1996-97-98

The Parliament of the
Commonwealth of Australia

HOUSE OF REPRESENTATIVES

Presented and read a first time

Corporate Law Economic Reform Bill 1998

No. , 1998

(Treasury)

A Bill for an Act to amend the Corporations Law and the Australian Securities and Investments Commission Act 1989, and for related purposes

Part 5—Amendments relating to new Part 2F.1 (Oppressive conduct of affairs) 8cler0h1.html

Part 6—Amendments relating to new Part 2F.1A (Proceedings on behalf of a company by members and others) 8cler0h1.html

Part 7—Amendments relating to new Part 9.4B (Civil penalty provisions) 8cler0h1.html

Part 8—Amendments relating to new Part 12 of the ASIC Act (Accounting standards) 8cler0h1.html

Part 3—Amendments relating to new accounting standards provisions in ASIC Act 8cler0h1.html

A Bill for an Act to amend the Corporations Law and the Australian Securities and Investments Commission Act 1989, and for related purposes

1 Short title

2 Commencement

(1) Sections 1 and 2 commence on the day on which this Act receives the Royal Assent.

(2) Section 3 and the Schedules (other than item 12 of Schedule 7) commence on a day to be fixed by Proclamation.

(3) If that section and those Schedules do not commence under subsection (2) within the period of 6 months beginning on the day on which this Act receives the Royal Assent, they commence on the first day after that the end of that period.

(4) Item 12 of Schedule 7 is taken to have commenced on the day on which the Financial Sector Reform (Consequential Amendments) Act 1998 received the Royal Assent.

3 Schedule(s)

(1) Subject to section 2, the Corporations Law set out in section 82 of the Corporations Act 1989 is amended as set out in Schedules 1, 3 and 6 to this Act, and any other item in those Schedules has effect according to its terms.

(2) Subject to section 2, each Act that is specified in another Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in the Schedule has effect according to its terms.

Schedule 1—Main amendments of the Corporations Law

Chapter 2D—Officers and employees

Part 2D.1—Duties and powers

179 Background to duties of directors, other officers and employees

(1) This Part sets out some of the most significant duties of directors, secretaries, other officers and employees of corporations. Other duties are imposed by other provisions of this Law and other laws (including the general law).

(2) Section 9 defines both director and officer. Officer includes, as well as directors and secretaries, some other people who manage the corporation or its property (such as receivers and liquidators).

Division 1—General duties

180 Care and diligence—civil obligation only

(1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

(a) were a director or officer of a corporation in the corporation’s circumstances; and

(b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

(2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they:

(b) do not have a material personal interest in the subject matter of the judgment; and

(c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and

(d) rationally believe that the judgment is in the best interests of the corporation.

The director’s or officer’s belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.

Note: This subsection only operates in relation to duties under this section and their equivalent duties at common law or in equity (including the duty of care that arises under the common law principles governing liability for negligence)—it does not operate in relation to duties under any other provision of this Law or under any other laws.

business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation.

181 Good faith—civil obligations

(1) A director or other officer of a corporation must exercise their powers and discharge their duties:

(a) in good faith in what they believe to be in the best interests of the corporation; and

Note 2: Section 187 deals with the situation of directors of wholly-owned subsidiaries.

(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

182 Use of position—civil obligations

(1) A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

183 Use of information—civil obligations

(1) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

Note 1: This duty continues after the person stops being an officer or employee of the corporation.

(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

184 Good faith, use of position and use of information—criminal offences

(1) A director or other officer of a corporation commits an offence if they intentionally or recklessly fail to exercise their powers and discharge their duties:

Note: Section 187 deals with the situation of directors of wholly-owned subsidiaries.

(2) A director, other officer or employee of a corporation commits an offence if they use their position dishonestly:

(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or

(b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.

(3) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation commits an offence if they use the information dishonestly:

(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or

(b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.

185 Interaction of sections 180 to 184 with other laws etc.

(a) have effect in addition to, and not in derogation of, any rule of law relating to the duty or liability of a person because of their office or employment in relation to a corporation; and

(b) do not prevent the commencement of civil proceedings for a breach of a duty or in respect of a liability referred to in paragraph (a).

This section does not apply to subsections 180(2) and (3) to the extent to which they operate on the duties at common law and in equity that are equivalent to the requirements of subsection 180(1).

186 Territorial application of sections 180 to 184

Sections 180 to 184 do not apply to an act or omission by a director or other officer or employee of a foreign company unless the act or omission occurred in connection with:

187 Directors of wholly-owned subsidiaries

A director of a corporation that is a wholly-owned subsidiary of a body corporate is to be taken to act in good faith in the best interests of the subsidiary if:

(a) the constitution of the subsidiary expressly authorises the director to act in the best interests of the holding company; and

(b) the director acts in good faith in the best interests of the holding company; and

(c) the subsidiary is not insolvent at the time the director acts and does not become insolvent because of the director’s act.

188 Responsibility of secretaries and directors for certain contraventions

(1) A secretary of a company contravenes this subsection if the company contravenes:

(b) section 145 (requirement for registered office of public company to be open to public); or

Note: See section 203C for the circumstances in which a company must have a secretary.

Consequence if director of proprietary company without secretary does not fulfil secretary’s function

(b) the proprietary company does not have a secretary when it contravenes that section.

(3) A person does not contravene subsection (1) or (2) if they show that they took all reasonable steps to ensure that the company complied with the section.

189 Reliance on information or advice provided by others

(a) a director relies on information, or professional or expert advice, given or prepared by:

(i) an employee of the corporation whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned; or

(ii) a professional adviser or expert in relation to matters that the director believes on reasonable grounds to be within the person’s professional or expert competence; or

(iii) another director or officer in relation to matters within the director’s or officer’s authority; or

(iv) a committee of directors on which the director did not serve in relation to matters within the committee’s authority; and

(ii) after making proper inquiry if the circumstances indicated the need for inquiry; and

(c) the reasonableness of the director’s reliance on the information or advice arises in proceedings brought to determine whether a director has performed a duty under this Part or an equivalent general law duty;

the director’s reliance on the information or advice is taken to be reasonable unless the contrary is proved.

190 Responsibility for actions of delegate

(1) If the directors delegate a power under section 198D, a director is responsible for the exercise of the power by the delegate as if the power had been exercised by the directors themselves.

(a) the director believed on reasonable grounds at all times that the delegate would exercise the power in conformity with the duties imposed on directors of the company by this Law and the company’s constitution (if any); and

(iii) after making proper inquiry if the circumstances indicated the need for inquiry;

that the delegate was reliable and competent in relation to the power delegated.

Division 2—Disclosure of, and voting on matters involving, material personal interests

191 Material personal interest—director’s duty to disclose

Director’s duty to notify other directors of material personal interest when conflict arises

(1) A director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest unless subsection (2) says otherwise.

(2) The director does not need to give notice of an interest under subsection (1) if:

(i) arises because the director is a member of the company and is held in common with the other members of the company; or

(ii) arises in relation to the director’s remuneration as a director of the company; or

(iii) relates to a contract the company is proposing to enter into that is subject to approval by the members and will not impose any obligation on the company if it is not approved by the members; or

(iv) arises merely because the director is a guarantor or has given an indemnity or security for all or part of a loan (or proposed loan) to the company; or

(v) arises merely because the director has a right of subrogation in relation to a guarantee or indemnity referred to in subparagraph (iv); or

(vi) relates to a contract that insures, or would insure, the director against liabilities the director incurs as an officer of the company (but only if the contract does not make the company or a related body corporate the insurer); or

(vii) relates to any payment by the company or a related body corporate in respect of an indemnity permitted under section 199A or any contract relating to such an indemnity; or

(viii) is in a contract, or proposed contract, with, or for the benefit of, or on behalf of, a related body corporate and arises merely because the director is a director of the related body corporate; or

(b) the company is a proprietary company and the other directors are aware of the nature and extent of the interest and its relation to the affairs of the company; or

(i) the director has already given notice of the nature and extent of the interest and its relation to the affairs of the company under subsection (1)

(ii) if a person who was not a director of the company at the time when the notice under subsection (1) was given is appointed as a director of the company—the notice is given to that person

(iii) the nature or extent of the interest has not materially increased above that disclosed in the notice; or

(d) the director has given a standing notice of the nature and extent of the interest under section 192 and the notice is still effective in relation to the interest.

Note: Subparagraph (c)(ii)—the notice may be given to the person referred to in this subparagraph by someone other than the director to whose interests it relates (for example, by the secretary).

(b) be given at a directors’ meeting as soon as practicable after the director becomes aware of their interest in the matter.

(4) A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing.

(5) This section does not apply to a proprietary company that has only 1 director.

192 Director may give other directors standing notice about an interest

(1) A director of a company who has an interest in a matter may give the other directors standing notice of the nature and extent of the interest in the matter in accordance with subsection (2). The notice may be given at any time and whether or not the matter relates to the affairs of the company at the time the notice is given.

Note: The standing notice may be given to the other directors before the interest becomes a material personal interest.

The standing notice is given under subparagraph (b)(ii) when it has been given to every director.

(3) If the standing notice is given to the other directors individually in writing it must be tabled at the next directors’ meeting after it is given.

(4) The director must ensure that the nature and extent of the interest disclosed in the standing notice is recorded in the minutes of the meeting at which the standing notice is given or tabled.

(b) ceases to have effect if a person who was not a director of the company at the time when the notice was given is appointed as a director of the company.

A standing notice that ceases to have effect under paragraph (b) commences to have effect again if it is given to the person referred to in that paragraph.

Note: The notice may be given to the person referred to in paragraph (b) by someone other than the director to whose interests it relates (for example, by the secretary).

(6) The standing notice ceases to have effect in relation to a particular interest if the nature or extent of the interest materially increases above that disclosed in the notice.

(7) A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing.

193 Interaction of sections 191 and 192 with other laws etc.

(b) any provision in a company’s constitution (if any) that restricts a director from

involving duties or interests that conflict with their duties or interests as a director.

194 Voting and completion of transactions—directors of proprietary companies (replaceable rule—see section 135)

If a director of a proprietary company has a material personal interest in a matter that relates to the affairs of the company and:

(a) under section 191 the director discloses the nature and extent of the interest and its relation to the affairs of the company at a meeting of the directors; or

(e) the director may retain benefits under the transaction even though the director has the interest; and

(f) the company cannot avoid the transaction merely because of the existence of the interest.

If disclosure is required under section 191, paragraphs (e) and (f) apply only if the disclosure is made before the transaction is entered into.

Note: A director may need to give notice to the other directors if the director has a material personal interest in a matter relating to the affairs of the company (see section 191).

195 Restrictions on voting—directors of public companies only

(1) A director of a public company who has a material personal interest in a matter that is being considered at a directors’ meeting must not:

(2) The director may be present and vote if directors who do not have a material personal interest in the matter have passed a resolution that:

(a) identifies the director, the nature and extent of the director’s interest in the matter and its relation to the affairs of the company; and

(b) states that those directors are satisfied that the interest should not disqualify the director from voting or being present.

(3) The director may be present and vote if they are so entitled under a declaration or order made by ASIC under section 196.

Director may consider or vote on resolution to deal with matter at general meeting

(4) If there are not enough directors to form a quorum for a directors’ meeting because of subsection (1), 1 or more of the directors (including those who have a material personal interest in that matter) may call a general meeting and the general meeting may pass a resolution to deal with the matter.

(b) a condition attached to a declaration or order made by ASIC under section 196;

196 ASIC power to make declarations and class orders

(1) ASIC may declare in writing that a director of a public company who has a material personal interest in a matter that is being, or is to be, considered at a directors’ meeting may, despite the director’s interest, be present while the matter is being considered at the meeting, vote on the matter, or both be present and vote. However, ASIC may only make the declaration if:

(a) the number of directors entitled to be present and vote on the matter would be less than the quorum for a directors’ meeting if the director were not allowed to vote on the matter at the meeting; and

(b) the matter needs to be dealt with urgently, or there is some other compelling reason for the matter being dealt with at the directors’ meeting, rather than by a general meeting called under subsection 195(4).

(3) ASIC may make an order in writing that enables directors who have a material personal interest in a matter to be present while the matter is being considered at a directors’ meeting, vote on that matter, or both be present and vote. The order may be made in respect of a specified class of public companies, directors, resolutions or interests.

(5) Notice of the making, revocation or suspension of the order must be published in the Gazette.

Division 3—Duty to discharge certain trust liabilities

197 Directors liable for debts and other obligations incurred by corporation as trustee

(1) A person who is a director of a corporation when it incurs a liability while acting, or purporting to act, as trustee, is liable to discharge the whole or a part of the liability if the corporation:

(b) is not entitled to be fully indemnified against the liability out of trust assets.

This is so even if the trust does not have enough assets to indemnify the trustee. The person is liable both individually and jointly with the corporation and anyone else who is liable under this subsection.

(2) The person is not liable under subsection (1) if the person would be entitled to have been fully indemnified by 1 of the other directors against the liability had all the directors of the corporation been trustees when the liability was incurred.

(3) This section does not apply to a liability incurred outside Australia by a foreign company.

Division 4—Powers

198A Powers of directors (replaceable rule—see section 135)

(1) The business of a company is to be managed by or under the direction of the directors.

Note: See section 198E for special rules about the powers of directors who are the single director/shareholder of proprietary companies.

(2) The directors may exercise all the powers of the company except any powers that this Law or the company’s constitution (if any) requires the company to exercise in general meeting.

Note: For example, the directors may issue shares, borrow money and issue debentures.

198B Negotiable instruments (replaceable rule—see section 135)

(1) Any 2 directors of a company that has 2 or more directors, or the director of a proprietary company that has only 1 director, may sign, draw, accept, endorse or otherwise execute a negotiable instrument.

(2) The directors may determine that a negotiable instrument may be signed, drawn, accepted, endorsed or otherwise executed in a different way.

198C Managing director (replaceable rule—see section 135)

(1) The directors of a company may confer on a managing director any of the powers that the directors can exercise.

(2) The directors may revoke or vary a conferral of powers on the managing director.

198D Delegation

(1) Unless the company’s constitution provides otherwise, the directors of a company may delegate any of their powers to:

Note: The delegation must be recorded in the company’s minute book (see section 251A).

(2) The delegate must exercise the powers delegated in accordance with any directions of the directors.

(3) The exercise of the power by the delegate is as effective as if the directors had exercised it.

198E Single director/shareholder proprietary companies

(1) The director of a proprietary company who is its only director and only shareholder may exercise all the powers of the company except any powers that this Law or the company’s constitution (if any) requires the company to exercise in general meeting. The business of the company is to be managed by or under the direction of the director.

Note: For example, the director may issue shares, borrow money and issue debentures.

(2) The director of a proprietary company who is its only director and only shareholder may sign, draw, accept, endorse or otherwise execute a negotiable instrument. The director may determine that a negotiable instrument may be signed, drawn, accepted, endorsed or otherwise executed in a different way.

198F Right of access to company books

(1) A director of a company may inspect the books of the company (other than its financial records) at all reasonable times for the purposes of a legal proceeding:

(2) A person who has ceased to be a director of a company may inspect the books of the company (including its financial records) at all reasonable times for the purposes of a legal proceeding:

This right continues for 7 years after the person ceased to be a director of the company.

(3) A person authorised to inspect books under this section for the purposes of a legal proceeding may make copies of the books for the purposes of those proceedings.

(4) A company must allow a person to exercise their rights to inspect or take copies of the books under this section.

(5) This section does not limit any right of access to company books that a person has apart from this section.

Part 2D.2—Restrictions on indemnities, insurance and termination payments

Division 1—Indemnities and insurance for officers and auditors

199A Indemnification and exemption of officer or auditor

(1) A company or a related body corporate must not exempt a person (whether directly or through an interposed entity) from a liability to the company incurred as an officer or auditor of the company.

(2) A company or a related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer or auditor of the company:

(b) a liability for a pecuniary penalty order under section 1317G or a compensation order under section 1317H; or

(c) a liability that is owed to someone other than the company or a related body corporate and did not arise out of conduct in good faith.

(3) A company or related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against legal costs incurred in defending an action for a liability incurred as an officer or auditor of the company if the costs are incurred:

(a) in defending or resisting proceedings in which the person is found to have a liability for which they could not be indemnified under subsection (2); or

(b) in defending or resisting criminal proceedings in which the person is found guilty; or

(c) in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for making the order are found by the court to have been established; or

(d) in connection with proceedings for relief to the person under this Law in which the Court denies the relief.

Paragraph (c) does not apply to costs incurred in responding to actions taken by ASIC or a liquidator as part of an investigation before commencing proceedings for the court order.

Note 1: Paragraph (c)—This includes proceedings by ASIC for an order under section 206C, 206D or 206E (disqualification), section 232 (oppression), section 1317E, 1317G or 1317H (civil penalties) or section 1324 (injunction).

Note 2: The company may be able to give the person a loan or advance in respect of the legal costs (see section 212).

(4) For the purposes of subsection (3), the outcome of proceedings is the outcome of the proceedings and any appeal in relation to the proceedings.

199B Insurance premiums for certain liabilities of director, secretary, other officer or auditor

A company or a related body corporate must not pay, or agree to pay, a premium for a contract insuring a person who is or has been an officer or auditor of the company against a liability (other than one for legal costs) arising out of:

This section applies to a premium whether it is paid directly or through an interposed entity.

199C Certain indemnities, exemptions, payments and agreements not authorised and certain documents void

(1) Sections 199A and 199B do not authorise anything that would otherwise be unlawful.

(2) Anything that purports to indemnify or insure a person against a liability, or exempt them from a liability, is void to the extent that it contravenes section 199A or 199B.

Division 2—Termination payments

200A When benefit given in connection with retirement from office

(a) a benefit is given in connection with a person’s retirement from an office if the benefit is given:

(i) by way of compensation for, or otherwise in connection with, the loss by the person of the office; or

(d) a pension or lump sum is paid or payable in connection with the person’s retirement from an office if the pension or lump sum is paid or payable:

(i) by way of compensation for, or otherwise in connection with, the loss by the person of the office; or

(a) a person (person A) gives another person a benefit (benefit A); and

(b) person A gives benefit A for the purpose, or for purposes including the purpose, of enabling or assisting someone to give a person a benefit in connection with the retirement of a person (person B) from an office;

person A is taken to give benefit A in connection with the person B’s retirement from that office.

200B Retirement benefits generally need membership approval

(1) The following must not give a person a benefit in connection with that person’s, or someone else’s, retirement from a board or managerial office in a company, or a related body corporate, without member approval under section 200E:

(b) an associate of the company (other than a body corporate that is related to the company and is itself a company)

(a) a superannuation fund is taken to be a prescribed superannuation fund in relation to a company if the company, or an associate of the company, gives a benefit to the superannuation fund in prescribed circumstances; and

(b) if a prescribed superannuation fund in relation to a company gives a benefit to another superannuation fund in prescribed circumstances, the other superannuation fund is taken to be a prescribed superannuation fund in relation to the company.

(a) a company, or an associate of a company, gives a benefit to a superannuation fund solely for the purpose of enabling or assisting the superannuation fund to give to a person a benefit in connection with a person’s retirement from an office in the company or a related body corporate; or

(b) a superannuation fund gives a benefit to another superannuation fund solely for the purpose of enabling or assisting the other superannuation fund to give to a person a benefit in connection with a person’s retirement from an office in a company or a related body corporate;

the benefit first referred to in paragraph (a) or (b) is taken to be given in prescribed circumstances.

superannuation fund means a provident, benefit, superannuation or retirement fund.

200C Benefits on transfer of undertaking or property need membership approval

(a) holds, or has at any previous time held, a board or managerial office in a company or a related body corporate; or

(d) is an associate of a person referred to in paragraph (a) or the spouse of an associate of such a person;

in connection with the transfer of the whole or any part of the undertaking or property of the company without member approval under section 200E.

200D Contravention to receive benefit without member approval

(a) holds, or has at any previous time held, a board or managerial office in a company or related body corporate; or

(d) is an associate of a person referred to in paragraph (a) or the spouse of an associate of such a person;

must not receive a benefit if the giving of the benefit contravenes section 200B or 200C.

200E Approval by members

(1) If section 200B or 200C requires member approval for giving a person a benefit, it must be approved by a resolution passed at a general meeting of:

(b) if the company is a subsidiary of a listed domestic corporation—the listed corporation; and

(ii) is not itself a subsidiary of a domestic corporation—the holding company.

(2) Details of the benefit must be set out in, or accompany, the notice of the meeting at which the resolution is to be considered. The details must include:

(ii) if that amount cannot be ascertained at the time of the disclosure—the manner in which that amount is to be calculated and any matter, event or circumstance that will, or is likely to, affect the calculation of that amount; and

(ii) if that value cannot be ascertained at the time of the disclosure—the manner in which that value is to be calculated and any matter, event or circumstance that will, or is likely to, affect the calculation of that value.

These requirements are in addition to, and not in derogation of, any other law that requires disclosure to be made with respect to giving or receiving a benefit.

(a) the other benefit is given to the person instead of the proposed benefit; and

(b) the amount or money value of the benefit is less than the amount or money value of the proposed benefit.

(4) The approval does not relieve a director of a body corporate from any duty to the body corporate (whether under section 180,181,182,183 or 184 or otherwise and whether of a fiduciary nature or not) in connection with the giving of the benefit.

200F Exempt benefits and benefits given in certain circumstances

(a) a benefit given in connection with a person’s retirement from an office in relation to a company if the benefit is:

(i) given under an agreement entered into before 1 January 1991 if giving the benefit in accordance with the agreement would have been lawful if the benefit were given when the agreement was entered into; or

(iii) given to the person under an agreement made between the company and the person before the person became the holder of the office as the consideration, or part of the consideration, for the person agreeing to hold the office; or

(iv) a payment made in respect of leave of absence to which the person is entitled under an industrial instrument; or

200G Genuine payments of pension and lump sum

(a) the benefit is a payment in connection with a person’s retirement from a board or managerial office (the relevant office) in a company or a related body corporate; and

(iii) a body that was a related body corporate of the company when the past services were rendered; and

(c) the value of the benefit, when added to the value of all other payments (if any) already made or payable in connection with the person’s retirement from board or managerial offices in the company and related bodies corporate does not exceed the payment limit set by subsection (1A).

In applying paragraph (c), disregard any pensions or lump sums that section 200F applies to.

(i) was an eligible employee in relation to the company at the time when the person retired from the relevant office; and

(ii) has been an eligible employee in relation to the company throughout a period (the relevant period), or throughout periods totalling a period (also the relevant period), of more than 3 years; or

(b) otherwise—the total remuneration of the person from the company and related bodies corporate during the period of 3 years ending when the person retired from the relevant office.

(3) The amount worked out under this subsection is the amount worked out in accordance with the formula:

total remuneration is the amount of the total remuneration of the person from the company and related bodies corporate during the last 3 years of the relevant period.

relevant period is the number of years in the relevant period or 7, whichever is the lesser number.

(4) In determining for the purposes of paragraph (1)(c) the value of a pension or lump sum payment, disregard any part of the pension or lump sum payment that is attributable to:

(ii) a body corporate (a relevant body corporate) that is a related body corporate of the company, or that was, when the contribution was made, such a related body corporate; or

(iii) an associate of the company, or of a relevant body corporate, in respect of:

(A) the payment of the pension, or the making of the lump sum payment, as the case may be; or

(5) For the purposes of subparagraph (2)(a), a person is taken to have been an eligible employee in relation to a company at a particular time if:

(b) the person was a genuine full-time employee of a body corporate at that time and the body corporate was related to the company at that time.

payment means a payment by way of pension or lump sum and includes a superannuation, retiring allowance, superannuation gratuity or similar payment.

200H Benefits required by law

Subsection 200B(1) does not apply to a benefit given by a person if failure to give the benefit would constitute a contravention of a law in force in Australia or elsewhere (otherwise than because of breach of contract or breach of trust).

200J Benefits to be held in trust for company

(2) Subsection (1) applies to the whole of the amount of a payment or of the money value of the benefit even though giving the benefit would not have contravened section 200B if that amount or value of the benefit had been less.

Part 2D.3—Appointment, remuneration and cessation of appointment of directors

Division 1—Appointment of directors

201A Minimum number of directors

(1) A proprietary company must have at least 1 director. That director must ordinarily reside in Australia.

(2) A public company must have at least 3 directors (not counting alternate directors). At least 2 directors must ordinarily reside in Australia.

201B Who can be a director

(1) Only an individual who is at least 18 may be appointed as a director of a company.

(2) A person who is disqualified from managing corporations under Part 2D.6 may only be appointed as director of a company if the appointment is made with permission granted by ASIC under section 206F or leave granted by the Court under section 206G.

201C Directors of public companies, or subsidiaries, over 72

(3) The office of a director of a public company, or of a subsidiary of a public company, becomes vacant at the conclusion of the AGM of the public company, or the subsidiary, beginning next after the director turns 72.

(b) a person may continue to act as a director of the proprietary company until the next AGM of the public company after the person turns 72; and

Note: Proprietary companies do not need to hold annual general meetings (see section 250N).

(5) An act done by a person as a director is valid even if it is afterwards discovered that they had turned 72 at the time when they were appointed or that their appointment had terminated under subsection (3) or (4).

(6) If the office of a director has become vacant under subsection (3) or (4), no provision for the automatic re-appointment of retiring directors in default of another appointment applies in relation to that director.

(7) If a vacancy created under subsection (3) or (4) is not filled at the meeting at which the office became vacant, the office may be filled as a casual vacancy.

(8) Subject to subsections (9) and (10), a person who has turned 72 may by special resolution be appointed or re-appointed as a director of that company to hold office until the conclusion of the company’s next AGM company if:

(b) the notice of meeting states that the person is a candidate for election who has turned 72 and states the person’s age.

(9) If the company is a subsidiary of a public company, the appointment or re-appointment referred to in subsection (8) does not have effect unless:

(a) the person appointed or re-appointed is a director of the public company; or

(b) the appointment or re-appointment of the person as a director of the company has been approved by a special resolution of the public company and the notice of meeting states that the person is a candidate for election as a director of the company who has turned 72 and states the person’s age.

(a) the person may be appointed or re-appointed as a director of the subsidiary until the end of the next AGM of the holding company; and

(a) the constitution of a company limited by guarantee provides for the holding of postal ballots for the election of a director or directors; and

(b) a postal ballot for the election of a director or directors is held and in the ballot:

(i) the members entitled to vote have been given notice in writing by the company stating that a candidate for election has turned 72 and stating the age of the candidate; and

(ii) that candidate is elected by a majority of not less than 75% of the members who, being entitled to vote, vote in the ballot;

that candidate may be appointed or re-appointed as a director to hold office until the conclusion of the next AGM of the company.

(a) the constitution of a company limited by guarantee provides for the election or appointment of a director or directors otherwise than by members at a general meeting or by postal ballot of members; and

(b) ASIC declares in writing that this section does not apply to the company or its directors;

then, subject to the conditions (if any) that ASIC specifies in the declaration, this section does not so apply.

(13) A vacancy in the office of a director occurring under subsection (3) or (4) is not to be taken into account in determining when other directors are to retire.

(14) Nothing in this section limits, or affects the operation of, any provision of a company’s constitution that prevents any person from being appointed as a director or requiring any director to vacate their office at any age less than 72 years.

201D Consent to act as director

(1) A company contravenes this subsection if a person does not give the company a signed consent to act as a director of the company before being appointed.

201E Special rules for the appointment of public company directors

(1) A resolution passed at a general meeting of a public company appointing or confirming the appointment of 2 or more directors is void unless:

(a) the meeting has resolved that the appointments or confirmations may be voted on together; and

(a) a resolution to appoint directors by an amendment to the company’s constitution (if any); or

(b) a ballot or poll to elect 2 or more directors if the ballot or poll does not require members voting for 1 candidate to vote for another candidate.

(3) For the purposes of paragraph (2)(b), a ballot or poll does not require a member to vote for a candidate merely because the member is required to express a preference among individual candidates in order to cast a valid vote.

201F Special rules for the appointment of directors for single director/single shareholder proprietary companies

(1) The director of a proprietary company who is its only director and only shareholder may appoint another director by recording the appointment and signing the record.

(2) If a person who is the only director and the only shareholder of a proprietary company:

and a personal representative or trustee is appointed to administer the person’s estate or property, the personal representative or trustee may appoint a person as the director of the company.

(a) the office of the director of a proprietary company is vacated under subsection 206B(3) or (4) because of the bankruptcy of the director; and

(b) the person is the only director and the only shareholder of the company; and

(4) A person who has a power of appointment under subsection (2) or (3) may appoint themselves as director.

(5) A person appointed as a director of a company under subsection (2), (3) or (4) holds office as if they had been appointed in the usual way.

201G Company may appoint a director (replaceable rule—see section 135)

A company may appoint a person as a director by resolution passed in general meeting.

201H Directors may appoint other directors (replaceable rule—see section 135)

(1) The directors of a company may appoint a person as a director. A person can be appointed as a director in order to make up a quorum for a directors’ meeting even if the total number of directors of the company is not enough to make up that quorum.

(2) If a person is appointed under this section as a director of a proprietary company, the company must confirm the appointment by resolution within 2 months after the appointment is made. If the appointment is not confirmed, the person ceases to be a director of the company at the end of those 2 months.

(3) If a person is appointed by the other directors as a director of a public company, the company must confirm the appointment by resolution at the company’s next AGM. If the appointment is not confirmed, the person ceases to be a director of the company at the end of the AGM.

201J Appointment of managing directors (replaceable rule—see section 135)

The directors of a company may appoint 1 or more of themselves to the office of managing director of the company for the period, and on the terms (including as to remuneration), as the directors see fit.

201K Alternate directors (replaceable rule—see section 135)

(1) With the other directors’ approval, a director may appoint an alternate to exercise some or all of the director’s powers for a specified period.

(2) If the appointing director requests the company to give the alternate notice of directors’ meetings, the company must do so.

(3) When an alternate exercises the director’s powers, the exercise of the powers is just as effective as if the powers were exercised by the director.

(4) The appointing director may terminate the alternate’s appointment at any time.

(5) An appointment or its termination must be in writing. A copy must be given to the company.

Note: ASIC must be given notice of the appointment and termination of appointment of an alternate (see subsections 205B(2) and (5)).

201L Signpost—ASIC to be notified of appointment

Under section 205B, a company must notify ASIC within 14 days if a person is appointed as a director or as an alternate director.

201M Effectiveness of acts by directors

(1) An act done by a director is effective even if their appointment, or the continuance of their appointment, is invalid because the company or director did not comply with the company’s constitution (if any) or any provision of this Law.

(2) Subsection (1) does not deal with the question whether an effective act by a director:

Note: The kinds of acts that this section validates are those that are only legally effective if the person doing them is a director (for example, calling a meeting of the company’s members or signing a document to be lodged with ASIC or minutes of a meeting). Sections 128-130 contain rules about the assumptions people are entitled to make when dealing with a company and its officers.

Division 2—Remuneration of directors

202A Remuneration of directors (replaceable rule—see section 135)

(1) The directors of a company are to be paid the remuneration that the company determines by resolution.

Note: Chapter 2E makes special provision for the payment of remuneration to the directors of public companies.

(2) The company may also pay the directors’ travelling and other expenses that they properly incur:

(a) in attending directors’ meetings or any meetings of committees of directors; and

202B Members may obtain information about directors’ remuneration

(1) A company must disclose the remuneration paid to each director of the company or a subsidiary (if any) by the company or by an entity controlled by the company if the company is directed to disclose the information by:

(a) members with at least 5% of the votes that may be cast at a general meeting of the company; or

(b) at least 100 members who are entitled to vote at a general meeting of the company.

The company must disclose all remuneration paid to the director, regardless of whether it is paid to the director in relation to their capacity as director or another capacity.

(a) preparing a statement of the remuneration of each director of the company or subsidiary for the last financial year before the direction was given; and

(c) sending a copy of the audited statement to each person entitled to receive notice of general meetings of the company.

202C Special rule for single director/single shareholder proprietary companies

A person who is the only director and the only shareholder of a proprietary company is to be paid any remuneration for being a director that the company determines by resolution. The company may also pay the director’s travelling and other expenses properly incurred by the director in connection with the company’s business.

Division 3—Resignation, retirement or removal of directors

203A Director may resign by giving written notice to company (replaceable rule—see section 135)

A director of a company may resign as a director of the company by giving a written notice of resignation to the company at its registered office.

203B Signpost to consequences of disqualification from managing corporations

A person ceases to be a director of a company if the person becomes disqualified from managing corporations under Part 2D.6 (see subsection 206A(2)) unless ASIC or the Court allows them to manage the company (see sections 206F and 206G).

203C Removal by members—proprietary companies (replaceable rule—see section 135)

203D Removal by members—public companies

(1) A public company may by resolution remove a director from office despite anything in:

If the director was appointed to represent the interests of particular shareholders or debenture holders, the resolution to remove the director does not take effect until a replacement to represent their interests has been appointed.

