Matrix Ltd has its ordinary and preference shares quoted for trading on the Australian Securities Exchange. The highly profitable company has 100 million ordinary shares on issue. Half of these shares are fully paid up. The remaining ordinary shares are paid up to 50% of their issue price.
The company’s 50 million fully paid up issued preference shares entitle their holders to an annual dividend of 5 cents per share, and priority to return of share capital in a winding up. The shares can only be voted at a general meeting in the circumstances referred to in the definition of ‘voting share’ in s 9 of the Corporations Act.
The directors of Matrix Ltd want to make the partly-paid ordinary shares fully-paid by cancelling the existing obligation to pay up the amount currently unpaid in respect of their issue price.
Please advise the directors in relation to this proposal. Your advice should cover at least the following issues:
(i) The procedure that would have to be followed to implement the proposal.
(ii) Which shareholders could vote on resolutions put to a general meeting in relation to the proposal, and how many votes those shareholders would be entitled to exercise on any such resolution.
(iii) Whether the proposal would be likely to be considered fair and reasonable to the company’s shareholders as a whole.