Section 189 - Limitations on the powers of directors

(1) Subject to this Act, the directors of a company with shares shall not, without the approval of

(a) an ordinary resolution of the company,

(i) issue any new or unissued shares, other than treasury shares, in the company unless the shares have first been offered on the same terms and conditions to all the existing shareholders or to all the holders of the shares of the class or classes being issued in proportion as nearly as may be to their existing holdings;

(ii) make voluntary contributions to a charitable or any other fund, other than pension funds for the benefit of employees of the company or an associated company, of the amounts the aggregate of which will, in a financial year of the company, not exceed two per cent of the retained earnings of the company at the end of the preceding financial year; or

(b) a special resolution, pursue a major transaction under section 145.

(2) A resolution of the company shall not be effective as approving a transaction as is referred to in subparagraph (i) of paragraph (a) of subsection (1), unless the resolution authorises in terms the specific transaction proposed by the directors.

(3) A resolution of the company shall not be effective as approving a transaction as is referred to in paragraph (b) of subsection (1), if passed more than one year before the issue of the shares, unless the issue is in accordance with a scheme for the time being in force relating to the issue of shares to or for the benefit of persons genuinely in the employment of the company or any of the associated companies.

(4) Subsection (3) shall not apply to a public company which has some or all of the equity shares of that public company being dealt in on an approved stock exchange.

(5) Despite a provision of this Act or in the constitution of a company, or in a resolution of the company in general meeting, new or unissued shares or treasury shares shall not be issued to a director or past director of the company or of an associated company or to the nominee of that director or to a body corporate controlled by that director, unless the shares have first been offered on the same terms and conditions to

(a) all the existing shareholders,

(b) all the holders of the shares of the class or classes being issued in proportion to their existing holdings, or

(c) to members of the public in the case of a public company.

(6) Subsection (5) may be disapplied with the approval of an ordinary resolution of a public company if some or all of the equity shares of that public company are dealt in on an approved stock exchange or in respect of which an application has been made to an approved stock exchange for permission to deal in those shares.

(7) For the purposes of subsection (5), a body corporate is controlled by a director if the body corporate or the directors of the body corporate are accustomed to act in accordance with the directions or instructions of that director or a nominee of that director or if at a general meeting of the body corporate, that director or a nominee of that director is entitled to exercise or control the exercise of one-third or more of the voting powers.

(8) This section does not prohibit,

(a) the issue of shares under a genuine underwriting agreement, or

(b) the issue to a director at a fair price payable in cash of the shares, if under the constitution of the company, that director is required to hold by way of share qualification.

(9) Except as otherwise provided in the constitution of a company, the directors of a company with shares shall not, without the approval of an ordinary resolution of the company, exercise the powers of the company to borrow money or to charge any of the assets of the company where the moneys to be borrowed or secured, together with the amount remaining undercharged of moneys already borrowed or secured, apart from temporary loans obtained from the bankers of the company in the ordinary course of business, will exceed the stated capital for the time being of the company.

(10) A person dealing with the company in good faith or registering a disposition of, or title to, property shall not be concerned to see whether the conditions of this section have been fulfilled, and sections 147 to 151 shall apply to a transaction of the type referred to in this section although the conditions have not been fulfilled.