Companies Act 2014 section 491

Directors' explanatory report

Section 491 requires the directors of each company involved in a division to prepare a written explanatory report on the common draft terms of division, subject to certain exemptions.

• The directors of each company involved in a division must prepare a separate written explanatory report covering the common draft terms of division and their legal and economic implications.
• The report must address the proposed share exchange ratio, organisational and management structures, recent and future business activities, and the financial interests of shareholders and other security holders.
• The requirement to prepare an explanatory report may be waived if all voting shareholders (and, where applicable, all relevant security holders) of each company involved agree to dispense with it.
• The requirement also does not apply where a division is carried out by forming new companies and shares in each new acquiring company are allocated to the transferor company's shareholders in proportion to their existing capital rights.