House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)

Chapter 2: Scope of acquisition notification requirements

Detailed explanation of new law

Notification of acquisitions

Acquisitions to which acquisitions provisions apply

Acquisitions of shares and assets

2.1 The acquisitions provisions apply to a range of share and asset acquisitions, including:

•

an acquisition by a corporation of:

-

shares in the capital of a body corporate;

-

any assets of a person;

•

an acquisition of shares in the capital of a corporation;

•

an acquisition of any assets of a corporation.

[Schedule 1, item 35, paragraphs 51ABB(1)(a), (b), (d) and (e) of the CCA]

Acquisitions captured by ministerial determination

2.2 The Minister has the power to determine, by legislative instrument, that the acquisition provisions apply to:

•

an acquisition by a corporation of anything; and

•

an acquisition of anything relating to a corporation.

[Schedule 1, item 35, paragraphs 51ABB(1)(c), (f) and subsection 51ABB(2) of the CCA]

2.3 The Minister's determination power provides necessary flexibility to address emerging issues or transaction structures that may not be captured by the categories specified in the legislation. For instance, this may include business transactions where control is obtained via management agreements in combination with partial shareholding. This supports a risk-based system by providing a mechanism to specifically target acquisitions that should be captured while managing regulatory impacts.

2.4 The corporations power in section 51(xx) of the Constitution is the primary power relied on to support the new Part IVA of the CCA. Accordingly, the Minister's determination power will be exercised with reference to an acquisition by or relating to a corporation. Determinations will be subject to disallowance and are anticipated to be informed through consultation processes.

Acquisitions of units in unit trusts and interests in managed investment schemes

2.5 The acquisitions provisions apply to the acquisition of units in a unit trust or the acquisition of an interest in a managed investment scheme (within the meaning of the Corporations Act) as if:

•

the trust or scheme were a body corporate;

•

units in the trust or interests in the scheme were shares in the capital of the body corporate.

[Schedule 1, item 35, paragraphs 51ABC(1)(a) and (2)(a) of the CCA]

2.6 In the case of a managed investment scheme, the acquisitions provisions also apply as if the body corporate were a corporation if:

•

for a registered scheme (within the meaning of the Corporations Act) - the scheme's responsible entity (with the meaning of that Act) is a corporation, or

•

for a scheme that is not a registered scheme - the person holding the office in relation to the scheme that corresponds most closely to the office of responsible entity, is a corporation.

[Schedule 1, item 35, paragraph 51ABC(2)(b) of the CCA]

2.7 The Minister has the power to determine, by legislative instrument, modifications to how the acquisitions provisions apply to a unit trust or managed investment scheme.

[Schedule 1, item 35, subsection 51ABC(3) and paragraphs 51ABC(1)(b) and (2)(c) of the CCA]

2.8 Acquisitions of units in unit trusts or interests in managed investment schemes may raise competition concerns, similar to acquisitions of interests in other entities, such as a corporation. This power provides flexibility in relation to modifications which may be necessary to apply the acquisitions provisions to, for example, the wide variety of arrangements covered by the statutory definition of 'managed investment scheme' in the Corporations Act.

Extended application to assets

2.9 The acquisitions provisions apply to the following that is not an asset in the same way as they apply in relation to an asset:

•

any kind of property;

•

a legal or equitable right that is not property; and

•

a part of, or an interest in, either of the above.

[Schedule 1, item 35, paragraphs 51ABN(1)(a), (b) and subparagraph (c)(i) of the CCA]

2.10 For avoidance of doubt, the amendments clarify what will be treated as an asset for the purposes of the acquisitions provisions. Examples of assets that may be acquired include:

•

legal or equitable interests in tangible assets, such as options for land; and

•

intangible assets, such as intellectual property rights or contractual rights such as leases.

2.11 Similarly, the acquisitions provisions apply to the following in the same way as they apply in relation to an asset:

•

goodwill or an interest in it;

•

an interest in an asset of a partnership; and

•

an interest in a partnership that is not an interest in an asset of the partnership.

[Schedule 1, item 35, subparagraphs 51ABN(1)(c)(ii), (iii) and (iv) of the CCA]

2.12 Goodwill can be a significant component of the value of a business and its acquisition could have effects on competition (see paragraphs 4.52 to 4.54 below for more on goodwill protections). Similarly, partnerships are a common form of business structure and acquisitions of interests in partnerships could raise competition concerns in some contexts.

2.13 Applying the acquisitions provisions to both, the interests in assets held by a partnership, as well as the to the interests in the partnership itself, means that all forms of partnership acquisitions are subject to these provisions.

Land or patent

2.14 Under paragraph 4(4)(b) of the Act, a reference to the acquisition of assets of a person does not include a reference to an acquisition in the ordinary course of business ('ordinary course of business exception').

