The Federal Court delivered a landmark decision today on the interpretation of sections 85 and 223, Companies Act 2016

In its broad grounds of judgment, the Federal Court held:

1. The pre-emptive rights under section 85 (for any shares issued by the Company to first be offered to existing shareholders) is not absolute but is instead subordinate to the constitution of the company. Shareholders are entitled to waive the pre-emptive rights in full (instead of just manner and proportion) at a general meeting;

2. In the circumstances, so long as the shareholder is aware that by voting in favour of the resolution, his shares would be diluted – that is sufficient for the disapplication of the pre-emptive rights under section 85;

3. On the timing of shareholder approval under section 223, the restrictions on the “entering into” and “the carrying into effect” of the transaction are to be read disjunctively. In other words, so long as the transaction contemplates that it would not go through without shareholder approval, it is sufficient to meet the requirements of section 223.

More to follow when we receive the full grounds of judgment.

Read all about it here:

https://tinyurl.com/4annbd47