ASIC CLASS ORDER [CO 06/267]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
Subsections 741(1) and 1020F(1) — Variations
The Australian Securities and Investments Commission (ASIC) makes ASIC Class Order [CO 06/267] under paragraphs 741(1)(a) and 1020F(1)(a) of the Corporations Act 2001 (the Act). All legislative references made in this document relate to the Act.
1. Background
Under subsection 707(3), where securities are issued without a disclosure document under Part 6D.2, and the holder of those securities offers to sell those securities within 12 months after their issue, the person offering the securities for sale must prepare a disclosure document in accordance with Part 6D.2, where there are reasonable grounds that:
- the body issued the securities with the purpose of the person to whom they were issued selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them; or
2. the person to whom the securities were issued acquired them with the purpose of selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them;
Similar provisions exist for other financial products (and financial product disclosure) regulated under Chapter 7. These provisions are contained in subsections 1012C(3) and 1012C(6). Also, under subsection 1012A(3), a person who makes a recommendation to acquire securities, in circumstances covered by subsection 1012C(6), must give the person to whom the recommendation is made a Product Disclosure Statement.
ASIC currently provides limited relief from the obligations of subsection 707(3) and section 1012C (the "On-sale Provisions") in Class Order [CO 04/653] On-sale disclosure relief for scrip bids (the "Existing Class Order"). The Existing Class Order provides relief where, under a takeover offer involving an offer of securities/financial products ("securities"), the offeror relies on subsection 619(3) and avoids making an offer of securities to foreign holders, but instead, transfers the securities to a nominee to sell. ASIC provides relief from the On-sale Provisions so that the securities issued to a nominee with the purpose that the nominee on-sells those securities does not invoke the disclosure obligations of the On-sale Provisions.
The On-sale provisions are anti-avoidance provisions designed to deal with the risk of issuers avoiding regulated disclosure in a prospectus or a Product Disclosure Statement by issuing securities to a third party who then resells them into the market place.
2. Class Order [CO 06/267] On-sale disclosure relief for scrip bids and schemes of arrangements - amendment (the "Amending Class Order")
Takeover offers
The Amending Class Order maintains the relief provided to foreign holders under the Existing Class Order and expands the circumstances where relief from the On-sale Provisions is available. The Amending Class Order extends relief to takeover offers involving an offer of securities in the following circumstances:
(a) where, under the terms of the takeover offer, target shareholders who are entitled to be issued securities as consideration for the offer may, in lieu of being issued securities, elect to participate in a facility through which some (or all) of their securities are sold by a nominee.
If a shareholder makes this election, the securities are transferred to a nominee who must dispose of the shares in the same mechanism as that set out in subsection 619(3) (which is the mechanism for selling shares that do not need to be offered to foreign holders under a takeover bid). The offer for sale made by the nominee is exempt from the On-sale Provisions.
The terms of the facility mentioned in this section must be disclosed in the bidder's statement; and
(b) where, under the terms of a takeover offer, target shareholders who are entitled to be issued an unmarketable parcel of securities as consideration for the offer, have their securities sold via a nominee in accordance with subsection 619(4) (as notionally inserted into the Act by ASIC Class Order [CO 00/343] Unmarketable parcels). The offer for sale made by the nominee is exempt from the On-sale Provisions.
ASIC has provided this relief on the basis that the types of transactions mentioned above are regulated and unlikely to be used for avoidance purposes.
Part 5.1 schemes
The Amending Class Order also provides relief from the On-Sale Provisions to offers for the sale of securities made under a sale facility established in connection to a Part 5.1 scheme. Under a Part 5.1 scheme, where all of the following apply:
(a) a person is entitled to receive securities under the scheme;
(b) the person does not receive securities, but instead, elects to participate in a sale facility through which part (or all) of the securities that would otherwise be issued to that person are sold; and
(c) the person receives their proportion of the proceeds of the sale net of expenses;
the person who makes an offer to sell such securities does not have to comply with the On-sale Provisions. This relief is only available where the terms and conditions of the sale facility are disclosed in the explanatory statement for the scheme.
The Amending Class Order also provides relief from the On-sale Provisions where:
(a) a person makes an offer of securities under a Part 5.1 scheme; and
(b) those securities are sold under a sale facility in connection with a Part 5.1 scheme because the persons who would have received the securities under the Part 5.1 scheme:
(i) would be foreign holders of the securities; or
(ii) would otherwise receive an unmarketable parcel of the securities under the terms of the scheme.
This relief is only available where the terms and conditions of the sale facility are disclosed in the explanatory statement for the scheme.
ASIC has provided this relief on the basis that the types of transactions mentioned above are regulated and unlikely to be used for avoidance purposes.
3. Consultation
Consultation was not required as the class order is minor or machinery in nature.