Company controlling entity that holds shares in it
259D Company controlling entity that holds shares in it
If any of the following occur:
a company obtains control of an entity that holds shares (or units of shares) in the company;
a company’s control over an entity that holds shares (or units of shares) in the company increases;
a company issues shares (or units of shares) to an entity it controls in the situation covered by paragraph 259C(1)(c);
shares (or units of shares) in the company are transferred to an entity it controls in the situation covered by paragraph 259C(1)(d);
then, within 12 months after it occurs either:
the entity must cease to hold the shares (or units); or
the company must cease to control the entity.
ASIC may extend this period of 12 months if the company applies for the extension before the end of the period.
If this section applies to shares (or units of shares), it also applies to bonus shares issued in respect of those shares (or units of shares). Within the same period that applies to the shares themselves under subsection (1), either:
the entity must cease to hold the bonus shares; or
the company must cease to control the entity.
Any voting rights attached to the shares (or units of shares) cannot be exercised while the company continues to control the entity.
If, at the end of the 12 months (or extended period), the company still controls the entity and the entity still holds the shares (or units of shares), the company commits an offence for each day while that situation continues.
An offence based on subsection (4) is an offence of strict liability.
For strict liability, see section 6.1 of the Criminal Code.
This section does not apply to shares (or units of shares) if:
they are held by the entity as a personal representative; or
they are held by the entity as trustee and neither the company nor any entity it controls has a beneficial interest in the trust, other than a beneficial interest that satisfies these conditions:
the interest arises from a security given for the purposes of a transaction entered into in the ordinary course of business in connection with providing finance; and
that transaction was not entered into with an associate of the company or an entity it controls.
A contravention of this section does not affect the validity of any transaction.
This Act’s bill:Explanatory memorandumSecond reading speech
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