ASIC CLASS ORDER [05/84]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
Item 14 of the table in section 611– Variation of Approval
The Australian Securities and Investments Commission may approve in writing a foreign body conducting a financial market for the purposes of item 14 of section 611 of the Corporations Act 2001 ("Act").
1. Background
Unless a relevant exception applies, section 606 of the Act prohibits an acquisition that increases a person's voting power in a listed company (or an unlisted company with more than 50 members):
(a) from 20% or below to more than 20%; or
(b) from a starting point that is above 20% and below 90%.
Item 14 of the table in section 611 of the Act provides an exception for an acquisition that results from an acquisition of interests in another entity on certain financial markets.
Item 14 enables the acquisition of over 20% of the Australian company as a "downstream acquisition" (that is, an acquisition resulting from an "upstream acquisition" of an interest in another entity that holds shares in the Australian company). The upstream acquisition must occur on a prescribed financial market or a foreign body conducting a financial market approved by ASIC. The purpose of the exception in item 14 is to allow a person to make the upstream acquisition without having to make two or more fully regulated takeovers. Without the exception, companies could use downstream holdings as a takeover defence.
Where the upstream acquisition occurs on an approved financial market it is unlikely to be an artifice to gain control of the downstream Australian company without complying with Australian takeovers regulation. The criteria ASIC applies to approval are designed to promote this purpose. This policy is set out in Information Release [IR 01/3] ASIC approves overseas exchanges: safe harbour for downstream acquisitions.
For example, ASIC considers whether the foreign market has rules that meet ASX's listing principles, including size and spread requirements. The upstream acquisition is more likely to be a serious bid involving the acquisition of a substantial company with a large number of shareholders and less likely to be an artifice.
2. Approval of JSE Securities Exchange South Africa as a foreign body conducting a financial market
Class order [05/84] has the effect of approving the JSE Securities Exchange South Africa ("JSE") as a foreign body conducting a financial market for the purpose of item 14 of section 611. It adds the JSE to an existing class order under which a number of other foreign bodies are approved by ASIC for the purposes of item 14 of section 611 of the Act.
ASIC has decided to approve the JSE because ASIC is satisfied that the JSE meets its criteria on approvals for the purpose of item 14 of section 611 in [IR 01/3].
3. Consultation
ASIC gave this approval after considering an application from JSE. ASIC did not undertake any consultation with other external stakeholders before this instrument was made. Consultation was not undertaken because this instrument is consistent with ASIC's existing policy and, therefore, does not substantially alter existing arrangements.