Note that where there is no material prejudice to members or creditors, there is NO requirement for the giving of the financial assistance to be approved by a general meeting. The word separates s ‘or’ 260A(1)(a) and s 260A(1)(b).] (b) the company could itself buy back his shares. (6 marks) [A company cannot usually acquire its own shares: see s 259A. However, one of the exceptions allows a company to buy-back its shares s 257A: s 259A(a). Bemex could buy-back Colin’s shares if the buy-back does not materially prejudice the company’s ability to pay its creditors and Bemex follows the prescribed procedures: s 257A. In contrast to the position under s 260A(1)(a), it is somewhat easier to apply the material prejudice test to a buy-back. This is because it is the company’s current financial position which is important. Since the company is profitable with no major creditors, it should be a relatively straight forward exercise to determine whether the payment of the buy-back price will materially prejudice the company’s ability to pay its creditors. The buy-back of Colin’s shares would be a selective buy-back since it does not fit the definitions of the other kinds of permitted buy-back: see the relevant s 9 definitions. Thus the buy-back would have to be approved by special resolution in the manner prescribed by s 257D. Colin and his associates should not vote in favour of that resolution. It is irrelevant that the buy-back would exceed the 10/12 limit referred to in ss 257B(4)-(5). This is because the buy-back has to be approved by special resolution under s 257D. It would make no sense for it to also have to be approved by ordinary resolution under s 257C. The 10/12 limit is only relevant to employee share scheme buy-backs, on-market buy backs and equal access scheme buy-backs: see the table in s 257B(1).] TOTAL: 12 marks Question 2 ABW Ltd has 100 million fully paid ordinary shares on issue. It also has 10 million cumulative preference shares on issue. Both classes of shares are quoted for trading on the Australian Securities Exchange (‘ASX’). The rights attached to the preference shares are stated in the company’s constitution.
Note that where there is no material prejudice to members or creditors, there is NO requirement for the giving of the financial assistance to be approved by a general meeting. The word ‘or’ separates s 260A(1)(a) and s 260A(1)(b).] (b) the company could itself buy back his shares. (6 marks) [A company cannot usually acquire its own shares: see s 259A. However, one of the exceptions allows a company to buy-back its shares s 257A: s 259A(a). Bemex could buy-back Colin’s shares if the buy-back does not materially prejudice the company’s ability to pay its creditors and Bemex follows the prescribed procedures: s 257A. In contrast to the position under s 260A(1)(a), it is somewhat easier to apply the material prejudice test to a buy-back. This is because it is the company’s current financial position which is important. Since the company is profitable with no major creditors, it should be a relatively straight forward exercise to determine whether the payment of the buy-back price will materially prejudice the company’s ability to pay its creditors. The buy-back of Colin’s shares would be a selective buy-back since it does not fit the definitions of the other kinds of permitted buy-back: see the relevant s 9 definitions. Thus the buy-back would have to be approved by special resolution in the manner prescribed by s 257D. Colin and his associates should not vote in favour of that resolution. It is irrelevant that the buy-back would exceed the 10/12 limit referred to in ss 257B(4)-(5). This is because the buy-back has to be approved by special resolution under s 257D. It would make no sense for it to also have to be approved by ordinary resolution under s 257C. The 10/12 limit is only relevant to employee share scheme buy-backs, on-market buy backs and equal access scheme buy-backs: see the table in s 257B(1).] TOTAL: 12 marks Question 2 ABW Ltd has 100 million fully paid ordinary shares on issue. It also has 10 million cumulative preference shares on issue. Both classes of shares are quoted for trading on the Australian Securities Exchange (‘ASX’). The rights attached to the preference shares are stated in the company’s constitution.
Corporate-Law-Exam-Notes-2010.docx