Note: See sections 249C to 249G for the rules on who may call meetings, sections 249H to 249M on how to call meetings and sections 249N to 249Q for rules on members’ resolutions.

(2) Notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held. However, if the company calls a meeting after the notice of intention is given under this subsection, the meeting may pass the resolution even though the meeting is held less than 2 months after the notice of intention is given.

Note: Short notice of the meeting cannot be given for this resolution (see subsection 249H(3)).

(3) The company must give the director a copy of the notice as soon as practicable after it is received.

(a) giving the company a written statement for circulation to members (see subsections (5) and (6)); and

(b) speaking to the motion at the meeting (whether or not the director is a member of the company).

(a) sending a copy to everyone to whom notice of the meeting is sent if there is time to do so; or

(b) if there is not time to comply with paragraph (a)—having the statement distributed to members attending the meeting and read out at the meeting before the resolution is voted on.

(6) The director’s statement does not have to be circulated to members if it is more than 1,000 words long or defamatory.

(7) If a person is appointed to replace a director removed under this section, the time at which:

is to retire is to be worked out as if the replacement director had become director on the day on which the replaced director was last appointed a director.

203E Director cannot be removed by other directors—public companies

A resolution, request or notice of any or all of the directors of a public company is void to the extent that it purports to:

203F Termination of appointment of managing director (replaceable rule—see section 135)

Part 2D.4—Appointment of secretaries

204A Minimum number of secretaries

(1) A proprietary company is not required to have a secretary but, if it does have 1 or more secretaries, at least 1 of them must ordinarily reside in Australia.

(2) A public company must have at least 1 secretary. At least 1 of them must ordinarily reside in Australia.

204B Who can be a secretary

(1) Only an individual who is at least 18 may be appointed as a secretary of a company.

(2) A person who is disqualified from managing corporations under Part 2D.6 may only be appointed as a secretary of a company if the appointment is made with permission granted by ASIC under section 206F or leave granted by the Court under section 206G.

204C Consent to act as secretary

(1) A company contravenes this subsection if a person does not give the company a signed consent to act as secretary of the company before being appointed.

204D How a secretary is appointed

Note 1: The company must notify ASIC of the appointment within 14 days (see subsection 205B(1)).

Note 2: Section 188 deals with the responsibilities of secretaries for contraventions by the company.

204E Effectiveness of acts by secretaries

(1) An act done by a secretary is effective even if their appointment, or the continuance of their appointment, is invalid because the company or secretary did not comply with the company’s constitution (if any) or any provision of this Law.

(2) Subsection (1) does not deal with the question whether an effective act by a secretary:

Note: The kinds of acts that this section validates are those that are only legally effective if the person doing them is a secretary (for example, signing and sending out a notice of a meeting of directors if the company’s constitution authorises the secretary to do so or signing a document to be lodged with ASIC). Sections 128-130 contain rules about the assumptions people are entitled to make when dealing with a company and its officers.

204F Terms and conditions of office for secretaries (replaceable rule—see section 135)

A secretary holds office on the terms and conditions (including as to remuneration) that the directors determine.

204G Signpost to consequences of disqualification from managing corporations

A person ceases to be a secretary of a company if the person becomes disqualified from managing corporations under Part 2D.6 (see subsection 206A(2)) unless ASIC or the Court allows them to manage the company (see sections 206F and 206G).

Part 2D.5—Public information about directors and secretaries

205A Director, secretary or alternate director may notify ASIC of resignation or retirement

(1) If a director, secretary or alternate director retires or resigns, they may give ASIC written notice of the retirement or resignation. The notice must be in the prescribed form.

(2) To be effective, a notice of resignation must be accompanied by a copy of the letter of resignation given to the company.

(3) Nothing in this section affects the company’s obligations to notify ASIC of the resignation or retirement.

205B Notice of name and address of directors and secretaries to ASIC

(1) A company must lodge with ASIC a notice of the personal details of a director or secretary within 14 days after they are appointed. The notice must be in the prescribed form.

Note 1: If a person becomes a director under subsection 120(1) there is no appointment and no notice is required under this subsection.

Note 2: If a person who was appointed as an alternate director becomes a director under the terms of their appointment as an alternate director, there is no appointment as a director and no notice is required under this subsection.

(a) the personal details of a person who is appointed as an alternate director; and

(b) the terms of their appointment (including terms about when the alternate director is to act as a director);

within 14 days after their appointment as an alternate director. The notice must be in the prescribed form.

(4) The company must lodge with ASIC notice of any change in the personal details of a director, alternate director or secretary within 14 days after the change. The notice must be in the prescribed form.

(5) If a person stops being a director, alternate director or secretary of the company, the company must lodge with ASIC notice of the fact within 14 days. The notice must be in the prescribed form. However, the company does not need to lodge a notice if the person was an alternate director who stopped being a director in accordance with the terms of their appointment as an alternate director.

205C Director and secretary must give information to company

(1) A director, alternate director or secretary must give the company any information the company needs to comply with subsection 205B(1) or (2) within 7 days after their initial appointment unless they have previously given the information to the company.

(2) A director, alternate director or secretary must give the company any information the company needs to comply with subsection 205B(4) within 7 days after any change in their personal details.

205D Address for officers

(1) A person’s address for the purposes of a notice or application under subsection 205B(1), (2), (3) or (5) or 117(2) or 601BC(2) must be their usual residential address unless they are entitled to have an alternative address substituted for their usual residential address under subsection (2).

(2) The person is entitled to have an alternative address substituted for their usual residential address if:

(a) their name, but not their residential address, is on an electoral roll under the Commonwealth Electoral Act 1918 because of section 104 of that Act; or

(b) their name is not on an electoral roll under that Act and ASIC determines, in writing, that including their residential address in the notice or application would put at risk their personal safety or the personal safety of members of their family.

This alternative address must be in Australia and be one at which documents can be served on the person. At any particular time, a person is entitled to have only 1 alternative address under this section.

Note: See subsection 109X(2) on the status of the alternative address as an address for service.

(a) before or at the same time as the alternative address is first included in a notice or application, lodge with ASIC notice of the person’s usual residential address; and

(b) lodge with ASIC notice of any change in the person’s usual residential address within 14 days after the change.

(4) If a court gives a judgment for payment of a sum of money against a person who is taking advantage of subsection (2), ASIC may give details of the person’s usual residential address to an officer of the court for the purposes of enforcing the judgment debt.

205E ASIC’s power to ask for information about person’s position as director or secretary

(b) if the person is no longer a director or secretary of the company—the date on which the person stopped being a director or secretary.

(2) The person must give the information to ASIC in writing by the date specified in the request.

205F Director must give information to company

A director must give the company any information affecting or relating to the director that the company needs, or will need, to comply with Chapter 6. The director must give the information to the company as soon as practicable after becoming aware that the company needs, or will need, the information. The company must give the information to each of the other directors of the company within 7 days of receiving it.

205G Listed company—director to notify securities exchange of shareholdings etc.

(1) A director of a listed public company must notify the relevant securities exchange under subsections (3) and (4) of the following interests of the director:

(i) to which the director is a party or under which the director is entitled to a benefit; and

(ii) that confer a right to call for or deliver shares in, debentures of, or interests in a collective investment scheme made available by, the company or a related body corporate.

(2) A notice of a relevant interest in securities under paragraph (1)(a) must give details of:

(3) The director must notify the exchange within 14 days after each of the following occasions:

Paragraph (a) does not apply to a director who retires and is then reappointed at the same meeting.

(4) The director must notify the exchange within 14 days after any change in the director’s interests.

(5) The director need not give the information to the exchange under this section if the director has already given the information to the exchange.

(6) ASIC may make an order in writing relieving a director of the obligation to notify the relevant securities exchange of an interest in a security or contract. The order may be made in respect of a specified class of companies, directors, securities or contracts.

(8) Notice of the making, revocation or suspension of the order must be published in the Gazette.

Part 2D.6—Disqualification from managing corporations

206A Disqualified person not to manage corporations

(1) A person who is disqualified from managing corporations under this Part commits an offence if:

(a) they make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(b) they exercise the capacity to affect significantly the corporation’s financial standing; or

(c) they communicate instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation) to the directors of the corporation:

(i) knowing that the directors are accustomed to act in accordance with the person’s instructions or wishes; or

(ii) intending that the directors will act in accordance with those instructions or wishes.

It is a defence to the contravention if the person had permission to manage the corporation under either section 206F or 206G and their conduct was within the terms of that permission.

Note: Under section 1274AA, ASIC is required to keep a record of persons disqualified from managing corporations.

(2) A person ceases to be a director, alternate director or a secretary of a company if:

(a) the person becomes disqualified from managing corporations under this Part; and

(b) they are not given permission to manage the corporation under section 206F or 206G.

Note: If a person ceases to be a director, alternate director or a secretary under subsection (2) the company must notify ASIC (see subsection 205B(1)).

206B Automatic disqualification

(i) concerns the making, or participation in making, of decisions that affect the whole or a substantial part of the business of the corporation; or

(ii) concerns an act that has the capacity to affect significantly the corporation’s financial standing; or

(i) is a contravention of the Corporations Law and is punishable by imprisonment for a period greater than 12 months; or

(ii) involves dishonesty and is punishable by imprisonment for at least 3 months; or

(c) is convicted of an offence against the law of a foreign country that is punishable by imprisonment for a period greater than 12 months.

The offences covered by paragraph (a) and subparagraph (b)(ii) include offences against the law of a foreign country.

(2) The period of disqualification under subsection (1) starts on the day the person is convicted and lasts for:

(a) if the person does not serve a term of imprisonment—5 years after the day on which they are convicted; or

(b) if the person serves a term of imprisonment—5 years after the day on which they are released from prison.

(3) A person is disqualified from managing corporations if the person is an undischarged bankrupt under the law of Australia, its external territories or another country.

(a) the person has executed a deed of arrangement under Part X of the Bankruptcy Act 1966 (or a similar law of an external territory or another country) and the terms of the deed have not been fully complied with; or

(b) the person’s creditors have accepted a composition under Part X of the Bankruptcy Act 1966 (or a similar law of an external territory or another country) and final payment has not been made under the composition.

206C Court power of disqualification—contravention of civil penalty provision

(1) On application by ASIC, the Court may disqualify a person from managing corporations for a period that the Court considers appropriate if:

(a) a declaration is made under section 1317E (civil penalty provision) that the person has contravened a civil penalty provision; and

Note: The civil penalty provisions are subsection 180(1) and (2), 181(1) and (2), 182(1) and (2), 183(1) and (2), 209(2), 254L(2), 256D(3), 259F(2), 260D(2) or 344(1) or section 588G.

(2) In determining whether the disqualification is justified, the Court may have regard to:

(a) the person’s conduct in relation to the management, business or property of any corporation; and

206D Court power of disqualification—insolvency and non-payment of debts

(1) On application by ASIC, the Court may disqualify a person from managing corporations for up to 10 years if:

(a) within the last 7 years, the person has been an officer of 2 or more corporations when they have failed; and

(i) the manner in which the corporation was managed was wholly or partly responsible for the corporation failing; and

(a) a Court orders the corporation to be wound up under section 459B because the Court is satisfied that the corporation is insolvent; or

(b) the corporation enters into voluntary liquidation and creditors are not fully paid or are unlikely to be fully paid; or

(c) the corporation executes a deed of company arrangement and creditors are not fully paid or are unlikely to be fully paid; or

(d) the corporation ceases to carry on business and creditors are not fully paid or are unlikely to be fully paid; or

(f) a receiver, receiver and manager, or provisional liquidator is appointed in relation to the corporation; or

(g) the corporation enters into a compromise or arrangement with its creditors under Part 5.1; or

(h) the corporation is wound up and a liquidator lodges a report under subsection 533(1) about the corporation’s inability to pay its debts.

Note: To satisfy paragraph (h), a corporation must begin to be wound up while the person is an officer or within 12 months after the person ceases to be an officer. However, the report under subsection 533(1) may be lodged by the liquidator at a time that is more than 12 months after the person ceases to be an officer. Sections 513A to 513D contain rules about when a company begins to be wound up.

(3) In determining whether the disqualification is justified, the Court may have regard to:

(a) the person’s conduct in relation to the management, business or property of any corporation; and

206E Court power of disqualification—repeated contraventions of Law

(1) On application by ASIC, the Court may disqualify a person from managing corporations for the period that the Court considers appropriate if:

(i) has at least twice been an officer of a body corporate that has contravened this Law while they were an officer of the body corporate and each time the person has failed to take reasonable steps to prevent the contravention; or

(ii) has at least twice contravened this Law while they were an officer of a body corporate; or

(iii) has been an officer of a body corporate and has done something that would have contravened subsection 180(1) or section 181 if the body corporate had been a corporation; and

(2) In determining whether the disqualification is justified, the Court may have regard to:

(a) the person’s conduct in relation to the management, business or property of any corporation; and

206F ASIC’s power of disqualification

(1) ASIC may disqualify a person from managing corporations for up to 5 years if:

(a) within 7 years immediately before ASIC gives a notice under paragraph (b)(i):

(ii) while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) about the corporation’s inability to pay its debts; and

(i) a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and

(a) must have regard to whether any of the corporations mentioned in subsection (1) were related to one another; and

(i) the person’s conduct in relation to the management, business or property of any corporation; and

(3) If ASIC disqualifies a person from managing corporations under this section, ASIC must serve a notice on the person advising them of the disqualification. The notice must be in the prescribed form.

(4) The disqualification takes effect from the time when a notice referred to in subsection (3) is served on the person.

(5) ASIC may give a person who it has disqualified from managing corporations under this Part written permission to manage a particular corporation or corporations. The permission may be expressed to be subject to conditions and exceptions determined by ASIC.

206G Court power to grant leave

(1) A person who is disqualified from managing corporations may apply to the Court for leave to manage:

(2) The person must lodge a notice with ASIC at least 21 days before commencing the proceedings. The notice must be in the prescribed form.

(3) The order granting leave may be expressed to be subject to exceptions and conditions determined by the Court.

Note: If the Court grants the person leave to manage the corporation, the person may be appointed as a director (see section 201B) or secretary (see section 204B) of a company.

(4) The person must lodge with ASIC a copy of any order granting leave within 14 days after the order is made.

(5) On application by ASIC, the Court may revoke the leave. The order revoking leave does not take effect until it is served on the person.

206H Territorial application of this Part

Part 2D.6 does not apply in respect of an act or omission by a person while they are managing a corporation that is a foreign company unless the act or omission occurred in connection with:

Chapter 2E—Related party transactions

207 Purpose

The rules in this Chapter are designed to protect the interests of a public company’s members as a whole, by requiring member approval for giving financial benefits to related parties that could endanger those interests.

Part 2E.1—Member approval needed for related party benefit

Division 1—Need for member approval

208 Need for member approval for financial benefit

(1) For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company:

(i) obtain the approval of the public company’s members in the way set out in sections 217 to 227; and

(b) the giving of the benefit must fall within an exception set out in sections 210 to 216.

Note: Section 228 defines related party, section 9 defines entity, section 55AA defines control and section 229 affects the meaning of giving a financial benefit.

(b) the making of the contract was approved in accordance with subparagraph (1)(a)(i) as a financial benefit given to the related party; and

(ii) before that approval, if the contract was conditional on the approval being obtained;

member approval for the giving of the benefit is taken to have been given and the benefit need not be given within the 15 months.

209 Consequences of breach

(a) the contravention does not affect the validity of any contract or transaction connected with the giving of the benefit; and

Note: A Court may order an injunction to stop the company or entity giving the benefit to the related party (see section #1324).

(2) A person contravenes this subsection if they are involved in a contravention of section 208 by a public company or entity.

(3) A person commits an offence if they are involved in a contravention of section 208 by a public company or entity and the involvement is dishonest.

Division 2—Exceptions to the requirement for member approval

210 Arm’s length terms

(a) would be reasonable in the circumstances if the public company or entity and the related party were dealing at arm’s length; or

(b) are less favourable to the related party than the terms referred to in paragraph (a).

211 Remuneration and reimbursement for officer or employee

(a) the benefit is remuneration to a related party as an officer or employee of the following:

(iv) an entity that is controlled by an entity that controls the public company; and

(i) the circumstances of the public company or entity giving the remuneration; and

(ii) the related party’s circumstances (including the responsibilities involved in the office or employment).

(a) the benefit is payment of expenses incurred or to be incurred, or reimbursement for expenses incurred, by a related party in performing duties as an officer or employee of the following:

(iv) an entity that is controlled by an entity that controls the public company; and

(b) to give the benefit would be reasonable in the circumstances of the public company or entity giving the remuneration.

(a) a contribution made by a body corporate to a fund for the purpose of making provision for, or obtaining, superannuation benefits for an officer of the body, or for dependants of an officer of the body, is remuneration provided by the body to the officer of the body; and

(b) a financial benefit given to a person because of the person ceasing to hold an office or employment as an officer or employee of a body corporate is remuneration paid or provided to the person in a capacity as an officer of the body.

212 Indemnities, exemptions, insurance premiums and payment for legal costs for officers

(a) the benefit is for a related party who is an officer of the public company or entity; and

(i) an indemnity, exemption or insurance premium in respect of a liability incurred as an officer of the public company or entity; or

(ii) an agreement to give an indemnity or exemption, or to pay an insurance premium, of that kind; and

Note: Sections 199A to 199C may prohibit giving an indemnity or exemption or paying an insurance premium for an officer.

(a) the benefit is for a related party who is an officer of the public company or entity; and

(b) the benefit is a payment (whether by way of advance, loan or otherwise) in respect of legal costs incurred by the officer in defending an action for a liability incurred as an officer of the public company or entity; and

(ii) if section 199A applies to the costs—the officer must repay the amount paid if the costs become costs for which the company must not give the officer an indemnity under that section; and

(d) to give the benefit would be reasonable in the circumstances of the public company or entity giving the benefit.

(3) In working out for the purposes of subsection (1) or (2) whether giving the benefit is reasonable in the circumstances:

(a) assess whether it would be reasonable on the basis of the circumstances existing:

(i) if the benefit is given under an agreement—at the time when the agreement is or was made; or

(ii) if the benefit is not given under an agreement—at the time when the benefit is or was given; and

(b) disregard any other financial benefit given or payable to the officer by the public company or entity.

213 Small amounts given to director or spouse

(1) Member approval is not needed to give a financial benefit that is an amount of money for a director of the public company or their spouse or de facto spouse if the amount does not exceed $2,000 or a greater amount as prescribed by the regulations.

(a) add in all amounts previously given by the public company and any entities controlled by the public company to:

(ii) amounts that fall under any other exception in this Part or a corresponding previous law.

For the purposes of this subsection, the time at which the entity must be controlled by the public company is the time at which the amount is given.

214 Benefit to or by closely-held subsidiary

(1) Member approval is not needed to give a financial benefit if the benefit is given:

(b) by a closely-held subsidiary of a body corporate to the body or an entity it controls.

(2) For the purposes of this section, a body corporate is a closely-held subsidiary of another body corporate if, and only if, no member of the first-mentioned body is a person other than:

(c) a body corporate that is a closely-held subsidiary of the other body because of any other application or applications of this subsection; or

(3) For the purposes of subsection (2), disregard shares that are not voting shares.

215 Benefits to members that do not discriminate unfairly

(a) the benefit is given to the related party in their capacity as a member of the public company; and

(b) giving the benefit does not discriminate unfairly against the other members of the public company.

216 Court order

Member approval is not needed to give a financial benefit under an order of a court.

Division 3—Procedure for obtaining member approval

217 Resolution may specify matters by class or kind

A resolution under this Division may specify anything either in particular or by reference to class or kind.

218 Company must lodge material that will be put to members with ASIC

(1) At least 14 days before the notice convening the relevant meeting is given, the public company must lodge:

(a) a proposed notice of meeting setting out the text of the proposed resolution; and

(c) any other document that is proposed to accompany the notice convening the meeting and that relates to the proposed resolution; and

(d) any other document that any of the following proposes to give to members of the public company before or at the meeting:

(ii) a related party of the company to whom the proposed resolution would permit a financial benefit to be given;

and can reasonably be expected to be material to a member in deciding how to vote on the proposed resolution.

(a) has approved in writing a period of less than 14 days for the purposes of subsection (1); and

subsection (1) applies as if the reference to 14 days were a reference to the approved period.

219 Requirements for explanatory statement to members

(1) The proposed explanatory statement lodged under section 218 must be in writing and set out:

(a) the related parties to whom the proposed resolution would permit financial benefits to be given; and

(i) if the director wanted to make a recommendation to members about the proposed resolution—the recommendation and his or her reasons for it; or

(iii) if the director was not available to consider the proposed resolution—why not; and

(i) whether the director had an interest in the outcome of the proposed resolution; and

(i) is reasonably required by members in order to decide whether or not it is in the company’s interests to pass the proposed resolution; and

(2) An example of the kind of information referred to in paragraph (1)(d) is information about what, from an economic and commercial point of view, are the true potential costs and detriments of, or resulting from, giving financial benefits as permitted by the proposed resolution, including (without limitation):

Note: Sections 180 and 181 require an officer of a corporation to act honestly and to exercise care and diligence. These duties extend to preparing an explanatory statement under this section. Section 1309 creates offences where false and misleading material relating to a corporation’s affairs is made available or furnished to members.

220 ASIC may comment on proposed resolution

(1) Within 14 days after a public company lodges documents under section 218, ASIC may give to the company written comments on those documents (other than comments about whether the proposed resolution is in the company’s best interests).

(2) ASIC may consult with the Exchange for the purposes of giving comments to a company that is included in the official list of the Exchange.

(4) ASIC must keep a copy of the written comments it gives to a company under subsection (1), and subsections 1274(2) and (5) apply to the copy as if it were a document lodged with ASIC.

(5) The fact that ASIC has given particular comments, or has declined to give comments, under subsection (1) does not in any way affect the performance or exercise of any of ASIC’s functions and powers.

221 Requirements for notice of meeting

(a) must be the same, in all material respects, as the proposed notice lodged under section 218; and

(b) must be accompanied by an explanatory statement that is the same, in all material respects, as the proposed explanatory statement lodged under that section; and

(c) must be accompanied by a document that is, or documents that are, the same, in all material respects, as the document or documents (if any) lodged under paragraph 218(1)(c); and

(d) if ASIC has given to the public company, under section 220, comments on the documents lodged under section 218—must be accompanied by a copy of those comments; and

222 Other material put to members

(ii) a related party of the public company to whom the proposed resolution would permit a financial benefit to be given; or

must be the same, in all material respects, as a document lodged under paragraph 218(1)(d).

223 Proposed resolution cannot be varied

The resolution must be the same as the proposed resolution set out in the proposed notice lodged under section 218.

224 Voting by or on behalf of related party interested in proposed resolution

(1) At a general meeting, a vote on a proposed resolution under this Division must not be cast (in any capacity) by or on behalf of:

(a) a related party of the public company to whom the resolution would permit a financial benefit to be given; or

(a) it is cast by a person as a proxy appointed by writing that specifies how the proxy is to vote on the proposed resolution; and

(b) it is not cast on behalf of a related party or associate of a kind referred to in subsection (1).

(b) subsection (1) does not prevent the casting of a vote, on a specified proposed resolution, by a specified entity, or on behalf of a specified entity;

but may only do so if satisfied that the declaration will not cause unfair prejudice to the interests of any member of the public company.

(6) If a vote is cast in contravention of subsection (1), the related party or associate, as the case may be, contravenes this subsection, whether or not the proposed resolution is passed.

(7) For the purposes of this section, a vote is cast on behalf of an entity if, and only if, it is cast:

(8) Subject to subsection 225(1), a contravention of this section does not affect the validity of a resolution.

(a) anything else in this Law or in any other law of this jurisdiction (including the general law); or

225 Voting on the resolution

(1) If any votes on the resolution are cast in contravention of subsection 224(1), it must be the case that the resolution would still be passed even if those votes were disregarded.

(2) If a poll was duly demanded on the question that the resolution be passed, subsections (3) and (4) apply in relation to voting on the poll.

(3) In relation to each member of the public company who voted on the resolution in person, the public company must record in writing:

(4) In relation to each member of the public company who voted on the resolution by proxy, or by a representative authorised under section 250D, the public company must record in writing:

(b) in relation to each person who voted as proxy, or as such a representative, for the member:

(ii) how many votes the person cast on the resolution as proxy, or as such a representative, for the member; and

(iii) how many of those votes the person cast for the resolution and how many against.

(5) For 7 years after the day when a resolution under this Division is passed, the public company must retain the records it made under this section in relation to the resolution.

226 Notice of resolution to be lodged

The public company must lodge a notice setting out the text of the resolution within 14 days after the resolution is passed.

227 Declaration by court of substantial compliance

(1) The Court may declare that the conditions prescribed by this Division have been satisfied if it finds that they have been substantially satisfied.

Part 2E.2—Related parties and financial benefits

228 Related parties

(1) An entity that controls a public company is a related party of the public company.

(c) if the public company is controlled by an entity that is not a body corporate—each of the persons making up the controlling entity

(d) spouses and de facto spouses of the persons referred to in paragraphs (a), (b) and (c).

(3) The following relatives of persons referred to in subsection (2) are related parties of the public company:

(4) An entity controlled by a related party referred to in subsection (1), (2) or (3) is a related party of the public company unless the entity is also controlled by the public company.

(5) An entity is a related party of a public company at a particular time if the entity was a related party of the public company of a kind referred to in subsection (1), (2), (3) or (4) at any time within the previous 6 months.

Entity has reasonable grounds to believe it will become related party in future

(6) An entity is a related party of a public company at a particular time if the entity believes or has reasonable grounds to believe that it is likely to become a related party of the public company of a kind referred to in subsection (1), (2), (3) or (4) at any time in the future.

(7) An entity is a related party of a public company if the entity acts in concert with a related party of the public company on the understanding that the related party will receive a financial benefit if the public company gives the entity a financial benefit.

229 Giving a financial benefit

(1) In determining whether a financial benefit is given for the purposes of this Chapter:

(a) give a broad interpretation to financial benefits being given, even if criminal or civil penalties may be involved; and

(b) the economic and commercial substance of conduct is to prevail over its legal form; and

(a) giving a financial benefit indirectly, for example, through 1 or more interposed entities

(b) giving a financial benefit by making an informal agreement, oral agreement or an agreement that has no binding force

(3) The following are examples of giving a financial benefit to a related party:

Part 2E.3—Interaction with other rules

230 General duties still apply

A director is not relieved from any of their duties under this Law (including sections 180 and 184), or their fiduciary duties, in connection with a transaction merely because the transaction is authorised by a provision of this Chapter or is approved by a resolution of members under a provision of this Chapter.

Part 2F.1—Oppressive conduct of affairs

232 Grounds for Court order

(e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.

233 Orders the Court can make

(1) The Court can make any order under this section that it considers appropriate in relation to the company, including an order:

(d) for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law

(e) for the purchase of shares with an appropriate reduction of the company’s share capital

(f) for the company to institute, prosecute, defend or discontinue specified proceedings

(g) authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company

(h) appointing a receiver or a receiver and manager of any or all of the company’s property

(i) restraining a person from engaging in specified conduct or from doing a specified act

(2) If an order that a company be wound up is made under this section, the provisions of this Law relating to the winding up of companies apply:

(3) If an order made under this section repeals or modifies a company’s constitution, or requires the company to adopt a constitution, the company does not have the power under section 136 to change or repeal the constitution if that change or repeal would be inconsistent with the provisions of the order, unless:

(a) the order states that the company does have the power to make such a change or repeal; or

234 Who can apply for order

An application for an order under section 233 in relation to a company may be made by:

(a) a member of the company, even if the application relates to an act or omission that is against:

(b) a person who has been removed from the register of members because of a selective reduction; or

(c) a person who has ceased to be a member of the company if the application relates to the circumstances in which they ceased to be a member; or

(d) a person to whom a share in the company has been transmitted by will or by operation of law; or

(e) a person whom ASIC thinks appropriate having regard to investigations it is conducting or has conducted into:

Note 1: If an application is made under this section, in certain cases the court may order that the company be wound up in insolvency (see section 459B).

235 Requirement for person to lodge order

If an order is made under section 233, the applicant must lodge a copy of the order with ASIC within 14 days after it is made.

Part 2F.1A—Proceedings on behalf of a company by members and others

236 Bringing, or intervening in, proceedings on behalf of a company

(1) A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:

(i) a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or

(2) Proceedings brought on behalf of a company must be brought in the company’s name.

(3) The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.

Note 2: For the requirements to disclose proceedings and leave applications in the annual directors’ report, see subsections 300(14) and (15).

Note 3: This section does not prevent a person bringing, or intervening in, proceedings on their own behalf in respect of a personal right.

237 Applying for and granting leave

(1) A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.

(a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the step in them; and

(d) if the applicant is applying for leave to bring proceedings—there is a serious question to be tried; and

(i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or

(ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied.

(3) A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:

(iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and

(iv) rationally believed that the decision was in the best interests of the company.

The director’s belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold.

(i) the company is a public company and the person is not a related party of the company; or

(ii) the company is not a public company and the person would not be a related party of the company if the company were a public company; and

(b) proceedings by or against the company include any appeal from a decision made in proceedings by or against the company.

238 Substitution of another person for the person granted leave

(1) Any of the following persons may apply to the Court for an order that they be substituted for a person to whom leave has been granted under section 237:

(a) a member, former member, or a person entitled to be registered as a member, of the company or of a related body corporate; or

(a) the grant of leave is taken to have been made in favour of the substituted person; and

(b) if the other person has already brought the proceedings or intervened—the substituted person is taken to have brought those proceedings or to have made that intervention.

239 Effect of ratification by members

(1) If the members of a company ratify or approve conduct, the ratification or approval:

(a) does not prevent a person from bringing or intervening in proceedings with leave under section 237 or from applying for leave under that section; and

(b) does not have the effect that proceedings brought or intervened in with leave under section 237 must be determined in favour of the defendant, or that an application for leave under that section must be refused.

(2) If members of a company ratify or approve conduct, the Court may take the ratification or approval into account in deciding what order or judgment (including as to damages) to make in proceedings brought or intervened in with leave under section 237 or in relation to an application for leave under that section. In doing this, it must have regard to:

(a) how well-informed about the conduct the members were when deciding whether to ratify or approve the conduct; and

(b) whether the members who ratified or approved the conduct were acting for proper purposes.

240 Leave to discontinue, compromise or settle proceedings brought, or intervened in, with leave

Proceedings brought or intervened in with leave must not be discontinued, compromised or settled without the leave of the Court.

241 General powers of the Court

(1) The Court may make any orders, and give any directions, that it considers appropriate in relation to proceedings brought or intervened in with leave, or an application for leave, including:

(b) directions about the conduct of the proceedings, including requiring mediation; and

(d) an order appointing an independent person to investigate, and report to the Court on:

(ii) the facts or circumstances which gave rise to the cause of action the subject of the proceedings; or

(iii) the costs incurred in the proceedings by the parties to the proceedings and the person granted leave.

(2) A person appointed by the Court under paragraph (1)(d) is entitled, on giving reasonable notice to the company, to inspect any books of the company for any purpose connected with their appointment.

(a) the Court must also make an order stating who is liable for the remuneration and expenses of the person appointed; and

(d) if the order, or the order as varied, makes 2 or more persons liable, the order may also determine the nature and extent of the liability of each of those persons.

242 Power of the Court to make costs orders

The Court may at any time make any orders it considers appropriate about the costs of the following persons in relation to proceedings brought or intervened in with leave under section 237 or an application for leave under that section:

Chapter 2L—Debentures

Part 2L.1—Requirement for trust deed and trustee

260FA Requirement for trust deed and trustee

(a) makes an offer of debentures in this jurisdiction that needs disclosure to investors under Chapter 6D, or does not need disclosure to investors under Chapter 6D because of subsection 9(13) (disclosure document exclusion for debenture roll overs); or

(b) makes an offer of debentures in this jurisdiction or elsewhere as consideration for the acquisition of securities under an off-market takeover bid; or

(c) issues debentures in this jurisdiction or elsewhere under a compromise or arrangement under Part 5.1 approved at a meeting held as a result of an order under subsection 411(1) or (1A);

regardless of where any resulting issue, sale or transfer occurs, the body must enter into a trust deed that complies with section 260FB and appoint a trustee that complies with section 260FC.

Note: For rules about when an offer of debentures will need disclosure to investors under Chapter 6D, see sections 706, 707 and 708.

(2) The body may revoke the trust deed after it has repaid all amounts payable under the debentures in accordance with the debentures’ terms and the trust deed.

Note: Sections 168 and 601CZB require a register of debenture holders to be set up and kept.

260FB Trust deed

The trust deed must provide that the following are held in trust by the trustee for the benefit of the debenture holders:

Note: For information about the duties that the borrower and any guarantor body have under this Chapter, see sections 260GB to 260HE.

