Plain language law

New Zealand law explained for everyone

Companies Act 1993

Shareholders and their rights and obligations - Minority buy-out rights

114: Court may grant exemption

You could also call this:

“Court can excuse company from buying shares if it would cause harm”

If a company gets a notice under section 111, they can ask the court for permission not to buy the shares mentioned in the notice. They can do this if buying the shares would be too damaging for the company, if the company can’t afford to buy them, or if it wouldn’t be fair to make the company buy them.

When a company asks for this permission, the court can decide to let the company off the hook for buying the shares. The court can also make other decisions, like cancelling a decision the shareholders made, telling the company what to do or not do, making the company pay the affected shareholders, or even shutting down the company.

Before the court will let a company off the hook for financial reasons, the company needs to show that they’ve tried hard to find someone else to buy the shares as described in section 111(2)(b).

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320600.

Topics:
Business > Industry rules
Business > Fair trading
Previous

113: Purchase of shares by third party, or

“Rules for when someone else buys your shares in a company”

Next

115: Court may grant exemption if company insolvent, or

“Court can excuse company from buying shares if it can't afford them”

Part 7 Shareholders and their rights and obligations
Minority buy-out rights

114Court may grant exemption

  1. A company to which a notice has been given under section 111 may apply to the court for an order exempting it from the obligation to purchase the shares to which the notice relates on the grounds that—

  2. the purchase would be disproportionately damaging to the company; or
    1. the company cannot reasonably be required to finance the purchase; or
      1. it would not be just and equitable to require the company to purchase the shares.

        1. On an application under this section, the court may make an order exempting the company from the obligation to purchase the shares, and may make any other order it thinks fit, including an order—

        2. setting aside a resolution of the shareholders:
          1. directing the company to take, or refrain from taking, any action specified in the order:
            1. requiring the company to pay compensation to the shareholders affected:
              1. that the company be put into liquidation.

                1. The court shall not make an order under subsection (2) on either of the grounds set out in paragraph (a) or paragraph (b) of subsection (1) unless it is satisfied that the company has made reasonable efforts to arrange for another person to purchase the shares in accordance with section 111(2)(b).