An on market offer requires the ordinary resolution

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An on market offer requires the ordinary resolution if it exceeds the 10/12 limit o However unlike an equal access scheme, information need not be provided to shareholders or lodged with ASIC Employee Share Scheme o Procedure required for an employee share scheme buy back is the same as for an on market buy back These requirements are summarised in {s 257B(1) Corporations Act} . Within the 10/12 Limit This refers to the quantity of shares purchased A buy back within the 10/12 limit if the number of votes attaching to voting shares purchased by the company is less than 10% of the smallest number of voting shares held in the company over the previous 12 months o 10% of the smallest issued equity capital in the past 12 months Because the buy-back is on a ‘small scale’ no shareholder approval is require unless the buy back also constitutes a selective buy back C.4 Consequences of Breach The consequences of a company buying back its own shares without complying with s 257A as much the same for any unauthorised reduction in share capital The transaction may still be valid {s 259F Corporations Act} But may be subject to an injunction or damages claim {s 1324(1A)(b)(i) Corporations Act} The company does not commit an offence but persons involved in the contravention will commit an offence if they acted dishonestly {s 259F(3) Corporations Act} Directors may also be liable under insolvent trading provisions D. Financial Assistance For a company to provide funds to assist a person to purchase the shares in the company may also offend the capital maintenance doctrine. This prohibition was taken from English legislation that was prompted by concerns over the practice of corporate takeovers being financed by borrowed funds and then the new controllers using the newly acquired company to repay those borrowings. Although such conduct was a breach of directors’ fiduciary duties it was also considered necessary to have specific legislation dealing with the problem {Greene Committee (UK)} Therefore the Australian legislation only allows a company to financial assist the purchase of its shares if {s 260A Corporations Act} (a) giving the financial assistance does not materially prejudice (i) the interests of the company or its shareholders; or (ii) the company’s ability to pay its creditors; or (b) the assistance is approved by shareholders under s 260B; or (c) assistance is exempted under s 260C D.1 Has there been Financial Assistance? The Corporations Act does not define ‘financial assistance’ However the financial assistance can take place before or after the acquisition {s 260A(2)(a) Corporations Act} A narrow view would suggest that this means a diminuition of the company’s resources to assist in the acquisition o “the essence of the matter is clear – has the company diminished its financial resources, including future resources” {Burton v Palmer per Hutley JA} 4
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A broader view would suggest that it does not require the company’s financial resources to be diminished – rather purchase of property could be used to provide financial assistance {Belmont Finance Corporation v Williams Furniture} In {ASIC v Adler} the
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