260FC Who can be a trustee

(b) a body corporate authorised by a law of any State or Territory to take in its own name a grant of probate of the will, or letters of administration of the estate, of a deceased person; or

(e) a body corporate, all of whose shares are held beneficially by a body corporate or bodies corporate of the kind referred to in paragraph (b), (c) or (d) if that body or those bodies:

(i) are liable for all of the liabilities incurred, or to be incurred, by the trustee as trustee; or

(ii) have subscribed for and beneficially hold shares in the trustee and there is an uncalled liability of at least $500,000 in respect of those shares that can only be called up if the trustee becomes an externally-administered body corporate (see section 254N); or

Note: Section 260GD provides that if the borrower becomes aware that the trustee cannot be a trustee, the trustee must be replaced.

(2) A person may only be appointed or act as trustee (except to the extent provided for by section 260FD) if the appointment or acting will not result in a conflict of interest or duty. This subsection is not intended to affect any rule of law or equity.

260FD Existing trustee continues to act until new trustee takes office

An existing trustee continues to act as the trustee until a new trustee is appointed and has taken office as trustee, despite any rule of law or equity to the contrary.

260FE Replacement of trustee

(1) In addition to any other powers of appointment under the terms of the debentures or provisions of the trust deed, the borrower may appoint a body corporate which is related to the existing trustee as trustee in place of the existing trustee if:

The appointment has effect despite any terms of the debentures or provisions of the trust deed.

(a) appoint a person who may be a trustee under section 260FC as trustee on the application of the borrower, a debenture holder or ASIC if:

(b) terminate the existing trustee’s appointment and appoint a person who may be a trustee under section 260FC as trustee in the existing trustee’s place on the application of the borrower, the existing trustee, a debenture holder or ASIC if:

Part 2L.2—Duties of borrower

260GA Duties of borrower

A borrower that is required to enter into a trust deed under section 260FA has the duties imposed by this Part.

260GB General duties

(ii) an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

(iii) a registered company auditor appointed by the trustee to carry out the inspection;

and give them any information, explanations or other assistance that they require about matters relating to those records.

Note: The borrower also has a duty to call a meeting of debenture holders in certain circumstances (see section 260KA).

260GC Duty to notify ASIC of name of trustee

The borrower must lodge with ASIC a notice of the name of a trustee within 14 days after they are appointed. The notice must be in the prescribed form.

260GD Duty to replace trustee

The borrower must take all reasonable steps to replace the trustee under section 260FE as soon as practicable after the borrower becomes aware that the trustee:

260GE Duty to inform trustee about charges

(a) give the trustee written details of the charge within 21 days after it is created; and

(b) if the total amount to be advanced on the security of the charge is indeterminate and the advances are not merged in a current account with bankers, trade creditors or anyone else—give the trustee written details of the amount of each advance within 7 days after it is made.

Note: If the advances are merged in a current account the borrower must give the trustee the details in the quarterly report (see subsection 260GF(4)).

260GF Duty to give trustee and ASIC quarterly reports

(a) give the trustee a quarterly report that sets out the information required by subsections (4), (5) and (6); and

(2) The first quarter is the period of 3 months ending on a day fixed by the borrower, by written notice to the trustee. The day must be less than 6 months after the first issue of a debenture under the trust deed.

(3) Each of the subsequent quarters are periods of 3 months. The trustee may allow a particular quarter to be a period of less than 3 months if the trustee is satisfied that special circumstances justify doing so.

(a) any failure by the borrower and each guarantor to comply with the terms of the debentures or the provisions of the trust deed or this Chapter during the quarter; and

(b) any event that has happened during the quarter that has caused, or could cause, 1 or more of the following:

(i) any amount deposited or lent under the debentures to become immediately payable

(iii) any other right or remedy under the terms of the debenture or provisions of the trust deed to become immediately enforceable; and

(ii) any security or charge included in or created by the debentures or the trust deed; and

(d) any substantial change in the nature of the business of the borrower, any of its subsidiaries, or any of the guarantors that has occurred during the quarter; and

(ii) the cessation of liability of a guarantor body for the payment of the whole or part of the money for which it was liable under the guarantee

(iii) a change of name of a guarantor (if this happens, the report must also disclose the guarantor’s new name); and

(f) the net amount outstanding on any advances at the end of the quarter if the borrower has created a charge where:

(i) the total amount to be advanced on the security of the charge is indeterminate; and

(ii) the advances are merged in a current account with bankers, trade creditors or anyone else; and

(g) any other matters that may materially prejudice any security or the interests of the debenture holders.

Note: Paragraph (f)—the borrower has a duty to inform the trustee about charges as they are created (see section 260GE).

(5) If the borrower has deposited money with, or lent money to, a related body corporate during the quarter, the report must also include details of:

(a) the total of the money deposited with, or lent to, the related body corporate during the quarter (see subsection (7)); and

(b) the total amount of money owing to the borrower at the end of the quarter in respect of the deposits or loans to the related body corporate.

Disregard any amount that the borrower deposits with an ADI in the normal course of the borrower’s business.

(6) If the borrower has assumed a liability of a related body corporate during the quarter, the report must also include details of the extent of the liability assumed during the quarter and the extent of the liability as at the end of the quarter.

(a) must distinguish between deposits, loans and assumptions of liability that are secured and those that are unsecured; and

(b) may exclude any deposit, loan or assumption of liability on behalf of the related body corporate if it has:

(ii) secured the guarantee by a charge over all of its property in favour of the trustee.

260GG Exceptions

(b) a receiver, or a receiver and manager, of property of the borrower has been appointed and has not ceased to act under that appointment.

260GH How debentures may be described

(b) any other document constituting or relating to the offer of the debentures; or

How debentures may be described
Item	Description	When description may be used
1	mortgage debenture	only if the circumstances set out in subsection (2) are satisfied
2	debenture	only if the circumstances set out in subsection (2) or (3) are satisfied
3	unsecured note or unsecured deposit note	in any other case

When debentures can be called mortgage debentures or debentures

(2) The borrower may describe or refer to the debentures as:

(a) mortgage debentures; or

(b) debentures;

if:

(c) the repayment of all money that has been, or may be, deposited or lent under the debentures is secured by a first mortgage given to the trustee over land vested in the borrower or in any of the guarantors; and

(d) the mortgage has been registered, or is a registrable mortgage that has been lodged for registration, in accordance with the law relating to the registration of mortgages of land in the place where the land is situated; and

(e) the total amount of that money and of all other liabilities (if any) secured by the mortgage of that land ranking equally with the liability to repay that money does not exceed 60% of the value of the borrower’s or guarantor’s interest in that land as shown in the valuation included in the disclosure document for the debentures.

When debentures can be called debentures

(3) The borrower may describe or refer to the debentures as debentures if:

(a) the repayment of all money that has been, or may be, deposited or lent under the debentures has been secured by a charge in favour of the trustee over the whole or any part of the tangible property of the borrower or of any of the guarantors; and

(b) the tangible property that constitutes the security for the charge is sufficient and is reasonably likely to be sufficient to meet the liability for the repayment of all such money and all other liabilities that:

(i) have been or may be incurred; and

(ii) rank in priority to, or equally with, that liability.

260GI Offences for failure to comply with statutory duties

The borrower commits an offence if it intentionally or recklessly contravenes section 260GB, 260GC, 260GD, 260GE, 260GF or 260KA.

Part 2L.3—Duties of guarantor

260HA Duties of guarantor

If a borrower is required to enter into a trust deed under section 260FA in relation to debentures, a guarantor in respect of the debentures has the duties imposed by this Part.

260HB General duties

The guarantor must:

(a) carry on and conduct its business in a proper and efficient manner; and

(b) make all of its financial and other records available for inspection by:

(i) the trustee; or

(ii) an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

(iii) a registered company auditor appointed by the trustee to carry out the inspection;

and give them any information, explanations or other assistance that they require about matters relating to those records.

260HC Duty to inform trustee about charges

If the guarantor creates a charge, it must:

(a) give the trustee written details of the charge within 21 days after it is created; and

(b) if the total amount to be advanced on the security of the charge is indeterminate, give the trustee written details of:

(i) the amount of each advance made within 7 days after it is made; or

(ii) where the advances are merged in a current account with bankers, trade creditors or anyone else—the net amount outstanding on the advances at the end of every 3 months.

260HD Exceptions

Section 260HC does not apply in respect of the guarantor while:

(a) it is under external administration; or

(b) a receiver, or a receiver and manager, of property of the guarantor has been appointed and has not ceased to act under that appointment.

260HE Offences for failure to comply with statutory duties

The guarantor commits an offence if it intentionally or recklessly contravenes paragraph 260HB(b) or section 260HC.

Part 2L.4—Trustee

260JA Trustee’s duties

The trustee of a trust deed entered into under section 260FA must:

(a) exercise reasonable diligence to ascertain whether the property of the borrower and of each guarantor that is or should be available (whether by way of security or otherwise) will be sufficient to repay the amount deposited or lent when it becomes due; and

(b) exercise reasonable diligence to ascertain whether the borrower or any guarantor has committed any breach of:

(i) the terms of the debentures; or

(ii) the provisions of the trust deed or this Chapter; and

(i) any term of the debentures; or

(ii) any provision of the trust deed or this Chapter;

unless the trustee is satisfied that the breach will not materially prejudice the debenture holders’ interests or any security for the debentures; and

(d) ensure that the borrower and each guarantor complies with Part 2K to the extent that it applies to the debentures; and

(e) notify ASIC as soon as practicable if:

(i) the borrower has not complied with section 260GE, 260GF or subsection 318(1) or (4); or

(ii) a guarantor has not complied with section 260HC; and

(f) notify ASIC and the borrower as soon as practicable if the trustee discovers that it cannot be a trustee under section 260FC; and

(g) give the debenture holders a statement explaining the effect of any proposal that the borrower submits to the debenture holders before any meeting that:

(i) the Court calls in relation to a scheme under subsection 411(1) or (1A); or

(ii) the trustee calls under subsection 260KB(1); and

(h) comply with any directions given to it at a debenture holders’ meeting referred to in section 260KA, 260KB or 260KC unless:

(i) the trustee is of the opinion that the direction is inconsistent with the terms of the debentures or the provisions of the trust deed or this Law or is otherwise objectionable; and

(ii) has either obtained, or is in the process of obtaining, an order from the Court under section 260NA setting aside or varying the direction; and

(i) apply to the Court for an order under section 260NB if the borrower requests it to do so.

Note 1: Paragraph (g)—Section 411 relates to compromises and arrangements.

Note 2: Section 260JC deals with indemnification in respect of trustee’s liability to the debenture holders.

260JB Exemptions and indemnifications of trustee from liability

(1) A term of a debenture, provision of a trust deed or a term of a contract with holders of debentures secured by a trust deed, is void in so far as the term or provision would have the effect of:

(a) exempting a trustee from liability for breach of section 260JA for failure to show the degree of care and diligence required of it as trustee; or

(b) indemnifying the trustee against that liability;

unless the term or provision:

(d) enables a meeting of debenture holders to approve the release of the trustee from liability for something done or omitted to be done before the release is given.

(2) For the purposes of paragraph (1)(d):

(a) a release is approved if the debenture holders who vote for the resolution hold 75% of the nominal value of the debentures held by all the debenture holders who attend the meeting and vote on the resolution; and

(b) a debenture holder attends the meeting and votes on the resolution if:

(i) they attend the meeting in person and vote on the resolution; or

(ii) if proxies are permitted—they are represented at the meeting by a proxy and the proxy votes on the resolution.

260JC Indemnity

The trustee is not liable for anything done or omitted to be done in accordance with a direction given to it by the debenture holders at any meeting called under section 260KA, 260KB or 260KC.

Part 2L.5—Meetings of debenture holders

260KA Borrower’s duty to call meeting

Duty to call meeting

(1) The borrower must call a meeting of debenture holders if:

(a) debenture holders who together hold 10% or more of the nominal value of the issued debentures to which the trust relates direct the borrower to do so; and

(b) the direction is given to the borrower in writing at its registered office; and

(i) consider the financial statements that were laid before the last AGM of the borrower; or

(ii) give the trustee directions in relation to the exercise of any of its powers.

Note: The trustee usually must comply with any directions given to it by the debenture holders at the meeting (see paragraph 260JA(h)).

Duty to give notification of meeting

(2) If the borrower is required to call a meeting, it must give notice of the time and place of the meeting to:

(a) the trustee; and

(b) the borrower’s auditor; and

Notice to joint holders of a debenture must be given to the joint holder named first in the register of debenture holders.

(3) The borrower may give the notice to a debenture holder:

(a) personally; or

(b) by sending it by post to the address for the debenture holder in the register of debenture holders; or

(d) by any other means that the trust deed or the terms of the debentures permit.

Note: A defect in the notice may not invalidate a meeting (see section 1322).

When notice by post or fax is given

(4) A notice of meeting sent to a debenture holder is taken to be given:

(a) 3 days after it is posted, if it is posted; or

(b) on the business day after it is sent, if it is sent by fax or other electronic means;

unless the trust deed or the terms of the debentures provide otherwise.

260KB Trustee’s power to call meeting

Trustee may call meeting in event of breach

(1) If the borrower or a guarantor fails to remedy any breach of the terms of the debentures or provisions of the trust deed or this Chapter when required by the trustee, the trustee may:

(a) call a meeting of debenture holders; and

(b) inform the debenture holders of the failure at the meeting; and

(d) ask for directions from the debenture holders in relation to the matter.

Trustee may appoint person to chair meeting

(2) The trustee may appoint a person to chair a meeting of debenture holders called under subsection (1). If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.

260KC Court may order meeting

(1) Without limiting section 260NA or 260NB, the Court may make an order under either of those sections for a meeting of all or any of the debenture holders to be held to give directions to the trustee. The order may direct the trustee to:

(a) place before the debenture holders any information concerning their interests; and

(b) place before the debenture holders any proposals to protect their interests that the Court directs or the trustee considers appropriate; and

(2) The meeting is to be held and conducted in the manner the Court directs. The trustee may appoint a person to chair the meeting. If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.

Part 2L.6—Civil liability

260L Civil liability for contravening this Chapter

(1) A person who suffers loss or damage because a person contravenes a provision of this Chapter may recover the amount of the loss or damage from:

(a) the person who contravened the provision; or

(b) a person involved in the contravention.

This is so even if the person did not commit, and was not involved in, the contravention.

(2) An action under subsection (1) may begin at any time within 6 years after the day on which the cause of action arose.

(3) This Part does not affect any liability that a person has under any other law.

Part 2L.7—ASIC powers

260MA ASIC’s power to exempt and modify

(1) ASIC may:

(a) exempt a person from a provision of this Chapter; or

(b) declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

(2) The exemption or declaration may do all or any of the following:

(a) apply to all or specified provisions of this Chapter

(b) apply to all persons, specified persons, or a specified class of persons

(d) relate to any other matter generally or as specified.

(3) An exemption may apply unconditionally or subject to specified conditions. A person to whom a condition specified in an exemption applies must comply with the condition. The Court may order the person to comply with the condition in a specified way. Only ASIC may apply to the Court for the order.

(4) The exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette.

(5) For the purposes of this section, the provisions of this Chapter include:

(a) regulations made for the purposes of this Chapter; and

(b) definitions in this Law or the regulations as they apply to references in:

(i) this Chapter; or

(ii) regulations made for the purposes of this Chapter; and

260MB ASIC may approve body corporate to be trustee

(1) ASIC may approve a body corporate in writing to be a trustee for the purposes of paragraph 260FC(1)(f). The approval may allow the body corporate to act as trustee:

(a) in any circumstances; or

(b) in relation to a particular borrower or particular class of borrower; or

and may be given subject to conditions.

(2) ASIC must publish notice of the approval in the Gazette.

Part 2L.8—Court

260NA General Court power to give directions and determine questions

If the trustee applies to the Court for any direction in relation to the performance of the trustee’s functions or to determine any question in relation to the interests of the debenture holders, the Court may give any direction and make any declaration or determination in relation to the matter that the Court considers appropriate. The Court may also make ancillary or consequential orders.

Note: Under this section, the Court may order a meeting of debenture holders to be held, see section 260KC.

260NB Specific Court powers

(1) If the trustee or ASIC applies to the Court, the Court may make any or all of the following orders:

(a) an order staying an action or other civil proceedings before a court by or against the borrower or a guarantor body

(b) an order restraining the borrower from paying any money to the debenture holders or any holders of any other class of debentures

(c) an order that any security for the debentures be enforceable immediately or at the time the Court directs (even if the debentures are irredeemable or redeemable only on the happening of a contingency)

(d) an order appointing a receiver of any property constituting security for the debentures

(e) an order restricting advertising by the borrower for deposits or loans

(f) an order restricting borrowing by the borrower

(g) any other order that the Court considers appropriate to protect the interests of existing or prospective debenture holders.

(2) In deciding whether to make an order under subsection(1) the Court must have regard to:

(a) the ability of the borrower and each guarantor to repay the amount deposited or lent as and when it becomes due; and

(b) any contravention of section 260MA by the borrower; and

(d) the interests of the members of each of the guarantors.

Note: The Court may order a meeting of debenture holders to be held (see section 260KC).

Part 2L.9—Location of other debenture provisions

260P Signpost to other debenture provisions

There are other rules relating to debentures in paragraph 124(1)(b) and section 563AAA.

5 Chapter 6

Repeal the Chapter, substitute:

Chapter 6—Takeovers

602 Purposes of Chapter

The purposes of this Chapter are to ensure that:

(a) the acquisition of control over:

(i) the voting shares in a listed company, or an unlisted company with more than 50 members; or

(ii) the voting shares in a listed body; or

(iii) the voting interests in a listed managed investment scheme;

takes place in an efficient, competitive and informed market; and

(b) the holders of the shares or interests, and the directors of the company or body or the responsible entity for the scheme:

(i) know the identity of any person who proposes to acquire a substantial interest in the company, body or scheme; and

(ii) have a reasonable time to consider the proposal; and

(iii) are given enough information to enable them to assess the merits of the proposal; and

(c) as far as practicable, the holders of the relevant class of voting shares or interests all have a reasonable and equal opportunity to participate in any benefits accruing to the holders through any proposal under which a person would acquire a substantial interest in the company, body or scheme; and

(d) an appropriate procedure is followed as a preliminary to compulsory acquisition of voting shares or interests or any other kind of securities under Part 6A.1.

Note: To achieve the objectives referred to in paragraphs (a), (b) and (c), the prohibition in section 606 and the exceptions to it refer to interests in “voting shares”. To achieve the objective in paragraph (d), the provisions that deal with the takeover procedure refer more broadly to interests in “securities”.

603 Chapter extends to some listed bodies that are not companies

This Chapter applies to the acquisition of relevant interests in the securities of listed bodies that are not companies but are incorporated or formed in this jurisdiction in the same way as it applies to the acquisition of relevant interests in the securities of companies.

Note: Section 9 defines company, jurisdiction and listed.

604 Chapter extends to listed managed investment schemes

(1) This Chapter applies to the acquisition of relevant interests in the interests in a listed managed investment scheme registered in this jurisdiction as if:

(a) the scheme were a listed company; and

(b) interests in the scheme were shares in the company; and

(d) a meeting of the members of the scheme were a general meeting of the company; and

(e) the obligations and powers that are imposed or conferred on the company were imposed or conferred on the responsible entity; and

(f) the directors of the responsible entity were the directors of the company; and

(g) the appointment of a responsible entity for the scheme were the election of a director of the company; and

(h) the scheme’s constitution were the company’s constitution.

Note 1: Paragraph (g): see subsection 610(2).

Note 2: Section 9 defines voting interest in a managed investment scheme.

(2) The regulations may modify the operation of this Chapter as it applies in relation to the acquisition of interests in listed managed investment schemes.

605 Classes of securities

(1) Takeover bids are made for securities within a particular class. Similarly, compulsory acquisition and buy-out rights operate on securities within a particular class.

(2) For the purposes of this Chapter and Chapters 6A and 6C, securities are not to be taken to be different classes merely because:

(a) some of the securities are fully-paid and others are partly-paid; or

(b) different amounts are paid up or remain unpaid on the securities.

Part 6.1—Prohibited acquisitions of relevant interests in voting shares

606 Prohibition on certain acquisitions of relevant interests in voting shares

Acquisition of relevant interests in voting shares through transaction entered into by or on behalf of person acquiring relevant interest

(1) A person must not acquire a relevant interest in issued voting shares in a company if:

(a) the company is:

(i) a listed company; or

(ii) an unlisted company with more than 50 members; and

(b) the person acquiring the interest does so through a transaction in relation to securities entered into by or on behalf of the person; and

(i) from 20% or below to more than 20%; or

(ii) from a starting point that is above 20% and below 90%.

However, the person may acquire the relevant interest under one of the exceptions set out in section 611 without contravening this subsection.

Note 1: Section 9 defines company as meaning a company incorporated, or taken to have been incorporated, in this jurisdiction.

Note 2: Section 607 deals with the effect of a contravention of this section on transactions. Sections 608 and 609 deal with the meaning of relevant interest. Section 610 deals with the calculation of a person’s voting power in a company.

Note 3: If the acquisition of relevant interests in an unlisted company with 50 or fewer members leads to the acquisition of a relevant interest in another company that is an unlisted company with more than 50 members, or a listed company, the acquisition is caught by this section because of its effect on that other company.

Acquisition of legal or equitable interest giving rise to relevant interest for someone else

(2) A person must not acquire a legal or equitable interest in securities of a body corporate if, because of the acquisition:

(a) another person acquires a relevant interest in issued voting shares in a company that is:

(i) a listed company; or

(ii) an unlisted company with more than 50 members; and

(b) someone’s voting power in the company increases:

(i) from 20% or below to more than 20%; or

(ii) from a starting point that is above 20% and below 90%.

However, if the acquisition of the relevant interest is covered by one of the exceptions set out in section 611, the person may acquire the legal or equitable interest without contravening this subsection.

50 member threshold

(3) In determining whether the company has more than 50 members for the purposes of subsection (1) or (2), count joint holders of a particular parcel of shares as 1 person.

Offers and invitations

(4) A person must not:

(a) make an offer, or cause an offer to be made on their behalf, if the person would contravene subsection (1) or (2) if the offer were accepted; or

(b) issue an invitation, or cause an invitation to be issued on their behalf, if the person would contravene subsection (1) or (2) if:

(i) an offer were made in response to the invitation; and

(ii) the offer were accepted.

Defences

(5) It is a defence to the prosecution of a person for contravening subsection (1), (2) or (4) if the person proves that they contravened the subsection:

(a) because of inadvertence or mistake; or

(b) because the person was not aware of a relevant fact or occurrence.

In determining whether the defence is available, disregard the person’s ignorance of, or a mistake on the person’s part concerning, a matter of law.

Extended meaning of acquiring relevant interests—conversions and increases in voting rights

(6) A person is taken for the purposes of subsection (1) or (2) to acquire a relevant interest in voting shares in a company if:

(a) securities in which the person already had a relevant interest become voting shares in the company; or

(b) there is an increase in the number of votes that may be cast on a poll attached to voting shares that the person already had a relevant interest in.

The acquisition occurs when the securities become voting shares or the number of votes increases.

Note: Some examples of cases to which this subsection applies are:

• A person exercises a right to convert a non-voting preference share into an ordinary share that carries votes.

• A person pays up partly-paid shares with limited votes and this leads to an increase in the number of votes attached to the shares.

607 Effect on transactions

A transaction is not invalid merely because it involves a contravention of section 606.

608 Relevant interests in securities

Basic rule—relevant interest is holding, or controlling voting or disposal of, securities

(1) 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

It does not matter how remote the relevant interest is or how it arises. If 2 or more people can jointly exercise one of these powers, each of them is taken to have that power.

Extension to control exercisable through a trust, agreement or practice

(2) In this section, power or control includes:

(a) power or control that is indirect; and

(b) power or control that is, or can be, exercised as a result of, by means of or by the revocation or breach of:

(i) a trust; or

(ii) an agreement; or

(iii) a practice; or

(iv) any combination of them;

whether or not they are enforceable; and

It does not matter whether the power or control is express or implied, formal or informal, exercisable alone or jointly with someone else. It does not matter that the power or control cannot be related to a particular security.

Extension to relevant interests held through bodies corporate

(3) A person has the relevant interests in any securities that any of the following has:

(a) a body corporate, or managed investment scheme, in which the person’s voting power is above 20%

(b) a body corporate, or managed investment scheme, that the person controls.

Paragraph (a) does not apply to a relevant interest that the body corporate or scheme itself has in the securities merely because of the operation of that paragraph in relation to another body corporate or managed investment scheme.

(4) For the purposes of paragraph (3)(b), a person controls a body corporate if the person has the capacity to determine the outcome of decisions about the body corporate’s financial and operating policies.

(5) In determining whether a person has this capacity:

(a) the practical influence the person can exert (rather than the rights they can enforce) is the issue to be addressed; and

(b) any practice or pattern of behaviour affecting the body corporate’s financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).

(6) The person does not control the body corporate merely because the person and an entity that is not an associate jointly have the capacity to determine the outcome of decisions about the body corporate’s financial and operating policies.

(7) A person is not to be taken to control a body corporate merely because of a capacity they have if they are under a legal obligation to exercise that capacity for the benefit of:

(a) if the person is an individual—someone else; or

(b) if the person is a body corporate—someone other than its members.

Extension to control in anticipation of performance of agreements etc.

(8) If at a particular time all the following conditions are satisfied:

(a) a person has a relevant interest in issued securities

(b) the person (whether before or after acquiring the relevant interest):

(i) has entered or enters into an agreement with another person with respect to the securities; or

(ii) has given or gives another person an enforceable right, or has been or is given an enforceable right by another person, in relation to the securities (whether the right is enforceable presently or in the future and whether or not on the fulfilment of a condition); or

(iii) has granted or grants an option to, or has been or is granted an option by, another person with respect to the securities

(c) the other person would have a relevant interest in the securities if the agreement were performed, the right enforced or the option exercised;

the other person is taken to already have a relevant interest in the securities.

Note: Subsections 609(6) and (7) deal with specific situations in which the agreement will not give rise to a relevant interest.

Body corporate may have relevant interest in its own securities

(9) This section may result in a body corporate having a relevant interest in its own securities.

609 Situations not giving rise to relevant interests

Money lending and financial accommodation

(1) A person does not have a relevant interest in securities merely because of a mortgage, charge or other security taken for the purpose of a transaction entered into by the person if:

(a) the mortgage, charge or security is taken or acquired in the ordinary course of the person’s business of providing financial services and on ordinary commercial terms; and

(b) the person whose property is subject to the mortgage, charge or security is not an associate of the person.

Note: Sections 11 to 17 define associate.

Nominees and other trustees

(2) A person who would otherwise have a relevant interest in securities as a bare trustee does not have a relevant interest in the securities if a beneficiary under the trust has a relevant interest in the securities because of a presently enforceable and unconditional right of the kind referred to in subsection 608(8).

Note: This subsection will often apply to a person who holds securities as a nominee.

Holding of securities by securities dealer

(3) A securities dealer does not have a relevant interest in securities merely because they hold securities on behalf of someone else in the ordinary course of their securities business.

Shares covered by buy-backs

(4) A person does not have a relevant interest in a company’s shares if the relevant interest would arise merely because the company has entered into an agreement to buy back the shares.

Proxies

(5) A person does not have a relevant interest in securities merely because the person has been appointed to vote as a proxy or representative at a meeting of members, or of a class of members, of the company, body or managed investment scheme if:

(a) the appointment is for one meeting only; and

(b) neither the person nor any associate gives valuable consideration for the appointment.

Exchange traded options and futures contracts

(6) A person does not have a relevant interest in securities merely because of:

(a) an exchange traded option over the securities; or

(b) a right to acquire the securities given by a futures contract.

This subsection stops applying to the relevant interest when the obligation to make or take delivery of the securities arises.

Note: Without this subsection, subsection 608(8) would create a relevant interest from the option or contract.

Conditional agreements

(7) A person does not have a relevant interest in securities merely because of an agreement if the agreement:

(a) is conditional on:

(i) a resolution under item 7 in the table in section 611 being passed; or

(ii) ASIC exempting the acquisition under the agreement from the provisions of this Chapter under section 655A; and

(b) does not confer any control over, or power to substantially influence, the exercise of a voting right attached to the securities; and

(c) does not restrict disposal of the securities for more than 3 months from the date when the agreement is entered into.

The person acquires a relevant interest in the securities when the condition referred to in paragraph (a) is satisfied.

Pre-emptive rights

(8) A member of a company, body or managed investment scheme does not have a relevant interest in securities of the company, body or scheme merely because the company’s, body’s or scheme’s constitution gives members pre-emptive rights on the transfer of the securities if all members have pre-emptive rights on the same terms.

Director of body corporate holding securities

(9) A person does not have a relevant interest in securities merely because:

(a) the person is a director of a body corporate; and

(b) the body corporate has a relevant interest in those securities.

Prescribed exclusions

(10) A person does not have a relevant interest in securities in the circumstances specified in the regulations. The regulations may provide that interests in securities are not relevant interests subject to specified conditions.

610 Voting power in a body corporate

Person’s voting power in a body corporate

(1) A person’s voting power in a body corporate is:

where:

person’s and associates’ votes is the total number of votes attached to all the voting shares in the body corporate (if any) that the person or an associate has a relevant interest in.

total votes in body corporate is the total number of votes attached to all voting shares in the body corporate.

Note: Even if a person’s relevant interest in voting shares is based on control over disposal of the shares (rather than control over voting rights attached to the shares), their voting power in the body corporate is calculated on the basis of the number of votes attached to those shares.

Counting votes

(2) For the purposes of this section, the number of votes attached to a voting share in a body corporate is the maximum number of votes that can be cast in respect of the share on a poll:

(a) if the election of directors is determined by the casting of votes attached to voting shares—on the election of a director of the body corporate; or

(b) if the election of directors is not determined by the casting of votes attached to voting shares—on the adoption of a constitution for the body corporate or the amendment of the body corporate’s constitution.

Note: The Corporations and Securities Panel may decide that the setting or varying of voting rights in a way that affects control of a body corporate is unacceptable circumstances under section 657A.

(3) If:

(a) a transaction in relation to, or an acquisition of an interest in, securities occurs; and

(b) before the transaction or acquisition, a person did not have a relevant interest in particular voting shares but an associate of the person did have a relevant interest in those shares; and

then, for the purposes of applying section 606 to the transaction or acquisition, the person’s voting power is taken to have increased because of the transaction or acquisition from what it would have been before the transaction or acquisition if the votes attached to those shares were disregarded to what it was after the transaction or acquisition (taking the votes attached to those shares into account).

(4) Disregard the operation of section 613 and paragraph 614(1)(b) in working out a person’s voting power in a body corporate.

Part 6.2—Exceptions to the prohibition

611 Exceptions to the prohibition

The following table sets out:

(a) acquisitions of relevant interests in a company’s voting shares that are exempt from the prohibition in subsection 606(1); and

(b) acquisitions of relevant interests in a company’s voting shares resulting from acquisitions of legal or equitable interests in securities of a body corporate that are exempt from the prohibition in subsection 606(2).

Note: Some of the items in the table cover only activities in relation to the company itself (items 7, 8, 12 and 13) while the other items cover acquisitions in that company that may occur through activities in relation to other companies.

