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Companies Act 1993

Shares and debentures

40: Contracts for issue of shares

You could also call this:

“Rules for companies when agreeing to issue new shares”

When a company agrees to issue shares, there are rules they need to follow. If they don’t follow these rules, the agreement is not legal.

For the agreement to be legal, the company’s board must be allowed to issue the shares. Also, one of these things must happen:

  1. The board must follow the rules in section 47 or section 49.

  2. All the people who have a right to the shares must agree to the issue under section 107(2).

  3. The agreement must say that it depends on either the board following the rules in section 47 or section 49, or all the people with rights to the shares agreeing under section 107(2).

If these rules aren’t followed, the agreement is considered illegal under subpart 5 of Part 2 of the Contract and Commercial Law Act 2017.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320151.

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Part 6 Shares and debentures

40Contracts for issue of shares

  1. A contract or deed under which a company is or may be required to issue shares, whether on the exercise of an option or on the conversion of financial products or otherwise, is an illegal contract for the purposes of subpart 5 of Part 2 of the Contract and Commercial Law Act 2017 unless—

  2. the board is entitled to issue the shares; and
    1. either—
      1. the board has complied with section 47 or section 49; or
        1. all entitled persons agree or concur with the issue of the shares under section 107(2); or
          1. the contract or deed expressly provides that the contract or deed is subject to—
            1. the board complying with section 47 or section 49; or
              1. all entitled persons agreeing to or concurring with the issue of the shares under section 107(2).

            Notes
            • Section 40: replaced, on , by section 4 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).
            • Section 40: amended, on , by section 347 of the Contract and Commercial Law Act 2017 (2017 No 5).
            • Section 40: amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).