ASIC Corporations (Repeal) Instrument 2015/532
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (Repeal) Instrument 2015/532 (the repealing instrument) under subsections 655A(1) and 673(1) of the Corporations Act 2001 (the Act).
Chapter 6 of the Act relates to takeovers. Paragraph 655A(1)(b) of the Act provides that ASIC may declare that Chapter 6 of the Act applies as if specified provisions were omitted, modified or varied as specified in the declaration.
Chapter 6C of the Act relates to information about ownership of companies and schemes. Paragraph 673(1)(b) provides that ASIC may declare that Chapter 6C of the Act applies as if specified provisions were omitted, modified or varied as specified in the declaration.
Under subsection 33(3) of the Acts Interpretation Act 1901 (as in force as at 1 January 2005), the power to make an instrument is to be construed as including a power exercisable in a like manner and subject to the like conditions (if any) to repeal the instrument.
- Background
The takeover and substantial holding provisions in Chapters 6 and 6C, respectively, are triggered when the following thresholds are met:
(a) the 5% substantial holding threshold—after which a person must provide substantial holding notices relating to movements above or below the threshold, and any change of 1% or more in their substantial holding (section 671B of the Act); and
(b) the 20% takeover threshold—after which acquisitions and offers to acquire relevant interests in voting shares or interests are only permitted through certain transactions or in certain circumstances (section 606 of the Act).
The thresholds are made up of a person’s relevant interest in voting shares or interests, combined with that of any of their associates.
Section 608 of the Act provides that a person has a relevant interest in securities if they:
(a) are the holder of the securities; or
(b) have power to exercise, or control the exercise of, a right to vote attached to the securities; or
(c) have power to dispose of, or control the exercise of a power to dispose of, the securities.
Section 609 of the Act sets out situations not giving rise to relevant interests.
The purposes of these provisions are set out in section 602 of the Act and include ensuring:
(a) transparency to the market about those persons who control an entity; and
(b) that all investors are provided with equal opportunities to consider and benefit from control proposals.
ASIC Class Order [CO 00/455] Collective action by institutional shareholders modified sections 609 and 671B of the Act so that an institution would not have a relevant interest in, or voting power in relation to, securities merely because it entered into a voting agreement with one or more institutions. The effect of these modifications was to allow institutions to enter into agreements about voting at a specified or proposed meeting of a company without triggering the takeover and substantial holding thresholds in Chapters 6 and 6C of the Act, which would otherwise impose restrictions on the ability of those institutions to acquire shares and require the lodgement of substantial holding notices.
The relief in [CO 00/455] was subject to a number of conditions, including disclosure of information relating to the voting agreement, and was restricted to institutions whose primary functions are to pool funds of persons to which it owes a fiduciary duty, or a contractual duty under a life insurance policy, and invests the funds in specified investments, and who would not collectively be entitled to 20% or more of the voting shares in the company the subject of the voting agreement as principal.
The main policy objectives of [CO 00/455] were to recognise that the takeover and substantial holding provisions of the Act can operate to deter institutions from supporting or opposing matters which can or will be the subject of a vote at a company’s meeting and to ensure that those provisions do not have the unintended consequence of preventing institutions from actively participating in corporate governance issues.
After a recent review of the policy underlying [CO 00/455] in Regulatory Guide 128 Collective action by institutional investors (RG 128) and following public consultation in Consultation Paper 228 Collective action by investors: Update to RG 128 (CP 228), ASIC decided to discontinue the relief provided in [CO 00/455] on the basis that the class order did not reflect the way in which institutional investors tend to engage with entities and has rarely been used.
2. Purpose of the repealing instrument
The purpose of the repealing instrument is to repeal [CO 00/455]. Repealing [CO 00/455] will remove a class order that has rarely been relied upon.
3. Operation of the repealing instrument
The repealing instrument repeals [CO 00/455]. The effect of the repeal is that institutions will no longer be able to rely on the relief in [CO 00/455] after the date of the repeal.
4. Consultation
On 17 February 2015, ASIC released CP 228 seeking feedback on proposals to update ASIC’s policy in RG 128 and discontinue the relief in [CO 00/455]. The consultation period concluded on 20 April 2015.
ASIC received seven written submissions in response to CP 228. Respondents generally agreed with the proposal to repeal [CO 00/455]. Details of the submissions received are contained in ASIC’s response to submissions on CP 228 which is available on ASIC’s website at www.asic.gov.au.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
ASIC Corporations (Repeal) Instrument 2015/532
This legislative instrument 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 instrument
The purpose of this legislative instrument is to repeal ASIC Class Order [CO 00/455] so as to remove a class order that has rarely been relied upon. The repeal follows public consultation in which respondents generally agreed that [CO 00/455] was very rarely used and should be repealed.
Human rights implications
This legislative instrument does not engage any of the applicable rights or freedoms.
Conclusion
This legislative instrument is compatible with human rights as it does not raise any human rights issues.