) shall inform the Court, whether or not it intends to bring, continue, defend, or discontinue the proceedings, as the case may be.
(6) Except as provided in this section, a shareholder is not entitled to bring or intervene in any proceedings in the name of, or on behalf of, a company or a related company.
144. COSTS OF DERIVATIVE ACTION TO BE MET BY COMPANY.
145. POWERS OF COURT WHERE LEAVE GRANTED.
(a) make an order authorizing the shareholder or any other person to control the conduct of the proceedings; and
(b) give directions for the conduct of the proceedings; and
(c) make an order requiring the company or the directors to provide information or assistance in relation to the proceedings; and
(d) make an order directing that any amount ordered to be paid by a defendant in the proceedings shall be paid, in whole or part, to former and present shareholders of the company or related company instead of to the company or the related company.
146. COMPROMISE, SETTLEMENT, OR WITHDRAWAL OF DERIVATIVE ACTION.
Division 4.
Personal Actions by Shareholders.
147. PERSONAL ACTIONS BY SHAREHOLDERS AGAINST DIRECTORS.
(2) An action may not be brought under Subsection (1) to recover any loss in the form of a reduction in the value of shares in the company or a failure of the shares to increase in value by reason only of a loss suffered, or a gain forgone, by the company.
(3) Without limiting Subsection (1), the duties of directors set out in–
(a) Section 70; and
(b) Section 118; and
(c) Section 126,
are duties owed to shareholders, while the duties of directors set out in–
(d) Section 112; and
(e) Section 115; and
(f) Section 123,
are duties owed to the company and not to shareholders.
148. ACTIONS BY SHAREHOLDERS TO REQUIRE DIRECTORS TO ACT.
149. PERSONAL ACTIONS BY SHAREHOLDERS AGAINST COMPANY.
150. ACTIONS BY SHAREHOLDERS TO REQUIRE COMPANY TO ACT.
151. REPRESENTATIVE ACTIONS.
(a) as to the control and conduct of the proceedings; and
(b) as to the costs of the proceedings; and
(c) directing the distribution of any amount ordered to be paid by a defendant in the proceedings among the shareholders represented.
152. PREJUDICED SHAREHOLDERS.
(2) Where, on an application under this section, the Court considers that it is just and equitable to do so, it may make such order as it thinks fit including, without limiting the generality of this subsection, an order–
(a) requiring the company or any other person to acquire the shareholder’s shares; or
(b) requiring the company or any other person to pay compensation to a person; or
(c) regulating the future conduct of the company’s affairs; or
(d) altering or adding to the company’s constitution; or
(e) appointing a receiver of the company; or
(f) directing the rectification of the records of the company; or
(g) putting the company into liquidation; or
(h) setting aside action taken by the company or the board in breach of this Act or the constitution of the company.
(3) No order may be made against the company or any other person under Subsection (2) unless the company or that person is a party to the proceedings in which the application is made.
(4) Failure to comply with any of the following sections is conduct which is unfairly prejudicial for the purposes of this section:–
(a) Section 45;
(b) Section 47;
(c) Section 51;
(d) Section 57;
(e) Section 63;
(f) Section 98;
(g) Section 110.
(5) The signing by the directors of a company of a certificate required by this Act without reasonable grounds existing for an opinion set out in it is conduct that is unfairly prejudicial for the purposes of this section.
153. ALTERATION TO CONSTITUTION.
(a) in accordance with the terms of that order; or
(b) with the leave of the Court.
(2) Any alteration or addition to the constitution of a company made by an order under Section 152 has the same effect as if it had been made by the shareholders of the company pursuant to Section 33 and the provisions of this Act shall apply to the constitution as altered or added to.
(3) Within one month of the making of an order under Section 152 altering or adding to the constitution of a company, the board of the company shall ensure that a certified copy of the order and the constitution as altered or added to is submitted to the Registrar for registration.
(4) Where the board of a company fails to comply with Subsection (3), every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).
Division 5.
Ratification.
154. RATIFICATION OF CERTAIN ACTIONS OF DIRECTORS.
(2) The purported exercise of a power that is ratified under Subsection (1) is deemed to be, and always to have been, a proper and valid exercise of that power.
