Explanatory Memorandum(Circulated by the authority of the Parliamentary Secretary to the Treasurer, the Hon Chris Pearce MP)
Chapter 6 Takeovers
Outline of chapter
6.1 This chapter describes amendments to repeal the provisions in the Corporations Act which relate to telephone monitoring during takeover bids and the requirements to provide section 665D and 665E notices (85 per cent notices).
Context of amendments
Remove telephone monitoring during takeover bids
6.2 Currently a bidder and a target in a takeover situation must record all telephone calls they make to security holders (other than wholesale holders) to discuss a takeover bid during the bid period.
6.3 Subdivision D, Division 5, Part 6.5 of the Corporations Act was introduced by the Financial Services Reform Act 2001 . It imposes obligations relating to the identification, indexing, storing, destroying, accessing and copying of the recordings.
6.4 The purpose of the subdivision was to ensure that security holders did not receive information from the takeover bidder or target that could be considered misleading.
6.5 The existing provisions have not increased the protection of security holders and impose significant costs on the parties involved.
Remove section 665D and 665E notices (85 per cent notices)
6.6 Currently section 665D of the Corporations Act requires those persons who hold 85 per cent or more of a class of securities in a company to notify the company in writing of that fact within 14 days of becoming aware that they are a 85 per cent holder and then remind the company on an annual basis.
6.7 Section 665E requires a company that has been given a notice under section 665D to inform its members the next time it sends its members a notice or report under another provision of the Corporations Act.
6.8 The provisions were enacted to provide holders of securities with an advanced warning that the majority holder is approaching the 90 per cent limit, at which the majority holder can compulsorily acquire their securities.
6.9 However, it is often the case that the minority are already aware of the majority holder's position. For listed entities, other mechanisms in the Corporations Act will mean that the information is already publicly disclosed.
6.10 Furthermore, even if notice is given, it could be the case that a significant time has lapsed between the majority holder providing the information to the company and the issue of the company's next notice or report.
6.11 These provisions have proved to be of little benefit to minority holders but impose significant costs on majority holders and companies.
Summary of new law
6.12 The Bill will remove the requirement to monitor telephone calls during a takeover bid. It will also remove the requirement to issue section 665D and 665E notices.
Comparison of key features of new law and current law
|New law||Current law|
|No requirement to record telephone calls.||A bidder and a target in a takeover situation must record all telephone calls they make to security holders (other than wholesale holders) to discuss a takeover bid during the bid period.|
|No requirements to issue 85 per cent notices.||Persons who hold 85 per cent or more of a class of securities in a company must notify the company and the company must inform its members of such a notice.|
Detailed explanation of new law
6.1 Subdivision D of Division 5 of Part 6.5 will be repealed. This will remove the requirement for telephone monitoring during the takeover bid period. [Schedule 1, Part 1, item 68]
6.2 Division 3 of Part 6A.2 of the Corporations Act will be repealed. This will remove the requirement for holders of 85 per cent or more of a class of securities in a company to notify the company. It will also remove the requirement for the company to notify its members. [Schedule 1, Part 1, item 69]
Application and transitional provisions
6.3 The repeal of the telephone monitoring and 85 per cent notice requirements will take effect on the day of Royal Assent.
6.4 The penalty provisions related to telephone monitoring (Items 201A to 201M of Schedule 3) will be removed from the Corporations Act. [Schedule 1, Part 1, item 170]
6.5 The penalty provisions related to section 665D and 665E notices (Items 219 and 220 of Schedule 3) will be removed from the penalties schedule. [Schedule 1, Part 1, item 171]
Please do not delete the following section break