Companies Act 2014 section 490

Common draft terms of division

Section 490 sets out the requirements for preparing and approving common draft terms when a company division is proposed, including the mandatory contents of those terms and rules for allocating unallocated assets.

• Directors of all companies involved in a division must draw up and approve in writing common draft terms setting out key details such as company identities, the share exchange ratio, cash payments, allotment terms, profit participation dates, and any special advantages granted to directors or experts
• The draft terms must not provide for shares in any successor company to be exchanged for shares in the transferor company that are held by the successor companies themselves (or their nominees) or by the transferor company (or its nominee)
• Where an asset of the transferor company is not allocated by the draft terms and its allocation cannot be determined by interpreting those terms, it must be distributed among the successor companies in proportion to each company's share of net assets under the draft terms
• The official date of the common draft terms is the date on which the last board of directors approves them in writing — if different boards approve on different dates, the latest date applies

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