From Division 2

Allotment and Issue of Shares

140.

Exercise by directors of power to allot shares or grant rights

(1)

Except in accordance with section 141, the directors of a company must not exercise any power—

(a)

to allot shares in the company; or

(b)

to grant rights to subscribe for, or to convert any security into, shares in the company.

(2)

Subsection (1) does not apply to—

(a)

an allotment of shares, or grant of rights, under an offer made to the members of the company in proportion to their shareholdings;

(b)

an allotment of shares, or grant of rights, on a bonus issue of shares to the members of the company in proportion to their shareholdings;

(c)

an allotment to a founder member of a company of shares that the member, by signing the company’s articles, has agreed to take; or

(d)

an allotment of shares made in accordance with a grant of a right to subscribe for, or to convert any security into, shares if the right was granted in accordance with an approval under section 141.

(3)

For the purposes of subsection (2)(a), the offer is not required to be made to any member whose address is in a place where the offer is not permitted under the law of that place.

(4)

A director commits an offence if the director knowingly contravenes, or authorizes or permits a contravention of, this section.

(5)

A director who commits an offence under subsection (4) is liable to a fine at level 5 and to imprisonment for 6 months.

(6)

Nothing in this section or section 141 affects the validity of an allotment or other transaction.