ASIC CLASS ORDER [CO 13/525]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Class Order [CO 13/525] under sections 741 and 1020F of the Corporations Act 2001 (the Act).
Paragraph 741(1)(a) provides that ASIC may exempt a class of persons from a provision of Chapter 6D of the Act. Paragraph 1020F(1)(a) provides that ASIC may exempt a class of persons from specified provisions of Part 7.9 of the Act.
1. Background
Chapter 6D and Part 7.9 of the Act respectively regulate the disclosure of securities of a body and interests in registered schemes to retail investors. Generally, an offer of securities for issue must be made under a prospectus that complies with Chapter 6D of the Act, and an offer of interests in a registered scheme for issue must be made under a Product Disclosure Statement (PDS) under Part 7.9 of the Act.
An offer of securities for sale and an offer of interests in a registered scheme for sale will, in certain circumstances, also require disclosure by way of prospectus or PDS respectively under the on-sale provisions (subsections 707(3) and 1012C(3) of the Act).
The on-sale provisions are anti-avoidance provisions designed to ensure that retail investors receive adequate disclosure regardless of whether securities or interests are issued to them by the issuer directly, or indirectly through an intermediary (i.e. issued to an intermediary such as a wholesale client who in turn offers the securities or interests for sale to retail investors).
In some cases the operation of the on-sale provisions can raise practical difficulties, particularly in circumstances where the operator of a sale facility or a nominee acquires securities or interests in relation to a takeover bid or a scheme of arrangement under Part 5.1 of the Act with the intention of on-selling those securities or interests. The mischief that the on-sale provisions were designed to address is not present in these circumstances. For this reason, ASIC provided technical on-sale disclosure relief under Class Order [CO 04/653].
Class Order [CO 04/653] was scheduled to sunset under Part 6 of the Legislative Instruments Act 2003 and was subsequently revoked under Class Order [CO 13/518]. ASIC made Class Order [CO 13/525] to replace Class Order [CO 04/653] with some minor modifications to take into account minor mechanical issues encountered over time.
2. Purpose of the class order
The purpose of the class order is to give technical on-sale disclosure relief for certain incidental aspects of:
(a) “scrip takeover bids” under Chapter 6 of the Act (i.e. bids under which the consideration offered for the acquisition of bid class securities is or includes securities of a body or interests in a registered scheme); or
(b) “scrip schemes of arrangement” under Part 5.1 of the Act (i.e. schemes of arrangement involving an offer of securities of a body or interests in a registered scheme).
3. Operation of the class order
The effect of the class order is that neither a prospectus nor a PDS is required to be given for sale offers of securities or interests in registered schemes in specified circumstances. The class order applies to sale offers made in the following circumstances:
(a) in respect of “scrip” takeover bids—where a bidder appoints a nominee to sell securities or interests and remit the proceeds to:
persons who elect to participate in a sale facility (i.e. a facility offered to persons who do not wish to participate in the scrip takeover bid);
persons who would otherwise be issued with a small parcel of securities or interests; and
foreign holders; or
(b) in relation to “scrip schemes of arrangement”—where securities or interests that would otherwise be issued to the following persons are sold and those persons receive their proportion of the proceeds:
persons who elect to participate in a sale facility (i.e. a facility offered to persons who do not wish to participate in the scrip scheme of arrangement);
persons who would have otherwise been entitled to receive a small parcel of securities or interests; and
foreign holders of those securities.
Without this relief, the on-sale provisions would be triggered, and the person offering the securities or interests for sale would need to give a prospectus or PDS in relation to that offer, because securities or interests would have been issued as scrip consideration with the purpose that those securities or interests are to be on-sold.
The persons who would be entitled to the proceeds of the sale will have received adequate disclosure about the scrip consideration because these incidental facilities are being operated in connection with a regulated takeover bid under Chapter 6 of the Act or a regulated scheme of arrangement under Part 5.1 of the Act.
4. Consultation
On 14 November 2012 ASIC released Consultation Paper 193: Takeovers, compulsory acquisitions and substantial holdings: Update to ASIC guidance (CP 193) seeking feedback on proposals to update and consolidate a number of regulatory guides relating to Chapters 6–6C of the Act. CP 193 also sought feedback on proposals to reissue the class orders (including Class Order [CO 04/653]) associated with ASIC’s updated guidance and to make new class orders addressing some discrete policy issues. The consultation period closed on 22 February 2013.
While CP 193 invited general feedback on the renewal of ASIC’s class orders, ASIC also sought feedback on its proposal to amend the definition of ‘market value’ in Class Order [CO 04/653] and a further amendment to clarify that, for the purposes of a small parcel sale facility for a scrip scheme of arrangement, a small parcel is to be determined by reference to the highest closing price from the date the scheme booklet is registered by ASIC until the date the court order is lodged with ASIC.
ASIC received 7 submissions in response to CP 193. Details of the submissions received are contained in REP 350 Response to submissions on CP 193 Takeovers, compulsory acquisitions and substantial holdings which is available on ASIC’s website at www.asic.gov.au.
ASIC considers that Class Order [CO 13/525] is of a minor and machinery nature and does not substantially alter existing arrangements.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
ASIC Class Order [CO 13/525]
This class order is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the class order
An offer of securities of a body for sale and an offer of interests in a registered scheme for sale will, in certain circumstances, require disclosure by way of prospectus or a Product Disclosure Statement under the on-sale provisions of Chapter 6D and Part 7.9 of the Act.
The on-sale provisions are anti-avoidance provisions designed to ensure that retail investors receive adequate disclosure regardless of whether securities or interests are issued to them directly, or indirectly through an intermediary (i.e. issued to an intermediary such as a wholesale client who in turn offers the securities or interests for sale to retail investors).
In some cases the operation of the on-sale provisions can raise practical difficulties, particularly in circumstances where the operator of a sale facility or a nominee acquires securities or interests in relation to a takeover bid or a scheme of arrangement under Part 5.1 of the Act with the intention of on-selling those securities or interests.
The class order gives on-sale disclosure relief for certain incidental aspects of:
(a) “scrip takeover bids” under Chapter 6 of the Act (i.e. bids under which the consideration offered for the acquisition of bid class securities is or includes securities or interests in a registered scheme); or
(b) “scrip schemes of arrangement” under Part 5.1 of the Act (i.e. schemes of arrangement involving an offer of securities or interests in a registered scheme).
Human rights implications
This class order does not engage any of the applicable rights or freedoms.
Conclusion
This class order is compatible with human rights as it does not raise any human rights issues.