(3) The ratification or approval under this section of the purported exercise of a power by a director or the board does not prevent the Court from exercising a power which might, apart from the ratification or approval, be exercised in relation to the action of the director or the board.
PART X. – ADMINISTRATION OF COMPANIES.
Division 1.
Authority to Bind Company.
155. METHOD OF CONTRACTING.
(a) an obligation which, if entered into by a natural person, would, by law, be required to be by deed, may be entered into on behalf of the company in writing signed under the common seal of the company; or
(b) an obligation which, if entered into by a natural person, is, by law, required to be in writing, may be entered into on behalf of the company in writing by a person acting under the company’s express or implied authority; or
(c) an obligation which, if entered into by a natural person, is not, by law, required to be in writing, may be entered into on behalf of the company in writing or orally by a person acting under the company’s express or implied authority.
(2) Subsection (1) applies to a contract or other obligation–
(a) whether or not that contract or obligation was entered into in the country; and
(b) whether or not the law governing the contract or obligation is the law of Papua New Guinea.
(3) A company may, if its constitution so authorizes, have for use in any place outside the country an official seal, which shall be a facsimile of the common seal of the company with the addition on its face of the name of every place where it is to be used, and the person affixing any such official seal shall certify on the instrument to which it is affixed the date on which and the place at which it is affixed.
156. ATTORNEYS.
(2) An act of the attorney in accordance with the instrument binds the company.
Division 2.
Pre-incorporation Contracts.
157. PRE-INCORPORATION CONTRACTS MAY BE RATIFIED.
(a) a contract purporting to be made by a company before its incorporation; or
(b) a contract made by a person on behalf of a company before and in contemplation of its incorporation.
(2) Notwithstanding any law, a pre-incorporation contract may be ratified within such period as may be specified in the contract, or where no period is specified, then within one month after the incorporation of the company in the name of which, or on behalf of which, it has been made.
(3) A contract that is ratified is as valid and enforceable as if the company had been a party to the contract when it was made.
(4) A pre-incorporation contract may be ratified by a company in the same manner as a contract may be entered into on behalf of a company under Section 155.
(5) Notwithstanding any law, where a pre-incorporation contract has not been ratified by a company, or validated by the Court under Section 159, the company may not enforce it or take the benefit of it.
158. WARRANTIES IMPLIED IN PRE-INCORPORATION CONTRACTS.
(a) that the company will be incorporated within such period as may be specified in the contract, or where no period is specified, then within a reasonable time after the making of the contract; and
(b) that the company will ratify the contract within such period as may be specified in the contract, or where no period is specified, then within a reasonable time after the incorporation of the company.
(2) The amount of damages recoverable in an action for breach of a warranty implied by Subsection (1) is the same as the amount of damages that would be recoverable in an action against the company for damages for breach by the company of the unperformed obligations under the contract if the contract had been ratified and cancelled.
(3) Where, after its incorporation, a company enters into a contract in the same terms as, or in substitution for, a pre-incorporation contract (not being a contract ratified by the company under Section 157), the liability of a person under Subsection (1) (including any liability under an order made by the Court for the payment of damages) is discharged.
159. FAILURE TO RATIFY.
(a) directing the company to return property, whether real or personal, acquired under the contract to that party; or
(b) for any other relief in favour of that party relating to that property; or
(c) validating the contract whether in whole or in part.
(2) The Court may, where it considers it just and equitable to do so, make any order or grant any relief it thinks fit and may do so whether or not an order has been made under Section 158(2).
160. BREACH OF PRE-INCORPORATION CONTRACT.
Division 3.
Registered Office.
161. REGISTERED OFFICE.
(2) The registered office shall be identifiable and easily accessible to the public.
(3) Subject to Section 162, the registered office of a company at a particular time is the place that is described as its registered office in the register at that time.
(4) The description of the registered office shall–
(a) state the address of the registered office, including the suburb and street name and number or the allotment and section number or portion number; and
(b) where–
(i) the registered office is at the offices of any firm, or any other person, state–
(A) that the registered office of the company is at the offices of that firm or person; and
(B) particulars of the location in any building of those offices; or
(ii) the registered office is not at the offices of any such firm or person but is located in a building occupied by persons other than the company, state particulars of its location in the building.