Acquisitions that are exempt		[operative]
	Takeover bids
	Acceptance of takeover offer
1	An acquisition that results from the acceptance of an offer under a takeover bid. See also section 612.
	On-market purchase during bid period
2	An acquisition in relation to bid class securities that results from an on-market transaction if: (a) the acquisition is by or on behalf of the bidder under a takeover bid; and (b) the acquisition occurs during the bid period; and (c) the bid is for all the voting shares in the bid class; and
	(d) the bid is: (i) unconditional; or (ii) conditional only on the happening of an event referred to in subsection 652C(1) or (2). See also sections 612 and 613.
	On-market purchase of convertible securities during takeover bid period
3	An acquisition of bid class securities that results directly from the exercise of rights attached to convertible securities if: (a) the acquisition is by or on behalf of the bidder under a takeover bid; and (b) the bidder acquired a relevant interest in the convertible securities through an on-market transaction during the bid period; and (c) the bid is for all the voting shares in the bid class; and (d) the bid is: (i) unconditional; or (ii) conditional only on the happening of an event referred to in subsection 652C(1) or (2). See sections 612 and 613.
	Acceptance of scrip offered as takeover consideration
4	An acquisition that results from the acceptance of: (a) an offer under a takeover bid if the voting shares are included in the consideration for offers under the bid; or (b) an offer that results in an acquisition to which item 5 applies. See also section 612.
	Acquisition immediately followed by announcement of mandatory bid
5	An acquisition that occurs in, or results from, the following set of circumstances: (a) a person (the *acquirer) acquires a relevant interest in securities of a body corporate; and (b) those securities were held, immediately before the acquisition, by a particular person or by particular persons jointly (the prior holder or holders*); and (c) the acquirer does not, at the same time as the acquisition referred to in paragraph (a), acquire a relevant interest in securities of the body held by someone other than the prior holder or holders; and (d) immediately before the acquisition, the voting power of the acquirer in the body corporate is below 20%; and (e) the acquisition is immediately followed by a public proposal by the acquirer, or an associate, to make an unconditional takeover bid for all the securities in the class to which the securities belong; and (f) before the acquisition occurred, the prior holder or holders were informed that the acquisition would lead to that takeover bid.
	The proposal under paragraph (e) must set out the terms on which the acquisition was made. Note 1: Section 631 requires a person who publicly proposes to make a takeover bid to commence the bid within 2 months after the proposal. Note 2: Paragraph (e)—If securities are acquired under an agreement, the acquisition occurs when the agreement is entered into (not when the transfer takes place) (see subsection 608(8)). See also section 614.
	Nature of acquirer
6	An acquisition that results from the exercise by a person of a power, or appointment as a receiver, or receiver and manager, under a mortgage, charge or other security if: (a) the person’s ordinary business includes providing financial services; and (b) the person took or acquired the security in the ordinary course of their business of providing financial services and on ordinary commercial terms.
	Approval by resolution of target
7	An acquisition approved previously by a resolution passed at a general meeting of the company in which the acquisition is made, if: (a) no votes are cast in favour of the resolution by: (i) the person proposing to make the acquisition and their associates; or (ii) the persons (if any) from whom the acquisition is to be made and their associates; and (b) the members of the company were given all information known to the person proposing to make the acquisition or their associates, or known to the company, that was material to the decision on how to vote on the resolution, including: (i) the identity of the person proposing to make the acquisition and their associates; and (ii) the maximum extent of the increase in that person’s voting power in the company that would result from the acquisition; and
	(iii) the voting power that person would have as a result of the acquisition; and (iv) the maximum extent of the increase in the voting power of each of that person’s associates that would result from the acquisition; and (v) the voting power that each of that person’s associates would have as a result of the acquisition.
	Target newly formed
8	An acquisition that results from an issue of securities of the company in which the acquisition is made if the company has not started to carry on any business and has not borrowed any money.
	Manner of acquisition
	3% creep in 6 months
9	An acquisition by a person if: (a) throughout the 6 months before the acquisition that person, or any other person, has had voting power in the company of at least 19%; and (b) as a result of the acquisition, none of the persons referred to in paragraph (a) would have voting power in the company more than 3 percentage points higher than they had 6 months before the acquisition.
	Rights issues
10	An acquisition that results from an issue of securities that satisfies all of the following conditions: (a) a company offers to issue securities in a particular class (b) offers are made to every person who holds securities in that class to issue them with the percentage of the securities to be issued that is the same as the percentage of the securities in that class that they hold before the issue (c) all of those persons have a reasonable opportunity to accept the offers made to them
	(d) agreements to issue are not entered into until a specified time for acceptances of offers has closed (e) the terms of all the offers are the same. This extends to an acquisition by a person as underwriter to the issue or sub-underwriter. See section 615.
	Dividend reinvestment etc.
11	An acquisition that results from an issue of: (a) shares in a company to existing holders of shares in the company under a dividend reinvestment plan or bonus share plan; or (b) interests in a managed investment scheme to existing holders of interests in the scheme under a distribution reinvestment plan or switching facility; if the plan or facility is available to all members. Disregard any unavailability to foreign holders in determining whether the plan or facility is available to all members.
	Initial public offering (IPO) fundraising
12	An acquisition that results from an issue under a disclosure document of securities in the company in which the acquisition is made if: (a) the issue is to a promoter; and (b) the disclosure document is the first issued by the company; and (c) the disclosure document disclosed the effect that the acquisition would have on the promoter’s voting power in the company.
	Underwriting of fundraising
13	An acquisition that results from an issue under a disclosure document of securities in the company in which the acquisition is made if: (a) the issue is to a person as underwriter to the issue or sub-underwriter; and (b) the disclosure document disclosed the effect that the acquisition would have on the person’s voting power in the company.
	Acquisition through listed company
14	An acquisition that results from another acquisition of relevant interests in voting shares in a body corporate included in the official list of: (a) a stock exchange; or (b) a foreign body conducting a stock market that is a body approved in writing by ASIC for the purposes of this item.
	Wills etc.
15	An acquisition through a will or through operation of law.
	Forfeiture of shares
16	An acquisition that results from an auction of forfeited shares conducted on-market.
	Compromise, arrangement, liquidation or buy-back
	Part 5.1 compromise or arrangement
17	An acquisition that results from a compromise or arrangement approved by the Court under Part 5.1.
	Section 507 arrangement
18	An acquisition that results from an arrangement entered into by a liquidator under section 507.
	Buy-back
19	An acquisition that results from a buy-back authorised by section 257A.
	Regulations
20	An acquisition made in a manner or in circumstances prescribed by the regulations. The circumstances may include acquisitions of relevant interests in voting shares in a specified body or class of bodies.

612 Effect of non-compliance with takeover rules for exceptions 1 to 4

The exceptions in items 1 to 4 of the table in section 611 do not apply to a takeover bid if the bid is carried out in contravention of:

(a) section 618 (full or proportionate bid); or

(b) section 619 (offers to be the same); or

(d) subsection 624(1) (minimum offer period); or

(e) sections 625 to 630 (conditional offers); or

(f) items 2, 3 and 6 in the table in subsection 633(1) (procedural steps for off-market bid); or

(g) items 3, 4 and 6 in the table in section 635 (procedural steps for market bid).

613 Bidder not to exercise voting rights if failure to send bids for off-market acquisition—exception 2 or 3

If the exception in item 2 or 3 of the table in section 611 applies to an acquisition on-market during a takeover bid, the bidder is not entitled to exercise the voting rights attached to the shares if:

(a) the bid is an off-market bid; and

(b) the bidder fails to send offers under the bid within 28 days after giving the bidder’s statement to the target.

614 Mandatory bid—exception 5

(1) If the exception in item 5 of the table in section 611 applies to an acquisition of a relevant interest in securities:

(a) the person who publicly proposes to make a takeover bid for the securities must give notice of the proposed bid to:

(i) if the securities in the proposed bid class are quoted—the relevant securities exchange; or

(ii) otherwise—ASIC; and

(b) the votes attached to the securities may not be exercised by any person from the time of the acquisition until:

(i) the offer period starts; or

(ii) the person and their associates have no relevant interests in the securities; and

(c) if the target is a company or body—from the time of the acquisition until the end of the bid period for the proposed bid, the target may:

(i) issue or agree to issue securities (including options or convertible securities); or

(ii) declare a dividend;

only if authorised to do so by a resolution of the company or body passed in general meeting; and

(d) if the target is a managed investment scheme—from the time of the acquisition until the end of the bid period for the proposed bid, the responsible entity for the target may:

(i) issue or agree to issue interests in the scheme (including options or convertible securities); or

(ii) make a distribution to members out of scheme property that is not required by an arrangement entered into before the acquisition occurred;

only if authorised to do so by a resolution of the members of the scheme.

(2) Despite paragraphs (1)(c) and (d), the target may issue securities if:

(a) the issue of the securities:

(i) if the securities are not quoted—was publicly announced; or

(ii) if the securities are quoted—was notified to the relevant securities exchange;

before the acquisition occurred; or

(b) item 10, 11 or 17 in the table in section 611 applies to the acquisitions that result from the issue of the securities; or

(i) an option granted; or

(ii) rights attached to convertible securities issued;

before the acquisition occurred.

615 Treatment of foreign holders under equal access issue—exception 10

The exception in item 10 of the table in section 611 applies even though the conditions set out in the item are not satisfied in respect of foreign holders of the company’s securities if, under the terms of the offers:

(a) the company must appoint a nominee for foreign holders of the company’s securities who is approved by:

(i) if the securities are quoted—the relevant securities exchange; or

(ii) otherwise—ASIC; and

(b) the company must transfer to the nominee:

(i) the securities that would otherwise be issued to the foreign holders who accept the offer; or

(ii) the right to acquire those securities; and

(c) the nominee must sell the securities, or those rights, and distribute to each of those foreign holders their proportion of the proceeds of the sale net of expenses.

Part 6.3—The different types of takeover bid

616 Off-market bids and market bids

(1) There are 2 kinds of takeover bid:

(a) an off-market bid (for quoted or unquoted securities); or

(b) a market bid (only available for quoted securities).

Note: Although the prohibition in section 606 is against acquiring relevant interests in voting shares, a takeover bid may be made for any securities (for example, as a preliminary to compulsorily acquiring securities in that class under Part 6A.1).

(2) The following table shows where to find the provisions dealing with the main features of the offers that may be made under off-market bids and market bids and the procedures to be followed:

Takeover bids
	Feature	Off-market bid	Market bid
1	people to whom offers made	617(1)-(2)	617(3)
2	securities covered	618(1)-(2)	618(3)
3	consideration offered for the securities	621(1)-(2), (4)-(6) and 651A	621(3), (4)-(6)
4	escalation agreements and collateral benefits not allowed	622 and 623	622 and 623
5	offer period	624(1)-(2) and 650C	624(1)-(2) and 649C
6	conditional offers	625(2)-(3) and 626-630	625(1)
7	procedure to be followed in making bid	632 and 633	634 and 635
8	acceptances	650E and 653A-653B	-

Part 6.4—Formulating the takeover offer

Division 1—General

617 Securities covered by the bid

Off-market bid

(1) An off-market bid must relate to securities:

(a) in a class of securities (the bid class); and

(b) that exist or will exist as at the date set by the bidder under subsection 633(2).

(2) If other securities exist or will exist at that date that:

(a) will convert, or may be converted, to securities in the bid class; or

(b) confer rights to be issued securities in the bid class;

the bid may extend to securities that come to be in the bid class during the offer period due to a conversion or exercise of the rights.

Note: The bidder’s statement must say if the bid is extended in this way (see paragraph 636(1)(k)).

Market bid

(3) A market bid must relate to securities:

(a) in a class of quoted securities (the bid class); and

(b) that exist or will exist at any time during the offer period.

618 Offers must be for all or a proportion of securities in the bid class

Off-market bid

(1) An offer for securities under an off-market bid must be an offer to buy:

(a) all the securities in the bid class; or

(b) a specified proportion of the securities in the bid class.

The proportion specified under paragraph (b) must be the same for all holders of securities in the bid class.

Off-market bid—non-marketable parcels

(2) If accepting an offer under an off-market bid for quoted securities would leave a person with a parcel of the securities that is less than a marketable parcel (within the meaning of the rules of the relevant securities exchange), the offer extends to that parcel.

Market bid

(3) An offer for securities under a market bid must be an offer to buy all the securities in the bid class.

619 General terms of the offer

Off-market bid

(1) All the offers made under an off-market bid must be the same.

Note: The offers may include alternative forms of consideration (see section 621).

(2) In applying subsection (1), disregard the following:

(a) any differences in the offers attributable to the fact that the number of securities that may be acquired under each offer is limited by the number of securities held by the holder

(b) any differences in the offers attributable to the fact that the offers relate to securities having different accrued dividend or distribution entitlements

(c) any differences in the offers attributable to the fact that the offers relate to securities on which different amounts are paid up or remain unpaid

(d) any differences in the offers attributable to the fact that the bidder may issue or transfer only whole numbers of securities as consideration for the acquisition

(e) any additional cash amount offered to holders instead of the fraction of a security that they would otherwise be offered.

Foreign holders

(3) If the consideration for the bid includes an offer of securities, the securities do not need to be offered to foreign holders of the target’s securities if under the terms of the bid:

(a) the bidder must appoint a nominee for foreign holders of the target’s securities who is approved by:

(i) if the securities are quoted—the relevant securities exchange; or

(ii) otherwise—ASIC; and

(b) the bidder must transfer to the nominee:

(i) the securities that would otherwise be transferred to the foreign holders who accept the bid for that consideration; or

(ii) the right to acquire those securities; and

(c) the nominee must sell the securities, or those rights, and distribute to each of those foreign holders their proportion of the proceeds of the sale net of expenses.

620 Off-market bid (offer formalities)

(1) Each offer under an off-market bid must:

(a) be in writing; and

(b) have the same date; and

(d) state how, and when, the bidder is to satisfy their obligations.

(2) Each offer must provide that the bidder is to pay or provide the consideration for the offer:

(a) if the bidder is given the necessary transfer documents with the acceptance—by the end of whichever of the following periods ends earlier:

(i) 1 month after the offer is accepted or, if the offer is subject to a defeating condition, within 1 month after the takeover contract becomes unconditional

(ii) 21 days after the end of the offer period; or

(b) if the bidder is given the necessary transfer documents after the acceptance and before the end of the bid period—within 1 month after the bidder is given the necessary transfer documents; or

(c) if the bidder is given the necessary transfer documents after the acceptance and after the end of the bid period—within 21 days after the bidder is given the necessary transfer documents.

Note: Subsection 630(1) requires an offer that is subject to a defeating condition to specify a date for declaring whether the condition has been fulfilled or not.

(3) The offer may provide that the bidder may avoid the takeover contract if the bidder is not given the necessary transfer documents within 1 month after the end of the offer period.

Division 2—Consideration for the offer

621 Consideration offered

Off-market bid—general

(1) A bidder making an off-market bid for securities may offer any form of consideration for the securities, including:

(a) a cash sum; or

(b) securities (including shares, debentures, interests in a managed investment scheme or options); or

Note: Sections 650B and 651A deal with variations of the consideration offered under the bid.

Off-market bid—mandatory bid

(2) An off-market bid that is a mandatory bid:

(a) must include an offer of a cash sum for the securities; and

(b) may include other forms of consideration for the securities, including:

(i) securities (including shares, debentures, interests in a managed investment scheme or options); or

(ii) a combination of a cash sum and securities.

Market bid—cash only

(3) As the offers under a market bid for securities are made through the stock market of a securities exchange, the bidder must offer to acquire the securities for a cash sum only for each security.

Note: Section 649B deals with variations of the consideration offered under the bid.

All bids—minimum cash price if bidder purchased securities in the 4 months before the bid

(4) If:

(a) a person makes a takeover bid; and

(b) the consideration, or one of the forms of consideration, offered under the bid for the securities in the bid class consists solely of a cash sum for each security;

the amount of that cash sum must equal or exceed the maximum consideration that the bidder or an associate provided, or agreed to provide, for a security in the bid class under any purchase or agreement during the 4 months before the date of the bid.

(5) For the purposes of subsection (4), the consideration provided for a security is:

(a) if the consideration provided is a cash sum only—the amount of that cash sum; or

(b) if the consideration provided does not include a cash sum—the value of that consideration; or

(c) if the consideration provided is a cash sum and other consideration—the sum of the amount of the cash sum and the value of the other consideration.

The value of consideration that is not a cash sum is to be ascertained as at the time the relevant purchase or agreement is made.

(6) If:

(a) a person agrees to buy a security in a company; and

(b) the agreement provides that the price payable for the security is a price specified in the agreement but may be varied in accordance with the terms of the agreement;

any variation in price under the agreement is to be disregarded in working out, for the purposes of subsection (4), the price agreed to be paid for the security under the agreement.

622 Escalation agreements

Benefits linked to bids and proposed bids not allowed

(1) A person who makes or proposes to make a takeover bid for securities, or their associate, contravenes this section if:

(a) a person acquires a relevant interest in securities in the bid class within the 6 months before the bid is made or proposed; and

(b) at any time whatever, the bidder, proposed bidder or associate gives or agrees to give a benefit to, or receives or agrees to receive a benefit from:

(i) a person who had a relevant interest in any of the paragraph (a) securities immediately before the acquisition; or

(ii) an associate of a person who had a relevant interest in any of those securities at that time; and

(d) the amount or value of the benefit is, or is to be, determined by reference to or to matters that include either of the following:

(i) the amount or value of the consideration for the securities under the bid or proposed bid

(ii) the amount or value of the consideration for which the bidder or proposed bidder acquires, offers or proposes to offer to acquire, securities in the bid class during the offer period (whether or not under the bid) or under Chapter 6A.

Agreement to escalate to full-bid price for mandatory bid allowed

(2) The bidder, proposed bidder or associate does not contravene subsection (1) by giving a person a benefit under an agreement that merely adjusts the price paid under an acquisition that leads to a mandatory bid up to the amount payable under the bid or proposed bid.

Contravening agreements void

(3) An agreement is void to the extent that it purports to provide for:

(a) a person to give a benefit to a person; or

(b) a person to receive a benefit from a person;

in contravention of subsection (1).

623 Collateral benefits not allowed

(1) A bidder, or an associate, must not, during the offer period for a takeover bid, give, offer to give or agree to give a benefit to a person if:

(a) the benefit is likely to induce the person or an associate to:

(i) accept an offer under the bid; or

(ii) dispose of securities in the bid class; and

(b) the benefit is not offered to all holders of securities in the bid class under the bid.

(2) A person who proposes to make a takeover bid for securities within the next 4 months, or an associate, must not give, offer to give or agree to give a benefit to another person if:

(a) the benefit is likely to induce the other person, or an associate, to:

(i) accept an offer under the bid; or

(ii) dispose of securities in the bid class; and

(b) the benefit is not proposed to be offered, or is not in fact offered, to all holders of securities in the bid class under the bid.

(3) A person, or an associate, must not give, offer to give or agree to give a benefit to another person if:

(a) the benefit is likely to induce the other person, or an associate, to dispose of securities in a way that results in an acquisition that leads to a mandatory bid; and

(b) the benefit is not offered to all holders of securities in the bid class under the mandatory bid that is made as a result of the acquisition.

(4) For the purpose of this section, a person does not receive a benefit that is not offered under a takeover bid merely because the person sells bid class securities on-market and the takeover bid is an off-market bid or a conditional bid.

(5) This section does not prohibit:

(a) the variation of a takeover offer as provided by sections 649A to 650D; or

(b) an acquisition of securities through an on-market transaction; or

Division 3—The offer period

624 Offer period

Offer period set in offer

(1) The offers under a takeover bid must remain open for the period stated in the offer. The period must:

(a) start on the date the first offer under the bid is made; and

(b) last for at least 1 month, and not more than 12 months.

However, the offer may be withdrawn during that period under section 652B.

Note: Sections 649C (market bids) and 650C (off-market bids) deal with variation of the offer period.

Automatic extension of offer period if bidder reaches 50% or consideration increased in last week

(2) If, within the last 7 days of the offer period:

(a) for an off-market bid—the offers under the bid are varied to improve the consideration offered; or

(b) in any case—the bidder’s voting power in the target increases to more than 50%;

the offer period is extended so that it ends 14 days after the event referred to in paragraph (a) or (b). The bidder must give the target and everyone who has not accepted an offer under the bid written notice that the extension has occurred within 3 days after that event.

Note: The consideration for a market bid cannot be increased in the last 5 trading days of the offer period (see section 649B).

Division 4—Conditional offers

625 Conditional offers—general

Market bids

(1) Offers under a market bid must be unconditional.

Off-market bids may generally be conditional

(2) Offers under an off-market bid may be subject to conditions that are not prohibited by sections 626 to 629.

Note: A bid must be unconditional to qualify as a mandatory bid to which item 5 in the table in section 611 applies.

(3) If:

(a) the consideration offered is or includes securities; and

(b) the offer or the bidder’s statement states or implies that the securities are to be quoted on a stock market of a securities exchange (whether in Australia or elsewhere);

the following rules apply:

(i) an application for admission to quotation will be made within 7 days after the start of the bid period; and

(ii) permission for admission to quotation will be granted no later than 7 days after the end of the bid period

(d) the offer may not be freed from this condition.

Note: Section 1325A provides that a Court may make a remedial order if the condition is not satisfied.

626 Maximum acceptance conditions in off-market bids

Maximum acceptance conditions not allowed

(1) Offers under an off-market bid must not be subject to a maximum acceptance condition. A maximum acceptance condition is one that provides that the offers will terminate, or the maximum consideration offered under the bid will be reduced, if one or more of the following occur:

(a) the number of securities for which the bidder receives acceptances reaches or exceeds a particular number; or

(b) the bidder’s voting power in the company reaches or exceeds a particular percentage; or

(c) the percentage of securities the bidder has relevant interests in reaches or exceeds a particular percentage of securities in that class.

(2) For the purposes of subsection (1), it does not matter:

(a) how the condition is expressed; or

(b) how a particular number or percentage was, or is to be, determined; or

(c) whether or not a particular number or percentage is specified in the condition and, if it is so specified, how it is expressed.

(3) For the purposes of subsection (1), an offer under an off-market bid terminates if:

(a) the offer lapses, is withdrawn or otherwise ceases to have effect; or

(b) a binding takeover contract will not result from an acceptance of the offer; or

(d) the takeover contract is rescinded; or

(e) the bidder is entitled to rescind the takeover contract; or

(f) the bidder is relieved of an obligation arising under the takeover contract.

627 Discriminatory conditions not allowed for off-market bids

Offers under an off-market bid must not be subject to a condition that allows the bidder to acquire, or may result in the bidder acquiring, securities from some but not all of the people who accept the offers. It does not matter how the condition is expressed.

628 Conditions requiring payments to officers of target not allowed in off-market bids

An offer to a person under an off-market bid must not be made subject to a condition that requires the person to approve or consent to a payment or other benefit to an officer of the target or a related body corporate:

(a) as compensation for loss of; or

(b) as consideration in connection with retirement from;

any office or employment in connection with the management of the target or of a related body corporate. A purported requirement of this kind is void.

629 Conditions turning on bidder’s or associate’s opinion not allowed in off-market bids

(1) Offers under an off-market bid must not be subject to a defeating condition if the fulfilment of the condition depends on:

(a) the bidder’s, or an associate’s, opinion, belief or other state of mind; or

(b) the happening of an event that is within the sole control of, or is a direct result of action by, any of the following:

(i) the bidder (acting alone or together with an associate or associates)

(ii) an associate (acting alone or together with the bidder or another associate or associates of the bidder).

A purported condition of this kind is void.

Note: Section 9 defines defeating condition. Sections 630, 650F and 650G deal with defeating conditions.

(2) For the purposes of paragraph (1)(b):

(a) the target; and

(b) a subsidiary of the target;

are taken not to be associates of the bidder if they would otherwise be an associate merely because they are a related body corporate.

Note: Paragraph 11(b) makes related bodies corporate associates of each other.

630 Defeating conditions

Off-market bid may include defeating conditions

(1) Offers under an off-market bid may be made subject to a defeating condition only if the offers specify a date (not more than 14 days and not less than 7 days before the end of the offer period) for giving a notice on the status of the condition.

(2) If the offer period is extended by a period:

(a) the date for giving the notice is taken to be postponed for the same period; and

(b) as soon as practicable after the extension, the bidder must give a notice that states:

(i) the new date for giving the notice of the status of the condition; and

(ii) whether the offers have been freed from the condition and whether, so far as the bidder knows, the condition has been fulfilled on the date the notice under this subsection is given.

Bidder to give notice of status of defeating condition near end of offer period

(3) On the date determined under subsection (1) or (2), the bidder must give a notice that states:

(a) whether the offers are free of the condition; and

(b) whether, so far as the bidder knows, the condition was fulfilled on the date the notice is given; and

The bidder must comply with this subsection whether or not the bidder has given a notice under subsection (4) or 650F(1).

Note: The offers may be freed of the condition by a declaration by the bidder under subsection 650F(1).

Bidder to give notice if defeating condition fulfilled

(4) If the condition is fulfilled (so that the offers become free of the condition) during the bid period but before the date for publishing the notice on the status of the condition, the bidder must publish as soon as practicable a notice that states that the condition has been fulfilled.

(5) A notice under this section is given by:

(a) giving the notice to the target; and

(b) for quoted bid class securities—giving the notice to the relevant securities exchange; and

Part 6.5—The takeover procedure

Division 1—The overall procedure

631 Proposing or announcing a bid

Bid must proceed within 2 months after proposal

(1) If a person publicly proposes to make a takeover bid for securities in a company, either alone or with other persons, the person contravenes this subsection unless they make offers for the securities under a takeover bid within 2 months after the proposal. The terms and conditions of the bid must be the same as or not substantially less favourable than those in the public proposal.

Note: The Court has power under section 1325B to order a person to proceed with a bid.

Proposals if takeover bid not intended

(2) A person must not publicly propose, either alone or with other persons, to make a takeover bid if:

(a) the person knows the proposed bid will not be made, or is reckless as to whether the proposed bid is made; or

(b) the person is reckless as to whether they will be able to perform their obligations relating to the takeover bid if a substantial proportion of the offers under the bid are accepted.

(3) Section 1314 (continuing offences) and subsection 1324(2) (injunctions) do not apply in relation to a failure to make a takeover bid in accordance with a public proposal under subsection (1).

Note: For liability and defences for contraventions of this section, see sections 670E and 670F.

632 Overview of steps in an off-market bid

The following diagram gives an overview of the steps involved in an off-market bid.

Overview of steps in an off-market bid
	Bidder
Step 1	bidder’s statement (together with offer document)	——→	* ASIC * target * [exchange]

Step 2	notice that Step 1 done	——→	* ASIC

Step 3	bidder’s statement and offers	——→	* holders of bid class securities

Step 4	notice that Step 3 done	——→	* target * ASIC * [exchange]

	Target
Step 5	target’s statement	——→	* bidder * holders of bid class securities * ASIC * [exchange]
The holders then consider the terms of the offer, and the statements provided by the bidder and the target, and decide whether to accept the offer under section 653A before the end of the bid period. A holder may also decide to sell on-market during the bid period.

633 Detailed steps in an off-market bid

(1) The following table provides for the steps that a bidder must take to make an effective off-market bid and the steps that a target must take when an off-market bid is made.

Steps in off-market bid		[operative table]
	Steps	Timing and relevant provisions
1	The bidder must prepare: • a bidder’s statement; and • if the bidder’s statement does not set out all the terms of the offer—an offer document that sets out the other terms of the offer.	See section 636 for content of statement.
2	The bidder must lodge a copy of the bidder’s statement and offer document with ASIC.
3	The bidder must send a copy of the bidder’s statement and offer document to the target.	To be done on the day the bidder’s statement is lodged or within 21 days afterwards
4	The bidder must lodge with ASIC a notice stating that the bidder’s statement and offer document have been sent to the target.	To be done on the day the bidder’s statement is sent to the target
5	The bidder must send a copy of the bidder’s statement and offer document to each securities exchange that has a stock market on which the target’s securities are quoted.	To be done on the day the bidder’s statement is sent to the target See also subsection (5).
6	The bidder must send the bidder’s statement and offers to each person (other than the bidder) who holds: • securities in the bid class; or • if the bid extends to securities that come to be in the bid class due to the conversion of or exercise of rights attached to other securities (see subsection 617(2))—the other securities; as at the date set by the bidder under subsection (2). The offers must be made on the terms set out in the bidder’s statement and the offer document lodged with ASIC under item 2.	To be done: • within a 3 day period; and • within 14-28 days after the bidder’s statement is sent to the target The directors of the target may agree that the offers and accompanying documents be sent earlier. See also subsections (5) and (6.) Item 2 of the table in section 611 covers offers made by the bidder on-market during the period between the lodgement of the bidder’s statement and the making of the offers under the bid. Sections 648B and 648C provide for the manner in which documents may be sent to holders.
7	The bidder must send a notice to the target that the bidder’s statement and offers have been sent as required by item 6. The notice must state the date of the offers.	To be done on the day all offers have been sent as required by item 6 See subsection 620(1) on date of offer.
8	The bidder must send a notice that offers have been sent as required by item 6 to each securities exchange that has a stock market on which the target’s securities are quoted.	To be done on the day all offers have been sent as required by item 6
9	The bidder must lodge with ASIC a notice that offers have been sent as required by item 6.	To be done on the day all offers have been sent as required by item 6
10	The target must prepare a target’s statement.	See section 638 for content of statement.
11	The target must send the target’s statement (and any accompanying report) to the bidder.	To be done no later than 15 days after the target receives a notice that all offers have been sent as required by item 6
12	The target must send a copy of the target’s statement (and any accompanying report) to each person who holds: • securities in the bid class; or • if the bid extends to securities that come to be in the bid class due to the conversion of or exercise of rights attached to other securities (see subsection 617(2))—the other securities as at the date set by the bidder under subsection (2).	To be done: • no earlier than the day on which the target sends the target’s statement to the bidder; and • no later than 15 days after the target receives a notice that all offers have been sent as required by item 6 Sections 648B and 648C provide for the manner in which documents may be sent to holders.
13	The target must lodge a copy of the target’s statement (and any accompanying report) with ASIC.	To be done on the day the target’s statement is sent to the bidder See also subsection (7).
14	The target must send a copy of the target’s statement (and any accompanying report) to each securities exchange that has a stock market on which the target’s securities are quoted.	To be done on the day the target’s statement is sent to the bidder See also subsection (7).

Date for determining holders of securities

(2) The people to whom information is to be sent under items 6 and 12 of the table in subsection (1) are the holders of the securities referred to in those items as at the date set by the bidder in:

(a) the bidder’s statement; or

(b) a separate written notice given to the target on or before the date set by the bidder.

Note: The bidder may set the date when the bidder asks the target for a list of members under section 641.

(3) The date set by the bidder must be:

(a) on or after the date on which the bidder gives the bidder’s statement, or the separate written notice, to the target; and

(b) on or before the date on which the first offers under the bid are made to holders of the securities.

(4) As soon as practicable after setting the day, the bidder must give notice of it by:

(a) if the securities in the bid class are quoted—giving the notice to the relevant securities exchange; or

(b) otherwise—lodging the notice with ASIC.

Information to be sent with bidder’s statement

(5) A bidder’s statement required to be sent under item 5 or 6 in the table in subsection (1) must be sent together with any other information sent by the bidder to the target with the statement.

Information to be sent with notices that offers have been sent

(6) If the bidder sends the people to whom the bidder’s statement is sent under item 6 of the table in subsection (1) additional information together with the bidder’s statement and the offer, the bidder must also include that information in any notice under item 7, 8 or 9 of the table.

Information to be sent with target’s statement

(7) If the target sends the people to whom the target’s statement is sent under item 12 of the table in subsection (1) additional information together with the target’s statement, the target must also include that information in any notice under item 13 or 14 of the table.

634 Overview of steps in a market bid

The following diagram gives an overview of the steps involved in a market bid.

Overview of steps in a market bid
	Bidder
Step 1	announcement of bid to the exchange

Step 2	bidder’s statement	——→	* exchange * target * ASIC

Step 3	bidder’s statement and any other documents sent with it to the exchange	——→	* holders of bid class securities

Step 4	copy of documents sent to holders	——→	* exchange * ASIC

	Target
Step 5	target’s statement	——→	* exchange * bidder * ASIC * holders of bid class securities

	Bidder
Step 6	make offers on the exchange
The holders then consider the terms of the offer, and the statements provided by the bidder and the target, and decide whether to accept the offer on-market before the end of the bid period.

635 Detailed steps in a market bid

The following table provides for the steps that a bidder must take to make an effective market bid and the steps that a target must take when a market bid is made.

