Corporations Regulations (Amendment) 1996 No. 343
EXPLANATORY STATEMENT
STATUTORY RULES 1996 No. 343
Issued by the Authority of the Treasurer
Corporations Act 1989
Corporations Regulations (Amendment)
Section 22 of the Corporations Act 1989 (the Act) empowers the Governor-General to make regulations, not inconsistent with the Act or the Corporations Law, prescribing, inter alia, matters which are required by the Corporations Law to be prescribed by regulations, or necessary or convenient to be prescribed by regulations for carrying out or giving effect to the Corporations Law.
Part 6.7 of the Corporations Law (the Law) imposes an obligation upon each person who is a "substantial shareholder" in a listed company to give notice of his or her substantial shareholding.
The purpose of the regulations is threefold. Firstly, the substantial shareholder forms have been redrafted into plain English to make them easier to understand and use. Secondly, the requirement that a person making a substantial shareholder declaration list all share transactions during the previous twelve months has been reduced to four months. Thirdly, the new pro forma format for the substantial shareholder forms reduces the amount of paperwork involved in meeting the requirements of the Law and presents the information in a uniform fashion.
Details of the regulations are contained in the Attachment.
The regulations commence on the date of Gazettal.
ATTACHMENT
The information required by Part 6.7 of the Law to be provided by substantial shareholders is required to be in the prescribed Forms 603, 604 and 605 of Schedule 2 to the Corporations Regulations.
There are 3 types of substantial shareholder notices which include initial notice of entitlement to a substantial shareholding (section 709 and Form 603), notice of change in entitlement to the substantial shareholding (section 7 10 and Form 604), and notice where a person ceases to be entitled to a substantial shareholding (section 711 and Form 605).
Regulation 1
Regulation 1 provides that the regulations are amended as set out in these regulations.
Regulations 2.1
Previously, subregulation 6.7.01(2) effectively required prescribed documents to be attached to the initial shareholding notice relating to the period of 12 months before the date of the notice. The amendments reduce the relevant period from 12 months to 4 months.
The 12 month period is the same period as when the substantial shareholding threshold was 10% under the Companies (Acquisition of Shares) Act 1980. The threshold is now 5% and as such, it is appropriate to reduce the 12 month period. 4 months is consistent with the waiting periods in section 641 ( the time period within which earlier acquisitions affect the offeror's minimum takeover price) and section 698 (the period within which external benefits are prohibited before a takeover bid).
Regulations 2.2, 3 and 4
Part 6.7 of the Law (ss.709(3)(c), 710(3)(d) and 711(3)(e)) formerly required that the prescribed documents accompany the prescribed forms. Previous subregulations 6.7.01, 6.7.02 and 6.7.03 prescribed that copies of the contracts evidencing the transaction that led to the requirement to lodge the notices accompany the forms.
It is considered that where the relevant transaction took place on an approved stock exchange (see Part 7.2 of the Law) that it is unnecessary to require the attachment of the relevant contract note. The contract note adds little information but creates unnecessary paperwork. Therefore, the new subregulations remove the requirement to provide a contract note where the relevant transaction took place on an approved stock exchange.
Regulation 5
Schedule 1 lists all the forms in the Corporations Regulations. Regulation 5 changes the name of the substantial shareholder forms.
Regulation 6
Forms 603, 604 and 605 are being replaced by new forms. Generally, the new forms differ from the old forms in the use of language and layout. The new forms also represent a streamlining of the substantive requirements of the current forms.
The new forms are drafted in plain English and are set out in tabular format so that they are easier to comprehend, both to those who must fill them out and those who wish to access the information therein.
This regulation inserts the new forms in Schedule 2 of the regulations.