2.15 However, for the purposes of the acquisitions provisions, the ordinary course of business exception is taken not to apply to:

•

land, or an interest in land, or

•

a patent, or an interest in a patent.

[Schedule 1, item 35, subsection 51ABN(2) of the CCA]

2.16 This limitation to the ordinary course of business exception is introduced in recognition that acquisitions of land or patents can be competitively significant and should be within the scope of acquisitions that could be required to be notified.

2.17 Land is an essential input for many industries and the acquisition of land holdings could, for example, create barriers to entry or expansion. For example, in May 2024, the Senate Select Committee on Supermarket Prices identified the use of land banking as a way of reducing competition and solidifying market power in grocery retailing. Similarly, the acquisition of patents conferring exclusive rights could restrict competition.

2.18 These amendments do not change the scope of the ordinary course of business exception in paragraph 4(4)(b) for acquisitions under the existing prohibition against anti-competitive acquisitions in section 50 of the CCA.

Acquisitions to which acquisitions provisions do not apply

Internal restructures and reorganisations

2.19 The acquisitions provisions do not apply to an acquisition that is (or is part) of a restructure or reorganisation of a group of persons who are related:

•

in the ways referred to in section 4A of the CCA (i.e. related bodies corporate, including holding companies, subsidiaries, etc.); or

•

by means of a trust or partnership.

[Schedule 1, item 35, subsection 51ABD(1) of the CCA]

2.20 Internal restructures or reorganisations within a corporate group (or among entities related through trust or partnership structures) are not within scope of the acquisitions provisions. This exclusion avoids imposing unnecessary regulatory burden on corporate groups seeking to streamline, restructure or reorganise their internal operations, activities and structures.

Government authorities

2.21 For the purposes of the first limb of this exclusion (i.e. entities related in the ways referred to in section 4A of the CCA), the law treats the Commonwealth, States, and Territories as though they were bodies corporate, with their respective authorities considered as subsidiaries of the relevant jurisdiction.

[Schedule 1, item 35, subsection 51ABD(2) of the CCA]

2.22 As a result, the exclusion for internal restructures and reorganisations is extended to cover restructures involving government-owned corporations and different authorities within the same jurisdiction.

2.23 The law clarifies that treating jurisdictions and their authorities in this manner does not automatically establish a relationship between different authorities within the same jurisdiction. This means that merely being part of the same jurisdiction does not make two authorities related for the purposes of this exclusion.

[Schedule 1, item 35, subsection 51ABD(3) of the CCA]

2.24 Extending this exclusion to government-owned corporations and authorities means that internal restructures or reorganisations within State or Commonwealth entities will be excluded from the new system. This would apply to intra-Commonwealth, State and Territory authority restructures and not between or among Commonwealth, State and Territory authorities.

2.25 Because of this specific exemption, and exemptions to the requirement to notify outlined below, consequential amendments are made to section 95AA of the CCA to limit the Commission's general class exemption power to not include Division 1A of Part IV.

[Schedule 1, item 48, subsections 95AA(1) and (5) of the CCA]

Conditional contracts, arrangements and understandings

2.26 For the purposes of the acquisitions provisions, if:

•

a person enters into a contract, arrangement, or understanding to acquire shares in a body corporate, assets of another person, or anything determined by the Minister (under subsection 51ABB(2)), and

•

that contract, arrangement, or understanding is conditional upon one or more conditions being met, then the person does not make the relevant acquisition unless and until all conditions are satisfied and the agreement becomes binding

[Schedule 1, item 35, section 51ABL of the CCA]

2.27 This amendment applies the acquisitions provisions only to transactions that are binding. Contracts, arrangements, or understandings subject to conditions precedent (such as obtaining regulatory approvals or financing) are excluded until those conditions are met (for example, by the fulfilment of certain circumstances or through the relevant party or parties agreeing to waive the condition) and the agreement becomes binding. This provides clarity and commercial certainty to parties, allowing them to negotiate and plan their arrangements.

Changes in joint ownership

2.28 For the purposes of the acquisitions provisions, if a joint holder of a particular parcel of shares in the capital of a body corporate begins to hold the shares alone, they are taken to acquire those shares.

[Schedule 1, item 35, section 51ABM of the CCA]

Notification requirements for regulated acquisitions

When acquisitions are required to be notified

2.29 An acquisition is required to be notified to the Commission if it meets either of the following:

•

it occurs in circumstances determined by the Minister under subsection 51ABP(1) ('notification thresholds'); or

•

it belongs to a class of acquisitions determined by the Minister under subsection 51ABQ(1) ('class determinations').

[Schedule 1, item 35, section 51ABO of the CCA]

Notification thresholds

2.30 The Minister has the power to determine, by legislative instrument, the circumstances in which an acquisition must be notified based on specified thresholds.

