Resolution of directors to offer shares by way of rights issue to members

Resolution of directors to offer shares by way of rights issue to members

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This document is a resolution of directors to offer shares by way of rights issue to members.

Capital and shares

The most common and (generally considered) appropriate method for a company to raise funds is by the issue of share capital or other securities. In effect, a share is the bundle of rights and obligations, defined by the Corporations Act 2001 (Cth) (Act) and by the constitution of the company which issues it. A share is the interest of the member in the company, evidenced by the series of mutual covenants entered into by all members between themselves and with the company which are given statutory effect by section 140 of the Act. The share itself is a chose in action but it is incorrect to regard the holder of that share as owning each of the particular rights or powers which attach to it as separate items of property. Members of a company have no direct interest in the property of the company, though under the articles of a company, property of the company can be distributed to members.

The share capital of a company is the total amount of capital that shareholders have provided (or persons proposing to become shareholders have contractually bound themselves to provide) to the company for it to use in its business. The payment to the company can be provided in cash or other value but must be provided to the company by persons in their capacity as shareholders or intending shareholders, and not as creditors of the company.

Rights issue

In order to issue shares in the company by way of rights issue, proportionate to the members’ shareholdings, the directors must resolve to issue such shares.

Related document

Resolution of directors to offer shares generally

This document has been updated for LexisNexis by Jane Garber-Rosenzweig, Gable Lawyers. Previous versions of this were authored by Rosalind Anderson, Mark Gilligan, Abigail Jones, Shannon Finch, Georgina Goldsworth, Alex Bruce, Joel Hankinson, Tim Sherman, Leah Ranie and Helena Busljeta.

This document is prepared with the assistance of Specialist Editors Karen Lee and Geoff Geha.