EXPLANATORY STATEMENT for
ASIC Corporations (Unsolicited Offers—Foreign Bids) Instrument 2015/1070.
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (Unsolicited Offers – Foreign Bids) Instrument 2015/1070 under section 1020F of the Corporations Act 2001 (the Act).
Section 1020F of the Act 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 of the Act regulates the making of unsolicited offers to purchase financial products. The provision requires that unsolicited offers set out in a clear, concise and effective manner, certain information about:
(a) the market price of the financial product; or
(b) 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 value of off market financial products can be uncertain if there is no independently verifiable price.
The purpose of Division 5A Part 7.9 (Division) is to provide a disclosure regime to ensure adequate investor protections in situations where an investor may not know the value of their financial products. The Division is primarily (but not solely) aimed at stopping 'low ball offers' being made to unsophisticated investors.
2. Purpose of the instrument
The purpose of ASIC Corporations (Unsolicited Offers – Foreign Bids) Instrument 2015/1070 is to facilitate international comity by ensuring Australian legislation does not unreasonably impede a bona fide and otherwise lawful takeover offer for a foreign company, for example where a foreign company which may only have a small percentage of Australian shareholders is regulated in foreign jurisdictions with comparable regulatory requirements to Australia.
Whilst the Division specifically prescribes the way in which unsolicited offers to purchase a financial product must be made, Paragraph 1019D(1)(d) contains provisions which carve out the requirements of the Division for offers:
a) to buy back shares under a buy-back authorised under s257A;
b) made under a compromise or arrangement under Part 5.1;
c) made under an off-market bid; or
d) to compulsorily acquire or buy out securities under Chapter 6A.
The Division captures unsolicited offers made in connection with a takeover bid for a foreign company which are made or received in Australia. In such circumstances offers made to Australian holders of securities in a foreign company under a foreign takeover bid will, without relief, also need to be accompanied by an offer document in accordance with the Division.
Foreign takeover bids regulated in certain jurisdictions are likely to be accompanied by adequate disclosure because these jurisdictions have takeover regimes that offer comparable levels of disclosure and investor protection to that provided in Australia. As such, these regulated foreign takeover bids should not be subject to the disclosure provisions in Division 5A of Part 7.9 of the Act.
3. Operation of the instrument
ASIC Corporations (Unsolicited Offers – Foreign Bids) Instrument 2015/1070 provides an exemption from Division 5A of Part 7.9 of the Act in relation to an unsolicited offer to purchase securities of a foreign company where the offer is made under a foreign takeover bid or foreign scheme of arrangement, which the person reasonably believes is made in accordance with the relevant regulatory requirements.
The ASIC Corporations (Unsolicited Offers – Foreign Bids) Instrument 2015/1070 exempts listed bodies and their officers from compliance with Division 5A of Part 7.9 of the Act in relation to an unsolicited offer to acquire securities of a foreign company where the unsolicited offer is one of a number of offers made under an arrangement or compromise that is regulated by or under a law that is in force or in a part of an eligible foreign country.
In order to rely on relief afforded under ASIC Corporations (Unsolicited Offers – Foreign Bids) Instrument 2015/1070, a person must meet the condition which stipulates that reasonable steps must be taken to ensure that the regulated foreign takeover bid or foreign scheme is carried out in accordance with the relevant regulatory requirements. The exemption is not available to a person who does not take these steps.
The definition of foreign takeover bid or foreign scheme must be satisfied in order to rely on the relief afforded under ASIC Corporations (Unsolicited Offers – Foreign Bids) Instrument 2015/1070.
4. Consultation
The ASIC Corporations (Unsolicited Offers – Foreign Bids) Instrument 2015/1070 was the subject of public consultation in Consultation Paper 234 Remaking ASIC class orders on takeovers and schemes of arrangement (CP 234). CP 234 was published in August 2015 and is available on ASIC's website.
ASIC has determined that a Regulatory Impact Statement is not necessary for this instrument as it is a remaking of the previous Class Order 05/850, which was determined to be operating effectively and efficiently, and has thus been remade without significant changes.
