ASIC Class Order [CO 09/459]

Overview

ASIC Class Order [CO 09/459], effective under the Corporations Act 2001, was enacted to provide relief for accelerated rights issues during takeovers, addressing a gap in the regulatory framework that could potentially obstruct a company's ability to raise capital effectively during such periods. This instrument was created by the Australian Securities and Investments Commission (ASIC) to modify Chapter 6 of the Act, ensuring that certain acquisitions resulting from non-traditional rights issues are exempt from the takeover provisions. The policy objective is to facilitate smoother corporate restructuring and capital raising activities by companies facing takeover situations, thereby maintaining market stability and protecting investor interests. The Class Order was registered under the Legislative Instruments Act 2003 and came into effect on the date of registration, providing clear guidelines on the conditions under which rights issues would be exempt from takeover regulations.

Scope and Application

ASIC Class Order [CO 09/459] pertains to the Corporations Act 2001 and applies to all persons involved in acquisitions resulting from non-traditional rights issues of securities by a company. The Act modifies the conditions under which such acquisitions are made, providing specific criteria for the offer and acceptance of securities. This includes the requirement that offers be made to every holder of securities in the same class and that all offerees have a reasonable opportunity to accept the offer. Additionally, the terms of the offer must be uniform, and agreements cannot be made until the specified time for acceptances closes. This relief extends to acquisitions by underwriters or sub-underwriters of the issue. The Class Order is applicable nationally, as it is a Commonwealth instrument made under the Corporations Act 2001. While the order generally applies to all persons involved in such transactions, there are certain exclusions for exempt investors who may receive offers under different conditions. This Class Order is subject to amendment and extension through subordinate instruments, as evidenced by the amendments listed in [CO 13/527].

Key Provisions

ASIC Class Order [CO 09/459], made under section 655A(1) of the Corporations Act 2001, provides relief for accelerated rights issues by modifying certain provisions of Chapter 6 of the Act. Specifically, section 4(a) inserts a new item, 10A, into the table in section 611 of the Act, which defines non-traditional rights issues. These are acquisitions that result from an issue of securities that meet several conditions, such as being offered to all current holders of securities in the same class in proportion to their existing holdings, providing a reasonable opportunity for acceptance, and not entering into agreements until after a specified acceptance period. It also allows for certain exemptions for exempt investors and trading rights under specific conditions. The obligations imposed by this class order on companies issuing securities and their shareholders are primarily procedural and relate to the manner in which rights issues are conducted. Companies must ensure that offers to issue new securities are made to all existing shareholders in the same class in proportion to their holdings (section 4(a)(b)). They must also provide a reasonable opportunity for shareholders to accept the offers and must not enter into agreements to issue securities until the acceptance period has closed (section 4(a)(c) and (d)). Furthermore, all offers must have the same terms (section 4(a)(e)). These obligations are designed to ensure that rights issues are conducted fairly and transparently. Breaching the provisions of this class order can lead to significant consequences. Although the class order itself does not specify particular offences or penalties, violations of the Corporations Act 2001, under which this class order is made, can result in substantial penalties. For instance, misleading or deceptive conduct in relation to securities can attract penalties of up to $2.1 million for a corporation and imprisonment for up to five years under section 1041H of the Act. Additionally, failure to comply with the disclosure requirements can lead to fines and, in severe cases, criminal charges for individuals involved in the management of the company.