Steps in market bid		[operative]
	Steps	Timing and relevant provisions
1	The bidder must prepare a bidder’s statement.	See section 636 for content of statement
2	The bidder must have the bid announced to the relevant securities exchange.
3	The bidder must send a copy of the bidder’s statement to the relevant securities exchange.	To be done on the day the announcement is made
4	The bidder must send to the target: • a copy of the bidder’s statement; and • a copy of any other document that was sent with the bidder’s statement to the relevant securities exchange.	To be done on the day the announcement is made
5	The bidder must lodge with ASIC: • a copy of the bidder’s statement; and • a copy of any other document that was sent with the bidder’s statement to the relevant securities exchange.	To be done on the day the announcement is made
6	The bidder must send to each holder of bid class securities (other than the bidder): • a copy of the bidder’s statement; and • a copy of any other document that was sent with the bidder’s statement to the relevant securities exchange.	Within 14 days after the announcement is made Sections 648B and 648C provide for the manner in which documents may be sent to holders.
7	The bidder must lodge with ASIC a copy of every other document sent to holders of bid class securities with the bidder’s statement.	To be done no later than the day copies of the bidder’s statement have been sent to all holders of bid class securities
8	The bidder must give the relevant securities exchange a copy of every other document sent to holders of bid class securities with the bidder’s statement.	To be done no later than the day copies of the bidder’s statement have been sent to all holders of bid class securities
9	The target must prepare a target’s statement.	See section 638 for content of statement
10	The target must send a copy of the target’s statement to the relevant securities exchange.	Within 14 days after the announcement is made
11	The target must send to the bidder: • a copy of the target’s statement; and • a copy of any other document that was sent with the target’s statement to the relevant securities exchange.	To be done on the day the target sends a copy of the target’s statement to the securities exchange
12	The target must lodge with ASIC: • a copy of the target’s statement; and • a copy of any other document that was sent with the target’s statement to the relevant securities exchange.	To be done on the day the target sends a copy of the target’s statement to the securities exchange
13	The target must send each holder of bid class securities: • a copy of the target’s statement; and • a copy of any other document that was sent with the target’s statement to the relevant securities exchange.	Within 14 days after the announcement is made Sections 648B and 648C provide for the manner in which documents may be sent to holders.
14	The bidder must make offers for the securities under the bid through the relevant securities exchange.	To be done on the next day after the end of the 14 day period referred to in item 13. If the bidder does not make the offers at that time, the bidder contravenes this section. Item 2 of the table in section 611 covers offers made by the bidder on market during the 14 day period between the announcement and the making of the offers under the bid

Division 2—The bidder’s statement

636 Bidder’s statement content

(1) A bidder’s statement must include the following:

(a) the identity of the bidder

(b) the date of the statement

(i) the continuation of the business of the target; and

(ii) any major changes to be made to the business of the target, including any redeployment of the fixed assets of the target; and

(iii) the future employment of the present employees of the target

(d) if the target is a managed investment scheme—details of the bidder’s intentions regarding:

(i) the continued operation of the scheme; and

(ii) any major changes to be made to the operation of the scheme, including any redeployment of scheme property; and

(iii) any plans to remove the current responsible entity and appoint a new responsible entity

(e) for an off-market bid—a statement that the bidder’s statement has been lodged with ASIC but that ASIC takes no responsibility for the content of the statement

(f) in relation to the cash consideration (if any) offered under the bid—details of:

(i) the cash amounts (if any) held by the bidder for payment of the consideration; and

(ii) the identity of any other person who is to provide, directly or indirectly, cash consideration from that person’s own funds; and

(iii) any arrangements under which cash will be provided by a person referred to in subparagraph (ii)

(g) in relation to the cash consideration (if any) that might be payable under a compulsory buy-out under Part 6A.2 following the bid—details of the kind referred to in paragraph (f) in relation to the cash consideration

(h) if any securities are offered as consideration under the bid and the bidder is:

(i) the body that has issued or will issue the securities; or

(ii) a person who controls that body;

all material that would be required for a prospectus for an offer of those securities by the bidder under section 710 to 713

(i) if the bid is a mandatory bid—the terms of the acquisition that led to the bid being made including the number of securities affected and the consideration provided

(j) if the bidder or an associate provided, or agreed to provide, consideration for a security in the bid class under a purchase or agreement during the 4 months before the date of the bid—the following information about the consideration:

(i) to the extent to which the consideration is a cash sum—the amount per security of the cash sum

(ii) to the extent to which the consideration is quoted securities—the market price per security of those securities

(iii) to the extent to which the consideration is neither a cash sum nor a quoted security—the value per security of that consideration

(k) if the bid is to extend to securities that come to be in the bid class during the offer period due to the conversion of or exercise of rights attached to other securities (see subsection 617(2))—a statement to that effect

(l) for an off-market bid—the following details in relation to each class of securities in the target:

(i) the total number of securities in the class

(ii) the number of securities in the class that the bidder had a relevant interest in immediately before the first offer is sent (expressed as a number of securities or as a percentage of the total number of securities in the class)

(m) for an off-market bid—the bidder’s voting power in the company

(n) any other information that:

(i) is material to the making of the decision by a holder of bid class securities whether to accept an offer under the bid; and

(ii) is known to the bidder; and

(iii) does not relate to the value of securities offered as consideration under the bid.

The information that the bidder must disclose under subparagraph (l)(i) and paragraph (m) must be only as up-to-date as it is reasonable to expect in the circumstances. The bidder does not have to disclose information under paragraph (n) if it would be unreasonable to require the bidder to do so because the information had previously been disclosed to the holders of bid class securities.

Note: Paragraph (b)—see subsection 637(2) for the date of the statement.

Expert’s report on non-cash consideration provided for bid class securities in last 4 months

(2) If the bidder’s statement includes details of the value per share of consideration under subparagraph (1)(j)(iii), the statement must include, or be accompanied by, a report by an expert that states whether, in the expert’s opinion, the value stated is fair and reasonable and gives the reasons for forming that opinion.

Note: Subsections 648A(2) and (3) provide for the independence of the expert and disclosure of any association between the bidder and the expert or the target and the expert.

Consent of person to whom statement attributed

(3) The bidder’s statement may only include, or be accompanied by, a statement by a person, or a statement said in the bidder’s statement to be based on a statement by a person, if:

(a) the person has consented to the statement being included in the bidder’s statement, or accompanying it, in the form and context in which it is included; and

(b) the bidder’s statement states that the person has given this consent; and

(4) The bidder must keep the consent.

637 Bidder’s statement formalities

Approval

(1) The copy of the bidder’s statement that is lodged with ASIC must be approved by:

(a) for a bidder that is a body corporate:

(i) if the consideration offered under the bid is a cash sum only—a resolution passed by the directors of the bidder; or

(ii) otherwise—a unanimous resolution passed by all the directors of the bidder; or

(b) for a bidder who is an individual—the bidder.

(2) The bidder’s statement must be dated. The date is the date on which it is lodged with ASIC.

Division 3—The target’s response

638 Target’s statement content

General requirement

(1) A target’s statement must include all the information that holders of bid class securities and their professional advisers would reasonably require to make an informed assessment whether to accept the offer under the bid. The statement must contain this information:

(a) only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the statement; and

(b) only if the information is known to any of the directors of the target.

(2) In deciding what information should be included under subsection (1), have regard to:

(a) the nature of the bid class securities; and

(b) if the bid class securities are interests in a managed investment scheme—the nature of the scheme; and

(d) the fact that certain matters may reasonably be expected to be known to their professional advisers; and

(e) the time available to the target to prepare the statement.

Director’s recommendations

(3) A target’s statement must contain a statement by each director of the target:

(a) recommending that offers under the bid be accepted or not accepted, and giving reasons for the recommendation; or

(b) giving reasons why a recommendation is not made.

(4) The statement under subsection (3) must be made by:

(a) if the target is under administration—the liquidator or administrator; or

(b) if the target has executed a deed of company arrangement that has not yet terminated—the deed’s administrator.

Consent of person to whom statement attributed

(5) The target’s statement may only include, or be accompanied by, a statement by a person, or a statement said in the target’s statement to be based on a statement by a person, if:

(a) the person has consented to the statement being included in the target’s statement, or accompanying it, in the form and context in which it is included; and

(b) the target’s statement states that the person has given this consent; and

(6) The target must keep the consent.

639 Target’s statement formalities

Approval

(1) The copy of the target’s statement that is lodged with ASIC must be approved by:

(a) if paragraphs (b) and (c) do not apply—a resolution passed by the directors of the target; or

(b) for a target that is under administration—the liquidator or administrator; or

Date

(2) The target’s statement must be dated. The date is the date on which it is lodged with ASIC.

640 Expert’s report to accompany target’s statement if bidder connected with target

(1) If:

(a) the bidder’s voting power in the target is 30% or more; or

(b) for a bidder who is, or includes, an individual—the bidder is a director of the target; or

(d) the bid is a mandatory bid;

a target’s statement given in accordance with section 638 must include, or be accompanied by, a report by an expert that states whether, in the expert’s opinion, the takeover offers are fair and reasonable and gives the reasons for forming that opinion.

Note: Subsections 648A(2) and (3) provide for the independence of the expert and disclosure of any association between the target and the expert or the bidder and the expert.

(2) In determining whether the bidder’s voting power in the target is 30% or more, calculate the bidder’s voting power at the time the bidder’s statement is sent to the target.

641 Target must inform bidder about securities holdings

Requirement to inform bidder and information that must be given

(1) If the bidder has given a bidder’s statement to the target and requested the target to give the bidder information in accordance with this section, the target must inform the bidder of:

(a) the name and address of each person who, at a time specified by the bidder under subsection (2), held securities:

(i) in the bid class; or

(ii) convertible into securities in the bid class; and

(b) the type, and number of each type, of those securities held by the person at the specified time.

However, the target does not need to give information to the bidder about a person or their holding of securities unless the target knows the person’s name.

Time at which target’s information must be correct

(2) The bidder’s request must specify a day as at which the information must be correct. The day must be one that occurs after the day on which the bidder makes the request unless the target agrees to it being the day on which the bidder makes the request.

Form in which target must provide information

(3) The target must give the information to the bidder:

(a) in the form that the bidder requests; or

(b) if the target is unable to comply with the request—in writing.

(4) If the target must give the information to the bidder in electronic form, the information must be readable but the information need not be formatted for the bidder’s preferred operating system.

Fee for provision of information

(5) The target may require the bidder to pay an amount, not exceeding the prescribed amount, for the provision of the information to the bidder.

Time by which target must provide information

(6) The target must give the information to the bidder no later than the latest of the following times:

(a) the end of the second day after the day on which the bidder requested the information; or

(b) the end of the next day after the day as at which the information must be correct; or

642 Expenses of directors of target companies

(1) If the target is a company or body, the directors of the target have a right to recover from the target any expenses they reasonably incur in the interest of members of the target and in relation to the takeover bid. The directors have this right regardless of anything contained in the target’s constitution (if any).

(2) If the target is a managed investment scheme, the responsible entity for the scheme has a right to recover from scheme property any expenses it reasonably incurs in the interest of members of the scheme and in relation to the takeover bid. The responsible entity has this right regardless of anything contained in the scheme’s constitution.

Division 4—Updating and correcting the bidder’s statement and target’s statement

643 Supplementary bidder’s statement

If a bidder becomes aware of:

(a) a misleading or deceptive statement in the bidder’s statement; or

(b) an omission from the bidder’s statement of information required by section 636; or

(i) has arisen since the bidder’s statement was lodged; and

(ii) would have been required by section 636 to be included in the bidder’s statement if it had arisen before the bidder’s statement was lodged;

that is material from the point of view of a holder of bid class securities, the bidder must prepare a supplementary bidder’s statement that remedies this defect.

Note 1: The bidder must then send and lodge the supplementary bidder’s statement in accordance with section 647.

Note 2: Section 670A makes it an offence to give a bidder’s statement after the bidder has become aware of a misleading or deceptive statement, omission or new circumstance that is material from the point of view of a holder of securities to whom the statement is given (unless the deficiency is corrected).

Note 3: The power to issue a supplementary bidder’s statement is not limited to the situations dealt with in this section.

Note 4: This section applies to a bidder’s statement that has already been previously supplemented.

644 Supplementary target’s statement

If a target becomes aware of:

(a) a misleading or deceptive statement in the target’s statement; or

(b) an omission from the target’s statement of information required by section 638; or

(i) has arisen since the target’s statement was lodged; and

(ii) would have been required by section 638 to be included in the target’s statement if it had arisen before the target’s statement was lodged;

that is material from the point of view of a holder of bid class securities, the target must prepare a supplementary target’s statement that remedies this defect.

Note 1: The target must then send and lodge the supplementary target’s statement in accordance with section 647.

Note 2: Section 670A makes it an offence to give a target’s statement after the target has become aware of a misleading or deceptive statement, omission or new circumstance that is material from the point of view of a holder of securities to whom the statement is given (unless the deficiency is corrected).

Note 3: The power to issue a supplementary target’s statement is not limited to the situations dealt with in this section.

Note 4: This section applies to a target’s statement that has already been previously supplemented.

645 Form of supplementary statement

Identity as a supplementary statement

(1) At the beginning of a supplementary bidder’s or target’s statement there must be:

(a) a statement that it is a supplementary statement; and

(b) an identification of the statement it supplements; and

(d) a statement that it is to be read together with the statement it supplements and any previous supplementary statements.

Approval of supplementary bidder’s statement

(2) The copy of the supplementary bidder’s statement that is lodged with ASIC must be approved by:

(a) for a bidder that is a body corporate:

(i) if the consideration offered under the bid is a cash sum only—a resolution passed by the directors of the bidder; or

(ii) otherwise—a unanimous resolution passed by all the directors of the bidder; or

(b) for a bidder who is an individual—the bidder.

Approval of supplementary target’s statement

(3) The copy of a supplementary target’s statement that is lodged with ASIC must be approved by:

(a) if paragraphs (b) and (c) do not apply—a resolution passed by the directors of the target; or

(b) for a target that is under administration—the liquidator or administrator; or

Date

(4) A supplementary statement must be dated. The date is the date on which it is lodged with ASIC.

646 Consequences of lodging a supplementary statement

If a supplementary statement is lodged with ASIC, for the purposes of the application of this Chapter and Chapter 6B to events that occur after the lodgment, the bidder’s or target’s statement is taken to be the original statement together with the supplementary statement.

647 To whom supplementary statement must be sent

(1) A supplementary bidder’s statement must be sent to the target as soon as practicable.

(2) A supplementary target’s statement must be sent to the bidder as soon as practicable.

(3) Either kind of supplementary statement must as soon as practicable be:

(a) lodged with ASIC; and

(b) if the bid class securities are quoted and the target is listed—sent to each relevant securities exchange that has a stock market on which the target’s securities are quoted; and

(c) if the bid is an off-market bid and the bid class securities are not quoted—sent to all holders of bid class securities who have not accepted an offer under the bid.

Note: Sections 648B and 648C provide for the manner in which documents may be sent to holders.

Division 5—General rules on takeover procedure

Subdivision A—Experts’ reports

648A Experts’ reports

(1) If the bidder or target obtains 2 or more reports each of which could be used for the purposes of subparagraph 636(1)(j)(iii) or subsection 640(1), the bidder’s or target’s statement must be accompanied by a copy of each report.

(2) The expert must be someone other than an associate of the bidder or target.

(3) The report must set out details of:

(a) any relationship between the expert and:

(i) the bidder or an associate of the bidder; or

(ii) the target or an associate of the target;

including any circumstances in which the expert gives them advice, or acts on their behalf, in the proper performance of the functions attaching to the expert’s professional capacity or business relationship with them; and

(b) any financial or other interest of the expert that could reasonably be regarded as being capable of affecting the expert’s ability to give an unbiased opinion in relation to the matter being reported on; and

(c) any fee, payment or other benefit (whether direct or indirect) that the expert has received or will or may receive in connection with making the report.

Note: If the statement includes, or is accompanied by, the report, it must state that the expert has consented to this being done (see subsections 636(3) and 638(5)).

Subdivision B—Sending documents to holders of securities

648B Address at which bidder may send documents to holders of securities

The bidder may send a document to a holder of securities for the purposes of this Chapter at the address shown for the holder in the information given to the bidder by the target under section 641. This section does not limit the address to which the document may be sent to the holder.

Note: Section 109X makes general provision for service of documents.

648C Manner of sending documents to holders of securities

If a document must be sent to the holder of securities under this Chapter, the document must be sent:

(a) if the document is to be sent to the holder in an external territory or outside Australia—by pre-paid airmail post or by courier; or

(b) if the document is to be sent to the holder in Australia—by pre-paid ordinary post or by courier.

Subdivision C—Effect of proportional takeover approval provisions

648D Constitution may contain proportional takeover approval provisions

(1) Subject to this Subdivision, the constitution of a company may contain provisions to the effect that, if offers are made under a proportional takeover bid for securities of the company:

(a) the registration of a transfer giving effect to a takeover contract for the bid is prohibited unless and until a resolution (an approving resolution) to approve the bid is passed in accordance with the provisions; and

(b) a person (other than the bidder or an associate of the bidder) who, as at the end of the day on which the first offer under the bid was made, held bid class securities is entitled to vote on an approving resolution; and

(i) at a meeting, convened and conducted by the company, of the persons entitled to vote on the resolution;

(ii) by means of a postal ballot conducted by the company in accordance with a procedure set out in the provisions;

or, if the provisions so provide, in whichever of those ways is determined by the directors of the company; and

(d) an approving resolution that has been voted on is taken to have been passed if the proportion that the number of votes in favour of the resolution bears to the total number of votes on the resolution is greater than the proportion specified in the provisions, and otherwise is taken to have been rejected.

The proportion specified under paragraph (d) must not exceed 50%.

Note: Section 9 defines proportional takeover bid. See paragraph 618(1)(b).

(2) To be effective, an approving resolution in relation to a proportional takeover bid must be passed before the approving resolution deadline. The deadline is the 14th day before the last day of the bid period.

Note: In certain circumstances, an approving resolution will be taken to have been passed (see subsection 648E(3)).

(3) Except to the extent to which a company’s constitution provides otherwise:

(a) the provisions that apply to a general meeting of the company apply, with such modifications as the circumstances require, to a meeting convened under the company’s proportional takeover approval provisions; and

(b) those provisions apply as if the meeting convened under the proportional takeover provisions were a general meeting of the company.

The provisions referred to in paragraph (a) may be the provisions of a law, provisions of the company’s constitution or any other provisions.

648E Resolution to be put if proportional bid made

(1) If:

(a) a company’s constitution contains proportional takeover approval provisions; and

(b) offers are made under a proportional bid for a class of the company’s securities;

then:

(c) the company’s directors must ensure that a resolution to approve the bid is voted on in accordance with those provisions before the approving resolution deadline; and

(d) if the directors fail to ensure that a resolution of that kind is voted on before the deadline, each of the directors contravenes this subsection.

Note: Subsection 648D(2) sets the approving resolution deadline.

(2) If a resolution to approve the bid is voted on in accordance with the proportional takeover approval provisions before the approving resolution deadline, the company must, on or before the deadline, give:

(a) the bidder; and

(b) if the company is listed—each relevant securities exchange;

a written notice stating that a resolution to approve the bid has been voted on and whether the resolution was passed or rejected.

(3) If no resolution to approve the bid has been voted on in accordance with the proportional takeover approval provisions as at the end of the day before the approving resolution deadline, a resolution to approve the bid is taken, for the purposes of those provisions, to have been passed in accordance with those provisions.

648F Effect of rejection of approval resolution

If a resolution to approve the bid is voted on, in accordance with the proportional takeover approval provisions, before the approving resolution deadline and is rejected:

(a) despite section 652A:

(i) all offers under the bid that have not been accepted as at the end of deadline; and

(ii) all offers under the bid that have been accepted, and from whose acceptance binding contracts have not resulted, as at the end of the deadline;

are taken to be withdrawn at the end of the deadline; and

(b) as soon as practicable after the deadline, the bidder must return to each person who has accepted an offer referred to in subparagraph (a)(ii) any documents that the person sent the bidder with the acceptance of the offer; and

(i) is entitled to rescind; and

(ii) must rescind as soon as practicable after the deadline;

each binding takeover contract for the bid; and

(d) a person who has accepted an offer made under the bid is entitled to rescind their takeover contract.

648G Including proportional takeover provisions in constitution

(1) A company’s proportional takeover approval provisions, unless sooner omitted from the constitution of the company, cease to apply at the end of:

(a) unless paragraph (b) or (c) applies—3 years;

(b) if the constitution provides that the provisions apply for a specified period of less than 3 years and the provisions have not been renewed—the specified period; or

(c) if the provisions have been renewed on at least one occasion and the resolution, or the most recent resolution, renewing the provisions states that the provisions are renewed for a specified period of less than 3 years—the specified period.

(2) The period referred to in subsection (1) starts:

(a) if the provisions were contained in the company’s constitution when it was incorporated or formed and have not been renewed—at that time; or

(b) if the provisions were inserted in the company’s constitution and have not been renewed—when the provisions were inserted; or

(3) When the provisions cease to apply, the company’s constitution is, by force of this subsection, altered by omitting the provisions.

(4) A company may renew its proportional takeover approval provisions. The provisions are to be renewed in the same manner as that in which the company could alter its constitution to insert proportional takeover approval provisions.

(5) With every notice that:

(a) specifies the intention to propose:

(i) a resolution to alter a company’s constitution by inserting proportional takeover approval provisions; or

(ii) a resolution to renew a company’s proportional takeover approval provisions; and

(b) is sent to a person who is entitled to vote on the proposed resolution;

the company must send a statement that:

(d) explains the reasons for proposing the resolution and sets out the factual matters and principles underlying those reasons; and

(e) states whether, as at the day on which the statement is prepared, any of the directors of the company is aware of a proposal by a person to acquire, or to increase the extent of, a substantial interest in the company and, if so, explains the extent (if any) to which the proposal has influenced the decision to propose the resolution; and

(f) for a proposed resolution to renew proportional takeover approval provisions—reviews both the advantages, and disadvantages, of the provisions proposed to be renewed for:

(i) the directors; and

(ii) the company’s members;

during the period during which the provisions have been in effect; and

(g) discusses both the potential advantages, and the potential disadvantages, of the proposed provisions, or of the provisions proposed to be renewed, for:

(i) the directors; and

(ii) the company’s members.

(6) If, on a particular day, a company purports to:

(a) alter its constitution by inserting proportional takeover approval provisions; or

(b) renew its proportional takeover approval provisions;

then:

(c) holders who together hold not less than 10% (by number) of the issued securities in a class of securities in the company to which the provisions apply may, within 21 days after that day, apply to the Court to have the purported alteration or renewal set aside to the extent to which it relates to that class; and

(d) unless and until an application made under paragraph (c) is finally determined by the making of an order setting aside the purported alteration or renewal to that extent, the company is taken for all purposes (other than the purposes of an application of that kind):

(i) to have validly altered its constitution by inserting the provisions referred to in paragraph (a) applying to that class; or

(ii) to have validly renewed the provisions referred to in paragraph (b) applying to that class.

(7) An application under paragraph (6)(c) may be made, on behalf of the holders entitled to make the application, by a holder or holders appointed by them in writing.

(8) On an application under paragraph (6)(c), the Court may make an order setting aside the purported alteration or renewal to the extent to which it applies to that class if it is satisfied that it is appropriate in all the circumstances to do so. Otherwise the Court must dismiss the application.

(9) Within 14 days after the day on which the Court makes an order of the kind referred to in subsection (8) in relation to a company, the company must lodge a copy of the order with ASIC.

648H Effect of Subdivision

This Subdivision applies notwithstanding anything contained in:

(a) the business rules or listing rules of a securities exchange; or

(b) the constitution of a company; or

Part 6.6—Variation of offers

Division 1—Market bids

649A General

A bidder may only vary the offers under a market bid in accordance with section 649B or 649C.

Note: ASIC may allow other variations under section 655A.

649B Market bids—raising bid price

The bidder may increase the current market bid price. They may not do so, however, during the last 5 trading days of the relevant securities exchange in the offer period.

649C Market bids—extending the offer period

(1) The bidder may extend the offer period. The extension must be announced to the relevant securities exchange at least 5 trading days of the exchange before the end of the offer period. However, the announcement may be made up to the end of the offer period if during those 5 trading days:

(a) another person lodges with ASIC a bidder’s statement for a takeover bid for securities in the bid class; or

(b) another person announces a takeover bid for securities in the bid class; or

(d) the consideration for offers under another takeover bid for securities in the bid class is improved.

The offer period is extended by having the extension announced to the relevant securities exchange.

Note: Section 624 provides for an automatic extension of the bid period in certain circumstances.

(2) On the day on which the announcement is made, the bidder must:

(a) give the target and the relevant securities exchange a notice setting out the terms of the announcement; and

(b) lodge a notice setting out the terms of the announcement with ASIC.

Division 2—Off-market bids (express variation by bidder)

650A General

(1) A bidder may only vary the offers under an off-market bid in accordance with section 650B, 650C or 650D.

Note: ASIC may allow other variations under section 655A.

(2) If the bidder varies the offer under an off-market bid in accordance with section 650B, 650C or 650D, the bidder must vary all unaccepted offers under the bid in the same way.

Note: Subsections 650B(2) and (3) deal with the effect of a variation on takeover contracts that have already resulted from acceptances of offers under the bid when the variation is made.

650B Off-market bids—consideration offered

Improving the consideration offered

(1) The bidder may vary the offers made under the bid to improve the consideration offered:

(a) by increasing a cash sum offered; or

(b) by increasing the number of securities offered; or

(d) by increasing the amount or value of debentures offered; or

(e) by increasing the number of unissued securities that may be acquired under the options offered; or

(f) by offering a cash sum in addition to the securities; or

(g) if the securities being acquired include shares to which rights to accrued dividends are attached—by giving the holders the right to:

(i) retain the whole or a part of the dividend; or

(ii) be paid an amount equal to the amount of the dividend;

in addition to the consideration already offered; or

(h) offering an additional alternative form of consideration.

Note: If the bidder increases the consideration during the last 7 days of the offer period, subsection 624(2) extends the offer period by a further 14 days.

Effect of increase in consideration on offers already accepted

(2) Improving the consideration has the effects set out in the table on the rights of a person who has already accepted an offer when the variation is made:

Effect of improving consideration		[operative]
	Improvement	Effect on person who has already accepted bid offer
1	improvement of the only form of consideration being offered	entitled to the improved consideration
2	2 or more forms of consideration offered and all forms improved by the same factor or percentage	entitled to the improvement in the form of consideration accepted
3	2 or more forms of consideration offered and improvement in the consideration is identical for all forms	entitled to the improvement in the form of consideration accepted
4	addition of a new form of consideration	entitled to make a fresh election as to the form of consideration to be taken
5	any other improvement	entitled to make a fresh election as to the form of consideration to be taken

The person is entitled to receive the improved consideration immediately, or immediately after the exercise of the election.

Fresh election as to the form of consideration

(3) If a person who has already accepted an offer has the right to make a fresh election as to the form of consideration to be taken, the bidder must send the person as soon as practicable after the variation a written notice informing them about their right to make the election.

Note 1: Section 651B says how the election is to be exercised.

Note 2: Sections 648B and 648C provide for the manner in which documents may be sent to holders.

650C Off-market bids—extension of offer period

(1) A bidder making an off-market bid may extend the offer period at any time before the end of the offer period.

(2) If the bid is subject to a defeating condition, the bidder may extend the offer period after the publication of the notice under subsection 630(3) only if one of the following happens after the publication:

(a) another person lodges with ASIC a bidder’s statement for a takeover bid for securities in the bid class

(b) another person announces a takeover bid for securities in the bid class

(d) the consideration for offers under another takeover bid for securities in the bid class is improved.

Note: Section 624 says how long the total offer period can be.

650D Off-market bids—method of making variation

Variation to be made by notice to the target and holders

(1) To vary offers under an off-market bid, the bidder must:

(a) prepare a notice that:

(i) sets out the terms of the proposed variation; and

(ii) if the bid is subject to a defeating condition and the proposed variation postpones for more than 1 month the time by which the bidder must satisfy their obligations under the bid—informs people about the right to withdraw acceptances under section 650E; and

(b) lodge the notice with ASIC; and

(i) the target; and

(ii) everyone to whom offers were made under the bid.

Note: Sections 648B and 648C provide for the manner in which documents may be sent to holders.

(2) A person must be sent a copy of the notice under subparagraph (1)(c)(ii) even if they have already accepted the offer. However, they need not be sent a copy if:

(a) the variation merely extends the offer period; and

(b) the bid is not subject to a defeating condition at the time the notice is given to the target.

(3) A notice under subsection (1) must be signed by:

(a) if the bidder is, or includes, an individual—the individual; and

(b) if the bidder is, or includes, a body corporate with 2 or more directors—not fewer than 2 of the directors who are authorised to sign the notice by a resolution passed at a directors’ meeting; and

(4) A copy of a notice given to a person under subparagraph (1)(c)(ii) must include a statement that:

(a) a copy of the notice was lodged with ASIC on a specified date; and

(b) ASIC takes no responsibility for the contents of the notice.

650E Right to withdraw acceptance

(1) A person who accepts an offer made under an off-market bid may withdraw their acceptance of the offer if:

(a) the bid is subject to a defeating condition; and

(b) the bidder varies the offers under the bid in a way that postpones for more than 1 month the time when the bidder has to meet their obligations under the bid; and

(2) To withdraw their acceptance, the person must:

(a) give the bidder notice within 1 month beginning on the day after the day on which the copy of the notice of the variation was received; and

(b) return any consideration received by the person for accepting the offer.

(3) A notice under paragraph (2)(a):

(a) if it relates to securities that are entered on an SCH subregister—must be in an electronic form approved by the SCH business rules for the purposes of this Part; or

(b) if it relates to shares that are not entered on an SCH subregister—must be in writing.

(4) To return consideration that includes securities, the person must:

(a) if the securities are entered on an SCH subregister—take the action that the SCH business rules require in relation to the return of the securities; or

(b) otherwise—give the bidder any transfer documents needed to effect the return of securities.

(5) If the person withdraws their acceptance, the bidder must:

(a) take any action that the SCH business rules require in relation to any of the securities to which the acceptance relates that are entered on an SCH subregister; and

(b) return any documents that the person sent the bidder with the acceptance of the offer;

within 14 days after:

. (c) if the person does the things referred to in subsection (2) on the same day—that day; or

(d) if the person does those things on different days—the last of those days.

(6) If under this section a person returns to a company any certificates (together with any necessary transfer documents) in respect of the securities issued by the company, the company must cancel those securities as soon as possible. Any reduction in share capital is authorised by this subsection.

650F Freeing off-market bids from defeating conditions

(1) If the offers under an off-market bid are subject to a defeating condition, the bidder may free the offers, and the takeover contracts, from the condition only by giving the target a notice declaring the offers to be free from the condition in accordance with this section:

(a) if the condition is that the bidder may withdraw unaccepted offers if an event or circumstance referred to in subsection 652C(1) or (2) occurs in relation to the target—not later than 3 business days after the end of the offer period; or

(b) in any other case—not less than 7 days before the end of the offer period.

(2) The notice must:

(a) state that the offers are free from the condition; and

(b) specify the bidder’s voting power in the company.

(3) The notice must be:

(a) if the securities in the bid class are quoted—given to the relevant securities exchange; and

(b) if those securities are not quoted—lodged with ASIC.

650G Contracts and acceptances void if defeating condition not fulfilled

All takeover contracts, and all acceptances that have not resulted in binding takeover contracts, for an off-market bid are void if:

(a) offers made under the bid have at any time been subject to a defeating condition; and

(b) the bidder has not declared the offers to be free from the condition within the period before the date applicable under subsection 630(1) or (2); and

A transfer of securities based on an acceptance or contract that is void under this section must not be registered.

Division 3—Off-market bids (automatic variations)

651A Off-market bid—effect on bid consideration of purchases made outside bid

Effect of purchases outside bid on offers made under the bid

(1) The offers made under an off-market bid, and the takeover contracts, are varied under this section if:

(a) the consideration, or 1 of the forms of consideration, payable under the bid consists of a cash sum only; and

(b) the bidder purchases securities in the bid class outside the bid during the bid period and the consideration for that purchase:

(i) consists solely of a cash sum; and

(ii) is higher than the cash sum payable for the securities under the bid.

Note 1 Section 9 defines takeover contract.

Note 2: Section 623 prevents the bidder from making purchases outside the bid for better non-cash consideration without formally varying the bid offers.

Effect on unaccepted cash offers

(2) If:

(a) one of the forms of consideration offered to a person under an off-market bid is a cash sum only; and

(b) the person has not accepted the offer before the purchase outside the bid occurs;

the cash sum is taken to be increased to the highest outside purchase price before the offer is accepted.

Effect on cash offers already accepted

(3) The consideration payable for each security covered by a takeover contract arising from the acceptance of an offer for a cash sum only is increased to the highest outside purchase price. If the person who accepted the offer has already received the whole or any part of the consideration under the contract, they are entitled to receive the increase in consideration immediately.

Effect of cash purchase on non-cash offers already accepted

(4) If the consideration paid or provided, or to be paid or provided, under a takeover contract arising from the acceptance of an offer does not consist of a cash sum only:

(a) the person who accepted the offer may elect to take as consideration for each security covered by the takeover contract a cash sum equal to the highest outside purchase price instead of the consideration they originally accepted; and

(b) the bidder must give the person who accepted the offer a written notice of their right to make the election within 14 days after the end of the offer period.

Note: Section 651B says how the election is to be exercised.

651B How to make an election for new forms of consideration

(1) An election under section 650B or 651A to take a new form of consideration must be made:

(a) by written notice to the bidder; and

(b) within 1 month after the person receives the notice from the bidder of their right to make the election.

(2) The person becomes entitled to the new form of consideration if they:

(a) make the election; and

(b) return to the bidder:

(i) any consideration they have already received; and

(ii) any necessary transfer documents.

651C Returning securities as part of election

If under section 651B a person returns to a company any certificates (together with any necessary transfer documents) in respect of the securities issued by a company, the company must cancel those securities as soon as possible.

Part 6.7—Withdrawal and suspension of offers

652A Withdrawal of unaccepted offers under takeover bid

Unaccepted offers under a takeover bid may only be withdrawn under section 652B or 652C.

652B Withdrawal of takeover offers with ASIC consent

Unaccepted offers under a takeover bid may be withdrawn with the written consent of ASIC. ASIC may consent subject to conditions.

