ASIC Class Order [CO 03/637]

Overview

The Australian Securities and Investments Commission Corporations Act 2001 was enacted to provide a comprehensive regulatory framework for corporations and financial markets in Australia, addressing issues related to corporate governance, disclosure, and investor protection. One of the key amendments made to this Act is found in paragraph 669(1)(b), which allows the Australian Securities and Investments Commission to vary specific class orders. In this instance, the Australian Securities and Investments Commission has varied Class Order [CO 01/1544], specifically modifying the 75% calculation in subparagraph (1)(b)(ii) of the Corporations Act. The amendment, dated 22 September 2003 and signed by Stephen Yen as a delegate of the Commission, aims to exclude certain securities from the acquisition count when calculating a bidder's shareholding. This change addresses potential conflicts of interest and ensures greater transparency and fairness in corporate takeover bids.

Scope and Application

The Australian Securities and Investments Commission Corporations Act 2001 governs the regulation of corporations and financial markets in Australia. In particular, it provides the framework for regulating takeovers and bids made by entities or individuals for securities in listed companies. Under the Act, Class Order [CO 01/1544] was varied to refine the calculation of the 75% threshold for triggering a mandatory bid for remaining securities in a company. The variation specifies that certain securities need not be counted in the calculation of the bidder's holdings or offered securities. Specifically, securities in which the bidder or their associate already holds an interest at the bid's commencement, or those issued to an associate during the bid period, are excluded. Additionally, if the securities are convertible, those that convert into another class of security during the bid period are also excluded from the calculation. This legislative instrument applies to all bidders and associates involved in takeover bids for securities in Australian companies and is effective across the Commonwealth, encompassing all states and territories within Australia. The changes introduced by this variation do not explicitly exclude any entities or specific industries, meaning they broadly apply to all cases governed by the Corporations Act 2001. The instrument does not introduce new exemptions or thresholds but rather modifies the interpretation of existing provisions to clarify the application of the 75% acquisition threshold in takeover bids.

Key Provisions

Under paragraph 669(1)(b) of the Corporations Act 2001, the Australian Securities and Investments Commission (ASIC) has varied Class Order [CO 01/1544]. The key change involves the exclusion of certain securities from the 75% calculation under subparagraph (1)(b)(ii). Specifically, the omitted notional subsection 661A(1A) has been substituted with a new provision (1A). This new provision states that for the purposes of the 75% calculation, securities in which the bidder or their associate has a relevant interest at the date of the first offer, or those issued to an associate of the bidder during the offer period, must be excluded from both the number of securities acquired and the number of securities that the bidder offered to acquire under the bid. Additionally, if the securities are convertible, those that the bidder offered to acquire must be excluded if, by exercising the rights attached to those securities, the holder receives another class of securities or has the securities transformed into securities in another class between the date set by the bidder under subsection 633(2) and the end of the offer period. The Act imposes specific obligations on parties involved in a bid under these provisions. Bidders and their associates must ensure that the securities they hold or acquire during the offer period are accurately accounted for under the new rules. This involves identifying and excluding relevant securities as specified in the substituted subsection. The obligation also extends to those who hold convertible securities, requiring them to understand and apply the exclusion criteria to their securities. These obligations are crucial to maintaining the integrity of the bidding process and ensuring compliance with the statutory requirements. Failure to comply with the provisions set out in the Act can result in legal consequences. The Act does not explicitly state the penalties or consequences for breach; however, non-compliance with the Corporations Act 2001 can generally lead to enforcement actions by ASIC. These actions may include administrative penalties, fines, or legal proceedings. The severity of the penalties can depend on the nature and extent of the breach, with potential maximum penalties varying according to the specific contraventions of the Act. Additionally, persistent or severe breaches could also result in the disqualification of individuals from managing corporations, further underscoring the importance of strict adherence to the statutory requirements.