ASIC Class Order [CO 00/343]
Unmarketable parcels
This instrument has effect under section 655A of the Corporations Act 2001.
This compilation was prepared on 4 October 2005 taking into account amendments up to [CO 02/242].
Prepared by the Australian Securities and Investments Commission.
Australian Securities and Investments Commission
Corporations Act 2001 — Section 655A — Declaration
Pursuant to section 655A of the Corporations Act 2001 (“Act”) the Australian Securities and Investments Commission hereby declares that Chapter 6 of the Law applies in relation to the class of persons mentioned in Schedule A, in the case referred to in Schedule B, as if section 619 of the Law were modified or varied by inserting the following subsections after subsection 619(3):
“(4) If the consideration for the bid includes an offer of securities, the securities do not need to be offered to holders of the target's securities who would otherwise be offered an unmarketable parcel of securities, if under the terms of the bid:
(a) where a nominee is appointed under subsection 619(3) — the bidder and the nominee must follow the procedure in subsection 619(3) as if a reference to “foreign holders” were a reference to holders of the target's securities who would otherwise be offered an unmarketable parcel of securities; or
(b) where a nominee is not appointed under subsection 619(3) — the bidder must pay to each holder of an unmarketable parcel of securities who accepts the bid an amount of cash which is equal to the market value of those securities.
(5) For the purposes of this section:
(a) “unmarketable parcel” means a parcel of securities which is not a marketable parcel within the meaning of the operating rules of any prescribed financial market on which those securities are quoted, calculated using the market value of those securities; and
(b) “market value” of securities means the highest closing price for the securities published during the bid period by any prescribed financial market on which the securities are quoted.”
SCHEDULE A
All bidders.
SCHEDULE B
Where securities offered as consideration by the bidder are not a marketable parcel within the meaning of the operating rules of prescribed financial market on which those securities are quoted, calculated using the highest closing price for those securities published during the bid period by that financial market.
Notes to ASIC Class Order [CO 00/343]
Note 1
ASIC Class Order [CO 00/343] (in force under section 655A of the Corporations Act 2001) as shown in this compilation comprises that Class Order amended as indicated in the Tables below.
Table of Instruments
Instrument number | Date of making or FRLI registration | Date of commencement | Application, saving or transitional provisions |
[CO 00/343] | 2/3/2000 | 13/3/2000 | - |
[CO 02/242] | 1/3/2002 | 11/3/2002 | - |
Table of Amendments
ad. = added or inserted am. = amended rep. = repealed rs. = repealed and substituted
Provision affected | How affected |
Subsection 619(5) (as notionally inserted) | am. [CO 02/242] |
Schedule B | am. [CO 02/242] |
Class order | am. [CO 02/242] |
Overview
The ASIC Class Order [CO 00/343], enacted under section 655A of the Corporations Act 2001, addresses the issue of unmarketable parcels of securities in takeover bids, ensuring fairness and market integrity. This legislation was introduced by the Australian Securities and Investments Commission to provide a solution where securities offered as consideration in a bid are not marketable parcels, as defined by the operating rules of any prescribed financial market. The policy objective of the order is to prevent the offer of unmarketable parcels to target company shareholders by either requiring the bidder to follow a specified procedure involving a nominee or to pay cash equivalent to the market value of the securities to those who accept the bid. This order applies to all bidders in scenarios where the securities offered do not meet the criteria for being a marketable parcel, as calculated using the highest closing price during the bid period.
Scope and Application
ASIC Class Order [CO 00/343] pertains to the handling of unmarketable parcels of securities during corporate takeover bids under the Corporations Act 2001. Specifically, it applies to all bidders involved in a bid where the securities offered as consideration do not constitute a marketable parcel as defined by the operating rules of any prescribed financial market, calculated using the highest closing price of the securities during the bid period. The Class Order aims to modify the existing provisions to ensure that bidders do not need to offer securities to target security holders who would receive an unmarketable parcel. Instead, if a nominee is appointed, the bidder and nominee must follow certain procedures, or if no nominee is appointed, the bidder must provide an alternative cash payment equivalent to the market value of the unmarketable securities. This instrument extends the scope of the Corporations Act by specifying additional conditions and protections for target security holders during a takeover bid, ensuring fair and equitable treatment in the transaction. The application of this Class Order is subject to amendments and updates, as reflected in the tables of instruments and amendments.
Key Provisions
The ASIC Class Order [CO 00/343], effective under section 655A of the Corporations Act 2001, applies to all bidders in cases where the securities offered as consideration are not a marketable parcel, as determined by the operating rules of any prescribed financial market. Specifically, this applies if the securities are not marketable within the market value calculated during the bid period by the financial market where the securities are quoted. This modification to the Corporations Act allows for certain flexibility in the offer of securities during a bid, particularly in relation to unmarketable parcels (subsection 619(4)). If a bidder offers securities as part of their consideration, they are not required to offer these securities to holders who would otherwise receive an unmarketable parcel. Instead, the bidder must either ensure the nominee follows specific procedures if one is appointed or, if no nominee is appointed, pay each holder of an unmarketable parcel who accepts the bid an amount of cash equal to the market value of those securities.
The obligations imposed by this Class Order on bidders include ensuring compliance with the procedures for handling unmarketable parcels of securities. If a nominee is appointed, the bidder and the nominee must adhere to the specific procedures outlined in subsection 619(3), with the necessary adaptations to accommodate holders who would otherwise receive unmarketable parcels. If no nominee is appointed, the bidder must compensate each affected holder with cash equal to the market value of the unmarketable securities. These obligations ensure that bidders do not unfairly disadvantage target company security holders by offering them unmarketable parcels of securities, thereby maintaining fairness and transparency in the bidding process.
In terms of consequences for non-compliance, the Class Order does not explicitly state penalties or specific legal consequences for breach. However, non-compliance with the Corporations Act and associated regulations can result in significant legal and financial repercussions. The Australian Securities and Investments Commission (ASIC) may take action against entities that fail to comply with the provisions of this Class Order, which could include fines, legal proceedings, or other regulatory sanctions. The specific penalties for such breaches would depend on the nature and severity of the non-compliance, as well as any relevant provisions within the Corporations Act.