652C Withdrawal of market bids

Bidder entitled to withdraw if certain events happen during the offer period

(1) The bidder may withdraw unaccepted offers made under a market bid if 1 of the following happens during the bid period, but only if the bidder’s voting power in the target is at or below 50% when the event happens:

(a) the target converts all or any of its shares into a larger or smaller number of shares (see section 254H)

(b) the target or a subsidiary resolves to reduce its share capital in any way

(i) enters into a buy-back agreement; or

(ii) resolves to approve the terms of a buy-back agreement under subsection 257C(1) or 257D(1)

(d) the target or a subsidiary issues shares, or grants an option over its shares, or agrees to make such an issue or grant such an option

(e) the target or a subsidiary issues, or agrees to issue, convertible notes

(f) the target or a subsidiary disposes, or agrees to dispose, of the whole, or a substantial part, of its business or property

(g) the target or a subsidiary charges, or agrees to charge, the whole, or a substantial part, of its business or property

(h) the target or a subsidiary resolves to be wound up.

This subsection does not apply to a mandatory bid.

(2) The bidder may also withdraw unaccepted offers made under a market bid if 1 of the following happens during the bid period:

(a) a liquidator or provisional liquidator of the target or of a subsidiary is appointed

(b) a court makes an order for the winding up of the target or of a subsidiary

(d) the target or a subsidiary executes a deed of company arrangement

(e) a receiver, or a receiver and manager, is appointed in relation to the whole, or a substantial part, of the property of the target or of a subsidiary.

This is so regardless of the bidder’s voting power at the time.

(3) Notice of the withdrawal must be given to each relevant securities exchange.

Part 6.8—Acceptances

653A Acceptance of offers made under off-market bid

If:

(a) an offer is made under an off-market bid for quoted securities; and

(b) the SCH business rules require that an acceptance of the offer, so far as it relates to those securities, must be made in a particular way;

an acceptance of the offer for those securities is effective only if it is made in that way.

653B Acceptances by transferees and nominees of offers made under off-market bid

(1) If an off-market bid is made for securities:

(a) a person who:

(i) is able during the offer period to give good title to a parcel of those securities; and

(ii) has not already accepted an offer under the bid;

may accept as if an offer on terms identical with the other offers made under the bid had been made to that person in relation to those securities; and

(b) a person who holds 1 or more parcels of those securities as trustee or nominee for, or otherwise on account of, another person may accept as if a separate offer had been made in relation to:

(i) each of those parcels; and

(ii) any parcel they hold in their own right.

If a person accepts an offer under a proportional takeover bid, no-one else may accept an offer under the bid in respect of the remainder of that person’s securities.

Note: Section 9 defines proportional takeover bid. See paragraph 618(1)(b).

(2) For the purposes of this section:

(a) a person is taken to hold securities if the person is, or is entitled to be registered as, the holder of the securities; and

(b) a person is taken to hold the securities on trust for, as nominee for or on account of another person if they:

(i) are entitled to be registered as the holder of particular securities; and

(ii) hold their interest in the securities on trust for, as nominee for or on account of that other person.

(3) If under paragraph (1)(b) a person may accept as if a separate offer is taken to be made to a person for a parcel of securities within a holding, an acceptance of that offer is ineffective unless:

(a) the person gives the bidder a notice stating that the securities consist of a separate parcel; and

(b) the acceptance specifies the number of securities in the parcel.

(4) A notice under subsection (3) must be made:

(a) if it relates to securities that are entered on an SCH subregister—in an electronic form approved by the SCH business rules for the purposes of this Part; or

(b) if it relates to shares that are not entered on an SCH subregister—in writing.

(5) A person contravenes this subsection if:

(a) they purport to accept an offer under this section; and

(b) the acceptance is not made in accordance with this section.

The acceptance is, however, as valid as it would have been if it had been made in accordance with this section.

(6) A person may, at the one time, accept for 2 or more parcels under this section as if there had been a single offer for a separate parcel consisting of those parcels.

Part 6.9—Other activities during the bid period

654A Bidder not to dispose of securities during the bid period

(1) The bidder must not dispose of any securities in the bid class during the bid period.

(2) Subsection (1) does not apply to a disposal of securities by the bidder if:

(a) someone else who is not an associate of the bidder makes an offer, or improves the consideration offered, under a takeover bid for securities in the bid class after the bidder’s statement is given to the target; and

(b) the bidder disposes of the securities after the offer is made or the consideration is improved.

654B Disclosures by listed companies

During the bid period, substantial shareholding notices that need to be lodged under section 671B must be lodged by 9.30 am the next business day (rather than the usual 2 days).

654C Disclosures by unlisted companies

(1) A bidder making a bid for securities of an unlisted company must give the target a notice stating the bidder’s voting power in the target if, at a particular time during the bid period, the bidder’s voting power in the target rises from below a percentage in the following list to that percentage or higher:

(a) 25%

(b) 50%

(d) 90%.

(2) The notice must be given as soon as practicable, and in any event within 2 business days, after the rise in voting power occurred.

(3) The target must:

(a) make the notice available at its registered office for inspection without charge by any holder of bid class securities during the bid period; and

(b) lodge the notice with ASIC.

Part 6.10—Review and intervention

Division 1—ASIC’s power to exempt and modify

655A ASIC’s power to exempt and modify

(1) ASIC may:

(a) exempt a person from a provision of this Chapter; or

(b) declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

Note: Under section 656A, the Panel has power to review the exercise by ASIC of its powers under this section.

(2) In deciding whether to give the exemption or declaration, ASIC must consider the purposes of this Chapter set out in section 602.

(3) The exemption or declaration may:

(a) apply to all or specified provisions of this Chapter; and

(b) apply to all persons, specified persons, or a specified class of persons; and

(d) relate to any other matter generally or as specified.

(4) An exemption may apply unconditionally or subject to specified conditions. A person to whom a condition specified in an exemption applies must comply with the condition. The Court may order the person to comply with the condition in a specified way. Only ASIC may apply to the Court for the order.

(5) The exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette.

(6) For the purposes of this section, the provisions of this Chapter include:

(a) regulations made for the purposes of this Chapter; and

(b) definitions in this Law or the regulations as they apply to references in:

(i) this Chapter; or

(ii) regulations made for the purposes of this Chapter; and

655B Notice of decision and review rights

(1) Subject to subsection (3), ASIC must take such steps as are reasonable in the circumstances to give to each person whose interests are affected by a decision under a section 655A notice, in writing or otherwise:

(a) of the making of the decision; and

(b) of the person’s right to have the decision reviewed by the Panel under section 656A.

(2) Subsection (1) does not require ASIC to give notice to a person affected by the decision or to the persons in a class of persons affected by the decision, if ASIC determines that giving notice to the person or persons is not warranted, having regard to:

(a) the cost of giving notice to the person or persons; and

(b) the way in which the interests of the person or persons are affected by the decision.

(3) A failure to comply with this section does not affect the validity of the decision.

Division 2—The Corporations and Securities Panel

Subdivision A—Review of ASIC’s exercise of its exemption or modification powers

656A Review of exercise of exemption or modification powers

(1) The Panel may review:

(a) a decision of ASIC under section 655A; or

(b) a decision of ASIC under section 673 in relation to securities of the target of a takeover bid during the bid period.

For these purposes, decision has the same meaning as in the Administrative Appeals Tribunal Act 1975.

(2) An application to the Panel for review of the decision may be made by any person whose interests are affected by the decision.

(3) For the purpose of reviewing the decision, the Panel may exercise all the powers and discretions conferred on ASIC by this Chapter or Chapter 6C. The Panel must make a decision:

(a) affirming the decision; or

(b) varying the decision; or

(i) making a decision in substitution for the decision under review; or

(ii) remitting the matter for reconsideration by ASIC in accordance with any directions or recommendations of the Panel.

(4) The decision must be in writing and published in the Gazette.

(5) If the Panel varies an ASIC decision, or makes a decision in substitution for an ASIC decision:

(a) the ASIC decision as varied, or the substituted decision, is taken for all purposes (other than the purposes of applications to the Panel for review in accordance with this section) to be a decision of ASIC under section 655A; and

(b) when the Panel’s determination on the review comes into operation, the ASIC decision as varied, or the substituted decision, has effect, or is taken to have had effect, on and from the day on which the ASIC decision has or had effect.

Paragraph (b) applies unless the Panel otherwise orders.

656B Operation and implementation of a decision that is subject to review

(1) Subject to this section, applying to the Panel under section 656A for review of an ASIC decision does not:

(a) affect the operation of the decision; or

(b) prevent the taking of action to implement the decision.

(2) On application by a party to the proceedings before the Panel, the Panel may:

(a) make an order staying, or otherwise affecting the operation or implementation of, the whole or a part of the decision if the Panel considers that:

(i) it is desirable to make the order after taking into account the interests of any person who may be affected by the review; and

(ii) the order is appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review; or

(b) make an order varying or revoking an order made under paragraph (a) (including an order that has previously been varied on one or more occasions under this paragraph).

(3) Subject to subsection (4), the Panel must not:

(a) make an order under paragraph (2)(a) unless ASIC has been given a reasonable opportunity to make a submission to the Panel in relation to the matter; or

(b) make an order under paragraph (2)(b) unless:

(i) ASIC; and

(ii) the person who requested the making of the order under paragraph (2)(a); and

(iii) if the order under paragraph (2)(a) has previously been varied by an order or orders under paragraph (2)(b)—the person or persons who applied for the last-mentioned order or orders;

have been given a reasonable opportunity to make submissions to the Panel in relation to the matter.

(4) Subsection (3) does not prohibit the Panel from making an order without giving to a person referred to in that subsection a reasonable opportunity to make a submission to the Panel in relation to a matter if the Panel is satisfied that, by reason of the urgency of the case or otherwise, it is not practicable to give that person such an opportunity. If an order is so made without giving such an opportunity to ASIC, the order does not come into operation until a notice setting out the terms of the order is served on ASIC.

(5) An order in force under paragraph (2)(a) (including an order that has previously been varied on one or more occasions under paragraph (2)(b)):

(a) is subject to the conditions that are specified in the order; and

(b) has effect until:

(i) if a period for the operation of the order is specified in the order—the end of that period or, if the application for review is decided by the Panel before the end of that period, the decision of the Panel on the application for review comes into operation; or

(ii) if a period for the operation of the order is not specified in the order—the decision of the Panel on the application for review comes into operation.

Subdivision B—Unacceptable circumstances

657A Declaration of unacceptable circumstances

(1) The Panel may declare circumstances in relation to the affairs of a company to be unacceptable circumstances. Without limiting this, the Panel may declare circumstances to be unacceptable circumstances whether or not the circumstances constitute a contravention of a provision of this Law.

Note: Sections 659B and 659C deal with court proceedings during and after a takeover bid.

(2) The Panel may only declare circumstances to be unacceptable circumstances if it appears to the Panel that:

(a) the circumstances are unacceptable having regard to the effect of the circumstances on:

(i) the control, or potential control, of the company or another company; or

(ii) the acquisition, or proposed acquisition, by a person of a substantial interest in the company or another company; and

(b) it is in the public interest to make the declaration.

(3) In exercising its powers under this section, the Panel:

(a) must have regard to the purposes of this Chapter set out in section 602; and

(b) may have regard to any other matters it considers relevant.

In having regard to the purpose set out in paragraph 602(c) in relation to an acquisition, or proposed acquisition, of a substantial interest in a company, body or scheme, the Panel must take into account the actions of the directors of the company or body or the responsible entity for a scheme (including actions that caused the acquisition not to proceed or contributed to it not proceeding).

(4) The Panel must give an opportunity to make submissions in relation to the matter to:

(a) each person to whom a proposed declaration relates; and

(b) each party to the proceedings; and

(5) The declaration must be in writing and published in the Gazette.

(6) As soon as practicable, the Panel must give each person to whom the declaration relates:

(a) a copy of the declaration; and

(b) a written statement of the Panel’s reasons for making the declaration.

(7) This section does not require the Panel to perform a function, or exercise a power, in a particular way in a particular case.

657B When Panel may make declaration

The Panel can only make a declaration under section 657A within:

(a) 3 months after the circumstances occur; or

(b) 1 month after the application under section 657C for the declaration was made;

whichever ends last. The Court may extend the period on application by the Panel.

657C Applying for declarations and orders

(1) The Panel may make a declaration under section 657A, or an order under section 657D or 657E, only on an application made under this section.

(2) An application for a declaration under section 657A or an order under section 657D or 657E may be made by:

(a) the bidder; or

(b) the target; or

(d) any other person whose interests are affected by the relevant circumstances.

Note: The Administrative Appeals Tribunal cannot review ASIC’s decision whether to apply to the Panel (see paragraph 1317C(gc)).

(3) An application for a declaration under section 657A can be made only within:

(a) 2 months after the circumstances have occurred; or

(b) a longer period determined by the Panel.

657D Orders that Panel may make following declaration

(1) The Panel may make an order under subsection (2) if it has declared circumstances to be unacceptable under section 657A. It must not make an order if it is satisfied that the order would unfairly prejudice any person. Before making the order, the Panel must give:

(a) each person to whom a proposed order relates; and

(b) each party to the proceedings; and

an opportunity to make submissions to the Panel about the matter

(2) The Panel may make any order (including a remedial order but not including an order directing a person to comply with a requirement of Chapter 6, 6A, 6B or 6C) that it thinks appropriate to:

(a) protect the rights or interests of any person affected by the circumstances; or

(b) ensure that a takeover bid or proposed takeover bid in relation to securities proceeds (as far as possible) in a way that it would have proceeded if the circumstances had not occurred; or

(d) determine who is to bear the costs of the parties to the proceedings before the Panel;

regardless of whether it has previously made an order under this subsection or section 657E in relation to the declaration. The Panel may also make any ancillary or consequential orders that it thinks appropriate.

Note: Section 9 defines remedial order.

(3) The Panel may vary, revoke or suspend an order made under this section. Before doing so, it must give an opportunity to make submissions in relation to the matter to:

(a) each person to whom the order is directed; and

(b) each party to the proceedings in which the order was made; and

(4) If the Panel makes an order under this section, the Panel must give a copy of the order, and a written statement of its reasons for making the order, to:

(a) each party to the proceedings before the Panel; and

(b) each person to whom the order is directed if they are not a party to the proceedings; and

(d) ASIC.

The Panel must also publish the order in the Gazette. The order takes effect as soon as it is made and not when all the requirements of this subsection are met.

(5) If the Panel makes an order of the kind referred to in paragraph (j) of the definition of remedial order, the exercise of rights attached to shares is to be disregarded as provided in the order.

(6) If the Panel makes an order of the kind referred to in paragraph (k) of the definition of remedial order, then, by force of this subsection, the agreement or offer specified in the order is cancelled, or becomes voidable, as from the making of the order or the later time that is specified in the order.

657E Interim orders

(1) The Panel, or the President of the Panel, may make an interim order of a kind referred to in subsection 657D(2) in relation to circumstances even if:

(a) there is no declaration under section 657A that the circumstances are unacceptable; or

(b) no application to the Panel for a declaration of that kind has been made.

The order must specify the period (not exceeding 2 months) for which it is to have effect.

(2) The order ceases to have effect:

(a) at the end of the period specified in the order; or

(b) if, before the end of that period, proceedings for a declaration under section 657A in relation to the circumstances (and all related proceedings for an order under section 657D) are determined—when those proceedings are determined.

657F Offence to contravene Panel order

A person who contravenes an order made under section 657D or 657E commits an offence.

657G Orders by the Court where Panel order contravened

(1) If a person contravenes an order made by the Panel under section 657D or 657E, the Court may make any order it considers appropriate to secure compliance with the Panel’s order, including:

(a) 1 or more remedial orders; and

(b) an order directing a person to do, or to refrain from doing, a specified act.

Note: Section 9 defines remedial order.

(2) An application for an order under this section may only be made by ASIC.

657H ASIC may publish report about application to Panel or Court

(1) ASIC may publish a report, statement or notice in relation to an application it has made for:

(a) a declaration of unacceptable circumstances under section 657A; or

(b) an order under subsection 657D(2); or

(d) an order under section 657G to secure compliance with an order made under subsection 657D(2) or section 79.

(2) The report, statement or notice must:

(a) state that the application has been made; and

(b) name the company; and

(c) if ASIC considers that the report, statement or notice should name any other person to whom the declaration would relate or the order would be directed—name that other person.

(3) The report, statement or notice may be published in any way that ASIC thinks appropriate. It need not be in writing.

(4) This section does not limit a function or power of ASIC, the Panel or any other person or body.

Subdivision C—General provisions

658A Power of Panel where a proceeding is frivolous or vexatious

(1) If an application is made to the Panel under this Division, the Panel may, at any stage of the proceeding, if it is satisfied that the application is frivolous or vexatious:

(a) dismiss the application; or

(b) if the Panel considers it appropriate, on the application of a party to the proceedings, direct that the person who made the application must not, without leave of the Panel, make a subsequent application to the Panel of a kind or kinds specified in the direction.

(2) A direction given by the Panel under paragraph (1)(b) has effect despite any other provision of this Act or a provision of any other Act.

(3) The Panel may revoke or vary the direction.

658B Evidentiary value of findings of fact by Panel

(1) A finding of fact recorded in an order by the Panel, or a written statement of the reasons for an order of the Panel, is proof of the fact in the absence of evidence to the contrary.

(2) A certificate signed by the President of the Panel that states a finding of fact made in proceedings before the Panel is proof of the fact in the absence of evidence to the contrary.

Division 3—Court powers

659A Panel may refer questions of law to the Court

The Panel may, of its own motion, refer a question of law arising in a proceeding before the Panel to the Court for decision.

659B Court proceedings before end of bid period

Delay in commencing court proceedings until after end of bid period

(1) Only:

(a) ASIC; or

(b) another public authority of the Commonwealth or a State;

may commence court proceedings in relation to a takeover bid, or proposed takeover bid, before the end of the bid period.

Note: This restriction starts to apply as soon as there is a takeover bid, or a proposed takeover bid; it does not start to apply only when the bid period commences.

Court power to stay proceedings that have already commenced

(2) A court may stay:

(a) court proceedings in relation to a takeover bid or proposed takeover bid; or

(b) court proceedings that would have a significant effect on the progress of a takeover bid;

until the end of the bid period.

(3) In deciding whether to exercise its powers under subsection (2), the court is to have regard to:

(a) the purposes of this Chapter; and

(b) the availability of review by the Panel under Division 2.

(4) For the purposes of this section:

court proceedings in relation to a takeover bid or proposed takeover bid:

(a) means any proceedings before a court in relation to:

(i) an action taken or to be taken as part of, or for the purposes of, the bid or the target’s response to the bid; or

(ii) a document prepared or to be prepared, or a notice given or to be given, under this Chapter; and

(b) includes:

(i) proceedings to enforce an obligation imposed by this Chapter; or

(ii) proceedings for the review of a decision, or the exercise of a power or discretion, under this Chapter; or

(iii) proceedings for the review of a decision, or the exercise of a power or discretion, under Chapter 6C in relation to securities of the target of a takeover bid during the bid period; and

(iv) proceedings under Part 2F.1A for leave to bring, or to intervene in, proceedings referred to in paragraph (a) or subparagraph (b)(i), (ii) or (iii).

This is not limited to proceedings brought under this Chapter or this Law but includes proceedings under other Commonwealth and State laws (including the general law).

659C Court proceedings after end of bid period

(1) If:

(a) an application is made to the Panel for a declaration under section 657A that particular conduct amounts to, or leads to, circumstances that are unacceptable; and

(b) the Panel refuses to make the declaration; and

the Court’s powers under this Law in relation to the conduct are limited to the following:

(d) the Court may:

(i) determine whether a person is guilty of an offence against this Law because they engaged in or were involved in the conduct; and

(ii) impose a sentence if the person is found guilty

(e) the Court may:

(i) determine whether a person who engaged in, or was involved in, the conduct contravened a provision of the Law; and

(ii) order the person to pay an amount of money to another person (whether by way of damages, account of profits, pecuniary penalty or otherwise)

(f) the Court may make an order under section 1318 or 1322 in relation to the conduct.

This subsection does not confer power or jurisdiction on a court that it does not have apart from this subsection.

(2) Without limiting subsection (1), the only kind of remedial order that the Court may make is one that requires the person to pay money to another person.

Chapter 6A—Compulsory acquisitions and buy-outs

660A Chapter extends to some listed bodies that are not companies

This Chapter extends to the acquisition of securities of listed bodies that are not companies but are incorporated or formed in this jurisdiction in the same way as it applies to the acquisition of securities of companies.

Note: Section 9 defines company, jurisdiction and listed.

660B Chapter extends to listed managed investment schemes

(1) This Chapter extends to the acquisition of interests in a listed managed investment scheme registered in this jurisdiction as if:

(a) the scheme were a company; and

(b) interests in the scheme were shares in the company; and

(2) If Part 6A.1 applies to a scheme at the end of the bid period for a takeover, that Part continues to apply to the scheme in relation to the takeover bid even if the scheme ceases to be listed.

(3) If Part 6A.2 applies to a scheme when a compulsory acquisition notice under section 664C is lodged, that Part (including Division 2 of that Part) continues to apply to apply to the scheme in relation to the notice even if the scheme ceases to be listed.

(4) The regulations may modify the operation of this Chapter as it applies in relation to the acquisition of interests in listed managed investment schemes.

Part 6A.1—Compulsory acquisitions and buy-outs following takeover bid

Division 1—Compulsory acquisition of bid class securities

661A Compulsory acquisition power following takeover bid

Threshold for compulsory acquisition power

(1) Under this subsection, the bidder under a takeover bid may compulsorily acquire any securities in the bid class if:

(a) the bid is:

(i) an off-market bid to acquire all the securities in the bid class; or

(ii) a market bid; and

(b) during, or at the end of, the offer period:

(i) the bidder and their associates have relevant interests in at least 90% (by number) of the securities in the bid class; and

(ii) the bidder and their associates have acquired at least 75% (by number) of the securities that the bidder offered to acquire under the bid (whether the acquisitions happened under the bid or otherwise).

This is so even if the bidder subsequently ceases to satisfy subparagraph (b)(i) because of the issue of further securities in the bid class.

(2) For the purposes of subsection (1), disregard any relevant interests that the bidder has merely because of the operation of subsection 608(3) (relevant interest by 20% interest in body corporate).

Court may allow compulsory acquisition even if threshold not reached

(3) Under this subsection, the bidder under a takeover bid may compulsorily acquire securities in the bid class with the approval of the Court.

Securities to be acquired

(4) If the bidder compulsorily acquires securities in the bid class under subsection (1) or (3), the bidder:

(a) must acquire all the securities in the bid class:

(i) which were issued or granted before the end of the offer period; and

(ii) in which the bidder does not have a relevant interest; and

(b) may elect to acquire all securities in the bid class:

(i) that were issued or granted after the end of the offer period and before the notice under section 661B is issued; and

(ii) in which the bidder does not have a relevant interest;

but only if the bidder and their associates have relevant interests in at least 90% (by number) of the securities in the bid class when the bidder gives notice under section 661B; and

(i) will convert, or may be converted, to securities in the bid class; or

(ii) confer rights to be issued securities in the bid class that may be exercised;

within the period of 6 weeks after the notice is given—may elect to acquire securities that come to be in the bid class during that period due to a conversion or exercise of the rights but only if the bidder and their associates have relevant interests in at least 90% of the securities (by number) in the bid class when the bidder gives notice under section 661B; and

(d) may elect to acquire any securities in the bid class in which the bidder has a relevant interest (no matter when they were issued or granted).

(5) This section has effect despite anything in the constitution of the company whose securities are to be acquired.

661B Compulsory acquisition notice

Compulsory acquisition notice

(1) To compulsorily acquire securities under subsection 661A(1) or (3), the bidder must:

(a) prepare a notice in the prescribed form that informs the holders of the securities that the bidder is entitled to acquire their securities under that subsection; and

(b) lodge the notice with ASIC; and

(i) a holder of securities in the bid class; or

(ii) if the bidder elects under paragraph 661A(4)(c) to acquire securities that come to be in the bid class after the notice is given—a holder of the convertible securities referred to in that paragraph; and

(d) give a copy to each relevant securities exchange on the same day as it is lodged with ASIC if the target is listed.

If alternative forms of consideration were offered under the takeover bid, the notice must specify which of those forms of consideration will apply to the acquisition of the holder’s securities if the holder does not elect one of the forms under paragraph 661C(2)(a).

Note: Everyone who holds bid class securities on the day on which the notice is lodged with ASIC is entitled notice. Under section 661E, anyone who holds the securities after that day may apply to the Court to stop the acquisition.

Time for dispatching notices to holders

(2) The bidder must dispatch the notices under paragraph (1)(c):

(a) during the offer period, or within 1 month after:

(i) the end of offer period if the acquisition is under subsection 661A(1); or

(ii) the court approval if the acquisition is under subsection 661A(3); and

(b) on the day the bidder lodges the notice with ASIC or on the next business day.

The notices cannot be withdrawn.

Manner of giving notice to holders

(3) The bidder may give the notice to a holder:

(a) personally; or

(b) by sending it by post to the address for the holder in the register of members, debenture holders or option holders.

A notice sent by post is taken to be given 3 days after it is posted.

(4) The notice may be sent:

(a) if the notice is to be sent to the holder in an external territory or outside Australia—by pre-paid airmail post or by courier; or

(b) if the notice is to be sent to the holder in Australia—by pre-paid ordinary post or by courier.

This section does not limit the manner in which the notice may be sent to the holder.

Note: Section 109X makes general provision for service of documents.

661C Terms on which securities to be acquired

Same terms as takeover bid

(1) The bidder may acquire the securities only on the terms that applied to the acquisition of securities under the takeover bid immediately before:

(a) the notice under section 661B is given if it is given before the end of the offer period; or

(b) the end of the offer period if it is not.

Alternative forms of consideration under takeover bid

(2) If alternative forms of consideration were offered under the takeover bid, the form of consideration that applies to the acquisition of the holder’s securities is:

(a) the form that the holder elects; or

(b) the form set out in the compulsory acquisition notice under subsection 661B(1).

(3) The holder makes an election under subsection (2) by giving the bidder a notice of the election by the later of:

(a) 1 month after the compulsory acquisition notice is given under section 661B; or

(b) 14 days after the holder is given a statement under section 661D if the holder asks for it.

(4) The election must be:

(a) in an electronic form approved by the SCH business rules for the purposes of this Part if it relates to shares that are entered on an SCH subregister; or

(b) in writing if it relates to shares that are not entered on an SCH subregister.

661D Holder may obtain names and addresses of other holders

Within 1 month after a compulsory acquisition notice in relation to securities in the bid class is lodged with ASIC under section 661B, the holder of the securities may ask the bidder in writing for a written statement of the names and addresses of everyone else the bidder has given the notice to. The bidder must give the holder the statement within 7 days after the request.

661E Holder may apply to court to stop acquisition

(1) The holder of securities covered by a compulsory acquisition notice under section 661B may apply to the Court for an order that the securities not be compulsorily acquired under subsection 661A(1). The application must be made before the later of:

(a) the end of 1 month after the holder is given notice under section 661B; or

(b) the end of 14 days after the holder is given a statement under section 661D if the holder asks for it.

(2) The Court may order that the securities not be compulsorily acquired under subsection 661A(1) only if the Court is satisfied that the consideration is not fair value for the securities.

Note: See section 667C on valuation.

(3) If the Court makes an order under this section in relation to an acquisition of securities, the order applies to all holders who have applications to the Court pending for an order under this section in relation to the acquisition.

661F Signpost—completing the acquisition of the securities

See section 666A to find out how to complete the acquisition.

Division 2—Compulsory buy-out of bid class securities

662A Bidder must offer to buy out remaining holders of bid class securities

(1) If the bidder and their associates have relevant interests in at least 90% of the securities (by number) in the bid class at the end of the offer period, the bidder must offer to buy out the remaining holders of bid class securities in accordance with sections 662B and 662C.

(2) This section does not apply to securities that are issued:

(a) if the takeover bid was not subject to a defeating condition—after the end of the offer period; or

(b) if the takeover bid was subject to a defeating condition—after the notice whether the bid is free from defeating condition or not is given under subsection 630(3).

662B Bidder to tell remaining holders of their right to be bought out

Notice to remaining holders of bid class securities

(1) The bidder must:

(a) prepare a notice in the prescribed form that:

(i) states that the bidder and their associates have relevant interests in at least 90% (by number) of the securities in the bid class; and

(ii) informs the holder of bid class securities about their right to be bought out under this Part; and

(iii) sets out the terms on which the holder may be bought out; and

(b) lodge the notice with ASIC; and

(i) is a holder of securities in the bid class on the day on which the notice is lodged with ASIC; and

(ii) has not been given a compulsory acquisition notice under section 661B when the notice under subsection (2) is given; and

(d) give the notice to each relevant securities exchange on the same day as it is lodged with ASIC if the target is listed.

If alternative forms of consideration were offered under the takeover bid, the notice must specify which of those forms will apply to the acquisition of the holder’s securities if the holder does not give the bidder an election notice under subsection 662C(1).

Note: The notice is be given to everyone who holds bid class securities on the day on which the notice is lodged with ASIC. Under section 662C, anyone who acquires the securities after that day may require the bidder to acquire the securities.

Time for dispatching notice to holders

(2) The bidder must dispatch the notices under paragraph (1)(c):

(a) during, or within 1 month after the end of, the offer period; and

(b) on the day the bidder lodges the notice with ASIC or on the next business day.

The notices cannot be withdrawn.

Manner of giving notice to holders

(3) The bidder may give the notice to a holder:

(a) personally; or

(b) by sending it by post to the address for the holder in the register of members, debenture holders or option holders.

A notice sent by post is taken to be given 3 days after it is posted.

(4) The notice may be sent:

(a) if the notice is to be sent to the holder in an external territory or outside Australia—by pre-paid airmail post or by courier.

(b) if the notice is to be sent to the holder is in Australia—by pre-paid ordinary post or by courier.

This subsection does not limit the manner in which the document may be sent to the holder.

Note: Section 109X makes general provision for service of documents.

662C Right of remaining holder of securities in the bid class to be bought out

(1) Within 1 month after notice is given in relation to securities under section 662B, the holder of the securities may give the bidder written notice requiring the bidder to acquire the securities. If alternative forms of consideration were offered under the takeover bid, the holder may elect in the notice which of those forms will apply to the acquisition of the holder’s securities.

(2) The notice by the holder gives rise to a contract between the holder and the bidder for the sale of the securities on:

(a) the terms that applied to the acquisition of securities under the bid immediately before the end of the offer period; or

(b) if alternative forms of consideration applied at that time—on the terms that the bidder will provide:

(i) the alternative specified by the holder in the notice under subsection (1); or

(ii) if the holder has not made an election under that subsection—the alternative set out in the bidder’s notice under section 662B; or

Division 3—Compulsory buy-out of convertible securities

663A Bidder must offer to buy out holders of convertible securities

If the bidder and their associates have relevant interests in at least 90% of the securities (by number) in the bid class at the end of the offer period, the bidder must offer to buy out the holders of securities that are convertible into bid class securities in accordance with sections 663B and 663C. This section does not apply to securities if a takeover bid has been made for the convertible securities and a notice has been given under section 661B or 662B in relation to the convertible securities.

Note: For when securities are convertible into bid class securities, see the definition of convertible securities in section 9.

663B Bidder to tell holders of convertible securities of their right to be bought out

Notice to holders of convertible securities

(1) The bidder must:

(a) prepare a notice in the prescribed form that:

(i) states that the bidder and their associates have relevant interests in at least 90% of the securities (by number) in the bid class; and

(ii) informs the holder of convertible securities about their right to be bought out under this Part; and

(iii) sets out the terms on which the holder may be bought out; and

(b) lodge the notice with ASIC; and

(i) the notice; and

(ii) a copy of the expert’s report, or of all the experts’ reports, under section 667A; and

(d) give a copy of those documents to each relevant securities exchange on the same day as it is lodged with ASIC if the target is listed.

Note 1: Subparagraph (a)(iii)—Section 667A deals with the contents of an expert’s report.

Note 2: The notice is to be given to everyone who holds convertible securities on the day on which the notice is lodged with ASIC. Under section 663C, anyone who acquires the securities after that day may require the bidder to acquire the securities.

Time for dispatching notice to holders

(2) The bidder must dispatch the notices and reports under paragraph (1)(c):

(a) during, or within 1 month after the end of, the offer period; and

(b) on the day the bidder lodges the notice with ASIC or on the next business day.

The notices cannot be withdrawn.

Manner of giving notice to holders

(3) The bidder may give the notice or report to a holder:

(a) personally; or

(b) by sending it by post to the address for the holder in the register of members, debenture holders or option holders.

A notice or report sent by post is taken to be given 3 days after it is posted.

(4) The notice may be sent:

(a) if the notice is to be sent to the holder in an external territory or outside Australia—by pre-paid airmail post or by courier; or

(b) if the notice is to be sent to the holder in Australia—by pre-paid ordinary post or by courier.

This subsection does not limit the manner in which the document may be sent to the holder.

Note: Section 109X makes general provision for service of documents.

