Consolidated Takeovers Guidance
On 21 June 2013, the Australian Securities and Investments Commission (ASIC) released four new Regulatory Guides, which update and consolidate the bulk of its guidance about takeovers. The new Regulatory Guides cover:
takeover bids (Regulatory Guide 9)
exceptions to the 20% takeover threshold (Regulatory Guide 6)
relevant interests and substantial holdings (Regulatory Guide 5)
compulsory acquisitions and buy-outs (Regulatory Guide 10).
They are designed to make ASIC guidance in this important area of corporate regulation more transparent and relevant for the market. The new Regulatory Guides replace 17 former Regulatory Guides and are a welcome clarification of ASIC's approach to the regulation of takeovers.
In conjunction with the release of these new Regulatory Guides, ASIC has issued 11 new class orders which modify relevant provisions of the Corporations Act 2001 (Corporations Act).
The key points arising out of the updated guidance are outlined below.
ASIC has provided updated and more detailed guidance about how a relevant interest in securities may arise, including where a person has a "negative" power over disposal or voting rights, and where a relevant interest is derived through a chain of bodies corporate.
More detail is provided about the application of the "relevant interest" concept in specific scenarios, such as securities lending arrangements and call and put warrants.
Substantial Holding Notices
ASIC has provided detailed and welcome guidance about the requirements for completing and filing substantial holding notices. Where multiple agreements contribute to a substantial holding (being a relevant interest of 5% or more), a copy of all documents setting out the terms of each agreement must accompany the notice.
Regulatory Guide 5 includes a warning that the obligation to disclose full details of the relevant arrangements cannot be avoided by entering into preliminary agreements which omit substantive details of the overall transaction that have been negotiated. This is on the basis that a formal written agreement will be finalised after the immediate substantial holding disclosure requirement has been discharged.
Exceptions to the 20% Takeover Threshold
Regulatory Guide 6 includes policy guidance from ASIC:
confirmation that it may give relief for a substantial holder to rely on the 3% creep exception, but only where the holder has been diluted to below 19% within the preceding six months and did not have the opportunity to participate in the diluting issue of securities
details on the factors ASIC will consider in determining whether a rights issue or underwriting arrangement may constitute unacceptable circumstances, including where the arrangement is designed to enable a holder or underwriter to obtain control of a company.
ASIC has provided more guidance about how it administers the prohibition on collateral benefits in takeover bids, including:
a modification to the Corporations Act so that the prohibition on collateral benefits applies during the bid period (rather than the offer period)
guidance about ASIC's approach to determining whether a benefit is "likely to induce" acceptance of a bid.
Disclosure of the Bidder's Intentions
ASIC has provided further detail about the requirement to disclose a bidder's intentions, including the extent to which alternative intentions must be disclosed, and the need to consider all potential outcomes of the bid.
ASIC has issued new guidance and class order relief on the use of acceptance facilities, confirming that a bidder does not acquire a relevant interest in securities as a result of a holder tendering into an acceptance facility. Bidders will also be able to establish acceptance facilities that are only open to specified holders (such as institutional investors) where the bid is conditional.
There is also guidance on case-by-case relief that ASIC may offer for acceptance facilities that do not meet the class order requirements.
Subject to certain conditions, ASIC has extended its policy to provide relief for joint bids structured as schemes of arrangement on conditions equivalent to those imposed on joint bids structured as takeovers.
ASIC has issued class order relief for takeover bids so that a bidder need not disclose the details of each accepting target holder, and attach copies of the bidder's statement, for each substantial holding notice lodged.
Further detail about the new Regulatory Guides can be accessed here.
The new Regulatory Guides are available for downloading at www.asic.gov.au.