ASIC Class Order [CO 01/1545]

Overview

The Corporations Act 2001, enacted by the Commonwealth Parliament, is a comprehensive piece of legislation designed to regulate corporate activities and financial markets within Australia. One of its primary objectives is to provide a clear and consistent legal framework for the operation of companies, ensuring transparency, accountability, and investor protection. The Australian Securities and Investments Commission (ASIC) is responsible for enforcing the provisions of the Act, with a focus on maintaining the integrity of Australia's financial markets and safeguarding the interests of consumers and investors. The legislative instrument, F2007B00059, amends the Corporations Act to modify certain notification requirements for individuals or entities who acquire a significant shareholding in a company, specifically those who become 85% holders of a class of securities. This amendment was introduced to address the need for more efficient and streamlined communication processes between companies, their members, and security holders, ensuring that all relevant parties are adequately informed of significant shareholding changes without unnecessary duplication of notifications.

Scope and Application

Subsection 669(1) of the Corporations Act 2001, as amended by the legislative instrument F2007B00059, pertains to the obligations of individuals and entities when they acquire a significant interest in a company’s securities. Specifically, the Act applies to any person who becomes an 85% holder in relation to a class of securities. This amendment modifies several subsections of Chapter 6A to streamline the notification process when such a significant interest is acquired. The modifications allow an 85% holder to bypass direct notification to the company’s members and non-member security holders if they have already provided a compulsory acquisition notice or a buy-out notice to those parties. The revised provisions ensure that the company itself does not need to further notify its members or security holders under certain conditions, thereby simplifying and expediting the communication process during significant acquisitions. The changes are applicable nationally, affecting all jurisdictions within Australia, and extend to all types of companies and securities as defined under the Act.

Key Provisions

Subsection 669(1) of the Corporations Act 2001 modifies the requirements for when a person becomes an 85% holder of a class of securities within a company. The main changes introduced by the legislative instrument concern the notification requirements under sections 665D(3) and 665E(1). Specifically, the modified subsection 665D(3) now allows a person to bypass the requirement to notify the company of their status as an 85% holder if they have already provided a compulsory acquisition notice or a buy-out notice to each member and non-member holder of securities in that class, as outlined in sections 661B, 664C, 662B, 663B, and 665B. Furthermore, subsection 665E(1) is altered to ensure that a company does not have to notify members or non-member security holders that the person has become an 85% holder if they have already been notified via the compulsory acquisition or buy-out notices. These modifications also extend to subsections 665E(2) and (3) by replacing references to “members” with “member or holder” and adjusting paragraph references accordingly. The obligations imposed by these modifications include ensuring that any person who becomes an 85% holder of a class of securities within a company must provide either a compulsory acquisition notice or a buy-out notice to all relevant members and non-member security holders. This requirement aims to maintain transparency and provide security holders with the necessary information to make informed decisions. Additionally, the company is obligated to refrain from notifying members or holders if the person has already issued the appropriate notices. This shift in obligations seeks to streamline the notification process and reduce administrative burdens. Failure to comply with the requirements outlined in the legislative instrument may result in legal consequences. While specific offences and penalties are not detailed in the instrument, breaches of the Corporations Act can typically lead to civil or criminal penalties, depending on the severity of the breach. Civil penalties can include fines and orders for compensation, while criminal penalties can result in imprisonment. The maximum penalties are not specified in this particular legislative instrument, but they can be found in other sections of the Corporations Act. It is crucial for parties involved to adhere to these obligations to avoid any potential legal repercussions.