Corporations Act 2001
A company must not take security over shares (or units of shares) in itself or in a company that controls it, except as permitted by subsection (2) or (3).
[ CCH Note: Act No 180 of 2012, s 3, Sch 7 contained the following application provision (which was effective 11 December 2012):
Application of amendments made by this Act
The amendments made by this Act apply in relation to an act or omission by a body corporate occurring on or after the day this Act commences.
A company may take security over shares in itself under an employee share scheme that has been approved by:
(a) a resolution passed at a general meeting of the company; and
(b) if the company is a subsidiary of a listed domestic corporation - a resolution passed at a general meeting of the listed domestic corporation; and
(c) if paragraph (b) does not apply but the company has a holding company that is a domestic corporation and that is not itself a subsidiary of a domestic corporation - a resolution passed at a general meeting of that holding company. 259B(3) Special exemptions for financial institutions.
(a) the company ' s ordinary business includes providing finance; and
(b) the security is taken in the ordinary course of that business and on ordinary commercial terms. 259B(4)
If a company acquires shares (or units of shares) in itself because it exercises rights under a security permitted by subsection (2) or (3), then, within the following 12 months, the company must cease to hold those shares (or units of shares). ASIC may extend this period of 12 months if the company applies for the extension before the end of the period. 259B(5)
Any voting rights attached to the shares (or units of shares) cannot be exercised while the company continues to hold them. 259B(6)
If, at the end of the 12 months (or extended period), the company still holds any of the shares (or units of shares), the company commits an offence for each day while that situation continues. 259B(7)
An offence based on subsection (6) is an offence of strict liability.
Note: For strict liability , see section 6.1 of the Criminal Code .