ASIC Class Order [CO 05/850]

Overview

The ASIC Class Order [CO 05/850], enacted in 2005 under the Corporations Act 2001, was introduced to address the complexities and regulatory gaps associated with unsolicited offers under regulated foreign takeover bids. The Australian Securities and Investments Commission, the body responsible for its enactment, aimed to streamline the regulatory process for such bids while ensuring compliance with relevant foreign regulatory requirements. The policy objective is to facilitate smoother cross-border transactions by exempting certain unsolicited offers from specific compliance obligations under Division 5A of Part 7.9 of the Act, provided that the foreign takeover bid or scheme adheres to the regulatory requirements of the eligible foreign country. This legislative instrument is designed to provide a clear framework for managing unsolicited offers in a manner that balances regulatory oversight with the practicalities of international business.

Scope and Application

ASIC Class Order [CO 05/850] applies to any person who is involved in an unsolicited offer to acquire securities of a foreign company under a regulated foreign takeover bid or a foreign scheme. This legislation operates as an exemption under the Corporations Act 2001, specifically under paragraph 1020F(1)(a), for those entities conducting unsolicited offers in relation to securities of foreign companies within certain jurisdictions. The exemption does not apply to all unsolicited offers but is limited to those made under a regulated foreign takeover bid or a foreign scheme that is subject to regulatory requirements in an eligible foreign country. The geographic reach of this legislation is international, extending to countries such as Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia, the Netherlands, New Zealand, Singapore, South Africa, Switzerland, the United Kingdom, and the United States of America. To qualify for the exemption, it is necessary for the person to ensure that the regulated foreign takeover bid or foreign scheme adheres to the relevant regulatory requirements. If a person fails to take reasonable steps to comply with these requirements, they will not be eligible for the exemption provided by this class order. The scope and application of this legislation may be further extended or modified through subordinate instruments, although no such modifications are evident in the current text.

Key Provisions

The ASIC Class Order [CO 05/850], issued under section 1020F(1)(a) of the Corporations Act 2001, provides an exemption from certain requirements for unsolicited offers to acquire securities of a foreign company, provided these offers are part of a regulated foreign takeover bid or a foreign scheme. Specifically, this exemption applies to offers made under a regulatory framework in an eligible foreign country, which includes Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia, the Netherlands, New Zealand, Singapore, South Africa, Switzerland, the United Kingdom, and the United States of America (paragraph 4). This means that the person making the offer does not have to comply with Division 5A of Part 7.9 of the Act, provided the offer is made under the relevant regulatory requirements and the offer is either made to all holders of securities in the foreign company in the same class or to all such holders except for the offeror and their associates or any other persons exempted from receiving the offer under the relevant regulatory requirements (paragraph 4(a)). Similarly, the exemption applies to unsolicited offers made under a foreign scheme that is regulated by a law in force in an eligible foreign country and is between a foreign company and its members or any class of them (paragraph 4(b)). However, to take advantage of this exemption, the person must take reasonable steps to ensure that the regulated foreign takeover bid or foreign scheme is carried out in accordance with the relevant regulatory requirements (paragraph 5). The Act imposes several obligations and requirements on parties who take advantage of the exemption provided by the ASIC Class Order [CO 05/850]. Firstly, they must ensure that the regulated foreign takeover bid or foreign scheme is conducted in accordance with the relevant regulatory requirements of the eligible foreign country (paragraph 5). This involves adhering to the specific rules and laws governing the takeover bid or scheme in the relevant jurisdiction. Failure to comply with these regulatory requirements means that the exemption will not be available to the person making the offer. Additionally, the person must be aware of and understand the regulatory framework in the eligible foreign country to ensure compliance. This includes staying informed about any changes or updates to the relevant regulatory requirements that may impact the conduct of the takeover bid or scheme. The ASIC Class Order [CO 05/850] does not explicitly outline specific offences or penalties for non-compliance with its provisions. However, the Corporations Act 2001 contains various provisions that could apply to breaches of the Act's requirements, including those related to misleading or deceptive conduct, insider trading, and market manipulation. Non-compliance with the Act's requirements could potentially lead to civil or criminal penalties, depending on the nature and severity of the breach. For instance, individuals or entities found guilty of misleading or deceptive conduct under section 1041H of the Act could face penalties of up to $2.5 million for a corporation or $500,000 for an individual, or both imprisonment and fines. Similarly, breaches of insider trading provisions under section 1042 of the Act could result in penalties of up to $330,000 for an individual or $1.65 million for a corporation, or both imprisonment and fines. The specific penalties would depend on the nature and extent of the breach, as well as any mitigating or aggravating factors considered by the court.