Commonwealth Consolidated Acts

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No liability companies--forfeiture and sale of shares for failure to meet call

Forfeiture and sale of shares

             (1)  A share in a no liability company is immediately forfeited if:

                     (a)  a call is made on the share; and

                     (b)  the call is unpaid at the end of 14 days after it became payable.

Note:          The holder of the share may redeem it under section 254R.

             (2)  The forfeited share must then be offered for sale by public auction within 6 weeks after the call became payable.

Advertisement of sale

             (3)  At least 14 days, and not more than 21 days, before the day of the sale, the sale must be advertised in a national newspaper. The specific number of shares to be offered need not be specified in the advertisement and it is sufficient to give notice of the sale by advertising to the effect that all shares on which a call remains unpaid will be sold.

Postponement of sale

             (4)  An intended sale of forfeited shares that has been duly advertised may be postponed for not more than 21 days from the advertised date of sale. The date to which the sale is postponed must be advertised in a national newspaper.

          ( 4A)  A national newspaper is a daily newspaper that circulates generally, either in printed form or online, in Australia.

Note:          For daily newspaper , see section 9.

             (5)  There may be more than 1 postponement but the sale cannot be postponed to a date more than 90 days from the first date fixed for the intended sale.

Shares may be offered as credited to a particular amount

             (6)  The share may be sold credited as paid up to the sum of:

                     (a)  the amount paid upon the share at the time of forfeiture; and

                     (b)  the amount of the call; and

                     (c)  the amount of any other calls becoming payable on or before the day of the sale;

if the company in accordance with its constitution or by ordinary resolution so determines.

Reserve price

             (7)  The directors may fix a reserve price for the share that does not exceed the sum of:

                     (a)  the amount of the call due and unpaid on the share at the time of forfeiture; and

                     (b)  the amount of any other calls that become payable on or before the date of the sale.

Withdrawal from sale

             (8)  The share may be withdrawn from sale if no bid at least equal to the reserve price is made at the sale.

Disposal of shares withdrawn from sale

             (9)  If:

                     (a)  no bid for the share is received at the sale; or

                     (b)  the share is withdrawn from sale;

the share must be held by the directors in trust for the company. It must be then disposed of in the manner determined by the company in accordance with its constitution or by resolution. Unless otherwise specifically provided by resolution, the share must first be offered to shareholders for a period of 14 days before being disposed of in any other manner.

Suspension of voting rights attached to share held in trust

           (10)  At any meeting of the company, no person is entitled to any vote in respect of the shares held by the directors in trust under subsection (9).

Application of proceeds of sale

           (11)  The proceeds of the sale under subsection (2) or the disposal under subsection (9) must be applied to pay:

                     (a)  first, the expenses of the sale; and

                     (b)  then, any expenses necessarily incurred in respect of the forfeiture; and

                     (c)  then, the calls on the share that are due and unpaid.

The balance (if any) must be paid to the member whose share has been sold. If there is a share certificate that relates to the share, the balance does not have to be paid until the member delivers the certificate to the company.

Validity of sale

           (12)  If a sale is not held in time because of error or inadvertence, a late sale is not invalid if it is held as soon as practicable after the discovery of the error or inadvertence.

Failure to comply an offence

           (13)  If there is failure to comply with subsection (2) or (3), the company is guilty of an offence.

Strict liability offences

           (14)  An offence by the company based on subsection (13) is an offence of strict liability.

Note:          For strict liability , see section 6.1 of the Criminal Code .

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