Overview
The ASIC Corporations (Unsolicited Offers – Foreign Bids) Instrument 2015/1070 was enacted to address the potential impediments to bona fide and lawful takeover offers for foreign companies within Australian markets, particularly where these companies have minimal Australian shareholders but are subject to regulatory frameworks abroad that offer comparable protections to Australian investors. This instrument, made by the Australian Securities and Investments Commission (ASIC) under section 1020F of the Corporations Act 2001, aims to ensure that Australian legislation does not unnecessarily hinder international comity by imposing excessive disclosure requirements on foreign takeover bids. The instrument facilitates smoother international transactions by providing an exemption from the stringent disclosure obligations outlined in Division 5A of Part 7.9 of the Corporations Act for unsolicited offers under foreign takeover bids, provided that these bids are made in accordance with relevant foreign regulatory requirements. This approach recognises that foreign takeover bids regulated in jurisdictions with similar standards to Australia are likely to include adequate disclosures, thus alleviating the need for additional compliance burdens.
Scope and Application
The ASIC Corporations (Unsolicited Offers – Foreign Bids) Instrument 2015/1070 applies to entities and individuals who are involved in making unsolicited offers to purchase securities of foreign companies, particularly in the context of foreign takeover bids or foreign schemes of arrangement. The instrument is intended to provide relief from certain disclosure requirements under Division 5A of Part 7.9 of the Corporations Act 2001, ensuring that Australian legislation does not unduly hinder international takeovers. It applies nationally, as it is an instrument made under the Commonwealth’s authority. The instrument exempts listed bodies and their officers from complying with the specified disclosure requirements, provided the unsolicited offer is part of a regulated foreign takeover bid or scheme, and the person has taken reasonable steps to ensure compliance with relevant foreign regulatory requirements. Notably, the exemption is not available if these steps are not taken. The instrument does not specify exclusions beyond the scope of its application, but it is designed to align with foreign jurisdictions that provide comparable levels of disclosure and investor protection.
Key Provisions
The ASIC Corporations (Unsolicited Offers—Foreign Bids) Instrument 2015/1070 provides key exemptions under the Corporations Act 2001, particularly concerning unsolicited offers to purchase securities of foreign companies. Under Section 1020F of the Act, the Australian Securities and Investments Commission (ASIC) is empowered to exempt certain entities from specified provisions of Part 7.9 of the Act. The instrument exempts listed bodies and their officers from compliance with Division 5A of Part 7.9, which mandates clear and concise disclosure of information about unsolicited offers, including market prices and fair estimates of value. This exemption applies to unsolicited offers made under a foreign takeover bid or scheme, provided the offer is made in accordance with the regulatory requirements of the foreign jurisdiction.
Entities subject to this exemption must meet certain conditions to rely on the relief. They must reasonably believe that the foreign takeover bid or scheme complies with relevant regulatory requirements and must take reasonable steps to ensure this compliance. The exemption is not available if these steps are not taken. Additionally, the definition of a foreign takeover bid or scheme must be satisfied to benefit from this exemption. The exemption aims to ensure that Australian legislation does not unreasonably impede bona fide and otherwise lawful takeover offers for foreign companies, particularly when those companies are regulated in jurisdictions with comparable regulatory requirements to Australia.
The obligations imposed on parties under this instrument are primarily to ensure compliance with the foreign regulatory requirements of the takeover bid or scheme. They must take reasonable steps to verify that the foreign bid meets the regulatory standards and ensure that any unsolicited offers made to Australian shareholders are in line with those standards. Failure to meet these obligations means the exemption does not apply, and the full disclosure requirements of Division 5A of Part 7.9 would still apply. Furthermore, any misleading or deceptive conduct under Section 1019D of the Act, which is aimed at protecting investors, remains subject to scrutiny regardless of the exemption.
Failure to comply with the requirements of this instrument or misleading conduct in making unsolicited offers can lead to significant consequences. Under Section 1317E of the Act, penalties for misleading or deceptive conduct can include substantial fines and imprisonment. For corporations, the maximum penalty is $210,000 or three times the benefit obtained, whichever is greater. Individuals can face fines of up to $42,000 or imprisonment for up to two years, or both. Additionally, any breach of the Act that results in misleading investors can also lead to civil penalties and actions for compensation. These severe consequences underscore the importance of ensuring compliance with both the Act and the conditions set out in the instrument.