[Schedule 1, item 35, subsections 51ABP(1) and (2) of the CCA]

2.31 These thresholds may relate to factors such as:

•

the value of the acquisition or the underlying contract, arrangement, or understanding;

•

the turnover of a person, business, or part of a business;

•

the level of market concentration; or

•

any assets of a person.

[Schedule 1, item 35, subsection 51ABP(3) of the CCA]

2.32 For the avoidance of doubt, any instrument made under this section does not affect the meaning of substantially lessening competition. This provision confirms that the mere determination of circumstances does not imply that in those circumstances there will be a substantial lessening of competition.

[Schedule 1, item 35, subsection 51ABP(4) of the CCA]

2.33 Monetary thresholds generally relate to the size of the acquisition based on well understood financial metrics such as turnover, assets and transaction value. Monetary thresholds can be used to capture mergers by medium to very large businesses that are economically significant in size. They can also be structured to capture other mergers of concern such as serial acquisitions and nascent acquisitions.

2.34 Market concentration metrics are a good indicator of the market structure and potential competitive impact of the merger. Market concentration thresholds can ensure that acquisitions not captured by monetary thresholds that could appreciably impact competition will be captured.

Class determinations

2.35 The Minister may determine, by legislative instrument, specific classes of acquisitions that must be notified.

[Schedule 1, item 35, subsection 51ABQ(1) of the CCA]

2.36 When making a class determination, the Minister may determine the class by referring wholly or partly to any of the following:

•

a party, or a class of parties, to an acquisition or to a contract, arrangement or understanding;

•

an asset or a class of assets;

•

a business or a class of businesses;

•

a market or a class of markets;

•

an industry or a class of industries; or

•

another acquisition, or a class of acquisitions.

[Schedule 1, item 35, subsection 51ABQ(2) of the CCA]

2.37 Setting what constitutes a 'notifiable acquisition' in legislative instruments permits flexibility to calibrate these details over time to ensure the system is risk-based and targeted at acquisitions that are capable of affecting competition and most likely to result in harm to competition and consumers (including, for example, serial acquisitions and acquisitions of nascent competitors).

2.38 This flexibility will mean that the system is able to respond to, for example, emerging issues and competition concerns or high-risk acquisitions, while keeping the overall compliance costs low for businesses.

2.39 The ability to make a determination in relation to an acquisition, the reference to 'wholly or partly' in subsection 51ABQ(2), and subsection 33(3A) of the Acts Interpretation Act 1901 means that the determination can exclude exemptions from itself.

2.40 In making the determination, the Minister must consider all of the following:

•

the likely effect of making the instrument on:

-

the interests of consumers;

-

promoting competition;

-

the public interest;

•

the likely regulatory impact of requiring the class of acquisitions (to which the determination relates) to be notified; and

•

any other matters the Minister considers relevant.

[Schedule 1, item 35, subsection 51ABQ(3) of the CCA]

2.41 The Minister may also consider any reports or advice of the Commission in making a class determination, including any reports provided to the Minister as part of the consultation process with the Commission, as explained below.

[Schedule 1, item 35, subsection 51ABQ(4) of the CCA]

2.42 Instruments made under this section:

•

are to commence no earlier than the 30th day after the Instrument is registered under the Legislation Act 2003;

•

are repealed 5 years after registration, unless repealed earlier;

•

do not affect the meaning of substantially lessen competition.

[Schedule 1, item 35, subsections 51ABQ(5) to (7) of the CCA]

Consultation

2.43 Before making an instrument to determine a class of acquisitions that must be notified, the Minister may follow a consultation process with the Commission.

[Schedule 1, item 35, subsection 51ABR(1) of the CCA]

2.44 The Minister may ask the Commission to analyse the following matters:

•

the likely effect of making the instrument on:

-

the interests of consumers;

-

promoting competition;

-

the public interest;

•

the likely regulatory impact of requiring the class of acquisitions to be notified; and

•

any other matters the Minister considers relevant.

[Schedule 1, item 35, subsection 51ABR(1) of the CCA]

2.45 Upon receiving the Minister's request, the Commission must analyse the matters and provide the Minister with a written report of its analysis.

2.46 The Minister must ensure that the Commission's report is published on the Department's website. In addition, the Minister must not make the instrument until at least 60 days have passed since the publication.

[Schedule 1, item 35, subsection 51ABR(2) of the CCA]

2.47 The consultation process and the Commission's independent analysis ensures that the Minister's powers to determine notifiable acquisitions can be exercised with the benefit of the Commission's analysis.

2.48 The publication of the Commission's report, including the waiting period, aims to promote transparency, providing stakeholders time to consider and respond to the proposed instrument before it takes effect.

