ASIC Class Order [CO 01/1544]

Overview

The ASIC Class Order [CO 01/1544], enacted in 2001, was introduced to address the need for clarity and precision in the application of the Corporations Act 2001, specifically concerning the calculation of the 75% threshold in takeover bids. This legislative instrument was made under subsection 669(1) of the Corporations Act 2001 by the Australian Securities and Investments Commission (ASIC), the body responsible for regulating the Australian financial services and securities markets. The primary policy objective of this class order is to ensure that the acquisition process following a takeover bid is transparent and fair, by providing specific guidelines on what securities should be included or excluded from the 75% calculation, thereby protecting the interests of all stakeholders involved in the transaction. This class order was designed to amend the existing provisions to reflect the nuanced circumstances that can arise in takeover bids, ensuring that the application of the law remains consistent with its intended purpose.

Scope and Application

The ASIC Class Order [CO 01/1544] applies to all persons under the Corporations Act 2001, particularly those involved in takeover bids for a listed company. The order modifies the application of Chapter 6A of the Act, specifically concerning the 75% threshold for compulsory acquisition of securities. It excludes certain securities from the calculation of the 75% threshold if the bidder or an associate holds a relevant interest in those securities at the time of the bid or if they are issued to an associate during the offer period. Additionally, convertible securities are excluded from the bidder's offer if they result in the acquisition of another class of securities or if they are transformed into another class of securities during the offer period. This Class Order, made under subsection 669(1) of the Corporations Act 2001, came into effect on 11 December 2001 and has been amended by subsequent orders such as [CO 03/637], which came into effect on 22 September 2003. The order’s application is nationwide, consistent with the federal jurisdiction of the Corporations Act.

Key Provisions

The ASIC Class Order [CO 01/1544] under subsection 669(1) of the Corporations Act 2001 modifies how the 75% threshold is calculated when determining if a compulsory acquisition is required following a takeover bid. Specifically, section 661A of the Act is modified to exclude certain securities from the calculation (subsection (1A)). This includes securities in which the bidder or an associate has a relevant interest at the time of the first offer, or those issued to an associate during the offer period. Additionally, if the securities are convertible, those that result in another class of securities being issued or transformed during the offer period are also excluded (subsection (1A)(b)). This amendment ensures that the calculation of the 75% threshold is more accurately reflective of the actual securities acquired or offered under the bid. The obligations imposed by the ASIC Class Order [CO 01/1544] primarily concern the accurate calculation of the 75% threshold in takeover bids. Bidders must exclude specified securities from both the number of securities acquired and the number of securities offered as part of the bid. This means that any securities held by the bidder or an associate at the start of the bid, or issued to an associate during the bid period, must be excluded from the count. Furthermore, if the securities are convertible, any conversion that results in a different class of security within the offer period must also be excluded from the calculation. These obligations are crucial for ensuring that the compulsory acquisition rules are applied correctly and fairly. The consequences of failing to comply with the ASIC Class Order [CO 01/1544] can be significant. While the Class Order itself does not explicitly outline specific penalties, non-compliance with the Corporations Act 2001 could result in civil or criminal penalties. Under the Corporations Act, penalties can include substantial fines, both for individuals and corporations. For example, individuals may face fines of up to $210,000 or imprisonment for up to five years, or both, for serious breaches. Companies may be fined up to $1.05 million. These penalties underscore the importance of adhering to the requirements set out in the Class Order to avoid severe legal repercussions.