ASIC CLASS ORDER [CO 07/44]

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

Corporations Act 2001

Paragraph 1020F(1)(a) – Variation

The Australian Securities and Investments Commission (ASIC) makes Class Order [CO 07/44] Unsolicited offers under a regulated foreign takeover bid – Variation under paragraph 1020F(1)(a) of the Corporations Act 2001 (the Act). Paragraph 1020F(1)(a) provides that ASIC may exempt a person or class of persons from all or specified provisions of Part 7.9 of the Act.

1. Background

Division 5A of Part 7.9 regulates the making of unsolicited offers to purchase financial products. It provides a disclosure regime so as to ensure adequate investor protection in situations where an investor may not know the value of their financial products.

The provisions require that unsolicited offers set out certain information in an offer document in a clear, concise and effective manner including information about:

• the market price of the financial product; or, if applicable,
• a fair estimate of the value of the financial product as at the date of the offer and an explanation of the basis on which the estimate was made.

The Division is primarily aimed at stopping 'low ball offers' being made to unsophisticated investors. 

Offers made under an Australian scheme of arrangement or a buy-back authorised by section 257A of the Act are expressly exempted from the Division under subparagraphs 1019D(1)(d)(ii) and (iii) because adequate disclosure and protection is provided to investors as a substitute for the requirements in Division 5A.

Division 5A would potentially capture unsolicited offers made under a foreign scheme of arrangement, which are made or received in Australia. This means that offers made to Australian members under a foreign scheme of arrangement, will also need to be accompanied by an offer document in accordance with Division 5A

However schemes of arrangement regulated by or under a law in force certain foreign jurisdictions are likely to be accompanied by adequate disclosure. This is because   members will receive a notice of meeting and schemes in certain jurisdictions offer a comparable level of disclosure and investor protection to that provided in Australia.

2. Purpose of the class order

The purpose of [CO 07/44] is to provide relief from Division 5A of Part 7.9 to persons who make unsolicited offers to Australian residents under a scheme of arrangement regulated in foreign jurisdictions with comparable regulatory requirements to Australia. This relief is consistent with the exemption for Australian schemes of arrangement.

3. The class order

[CO 07/44] varies [CO 05/850] to provide an exemption from Division 5A of Part 7.9 of the Act in relation to an unsolicited offer to acquire a financial product where the unsolicited offer is one of a number of offers made under a foreign scheme. A foreign scheme is a compromise or arrangement that is:

(a) between a foreign company and its members; and

(b) regulated under the law of one of the following:

(i) Canada;

(ii) France;

(iii) Germany;

(iv) Hong Kong;

(v) Italy;

(vi) Japan;

(vii) Malaysia;

(viii) the Netherlands;

(ix) New Zealand;

(x) Singapore;

(xi) South Africa;

(xii) Switzerland;

(xiii) the United Kingdom; or

(xiv) the United States of America;

A person who takes advantage of the exemption must take reasonable steps to ensure that the foreign scheme is carried out in accordance with the foreign regulation.

4. Consultation

In July 2005, ASIC released a Policy Proposal Paper Disclosure in reconstructions (PPP) seeking submissions from interested parties on a range of proposals, including the relief in [CO 07/44].  Submissions received from industry in response to the PPP supported the relief in [CO 07/44].