663C Right of holders of convertible securities to be bought out

(1) Within 1 month after notice under section 663B is given in relation to convertible securities, the holder of the convertible securities may give the bidder a notice requiring the bidder to acquire the securities.

(2) The holder’s notice gives rise to a contract between the holder and the bidder for the sale of the securities on:

(a) the terms agreed to by the bidder and the holder; or

(b) the terms determined by the Court on application by the holder.

Part 6A.2—General compulsory acquisitions and buy-outs

Division 1—Compulsory acquisition of securities by 90% holder

664A Threshold for general compulsory acquisition power

90% holder—holder of 90% of securities in particular class

(1) A person is a 90% holder in relation to a class of securities of a company if the person holds, either alone or with a related body corporate, full beneficial interests in at least 90% of the securities (by number) in that class.

90% holder—holder with 90% voting power and 90% of whole company or scheme

(2) A person is also a 90% holder in relation to a class of securities of a company if:

(a) the securities in the class are shares or convertible into shares; and

(b) the person’s voting power in the company is at least 90%; and

(c) the person holds, either alone or with a related body corporate, full beneficial interests in at least 90% by value of all the securities of the company that are either shares or convertible into shares.

Note: Subsection 667A(2) provides that the expert’s report that accompanies the compulsory acquisition notice must support the paragraph (c) condition.

90% holder may acquire remainder of securities in class

(3) Under this section, a 90% holder in relation to a class of securities of a company may compulsorily acquire all the securities in that class in which neither the person nor any related bodies corporate has full beneficial interests if either:

(a) the holders of securities in that class (if any) who have objected to the acquisition between them hold less than 10% by value of those remaining securities at the end of the objection period set out in the notice under paragraph 664C(1)(b); or

(b) the Court approves the acquisition under section 664F.

If subsection (2) applies to the 90% holder, the holder may compulsorily acquire securities in a class only if the holder gives compulsory acquisition notices in relation to all classes of shares and securities convertible into shares of which they do not already have full beneficial ownership.

(4) This section has effect despite anything in the constitution of the company whose securities are to be acquired.

(5) This Part does not apply to shares that give the shareholder, as a shareholder, a right to occupy or use real property that the company owns or holds under lease, whether the right is a lease or licence or a contractual right.

(6) The 90% holder’s power to compulsorily acquire securities under a notice given under section 664C ends if the 90% holder contravenes section 664D by offering benefits outside the terms proposed in the compulsory acquisition notice under section 664C.

664B The terms for compulsory acquisition

The 90% holder may acquire the securities in the class for a cash sum only and must pay the same amount for each security in the class acquired.

664C Compulsory acquisition notice

Compulsory acquisition notice

(1) To compulsorily acquire securities under section 664A, the bidder must prepare a notice in the prescribed form that:

(a) sets out the cash sum for which the 90% holder proposes to acquire the securities; and

(b) specifies a period of at least 1 month during which the holders may return the objection forms; and

(i) their right to obtain the names and addresses of the other holders of securities in that class from the company register; and

(ii) their right to object to the acquisition by returning the objection form that accompanies the notice within the period specified in the notice; and

(d) gives details of the consideration given for any securities in that class that the 90% holder or an associate has purchased within the last 12 months; and

(e) discloses any other information that is:

(i) known to the 90% holder or any related bodies corporate; and

(ii) material to deciding whether to object to the acquisition; and

(iii) not disclosed in an expert’s report under section 667A.

(2) The 90% holder must then:

(a) lodge the notice with ASIC; and

(b) give each other person (other than a related body corporate) who is a holder of securities in the class on the day on which the notice is lodged with ASIC:

(i) the notice; and

(ii) a copy of the expert’s report, or of all experts’ reports, under section 667A; and

(iii) an objection form; and

(d) give copies of those documents to the relevant securities exchange if the company is listed.

Note: Everyone who holds the securities on the day on which the notice is lodged with ASIC is entitled to notice. Under subsection 664E(1), anyone who acquires the securities during the objection period may object to the acquisition.

Time for dispatching notice to holders

(3) The 90% holder bidder must dispatch the notices under paragraph (2)(b) on the day the bidder lodges the notice with ASIC or on the next business day.

Manner of giving notice to holders

(4) The 90% holder may give the notice to a holder:

(a) personally; or

(b) by sending it by post to the address for the holder in the register of members, debenture holders or option holders.

A notice sent by post is taken to be given 3 days after it is posted.

(5) The notice may be sent:

(a) if the notice is to be sent to the holder in an external territory or outside Australia—by pre-paid airmail post or by courier; or

(b) if the notice is to be sent to the holder in Australia—by pre-paid ordinary post or by courier.

This subsection does not limit the manner in which the document may be sent to the holder.

Note: Section 109X makes general provision for service of documents.

Notice not to be withdrawn

(6) The 90% holder may not:

(a) withdraw a notice under this section; or

(b) if the 90% holder has given a notice under this section in relation to those securities and the objection period for that notice has not ended—give another notice under this section in relation to securities.

664D Benefits outside compulsory acquisition procedure

(1) If the 90% holder gives a notice under section 664C to compulsorily acquire securities, the 90% holder or an associate must not offer, give or agree to give a benefit to a person during the objection period if:

(a) the benefit is likely to induce the person, or an associate of the person, to:

(i) dispose of securities in that class; or

(ii) not object to the acquisition of those securities under the notice; and

(b) the benefit is not provided for in the notice.

(2) If the 90% holder proposes to give a notice under section 664C to acquire securities within the next 4 months, the 90% holder or an associate must not offer, give or agree to give a benefit to a person if:

(a) the benefit is likely to induce the person, or an associate of the person, to:

(i) dispose of securities in that class; or

(ii) not object to the acquisition of those securities under the notice; and

(b) the benefit is not proposed to be provided for in the notice.

(3) If the 90% holder gives a notice under section 664C to compulsorily acquire securities, the 90% holder or an associate must not give a benefit to a person:

(a) within 1 month after the end of the objection period (see subsection 664F(2)); or

(b) during any proceedings by the Court to determine an application under subsection 664F(1) by the 90% holder;

if:

(i) not object, or pursue an objection, to the acquisition of those securities under the notice; or

(ii) dispose of securities in that class; and

(d) the benefit is not offered to all holders of securities in that class under the notice.

(4) This section does not prohibit simultaneous notices under section 664C to compulsorily acquire different classes of securities in the company.

664E Holder’s right to object to the acquisition

(1) A person who holds securities covered by the compulsory acquisition notice may object to the acquisition of the securities by signing an objection form and returning it to the 90% holder. The objection:

(a) relates to all securities that are covered by the notice and are held by the person at the end of the objection period; and

(b) cannot be withdrawn.

(2) The 90% holder must lodge with ASIC a copy of any objection form returned under subsection (1) as soon as practicable after it is returned.

(3) As soon as practicable after the end of the objection period, the 90% holder must:

(a) prepare a list that sets out:

(i) the names of people who hold securities covered by the compulsory acquisition notice and have objected to the acquisition; and

(ii) details of the securities they hold; and

(b) lodge the list with ASIC; and

(d) if the company is listed—give a copy to the relevant securities exchange.

(4) If people who hold at least 10% of the securities covered by the compulsory acquisition notice object to the acquisition before the end of the objection period, the 90% holder must give everyone to whom the compulsory acquisition notice was sent under section 664C:

(a) a notice that the proposed acquisition will not occur; or

(b) a notice that the 90% holder has applied to the Court for approval of the acquisition under section 664F;

within 1 month after the end of the objection period.

664F The Court’s power to approve acquisition

(1) If people who hold at least 10% of the securities covered by the compulsory acquisition notice object to the acquisition before the end of the objection period, the 90% holder may apply to the Court for approval of the acquisition of the securities covered by the notice.

(2) The 90% holder must apply within 1 month after the end of the objection period.

(3) If the 90% holder establishes that the terms set out in the compulsory acquisition notice give a fair value for the securities, the Court must approve the acquisition of the securities on those terms. Otherwise it must confirm that the acquisition will not take place.

Note: See section 667C on valuation.

(4) The 90% holder must bear the costs that a person incurs on legal proceedings in relation to the application unless the Court is satisfied that the person acted improperly, vexatiously or otherwise unreasonably. The 90% holder must bear their own costs.

664G Signpost—completing the acquisition of the securities

See section 666A for how to complete the acquisition.

Division 2—Compulsory buy-out of convertible securities by 100% holder

665A 100% holder must offer to buy out holders of convertible securities

(1) A person is a 100% holder of securities in a class if the person, either alone or with a related body corporate, holds full beneficial interests in all the securities in the class.

(2) A 100% holder in relation to a class of securities (the main class)) who becomes a 100% holder through compulsory acquisitions under this Part must offer to buy out the holders of securities in another class that are convertible into main class securities in accordance with sections 665B and 665C. This subsection does not apply to securities if a notice is given in relation to the securities under section 661B, 662B or 664C.

Note: For when securities are convertible into main class securities, see the definition of convertible securities in section 9.

665B 100% holder to tell holders of convertible securities of their right to be bought out

Notice to holders of convertible securities

(1) The 100% holder must:

(a) prepare a notice in the prescribed form that:

(i) states that the person giving the notice has acquired all the securities in the main class; and

(ii) sets out the cash sum for which they are willing to acquire the convertible securities; and

(iii) informs the holder of convertible securities about their right to be bought out under this Part; and

(b) lodge the notice with ASIC; and

(i) the notice; and

(ii) a copy of the expert’s report, or all experts’ reports, under section 667A; and

(d) give a copy of the documents to the company that issued the securities; and

(e) give a copy of the documents to each relevant securities exchange on the same day as it is lodged with ASIC if the company is listed.

Note 1: Subparagraph (a)(iii)—Section 667A deals with the contents of an expert’s report.

Note 2: The notice is to be given to everyone who holds convertible securities on the day on which the notice is lodged with ASIC. Under section 665C, anyone who holds the securities after that day may require the bidder to acquire the securities.

Time for dispatching notice to holders

(2) The 100% holder must dispatch the notices and reports under paragraph (1)(c):

(a) within 1 month after they become the 100% holder; and

(b) on the day the 100% holder lodges the notice with ASIC or on the next business day.

The notices cannot be withdrawn.

Manner of giving notice to holders

(3) The 100% holder may give the notice or report to a holder:

(a) personally; or

(b) by sending it by post to the address for the holder in the register of members, debenture holders or option holders.

A notice or report sent by post is taken to be given 3 days after it is posted.

(3) The notice may be sent:

(a) if the notice is to be sent to the holder in an external territory or outside Australia—by pre-paid airmail post or by courier; or

(b) if the notice is to be sent to the holder in Australia—by pre-paid ordinary post or by courier.

This subsection does not limit the manner in which the document may be sent to the holder.

Note: Section 109X makes general provision for service of documents.

665C Right of holders of convertible securities to be bought out

(1) Within 1 month after notice under section 665B is given in relation to convertible securities, the holder of the convertible securities may give the 100% holder a notice requiring the 100% holder to acquire the securities.

(2) The notice by the holder of convertible securities gives rise to a contract between the holder and the 100% holder for the sale of the securities on:

(a) terms agreed to by the 100% holder and the holder of the convertible securities; or

(b) the terms determined by the Court on application by the holder of the convertible securities.

Part 6A.3—Completion of compulsory acquisition of securities

666A Completing the acquisition of securities

Completion to be by private treaty or statutory procedure

(1) A person entitled to acquire securities under section 661A or 664A must either:

(a) pay, issue or transfer the consideration to the holder, take a transfer of the securities from the holder and have the company that issued the securities register the transfer; or

(b) complete the procedure laid down in section 666B;

by the end of the period referred to in subsection (2) or (3).

Time for completing compulsory acquisition following takeover

(2) For an acquisition under section 661A, the period ends 14 days after the later of:

(a) the end of 1 month after the compulsory acquisition notice was lodged with ASIC under section 661B; or

(b) the end of 14 days after the last statement under section 661D was given if a request is made under that section; or

(c) if an application to stop the acquisition is made to the Court under section 661E—the application is finally determined.

Time for completing compulsory acquisition under Part 6A.2

(3) For an acquisition under section 664A or 664F, the period ends 14 days after the later of:

(a) the end of the objection period; or

(b) if an application for approval of the acquisition is made to the Court under section 664F in relation to the securities—the application is finally determined.

666B Statutory procedure for completion

(1) Under this section, the person acquiring the securities must:

(a) give the company that issued the securities a copy of the compulsory acquisition notice under section 661B or 664C together with a transfer of the securities:

(i) signed as transferor by someone appointed by the person acquiring the securities; and

(ii) signed as transferee by the person acquiring the securities; and

(b) pay, issue or transfer the consideration for the transfer to the company that issued the securities.

The person appointed under subparagraph (a)(i) has authority to sign the transfer on behalf of the holder of the securities.

(2) If the person acquiring the securities complies with subsection (1), the company that issued the securities must:

(a) register the person as the holder of the securities; and

(b) hold the consideration received under subsection (1) in trust for the person who held the securities immediately before registration; and

(c) give written notice to the person referred to in paragraph (b) as soon as practicable that the consideration has been received and is being held by the company pending their instructions as to how it is to be dealt with.

(3) If the consideration held under subsection (2) consists of, or includes money, that money must be paid into a bank account opened and maintained for that purpose only.

Part 6A.4—Experts’ reports and valuations

667A Expert’s report

(1) An expert’s report under section 663B, 664C or 665B must:

(a) state whether, in the expert’s opinion, the terms proposed in the notice give a fair value for the securities concerned; and

(b) set out the reasons for forming that opinion.

Note: See section 667C on valuation.

(2) If the person giving the compulsory acquisition notice is relying on paragraph 664A(2)(c) to give the notice, the expert’s report under section 664C must also:

(a) state whether, in the expert’s opinion, the person (either alone or together with a related body corporate) has full beneficial ownership in at least 90% by value of all the securities of the company that are shares or convertible into shares; and

(b) set out the reasons for forming that opinion.

(3) If the person giving the compulsory acquisition notice obtains 2 or more reports, each of which were obtained for the purposes of that notice, a copy of each report must be given to the holder of the securities.

667B Expert must not be an associate and must disclose prior dealings and relationships

(1) The expert who provides the report must not be an associate of:

(a) the person giving the notice; or

(b) the company that issued the securities.

(2) The report must set out details of:

(a) any relationship between the expert and:

(i) the person giving the notice or an associate of the person giving the notice; or

(ii) the company that issued the securities or an associate of the company;

(c) any fee, payment or other benefit (whether direct or indirect) that the expert has received or will or may receive in connection with the report.

667C Valuation of securities

To determine what is fair value for securities for the purposes of this Chapter:

(a) first, assess the value of the company as a whole; and

(b) then allocate that value among the classes of issued securities in the company (taking into account the relative financial risk, and voting and distribution rights, of the classes); and

(c) then allocate the value of each class pro rata among the securities in that class (without allowing a premium or applying a discount for particular securities in that class).

Part 6A.5—Records of unclaimed consideration

668A Company’s power to deal with unclaimed consideration for compulsory acquisition

Records of unclaimed compulsory acquisition consideration

(1) If a company is paid consideration in respect of securities that are compulsorily acquired under Part 6A.1 or 6A.3, the company must maintain records of:

(a) the consideration paid (including any benefit accruing from the consideration and any property substituted for the whole or any part of that consideration); and

(b) the people who are entitled to that consideration; and

(2) The company must keep the records at:

(a) its registered office; or

(b) its principal place of business in Australia; or

(3) A person may ask the company to let the person inspect all or any of the records kept by the company under this section. The company must let the person inspect the records:

(a) if the company requires payment of an amount not exceeding the prescribed amount—within 7 days after the day on which the company receives that amount; or

(b) in any other case—within 7 days after the day on which the request is made.

(4) By the end of February each year, the company must publish in the Gazette a copy of the records kept under subsection (1) as at the end of the previous December.

668B Unclaimed consideration to be transferred to ASIC

(1) If the company has not transferred the unclaimed consideration to the person entitled to it within 12 months after the publication of a copy of the records in the Gazette, the company must transfer the consideration to ASIC within 1 month after the end of that 12 month period.

(2) The company is then discharged from liability to any person in respect of the consideration.

(3) ASIC must deal with the consideration under Part 9.7.

(4) Except as provided by subsection (2), this Part does not deprive a person of any right or remedy to which the person is entitled against a liquidator or company.

Part 6A.6—ASIC powers

669 ASIC’s power to exempt and modify

(1) ASIC may:

(a) exempt a person from a provision of this Chapter; or

(b) declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

(2) The exemption or declaration may:

(a) apply to all or specified provisions of this Chapter; and

(b) apply to all persons, specified persons, or a specified class of persons; and

(d) relate to any other matter generally or as specified.

(4) The exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette.

(5) For the purposes of this section, the provisions of this Chapter include:

(a) regulations made for the purposes of this Chapter; and

(b) definitions in this Law or the regulations as they apply to references in:

(i) this Chapter; or

(ii) regulations made for the purposes of this Chapter; and

Chapter 6B—Rights and liabilities in relation to Chapter 6 and 6A matters

670A Misstatements in, or omissions from, takeover and compulsory acquisition and buy-out documents

(1) A person must not give:

(a) a bidder’s statement

(b) a takeover offer document

(d) a target’s statement

(e) a compulsory acquisition notice under section 661B or 664C

(f) a compulsory buy-out notice under section 662B, 663B or 665B

(g) a report that is included in, or accompanies, a statement or notice referred to in paragraphs (a) to (f)

if there is:

(h) for all documents—a misleading or deceptive statement in the document; or

(i) for a bidder’s statement or target’s statement—an omission from the document of material required by section 636 or 638; or

(j) for a bidder’s statement or a target’s statement—a new circumstance that:

(i) has arisen since the document was lodged; and

(ii) would have been required by section 636 or 638 to be included in the document if it had arisen before the document was lodged; or

(k) for an expert’s report under subsection 636(2) or section 640, 663B, 664C or 665B—an omission from the report of material required by subsection 648A(3) or 667B(2).

Note 1: See section 670D for defences.

Note 2: Section 995 imposes liabilities in respect of other conduct related to the dealings in securities.

Forecasts and other forward-looking statement

(2) A person is taken to make a misleading statement about a future matter (including the doing of, or refusing to do, an act) if they do not have reasonable grounds for making the statement. This subsection does not limit the meaning of a reference to a misleading statement or a statement that is misleading in a material particular.

Offence if statement, omission or new matter materially adverse

(3) A person commits an offence if they contravene subsection (1) and the statement, omission or new circumstance is materially adverse from the point of view of the holder of securities to whom the document is given.

670B Right to recover for loss or damage resulting from contravention

(1) A person who suffers loss or damage that results from a contravention of subsection 670A(1) may recover the amount of the loss or damage from a person referred to in the following table if the loss or damage is one that the table makes the person liable for. This is so even if the person did not commit, and was not involved in, the contravention.

People liable on the document		[operative table]
	*For these documents* these people...	...are liable for loss or damages caused by
	*bidder’s statement or takeover offer document*
1	the bidder	any contravention of subsection 670A(1) in relation to the document
2	each director of a bidder that is a body if the consideration offered under the bid is not a cash sum only	any contravention of subsection 670A(1) in relation to the document
3	a director of a bidder that is a body unless the director proves that they: (a) were not present when the directors resolved to adopt the statement or offer document; or (b) voted against the resolution; if the consideration offered under the bid is a cash sum only	any contravention of subsection 670A(1) in relation to the document See also items 10 and 11.
	*Notice of variation of a takeover offer*
4	the bidder	any contravention of subsection 670A(1) in relation to the document
5	a director of a bidder that is a body	any contravention of subsection 670A(1) in relation to the document See also items 10 and 11.
	*a target’s statement*
6	the target	any contravention of subsection 670A(1) in relation to the document
7	a director of the target unless the director proves that they: (a) were not present when the directors resolved to adopt the statement; or (b) voted against the resolution	any contravention of subsection 670A(1) in relation to the document See also items 10 and 11.
	*a compulsory acquisition or compulsory buy-out notice*
8	the person giving the notice	any contravention of subsection 670A(1) in relation to the document
9	a director of a body corporate giving the notice unless the director proves that they: (a) were not present when the directors resolved to give the notice; or (b) voted against the resolution	any contravention of subsection 670A(1) in relation to the document See also items 10 and 11.
	*All documents*
10	a person named in the document, with their consent, as having made a statement: (a) that is included in the document; or (b) on which a statement made in the document is based	the inclusion of the statement in the document
11	a person who contravenes, or is involved in a contravention of, subsection 670A(1)	that contravention

(2) An action under subsection (1) may begin at any time within 6 years after the day on which the cause of action arose.

(3) This Part does not affect any liability that a person has under any other law.

Note: Conduct that contravenes subsection 670A(1) is expressly excluded from the operation of section 995A.

670C People liable on takeover or compulsory acquisition statement to inform maker about deficiencies in the statement

(1) A person referred to in the table in subsection 670B(1) in relation to a document must notify the issuer of the document in writing as soon as practicable if they become aware during the bid period or objection period that:

(a) a material statement in the document is misleading or deceptive; or

(b) there is a material omission from the document of information required by section 636, 638 or 640; or

(i) has arisen since the document was lodged; and

(ii) would have been required by section 636, 638 or 640 to be included in the document if it had arisen before the document was lodged.

(2) An expert whose report accompanies, or is included in, a target’s statement under section 640 must notify the target in writing as soon as practicable if they become aware during the takeover period that:

(a) a material statement in the report is misleading or deceptive; or

(b) there has been a significant change affecting information included in the report.

(3) An expert whose report accompanies, or is included in, a bidder’s statement under subsection 636(2) must notify the bidder in writing as soon as practicable if they become aware during the takeover period that:

(a) a material statement in the report is misleading or deceptive; or

(b) there has been a significant change affecting information included in the report.

670D Defences against prosecutions under subsection 670A(3) and actions under section 670B

Not knowing statement misleading or deceptive

(1) A person does not commit an offence against subsection 670A(3), and is not liable under section 670B for a contravention of subsection 670A(1), because of a misleading or deceptive statement in a document if the person proves that they did not know that the statement was misleading or deceptive.

Not knowing there was an omission

(2) A person does not commit an offence against subsection 670A(3), and is not liable under section 670B for a contravention of subsection 670A(1), because of an omission from a document in relation to a particular matter if the person proves that they did not know that there was an omission from the document in relation to that matter.

Reasonable reliance on information given by someone else—statements and omissions

(3) A person does not commit an offence against subsection 670A(3), and is not liable under section 670B for a contravention against subsection 670A(1), because of a misleading or deceptive statement in, or an omission from, a document if the person proves that they placed reasonable reliance on information given to them by:

(a) if the person is a body—someone other than a director, employee or agent of the body; or

(b) if the person is an individual—someone other than an employee or agent of the individual.

(4) For the purposes of subsection (3), a person is not the agent of a body or individual merely because they perform a particular professional or advisory function for the body or individual.

Withdrawal of consent—statements and omissions

(5) A person who is named in a document as:

(a) making a statement included in the document; or

(b) making a statement on the basis of which a statement is included in the document;

does not commit an offence against subsection 670A(3), and is not liable under section 670B for a contravention against subsection 670A(1), because of a misleading or deceptive statement in, or an omission from, a document if the person proves that they publicly withdrew their consent to being named in the document in that way.

Unawareness of new matter

(6) A person does not commit an offence against subsection 670A(3), and is not liable under section 670B for a contravention of subsection 670A(1), because of a new circumstance that has arisen since the document was lodged if the person proves that they were not aware of the matter.

670E Liability for proposing a bid or not carrying through with bid

(1) A person who:

(a) enters into a transaction relating to securities in reliance on:

(i) a public proposal for a takeover bid; or

(ii) an announcement of a market bid; and

(b) suffers loss or damage that results from a contravention of section 631:

may recover the amount of the loss or damage from:

(d) any person involved in the contravention.

(2) To determine the amount of compensation payable under subsection (1), deduct the price of the securities at which the transaction was entered into from the price of the securities at which the transaction would have been likely to be entered into if the proposal or announcement had not been made.

670F Defences

A person does not commit an offence under subsection 631(1) or (2), and is not liable under section 670E for a contravention of those subsections if the person proves that they could not reasonably have been expected to comply with those subsections because:

(a) at the time of the proposal or announcement, circumstances existed that the person did not know of and could not reasonably have been expected to know of; or

(b) after the proposal or announcement, a change in circumstances occurred that was not caused, directly or indirectly, by the person.

Chapter 6C—Information about ownership of listed companies and managed investment schemes

671A Chapter extends to some listed bodies that are not companies

Note: Section 9 defines company, jurisdiction and listed.

Part 6C.1—Substantial holding information

671B Information about substantial holdings must be given to company, responsible entity and relevant securities exchange

Requirement to give information

(1) A person must give the information referred to in subsection (3) to a listed company, or the responsible entity for a listed registered managed investment scheme, if:

(a) the person begins to have, or ceases to have, a substantial holding in the company or scheme; or

(b) the person has a substantial holding in the company or scheme and there is a movement of at least 1% in their holding; or

The person must also give the information to each relevant securities exchange.

Note 1: Section 9 defines substantial holding and associate.

Note 2: The information must be given even if the situation changes by the time the information is to be given.

(2) For the purposes of this section, there is a movement of at least 1% in a person’s holding if the percentage worked out using the following formula increases or decreases by 1 or more percentage points from the percentage they last disclosed under this Part in relation to the company or scheme:

where:

person’s and associates’ votes is the total number of votes attached to all the voting shares in the company or interests in the scheme (if any) that the person or an associate has a relevant interest in.

total votes in company or scheme is the total number of votes attached to all voting shares in the company or interests in the scheme.

Note: Subsection (7) expands the normal concept of relevant interest to take account of exchange traded options and conditional agreements.

Information that must be given

(3) The information to be given is:

(a) the person’s name and address; and

(b) details of their relevant interest in:

(i) voting shares in the company; or

(ii) interests in the scheme; and

(i) voting shares in the company; or

(ii) interests in the scheme; and

(d) the name of each associate who has a relevant interest in voting shares in the company or interests in the scheme, together with details of:

(i) the nature of their association with the associate; and

(ii) the relevant interest of the associate; and

(iii) any relevant agreement through which the associate has the relevant interest; and

(e) if the information is being given because of a movement in their holding—the size and date of that movement; and

(f) if the information is being given because a person has ceased to be an associate—the name of the person; and

(g) any other particulars that are prescribed.

Note: Subsection (7) expands the normal concept of relevant interest to take account of exchange traded options and conditional agreements.

Information to be in prescribed form and accompanied by certain documents

(4) The information must be given in the prescribed form and must be accompanied by:

(a) a copy of any document setting out the terms of any relevant agreement that:

(i) contributed to the situation giving rise to the person needing to provide the information; and

(ii) is in writing and readily available to the person; and

(b) a statement by the person giving full and accurate details of any contract, scheme or arrangement that:

(i) contributed to the situation giving rise to the person needing to provide the information; and

(ii) is not both in writing and readily available to the person.

If the person is required to give a copy of a contract, scheme or arrangement, the copy must be endorsed with a statement that the copy is a true copy.

(5) The information does not need to be accompanied by the documents referred to in subsection (4) if the transaction that gives rise to the person needing to provide the information takes place on a stock exchange approved under section 769.

Deadline for giving information

(6) The person must give the information:

(a) within 2 business days after they become aware of the information; or

(b) by 9.30 am on the next trading day of the relevant securities exchange after they become aware of the information if:

(i) a takeover bid is made for voting shares in the company or voting interests in the scheme; and

(ii) the person becomes aware of the information during the bid period.

Relevant interests—exchange traded options and conditional agreements

(7) For the purposes of this section, a person has a relevant interest in securities if the person would have a relevant interest in the securities but for subsection 609(6) (exchange traded options) or 609(7) (conditional agreements).

671C Civil liability

(1) A person who contravenes section 671B is liable to compensate a person for any loss or damage the person suffers because of the contravention.

(2) It is a defence if the person who contravenes section 671B proves that they contravened that section:

(a) because of inadvertence or mistake; or

(b) because they were not aware of a relevant fact or occurrence.

In determining whether the defence is available, disregard the person’s ignorance of, or a mistake on the person’s part concerning, a matter of law.

(3) If 2 or more persons each contravene section 671B because of the same act or omission, their liability under this section for the contravention is joint and individual.

Part 6C.2—Tracing beneficial ownership of shares

672A Disclosure notices

(1) ASIC, a listed company or the responsible entity for a listed managed investment scheme, may direct:

(a) a member of the company or scheme; or

(b) a person named in a previous disclosure under section 672B as having a relevant interest in, or having given instructions about, voting shares in the company or interests in the scheme;

to make the disclosure required by section 672B.

(2) ASIC must exercise its powers under this section if requested to do so by a member of the company or scheme unless it considers that it would be unreasonable to do so in all the circumstances.

672B Disclosure by member of relevant interests and instructions

(1) A person given a direction under section 672A must disclose to the person giving the direction:

(a) full details of their own relevant interest in the shares or interests in the scheme and of the circumstances that give rise to that interest; and

(b) the name and address of each other person who has a relevant interest in any of the shares or interests together with full details of:

(i) the nature and extent of the interest; and

(ii) the circumstances that give rise to the other person’s interest; and

(i) the acquisition or disposal of the shares or interests; or

(ii) the exercise of any voting or other rights attached to the shares or interests; or

(iii) any other matter relating to the shares or interests;

together with full details of those instructions (including the date or dates on which they were given).

A matter referred to in paragraph (b) or (c) need only be disclosed to the extent to which it is known to the person required to make the disclosure.

(2) The disclosure must be made within 2 business days after:

(a) the person is given the direction; or

(b) if the person applies for an exemption under section 673 from the obligation to make the disclosure and ASIC refuses to grant the exemption—ASIC notifies the person of its decision on the application; or

(c) if the direction is given by a company or responsible entity—the company or responsible entity pays any fee payable under the regulations made for the purposes of section 672D.

(3) The person does not have to comply with a direction given by the company or the responsible entity if the person proves that the giving of the direction is vexatious.

672C ASIC may pass information on to person who made request

If ASIC receives information in response to a direction under section 672A about shares in a company or interests in a listed managed investment scheme, ASIC:

(a) may pass the information on to the company or the responsible entity for the scheme; and

(b) if ASIC gave the direction in response to a request under subsection 672A(2)—must pass the information on to the person who made the request unless ASIC considers it would be unreasonable in all the circumstances to do so.

672D Fee for complying with a direction given by a company or scheme under this Part

(1) The regulations may prescribe fees that companies and responsible entities are to pay to persons for complying with directions given under this Part.

(2) A person is liable to repay a fee paid to the person for complying with a direction under section 672A if the person does not comply with the direction on time even if the person does so later. The fee may be recovered as a debt due to the company or responsible entity that paid it to the person.

672E No notice of rights

A company or responsible entity is not, because of anything done under this Part:

(a) to be taken for any purpose to have notice of; or

(b) put on inquiry as to;

a person’s right in relation to a share in the company or an interest in the listed managed investment scheme.

672F Civil liability

(1) A person who contravenes section 672B is liable to compensate a person for any loss or damage the person suffers because of the contravention.

(2) It is a defence if the person who contravenes section 672B proves that they contravened that section:

(a) because of inadvertence or mistake; or

(b) because they were not aware of a relevant fact or occurrence.

In determining whether the defence is available, disregard the person’s ignorance of, or a mistake on the person’s part concerning, a matter of law.

(3) If 2 or more persons each contravene section 672B because of the same act or omission, their liability under this section for the contravention is joint and individual.

Part 6C.3—ASIC powers

673 ASIC’s power to exempt and modify

(1) ASIC may:

(a) exempt a person from a provision of this Chapter; or

(b) declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

(2) In deciding whether to give the exemption or declaration, ASIC must consider the purposes of this Chapter set out in section 602.

(3) The exemption or declaration may:

(a) apply to all or specified provisions of this Chapter; and

(b) apply to all persons, specified persons, or a specified class of persons; and

(d) relate to any other matter generally or as specified.

(5) The exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette.

(6) For the purposes of this section, the provisions of this Chapter include:

(a) regulations made for the purposes of this Chapter; and

(b) definitions in this Law or the regulations as they apply to references in:

(i) this Chapter; or

(ii) regulations made for the purposes of this Chapter; and

Chapter 6D—Fundraising

Part 6D.1—Application of the fundraising provisions

700 Coverage of the fundraising rules

Securities covered

(1) This Chapter covers the following securities:

(a) shares in a body

(b) debentures of a body

(d) legal or equitable rights or interests in:

(i) shares; or

(ii) debentures; or

(iii) interests in a registered managed investment scheme

(e) options to acquire (whether by way of issue or transfer) a security covered by paragraph (a), (b), (c) or (d).

It does not cover a futures contract or an option approved by a securities exchange as an exchange traded option.

Note: Section 9 defines body, sections 9 and 92 define securities and sections 9 and 72 define futures contract.

