Australia: financial assistance and pre-emption rights

The High Court gave judgment yesterday in Connective Services Pty Ltd v Slea Pty Ltd [2019] HCA 33. The decision is an important and interesting one on the interaction between pre-emption provisions and the prohibition, within section 260A(1) of the Corporations Act 2001, against a company providing, in certain circumstances, financial assistance to a person in respect of that person's purchase of the company's shares. The court stated (at para. [39]):

Section 260A(1) does not abrogate the power of a company to enforce its constitution. However, together with s 1324(1B), it has the effect that if a company wishes to bring proceedings to enforce pre-emptive rights in its constitution, for the benefit of some of its shareholders but at the company's expense, then the company is liable to be enjoined from doing so unless the assistance is approved by shareholders under s 260B, or unless the company can satisfy the court that bringing the proceedings at its own expense does not materially prejudice the interests of the company or its shareholders or the company's ability to pay its creditors".