162. CHANGE OF REGISTERED OFFICE.
(2) Notice in the prescribed form of the change shall be submitted to the Registrar for registration within one month of the change.
163. REQUIREMENT TO CHANGE REGISTERED OFFICE.
(2) The Registrar may require a company to change its registered office by notice in writing sent to the company at its registered office.
(3) The notice shall–
(a) state that the company is required to change its registered office by a date stated in the notice, not being a date that is earlier than one month after the date of the notice;
(b) state the reasons for requiring the change;
(c) state that the company has the right to appeal to the Court under Section 408; and
(d) be dated and signed by the Registrar.
(4) A copy of the notice shall also be sent to each director of the company.
(5) The company shall change its registered office–
(a) by the date stated in the notice; or
(b) where it appeals to the Court and the appeal is dismissed, within five days after the decision of the Court.
(6) Where a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(1).
Division 4.
Company Records.
164. COMPANY RECORDS.
(a) the constitution of the company;
(b) minutes of all meetings and resolutions of shareholders within the last seven years;
(c) an interests register;
(d) minutes of all meetings and resolutions of directors and directors’ committees within the last seven years;
(e) certificates given by directors under this Act within the last seven years;
(f) the full names, addresses, and postal addresses of the current directors and secretary;
(g) copies of all written communications to all shareholders or all holders of the same class of shares during the last seven years, including annual reports made under Section 209;
(h) copies of all financial statements and group financial statements required to be completed by this Act for the last seven completed accounting periods of the company;
(i) the share register.
(2) The references in Subsection (1)(b), (d), (e), and (g) to seven years and the references in Paragraph (h) of that subsection to seven completed accounting periods include such lesser periods as the Registrar may approve by notice in writing to the company.
(3) The records referred to in Subsection (1)(a) to (h) (inclusive) may be kept at such other place as the board thinks proper, notice of which is submitted to the Registrar in accordance with Subsection (4).
(4) Where any records are not kept at the registered office of the company, or the place at which they are kept is changed, the company shall ensure that within one month of their first being kept elsewhere or moved, as the case may be, notice in the prescribed form is submitted to the Registrar for registration of the places where the records are kept.
(5) Where a company fails to comply with Subsection (1) or Subsection (4)–
(a) the company commits an offence and is liable on conviction to the penalty set out in Section 413(2); and
(b) every director of the company commits an offence and is liable on conviction to the penalty set out in Section 414(2).
165. FORM OF RECORDS.
(a) in written form; or
(b) in a form or in a manner that allows the documents and information that comprise the records to be easily accessible and convertible into written form.
(2) The board shall ensure that adequate measures exist to–
(a) prevent the records being falsified; and
(b) detect any falsification of them.
(3) Where the board fails to comply with Subsection (2), every director commits an offence and is liable on conviction to the penalty set out in Section 414(2).
166. INSPECTION OF RECORDS BY DIRECTORS.
(a) in written form; and
(b) without charge; and
(c) at a reasonable time specified by the director.
(2) The Court may, on application by the company, where it is satisfied that–
(a) it would not be in the company’s interests for a director to inspect the records; or
(b) the proposed inspection is for a purpose that is not properly connected with the director’s duties,
direct that the records need not be made available for inspection or limit the inspection of them in any manner it thinks fit.
Division 5.
Address for Service.
167. ADDRESS FOR SERVICE.
(2) The address for service may be the company’s registered office or another place, but–
(a) it shall have a readily identifiable street address; and
(b) it shall be a place that is readily accessible during normal business hours.
(3) A company’s address for service at any particular time is the place that is described as its address for service in the register at that time.
(4) The description of the place that is an address for service shall state the address of that place and where–
(a) the place is at the premises of any firm or other person–
(i) that the address for service of the company is at the premises of that firm or person; and
(ii) particulars of the location in any building of those premises; or
(b) the place is not at the premises of any firm or other person but is located in a building occupied by persons other than, or in addition t