Section 328 - Prohibition of loans by public companies to directors

(1) A public company shall not grant a loan to a person who is a director or a director of an associated company, or enter into a guarantee or provide a security in connection with a loan made to that person by any other person.

(2) Subsection (1) does not apply,

(a) to the making of a loan to an associated company or the entering into a guarantee or the providing of a security in connection with a loan made to an associated company by any other person; or

(b) subject to subsection (3), in the case of a company whose ordinary business includes the lending of money or the giving of guarantees in connection with loans made by other persons, to anything done by the company in the ordinary course of that business.

(3) Paragraph (b) of subsection (2) does not authorise the making of loans or the entering into a guarantee or the providing of a security, unless the total amount lent, guaranteed and secured in respect of loans to those persons does not exceed one per cent of the net assets of the company.

(4) Where a company defaults in complying with this section, the company and any officer of the company that is in default is liable to pay to the Registrar, an administrative penalty of five hundred penalty units, and the directors authorising the making of the loan or the entering into the guarantee or the providing of the security are jointly and severally liable to indemnify the company against the loss arising from the default.

(5) For the purpose of subsection (3), “net assets” means the assets less the liabilities of the company as shown in the last audited statement of financial position of the company.