Overview
The Corporations Regulations (Amendment) 1996 No. 343, issued by the authority of the Treasurer under Section 22 of the Corporations Act 1989, addresses the need to streamline and clarify the regulatory requirements for substantial shareholders in listed companies. This amendment aims to simplify the process for substantial shareholders to declare their holdings, thereby improving compliance and reducing administrative burden. The policy objective behind this amendment is to make the substantial shareholder forms more accessible and user-friendly by redrafting them in plain English and reducing the required paperwork. This includes reducing the period shareholders must list share transactions from twelve months to four months, aligning with other relevant timeframes in the Corporations Law, and removing the need for attaching contract notes for transactions on approved stock exchanges. The overall goal is to enhance transparency and efficiency in the reporting obligations of substantial shareholders.
Scope and Application
The Corporations Regulations (Amendment) 1996 No. 343 amends the Corporations Regulations 2001 under the Corporations Act 1989, focusing specifically on the disclosure obligations of substantial shareholders in listed companies. These regulations apply to any person who holds a substantial shareholding in a listed company, defined as a shareholding of 5% or more. The amendments aim to simplify the substantial shareholder notice process by redrafting the forms into plain English, reducing the required period for listing past share transactions from twelve to four months, and removing the necessity to attach contract notes for transactions executed on approved stock exchanges. The regulations are applicable across Australia, reflecting the nationwide scope of the Corporations Act. While the primary aim is to streamline reporting requirements and reduce paperwork, the regulations do not alter the underlying obligations of substantial shareholders to notify the relevant authorities of their shareholding interests. The amendments come into effect on the date of their gazette, ensuring timely updates to the regulatory framework governing corporate disclosures.
Key Provisions
The key provisions of the Corporations Regulations (Amendment) 1996 No. 343 involve amendments to the forms and requirements for substantial shareholders in listed companies to notify the Australian Securities and Investments Commission (ASIC) of their shareholdings. Section 22 of the Corporations Act 1989 provides the legislative authority for these regulations, ensuring they align with the overarching objectives of the Corporations Law. The primary changes introduced by these regulations are found in Regulations 2.1 to 6, which modify the requirements for substantial shareholder declarations.
Regulation 2.1 shortens the period for which share transactions must be listed in the substantial shareholder declaration from 12 months to 4 months. This change aligns with other periods stipulated in the Corporations Law, such as those related to takeover bids, reflecting the updated threshold for substantial shareholdings from 10% to 5%. Regulation 2.2, 3 and 4 eliminate the necessity of attaching contracts evidencing transactions to the substantial shareholder forms when the transactions occurred on an approved stock exchange. This amendment reduces paperwork and administrative burden without compromising the integrity of the information provided to ASIC.
Regulation 5 renames the substantial shareholder forms, while Regulation 6 introduces new forms, 603, 604, and 605, which are drafted in plain English and presented in a tabular format for clarity and ease of understanding. These new forms are designed to streamline the process of complying with the Corporations Law's notification requirements, thereby making it easier for substantial shareholders to meet their obligations.
The Corporations Regulations (Amendment) 1996 No. 343 impose specific obligations on substantial shareholders, which include providing timely and accurate notifications regarding their shareholdings in listed companies. The regulations mandate that substantial shareholders submit initial notices of their entitlement to a substantial shareholding, notices of any changes to their entitlement, and notices when they cease to hold a substantial shareholding. These notifications must be made using the prescribed forms, which now include simplified language and layout to enhance comprehension.
Furthermore, substantial shareholders must provide details of share transactions over a specified period, which has been reduced from 12 months to 4 months. The obligation to attach contracts evidencing transactions has been eliminated for transactions occurring on approved stock exchanges. These amendments aim to reduce the administrative burden on substantial shareholders while ensuring that ASIC receives the necessary information to regulate and monitor substantial shareholdings effectively.
The legislation does not explicitly outline specific offences, penalties, or civil/criminal consequences for breach in the provided explanatory statement. However, non-compliance with the requirements to notify ASIC of substantial shareholdings could lead to enforcement actions under the Corporations Act 1989. Such actions may include fines, legal penalties, and other regulatory measures aimed at ensuring compliance with corporate governance and disclosure obligations. The exact penalties would depend on the nature and severity of the breach, as well as any additional provisions within the broader Corporations Act.