77. Options over unissued shares

Question 1

77. Options over unissued shares

Answer 1

General overview
[77.01] Section 77 prohibits a public company from issuing an option to any person to take up unissued shares of the company after a lapse of five years from the date the option is granted. Such an option is void: s 77(1). In respect of an option granted to an employee, including a director of the company or its related corporation, the time to exercise the option is 10 years from the date the option is granted: s 77(1A). Otherwise, the option is void. An exception is made in s 77(2) which permits the company to issue an option to a debenture holder allowing him to take up unissued shares by way of redemption of the debenture. Subsection (2) facilitates the manner in which a company may raise funds for its corporate finance needs such as by issuing a debenture that may be converted or exchanged for ordinary shares upon its redemption.