Offers and invitations both covered

(2) For the purposes of this Chapter:

(a) offering securities for issue includes inviting applications for the issue of the securities; and

(b) offering securities for sale includes inviting offers to purchase the securities.

Person offering securities

(3) For the purposes of this Chapter, the person who offers securities is the person who has the capacity, or who agrees, to issue or transfer the securities if the offer is accepted.

Geographical coverage of Chapter

(4) This Chapter applies to offers of securities that are received in this jurisdiction, regardless of where any resulting issue, sale or transfer occurs.

Note: This Chapter in effect applies to all offers received anywhere in Australia because the Corporations Law operates as a national law.

701 Treatment of offers of interests in managed investment scheme

This Chapter applies to offers of interests in managed investment schemes as if:

(a) making the interests available were issuing the interests; and

(b) the person making the interests available were the body whose securities were issued; and

(c) the assets and liabilities, financial position and performance, profits and losses and prospects of the scheme were those of the body; and

(d) a person who has the capacity to determine the outcome of decisions about the financial and operating policies governing the operation of the scheme were able to control the body.

702 Treatment of offers of options over securities

For the purposes of this Chapter:

(a) an offer of an option over securities is not to be taken to be an offer of the underlying securities; and

(b) the grant of an option without an offer of the option is taken to be an offer of the option; and

Note 1: If a disclosure document is needed for the option and there is no further offer involved in exercising the option, the issue or sale of the underlying securities on the exercise of the option does not need a disclosure document.

Note 2: Paragraph (b)—the grant of the option will not require a disclosure document if no consideration is payable on the grant or the exercise of the option (see subsections 708(14) and (15)).

703 Chapter may not be contracted out of

A condition of a contract for the sale or issue of securities is void if it provides that a party to the contract is:

(a) required or bound to waive compliance with any requirement of this Chapter; or

(b) taken to have notice of any contract, document or matter not specifically referred to in the disclosure document for the offer.

Part 6D.2—Disclosure to investors about securities

Division 1—Overview

704 When disclosure to investors is needed

Sections 706, 707 and 708 say when an offer of securities needs disclosure to investors under this Part.

Note 1: Section 727 prohibits offering securities without disclosure.

Note 2: If the offer needs disclosure, section 734 applies advertising restrictions. These continue throughout the whole offer process. Different restrictions apply before and after the disclosure document is lodged.

Note 3: The way the offers are made to people must not breach the securities hawking prohibition in section 736.

705 Types of disclosure document

The following table shows what disclosure documents to use if an offer of securities needs disclosure to investors under this Part.

	Disclosure document
	Type	Sections
1	*prospectus* The standard full-disclosure document.	Content [710, 711, 713] procedure [717] liability [728 and 729] defences [731, 733]
2	*short form prospectus* May be used for any offer. Section 712 allows a prospectus to refer to material lodged with ASIC instead of setting it out. Investors are entitled to a copy of this material if they ask for it.	content [712]
3	*profile statement* Section 721 allows a brief profile statement (rather than the prospectus) to be sent out with offers with ASIC approval. The prospectus must still be prepared and lodged with ASIC. Investors are entitled to a copy of the prospectus if they ask for it.	content [714] procedure [717] liability [728 and 729] defences [732, 733]
4	*offer information statement* Section 709 allows an offer information statement to be used instead of a prospectus for an offer to issue securities if the amount raised from issues of securities is $5 million or less.	Content [715] procedure [717] liability [728 and 729] defences [732, 733]

Division 2—Offers that need disclosure to investors

706 Issue offers that need disclosure

An offer of securities for issue needs disclosure to investors under this Part unless section 708 says otherwise.

707 Sale offers that need disclosure

Only some sales need disclosure

(1) An offer of securities for sale needs disclosure to investors under this Part only if disclosure is required by subsection (2), (3) or (5).

Off-market sale by controller

(2) An offer of a body’s securities for sale needs disclosure to investors under this Part if:

(a) the person making the offer controls the body; and

(b) either:

(i) the securities are not quoted; or

(ii) although the securities are quoted, they are not offered for sale in the ordinary course of trading on a stock market of a securities exchange;

and section 708 does not say otherwise.

Note: See section 50AA for when a person controls a body.

Sale amounting to indirect issue

(3) An offer of a body’s securities for sale within 12 months after their issue needs disclosure to investors under this Part if the body issued the securities:

(a) without disclosure to investors under this Part; and

(b) with the purpose of the person to whom they were issued:

(i) selling or transferring them; or

(ii) granting, issuing or transferring interests in, or options or warrants over, them;

and section 708 does not say otherwise.

Note 1: Section 706 normally requires disclosure for the issue of securities. This subsection is intended to prevent avoidance of section 706. However, to establish a contravention of this subsection, the only purpose that needs to be shown is that referred to in paragraph (b).

Note 2: The issuer and the seller must both consent to the disclosure document (see section 720).

Evidence of intention—indirect issue

(4) Unless the contrary is proved, a body is taken to issue securities with the purpose referred to in paragraph (3)(b) if any of the securities are subsequently sold, or offered for sale, within 12 months after their issue.

Sale amounting to indirect off-market sale by controller

(5) An offer of a body’s securities for sale within 12 months after their sale by a person who controlled the body at the time of the sale needs disclosure to investors under this Part if:

(a) at the time of the sale by the controller either:

(i) the securities were not quoted; or

(ii) although the securities were quoted, they were not offered for sale in the ordinary course of trading on a stock market of a securities exchange; and

(b) the controller sold the securities without disclosure to investors under this Part; and

(i) selling or transferring them; or

(ii) granting, issuing or transferring interests in, or options or warrants over, them;

and section 708 does not say otherwise.

Note 1: Subsection (2) normally requires disclosure for a sale by a controller. This subsection is intended to prevent avoidance of subsection (2). However, to establish a contravention of this subsection, the only purpose that needs to be shown is that referred to in paragraph (c).

Note 2: See section 50AA for when a person controls a body.

Note 3: The controller and the seller must both consent to the disclosure document (see section 720).

Evidence of intention—indirect sale by controller

(6) Unless the contrary is proved, a person who controls a body is taken to sell securities with the purpose referred to in paragraph (5)(c) if any of the securities are subsequently sold, or offered for sale, within 12 months after their sale by the controller.

708 Offers that do not need disclosure

Small scale offerings (20 issues or sales in 12 months)

(1) Personal offers of a body’s securities by a person do not need disclosure to investors under this Part if:

(a) none of the offers results in a breach of the 20 investors ceiling (see subsections (3) and (4)); and

(b) none of the offers results in a breach of the $2 million ceiling (see subsections (3) and (4)).

This subsection does not apply to an offer for sale to which subsection 707(3) (sale amounting to indirect issue) or (5) (sale amounting to indirect sale by controller) applies.

Note 1: Subsection 727(4) makes it an offence to issue or transfer securities without disclosure to investors once 20 issues or transfers have occurred or $2 million has been raised.

Note 2: Under section 740 ASIC may make a determination aggregating the transactions of bodies that ASIC considers to be closely related.

(2) For the purposes of subsection (1), a personal offer is one that:

(a) may only be accepted by the person to whom it is made; and

(b) is made to a person who is likely to be interested in the offer, having regard to:

(i) previous contact between the person making the offer and that person; or

(ii) some professional or other connection between the person making the offer and that person; or

(iii) statements or actions by that person that indicate that they are interested in offers of that kind.

(3) An offer by a body to issue securities:

(a) results in a breach of the 20 investors ceiling if it results in the number of people to whom securities of the body have been issued exceeding 20 in any 12 month period; and

(b) results in a breach of the $2 million ceiling if it results in the amount raised by the body by issuing securities exceeding $2 million in any 12 month period.

(4) An offer by a person to transfer a body’s securities:

(a) results in a breach of the 20 investors ceiling if it results in the number of people to whom the person sells securities of the body exceeding 20 in any 12 month period; and

(b) results in a breach of the $2 million ceiling if it results in the amount raised by the person from selling the body’s securities exceeding $2 million in any 12 month period.

(5) In counting issues and sales of the body’s securities, and the amount raised from issues and sales, for the purposes of subsection (1), disregard issues and sales that result from offers that:

(a) do not need a disclosure document because of any other subsection of this section; or

(b) are received outside Australia; or

Note: Also see provisions on restrictions on advertising (section 734) and securities hawking provisions (Part 6D.3).

(6) In counting issues and sales of the body’s securities, and the amount raised from issues and sales, for the purposes of subsection (1), disregard any issues and sales made by a body if:

(a) the body was a managed investment scheme (but not a registered managed investment scheme) at the time that the offer of interests in the scheme that resulted in the issues or sales was made; and

(b) the body became a registered managed investment scheme within 12 months after that offer was made; and

(c) the offer would have been exempted under any other subsection of this section if the managed investment scheme had been a registered managed investment scheme at the time that the offer was made.

(7) In working out the amount of money raised by the body by issuing securities, include the following:

(a) the amount payable for the securities at the time when they are issued

(b) if the securities are shares issued partly-paid—any amount payable at a future time if a call is made

(d) if the securities carry a right to convert the securities into other securities—any amount payable on the exercise of that right.

Sophisticated investors

(8) An offer of a body’s securities does not need disclosure to investors under this Part if:

(a) the minimum amount payable for the securities on acceptance of the offer by the person to whom the offer is made is at least $500,000; or

(b) the amount payable for the securities on acceptance by the person to whom the offer is made and the amounts previously paid by the person for the body’s securities of the same class that are held by the person add up to at least $500,000; or

(c) the offer is made through a licensed dealer and the dealer is satisfied on reasonable grounds that the person to whom the offer is made has previous experience in investing in securities that allows them to assess:

(i) the merits of the offer; and

(ii) the value of the securities; and

(iii) the risks involved in accepting the offer; and

(iv) their own information needs; and

(v) the adequacy of the information given by the person making the offer; or

(d) it appears from a certificate given by a qualified accountant no more than 6 months before the offer is made that the person to whom the offer is made:

(i) has net assets of at least $2.5 million; or

(ii) has a gross income for each of the last 2 financial years of at least $250,000 a year.

Note: Section 9 defines qualified accountant.

(9) In calculating the amount payable, or paid, for securities for the purposes of paragraph (8)(a) or (b), disregard any amount payable, or paid, to the extent to which it is to be paid, or was paid, out of money lent by the person offering the securities or an associate.

Professional investors

(10) An offer of securities does not need disclosure to investors under this Part if it is made to:

(a) a person who is a licensed or exempt dealer and is acting as principal; or

(b) a person who is a licensed or exempt investment adviser and is acting as principal; or

(d) a body registered under the Financial Corporations Act 1974; or

(e) a regulated superannuation fund, an approved deposit fund, a pooled superannuation trust, or a public sector superannuation scheme within the meaning of the Superannuation Industry (Supervision) Act 1993 if the fund, trust or scheme has net assets of at least $10 million; or

(f) a terminating building society within the meaning of the Financial Corporations Act 1974; or

(g) a friendly society within the meaning of the Life Insurance Act 1995; or

(h) a person who controls at least $10 million (including any amount held by an associate or under a trust that the person manages) for the purpose of investment in securities.

Note 1: Section 68 defines exempt dealer and exempt investment adviser.

Note 2: An underwriter to a securities issue or sale will generally be a licensed dealer.

Offers of securities to people associated with the body

(11) An offer of a body’s securities does not need disclosure to investors under this Part if it is made to:

(a) an executive officer of the body or a related body or their spouse, parent, child, brother or sister; or

(b) a body corporate controlled by a person referred to in paragraph (a).

Certain offers to present holder of securities

(12) An offer of securities for issue does not need disclosure to investors under this Part if it is:

(a) an offer of fully-paid shares in a company to 1 or more existing holders of shares in the company under a dividend reinvestment plan or bonus share plan; or

(b) an offer of interests in a managed investment scheme to 1 or more existing holders of interests in the scheme if:

(i) the offer is made under a distribution reinvestment plan or switching facility; or

(ii) the scheme is of a kind commonly known as a cash common fund or cash management trust.

(13) An offer of a disclosing entity’s debentures for issue does not need disclosure to investors under this Part if the offer is made to 1 or more existing debenture holders.

Issues or sales for no consideration

(14) An offer of securities (other than options) does not need disclosure to investors under this Part if no consideration is to be provided for the issue or transfer of the securities.

(15) An offer of options does not need disclosure to investors under this Part if:

(a) no consideration is to be provided for the issue or transfer of the options; and

(b) no consideration is to be provided for the underlying securities on the exercise of the option.

Compromise or arrangement under Part 5.1

(16) An offer of securities does not need disclosure to investors under this Part if it is made under a compromise or arrangement under Part 5.1 approved at a meeting held as a result of an order under subsection 411(1) or (1A).

Takeovers

(17) An offer of securities does not need disclosure to investors under this Part if it is:

(a) made as consideration for an offer to acquire securities under a takeover bid under Chapter 6; and

(b) accompanied by a bidder’s statement.

Note: Although this offer does not need a disclosure document, similar disclosures must be made about the securities in the bidder’s statement under section 636.

Debentures of certain bodies

(18) An offer of a body’s debentures for issue or sale does not need disclosure to investors under this Part if the body is:

(a) an Australian ADI; or

(b) registered under the Life Insurance Act 1995.

Offers by exempt bodies

(19) An offer of a body’s securities does not need disclosure to investors under this Part if the body is an exempt body of this jurisdiction.

Note: Section 66A defines exempt body.

Division 3—Types of disclosure documents

709 Prospectuses, short-form prospectuses, profile statements and offer information statements

Prospectus or short-form prospectus

(1) If an offer of securities needs disclosure to investors under this Part, a prospectus must be prepared for the offer unless subsection (4) allows an offer information statement to be used instead. Under section 712, the prospectus may simply refer to material already lodged with ASIC instead of including it.

Note: See sections 710 to 713 for the contents of a prospectus.

Profile statement

(2) A profile statement for an offer may be prepared in addition to the prospectus if ASIC has approved the making of offers of that kind with a profile statement instead of a disclosure document.

Note 1: See section 714 for the contents of a profile statement.

Note 2: Subsection 729(2) provides that there is still liability to investors on the prospectus when a profile statement is used.

(3) ASIC may approve the use of profile statements for offers of securities of a particular kind. The approval may specify information to be included in the profile statement (including information about a matter referred to in paragraph 714(1)(a) to (d)).

Offer information statement

(4) A body offering to issue securities may use an offer information statement for the offer instead of a prospectus if the amount of money to be raised by the body by issuing the securities, when added to all amounts previously raised by:

(a) the body; or

(b) a related body corporate; or

(i) a person who controls the body; or

(ii) an associate of that person;

by issuing securities under an offer information statement is $5 million or less.

Note 1: See section 715 for the contents of an offer information statement. The statement must include financial statements that are less that 6 months old.

Note 2: Under section 740, ASIC may make a determination aggregating the transactions of bodies that ASIC considers to be closely related.

(5) In working out the amount of money to be raised by a body or entity by issuing securities, include the following:

(a) the amount payable for the securities at the time when they are issued

(b) if the securities are issued partly-paid—any amount payable at a future time if a call is made

(d) if the securities carry a right to convert the securities into other securities—any amount payable on the exercise of that right.

Division 4—Disclosure requirements

710 Prospectus content—general disclosure test

(1) A prospectus for a body’s securities must contain all the information that investors and their professional advisers would reasonably require to make an informed assessment of the matters set out in the table below. The prospectus must contain this information:

(a) only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the prospectus; and

(b) only if a person whose knowledge is relevant (see subsection (3)):

(i) actually knows the information; or

(ii) in the circumstances ought reasonably to have obtained the information by making enquiries.

Disclosures	[operative]
	Offer	Matters
1	offer to issue (or transfer) shares, debentures or interests in a managed investment scheme	• the rights and liabilities attaching to the securities offered • the assets and liabilities, financial position and performance, profits and losses and prospects of the body that is to issue (or issued) the shares, debentures or interests
2	offer to grant (or transfer) a legal or equitable interest in securities or grant (or transfer) an option over securities	• the rights and liabilities attaching to: - the interest or option - the underlying securities • for an option—the capacity of the person making the offer to issue or deliver the underlying securities • if the person making the offer is: - the body that issued or is to issue the underlying securities; or - a person who controls that body; the assets and liabilities, financial position and performance, profits and losses and prospects of that body • if subsection 707(3) or (5) applies to the offer—the assets and liabilities, financial position and performance, profits and losses and prospects of the body whose securities are offered

Disclosures

[operative]

Offer

Matters

offer to issue (or transfer) shares, debentures or interests in a managed investment scheme

• the rights and liabilities attaching to the securities offered
• the assets and liabilities, financial position and performance, profits and losses and prospects of the body that is to issue (or issued) the shares, debentures or interests

offer to grant (or transfer) a legal or equitable interest in securities or grant (or transfer) an option over securities

• the rights and liabilities attaching to:
- the interest or option
- the underlying securities
• for an option—the capacity of the person making the offer to issue or deliver the underlying securities

• if the person making the offer is:
- the body that issued or is to issue the underlying securities; or
- a person who controls that body;

the assets and liabilities, financial position and performance, profits and losses and prospects of that body
• if subsection 707(3) or (5) applies to the offer—the assets and liabilities, financial position and performance, profits and losses and prospects of the body whose securities are offered

Note: Section 713 makes special provision for prospectuses for continuously quoted securities.

(2) In deciding what information should be included under subsection (1), have regard to:

(a) the nature of the securities and of the body; and

(b) if the securities are investments in a managed investment scheme—the nature of the scheme; and

(d) the fact that certain matters may reasonably be expected to be known to their professional advisers.

(3) For the purposes of this section, a person’s knowledge is relevant only if they are one of the following:

(a) the person offering the securities

(b) if the person offering the securities is a body—a director of the body

(d) a person named in the prospectus as an underwriter of the issue or sale

(e) a person named in the prospectus as a stockbroker to the issue or sale if they participate in any way in the preparation of the prospectus

(f) a person named in the prospectus with their consent as having made a statement:

(i) that is included in the prospectus; or

(ii) on which a statement made in the prospectus is based

(g) a person named in the prospectus with their consent as having performed a particular professional or advisory function.

Note: Section 729 says who is liable for misstatements in, and omissions from, a disclosure document.

711 Prospectus content—specific disclosures

Terms and conditions of offer

(1) The prospectus must set out the terms and conditions of the offer.

Disclosure of interests and fees of certain people involved in the offer

(2) The prospectus must set out the nature and extent of the interests (if any) that each person referred to in subsection (4) holds, or held at any time during the last 2 years, in:

(a) the formation or promotion of the body; or

(b) property acquired or proposed to be acquired by the body in connection with:

(i) its formation or promotion; or

(ii) the offer of the securities; or

(3) The prospectus must set out the amount that anyone has paid or agreed to pay, or the nature and value of any benefit anyone has given or agreed to give:

(a) to a director, or proposed director, to induce them to become, or to qualify as, a director of the body; and

(b) for services provided by a person referred to in subsection (4) in connection with:

(i) the formation or promotion of the body; or

(ii) the offer of the securities; and

(i) to procure acquisitions of interests in the scheme; or

(ii) for services provided under the constitution of the scheme.

To comply with this subsection it is not sufficient merely to state in the prospectus that a person has been paid or will be paid normal, usual or standard fees.

(4) Disclosures need to be made under subsections (2) and (3) in relation to:

(a) any directors and proposed directors of the body

(b) a person named in the prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of the prospectus

(c) if the securities are interests in a managed investment scheme—the person making the interests available and, if the person is a body, its directors

(d) a promoter of the body

(e) a stockbroker or underwriter (but not a sub-underwriter) to the issue or sale.

Quotation of securities

(5) If the prospectus for an offer of securities states or implies that the securities are to be quoted on a stock market of a securities exchange (whether in Australia or elsewhere), the prospectus must state that:

(a) the securities have been admitted to quotation on that stock market; or

(b) an application for admission of the securities to quotation on that stock market has been made to that securities exchange; or

(c) an application for admission of the securities to quotation on that stock market will be made to that securities exchange within 7 days after the date of the prospectus.

Note 1: Paragraph 724(1)(b) gives times within which the person should seek and obtain admission to quotation.

Note 2: Subsection 716(1) requires the prospectus to be dated.

Expiry date

(6) The prospectus must state that no securities will be issued on the basis of the prospectus after the expiry date specified in the prospectus. The expiry date must not be later than 13 months after the date of the prospectus. The expiry date of a replacement prospectus must be the same as that of the original prospectus it replaces.

Note 1: Subsection 716(1) requires the prospectus to be dated.

Note 2: Section 719 deals with replacement prospectuses.

Lodgment with ASIC

(7) The prospectus must state that:

(a) a copy of the prospectus has been lodged with ASIC; and

(b) ASIC takes no responsibility for the content of the prospectus.

Prescribed information

(8) The prospectus must set out the information required by the regulations.

712 Prospectus content—short form prospectuses

Prospectus may simply refer to material lodged with ASIC

(1) Instead of setting out information that is contained in a document that has been lodged with ASIC, a prospectus may simply refer to the document. The reference must:

(a) identify the document or the part of the document that contains the information; and

(b) inform people of their right to obtain a copy of the document (or part) under subsection (5).

(2) The reference must also include:

(a) if the information is primarily of interest to professional analysts or advisers or investors with similar specialist information needs:

(i) a description of the contents of the document (or part); and

(ii) a statement to the effect that the information in the document (or part) is primarily of interest to those people; or

(b) in any other case—sufficient information about the contents of the document to allow a person to whom the offer is made to decide whether to obtain a copy of the document (or part).

(3) The document (or part) referred to under subsection (1) is taken to be included in the prospectus.

(4) A person who wishes to take advantage of subsection (1) may lodge a document with ASIC even if this Law does not require the document to be lodged.

(5) If the prospectus is taken to include a document, or part of a document, under subsection (1), the person making the offer must give a copy of the document (or part) free of charge to anyone who asks for it during the application period of the prospectus.

713 Special prospectus content rules for continuously quoted securities

Alternative general disclosure test

(1) A prospectus for an offer of:

(a) continuously quoted securities of a body; or

(b) options to acquire continuously quoted securities of a body;

satisfies section 710 if it complies with subsections (2), (3) and (4) of this section.

(2) The prospectus must contain all the information investors and their professional advisers would reasonably require to make an informed assessment of:

(a) the effect of the offer on the body; and

(b) if the securities are interests in a managed investment scheme—the effect of the offer on the scheme; and

(d) if the securities are options—the rights and liabilities attaching to:

(i) the options themselves; and

(ii) the underlying securities.

The prospectus must contain this information only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the prospectus.

(3) The prospectus must state that:

(a) as a disclosing entity, the body or scheme is subject to regular reporting and disclosure obligations; and

(b) copies of documents lodged with ASIC in relation to the body may be obtained from, or inspected at, an ASIC office.

(4) The prospectus must either:

(a) inform people of their right to obtain a copy of any of the following documents:

(i) the annual financial report most recently lodged with ASIC by the body or scheme

(ii) any half-year financial report lodged with ASIC by the body or scheme after the lodgment of that annual financial report and before the lodgment of the copy of the prospectus with ASIC

(iii) any continuous disclosure notices given by the body or scheme after the lodgment of that annual financial report and before the lodgment of the copy of the prospectus with ASIC; or

(b) include, or be accompanied by, a copy of the document.

If the prospectus informs people of their right to obtain a copy of the document, the person making the offer must give a copy of the document free of charge to anyone who asks for it during the application period for the prospectus.

Information excluded from continuous disclosure notice

(5) Information about the offer must also be set out in the prospectus if the information:

(a) has been excluded from a continuous disclosure notice in accordance with the listing rules of the securities exchange to which the notice was given; and

(b) is information that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of:

(i) the assets and liabilities, financial position and performance, profits and losses and prospects of the body; and

(ii) the rights and liabilities attaching to the securities being offered.

The prospectus must contain this information only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the prospectus.

ASIC power to exclude entity from this section

(6) ASIC may determine in writing that a body or scheme may not rely on this section if it is satisfied that, in the previous 12 months, any of the following provisions were contravened in relation to the body or scheme:

(a) the provisions of Chapter 2M

(b) section 1001A

(d) section 728.

ASIC must publish a copy of the determination in the Gazette. While the determination is in force, section 710 and not this section applies to securities of the body or scheme.

714 Contents of profile statement

(1) A profile statement must:

(a) identify the body and the nature of the securities; and

(b) state the nature of the risks involved in investing in the securities; and

(c) give details of all amounts payable in respect of the securities (including any amounts by way of fee, commission or charge); and

(d) state that the person given the profile statement is entitled to a copy of the prospectus free of charge; and

(e) state that:

(i) a copy of the statement has been lodged with ASIC; and

(ii) ASIC takes no responsibility for the content of the statement; and

(f) give any other information required by the regulations or by ASIC approval under subsection 709(3).

(2) The profile statement must state that no securities will be issued on the basis of the statement after the expiry date specified in the statement. The expiry date must not be later than 13 months after the date of the prospectus. The expiry date of a replacement statement must be the same as that of the original statement it replaces.

Note 1: Subsection 716(1) requires the profile statement to be dated.

Note 2: Section 719 deals with supplementary and replacement profile statements.

715 Contents of offer information statement

(1) An offer information statement for the issue of a body’s securities must:

(a) identify the body and the nature of the securities; and

(b) describe the body’s business; and

(d) state the nature of the risks involved in investing in the securities; and

(e) give details of all amounts payable in respect of the securities (including any amounts by way of fee, commission or charge); and

(f) state that:

(i) a copy of the statement has been lodged with ASIC; and

(ii) ASIC takes no responsibility for the content of the statement; and

(g) state that the statement is not a prospectus and that it has a lower level of disclosure requirements than a prospectus; and

(h) state that investors should obtain professional investment advice before accepting the offer; and

(i) include a copy of a financial report for the body; and

(j) include any other information that the regulations require to be included in the statement.

(2) The financial report included under paragraph (1)(i) must:

(a) be a report for a 12 month period and have a balance date that occurs within the last 6 months before the securities are first offered under the statement; and

(b) be prepared in accordance with the accounting standards; and

(3) The statement must state that no securities will be issued on the basis of the statement after the expiry date specified in the statement. The expiry date must not be later than 13 months after the date of the statement. The expiry date of a replacement statement must be the same as that of the original statement it replaces.

Note 1: Subsection 716(1) requires the statement to be dated.

Note 2: Section 719 deals with replacement statements.

716 Disclosure document date and consents

Date of disclosure document

(1) A disclosure document must be dated. The date is the date on which it is lodged with ASIC.

Consent of person to whom statement attributed

(2) A disclosure document may only include a statement by a person, or a statement said in the document to be based on a statement by a person, if:

(a) the person has consented to the statement being included in the document in the form and context in which it is included; and

(b) the document states that the person has given this consent; and

Division 5—Procedure for offering securities

717 Overview of procedure for offering securities

The following table summarises what a person who wants to offer securities must do to offer securities that needs disclosure to investors under this Part and gives signposts to relevant sections:

Offering securities (disclosure documents and procedure)
	Action required	Sections	Comments and related sections
1	Prepare disclosure document, making sure that it: • sets out all the information required • does not contain any misleading or deceptive statements • is dated and that the directors consent to the disclosure document.	710 711 712 713 714 715 716	Section 728 prohibits offering securities under a disclosure document that is materially deficient. Section 729 deals with the liability for breaches of this prohibition. Sections 731, 732 and 733 set out defences.
2	Lodge the disclosure document with ASIC	718	Subsection 727(3) prohibits processing applications for non-quoted securities for 7 days after the disclosure document is lodged.
3	Offer the securities, making sure that the offer and any application form is either included in or accompanies: • the disclosure document; or • a profile statement if ASIC has approved the use of a profile statement for offers of that kind.	721	Sections 727 and 728 make it an offence to: • offer securities without a disclosure document • offer securities if the disclosure document is materially deficient. Subsection 729(3) deals with liability on the prospectus if a profile statement is used. The securities hawking provisions (section 736) restrict the way in which the securities can be offered.
4	If it is found that the disclosure document lodged was deficient or a significant new matter arises, either: • lodge a supplementary or replacement document under section 719; or • return money to applicants under section 724.	719 724	Section 728 prohibits making offers after becoming aware of a material deficiency in the disclosure document or a significant new matter. Section 730 requires people liable on the disclosure document to inform the person making the offer about material deficiencies and new matters.
5	Hold application money received on trust until the securities are issued or transferred or the money returned.	722	Investors may have a right to have their money returned if certain events occur (see sections 724, 737 and 738).
6	Issue or transfer the securities, making sure that: • the investor used an application form distributed with the disclosure document; and • the disclosure document is current and not materially deficient; and • any minimum subscription or quotation condition has been satisfied.	723	Section 721 says which disclosure document must be distributed with the application form. Section 729 identifies the people who may be liable if: • securities are issued in response to an improper application form; or • the disclosure document is not current or is materially deficient. Sections 731, 732 and 733 provide defences for the contraventions. Section 737 provides remedies for an investor.

718 Lodging of disclosure document

A disclosure document to be used for an offer of securities must be lodged with ASIC.

Note 1: Subsection 727(3) makes it an offence to process applications for non-quoted securities under an offer that needs a disclosure document until 7 days after the disclosure document is lodged.

Note 2: See section 720 for the consents that need to be

Commonwealth of Australia Bills

CORPORATE LAW ECONOMIC REFORM BILL 1998

1 Short title

2 Commencement

3 Schedule(s)

Schedule 1—Main amendments of the Corporations Law

Chapter 2D—Officers and employees

Part 2D.1—Duties and powers

179 Background to duties of directors, other officers and employees

Division 1—General duties

180 Care and diligence—civil obligation only

181 Good faith—civil obligations

182 Use of position—civil obligations

183 Use of information—civil obligations

184 Good faith, use of position and use of information—criminal offences

185 Interaction of sections 180 to 184 with other laws etc.

186 Territorial application of sections 180 to 184

187 Directors of wholly-owned subsidiaries

188 Responsibility of secretaries and directors for certain contraventions

189 Reliance on information or advice provided by others

190 Responsibility for actions of delegate

Division 2—Disclosure of, and voting on matters involving, material personal interests

191 Material personal interest—director’s duty to disclose

192 Director may give other directors standing notice about an interest

193 Interaction of sections 191 and 192 with other laws etc.

194 Voting and completion of transactions—directors of proprietary companies (replaceable rule—see section 135)

195 Restrictions on voting—directors of public companies only

196 ASIC power to make declarations and class orders

Division 3—Duty to discharge certain trust liabilities

197 Directors liable for debts and other obligations incurred by corporation as trustee

Division 4—Powers

198A Powers of directors (replaceable rule—see section 135)

198B Negotiable instruments (replaceable rule—see section 135)

198C Managing director (replaceable rule—see section 135)

198D Delegation

198E Single director/shareholder proprietary companies

198F Right of access to company books

Part 2D.2—Restrictions on indemnities, insurance and termination payments

Division 1—Indemnities and insurance for officers and auditors

199A Indemnification and exemption of officer or auditor

199B Insurance premiums for certain liabilities of director, secretary, other officer or auditor

199C Certain indemnities, exemptions, payments and agreements not authorised and certain documents void

Division 2—Termination payments

200A When benefit given in connection with retirement from office

200B Retirement benefits generally need membership approval

200C Benefits on transfer of undertaking or property need membership approval

200D Contravention to receive benefit without member approval

200E Approval by members

200F Exempt benefits and benefits given in certain circumstances

200G Genuine payments of pension and lump sum

200H Benefits required by law

200J Benefits to be held in trust for company

Part 2D.3—Appointment, remuneration and cessation of appointment of directors

Division 1—Appointment of directors

201A Minimum number of directors

201B Who can be a director

201C Directors of public companies, or subsidiaries, over 72

201D Consent to act as director

201E Special rules for the appointment of public company directors

201F Special rules for the appointment of directors for single director/single shareholder proprietary companies

201G Company may appoint a director (replaceable rule—see section 135)

201H Directors may appoint other directors (replaceable rule—see section 135)

201J Appointment of managing directors (replaceable rule—see section 135)

201K Alternate directors (replaceable rule—see section 135)

201L Signpost—ASIC to be notified of appointment

201M Effectiveness of acts by directors

Division 2—Remuneration of directors

202A Remuneration of directors (replaceable rule—see section 135)

202B Members may obtain information about directors’ remuneration

202C Special rule for single director/single shareholder proprietary companies

Division 3—Resignation, retirement or removal of directors

203A Director may resign by giving written notice to company (replaceable rule—see section 135)

203B Signpost to consequences of disqualification from managing corporations

203C Removal by members—proprietary companies (replaceable rule—see section 135)

203D Removal by members—public companies

203E Director cannot be removed by other directors—public companies

203F Termination of appointment of managing director (replaceable rule—see section 135)

Part 2D.4—Appointment of secretaries

204A Minimum number of secretaries

204B Who can be a secretary