2.49 The law also clarifies that this process does not limit, the general consultation requirements under section 17 of the Legislation Act 2003, or the Minister's ability to consider reports or advice from the Commission under subsection 51ABQ(4). Before making an instrument, the Minister must be satisfied that there has been appropriate and reasonably practicable consultation (in accordance with section 17 of the Legislation Act 2003).

[Schedule 1, item 35, subsection 51ABR(3) of the CCA]

Classes of acquisitions that are not required to be notified

Acquisitions that do not result in control (control exemption)

2.50 An acquisition by a person of shares in the capital of a body corporate is not required to be notified if either of the following apply:

•

immediately after the acquisition is put into effect, the person does not control (within the meaning of section 50AA of the Corporations Act) the body corporate; or

•

the person controlled the body corporate immediately before putting the acquisition into effect.

2.51 However, if the acquisition is in a class of acquisitions determined by the Minister under subsection 51ABS(5), this exemption does not apply and the acquisition must be notified.

[Schedule 1, item 35, subsection 51ABS(1) of the CCA]

2.52 The question of whether control is capable of being exercised is one of substance, not form. Entering into or carrying out a scheme (or part of a scheme) where it would be reasonable to conclude that it was entered into or carried out for the purpose of avoiding the notification requirement must be disregarded. A scheme is:

•

any agreement, arrangement, understanding, promise or undertaking (whether express or implied);

•

any scheme, plan, proposal, action, course of action or course of conduct (whether unilateral or not); or

•

any combination of these.

[Schedule 1, item 35, subsections 51ABS(3) and (4) of the CCA]

Meaning of 'control'

2.53 'Control' within the meaning of section 50AA of the Corporations Act refers to the capacity of one entity to determine the outcome of decisions about another entity's financial and operating policies. In determining whether someone has that capacity, it is the practical influence that they can exert (rather than the rights they can enforce) that is the issue to be considered, and any practice or pattern of behaviour affecting the body corporate's financial and operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).

2.54 Aligning with a definition of 'control' that is familiar and understood by businesses will increase certainty. However, modifications are necessary to ensure that the definition is fit for purpose in the context of the acquisitions provisions. For the purposes of this exemption from notification, the following rules will apply to the concept of control:

•

a person is taken to control the body corporate if they and their associates (within the meaning of Chapter 6 of the Corporations Act) jointly have the capacity to determine the outcome of decisions about its financial and operating policies (even if the acquirer alone does not have this capacity).

[Schedule 1, item 35, paragraph 51ABS(2)(a) of the CCA]

•

for an acquirer that is a special purpose vehicle - the rule that deems an entity not to have control if it is under a legal obligation to exercise its influence for the benefit of others, is disregarded.

[Schedule 1, item 35, paragraph 51ABS(2)(b) of the CCA]

•

the requirement that the acquirer be under a legal obligation to exercise its influence for the benefit of someone other than its own members is also disregarded to the extent it applies to a legal obligation the acquirer has as a subsidiary of a body corporate.

[Schedule 1, item 35, paragraph 51ABS(2)(c) of the CCA]

2.55 For anti-avoidance purposes, it is important that the voting power of those who are capable of influencing the actions of a party are aggregated and considered together. For example, this may be where both entities are controlled by the same entity or where parties are within the same corporate group. Relationships which may mean that a person or body corporate is an 'associate' include where there is control by an entity of another entity, where both entities are controlled by the same entity (common control), a relevant agreement to control or influence the board composition or conduct of affairs of another entity, or where parties act in concert (see section 12 of the Corporations Act 2001).

2.56 Businesses may structure transactions in certain ways for tax and other purposes, including through the establishment of special purpose vehicles. Adopting the meaning of 'control' from section 50AA of the Corporations Act 2001 without modification may risk excluding arrangements involving special purpose vehicles or certain structures within corporate groups from the notification requirement. This is because subsection 50AA(4) of that Act provides that an entity is not taken to control another where it is able to influence decisions about another entity's financial and operating policies and is also under a legal obligation to exercise that capacity for the benefit of someone other than the first entity's members. Therefore, for avoidance of doubt, these amendments make it clear that it is intended that transactions involving special purpose vehicles or subsidiary arrangements should be capable of notification, and that subsection 50AA(4) of the Corporations Act 2001 does not apply in the context of special purpose vehicles and subsidiaries.

Ministerial determination

2.57 The Minister may determine a class of acquisitions of shares in the capital of bodies corporate by legislative instrument. The Minister may determine the class including (without limitation) by reference to the size of an interest in, or the nature of a person's control of, a body corporate.

[Schedule 1, item 35, subsection 51ABS(5) to (7) of the CCA]

2.58 The Ministerial determination power provides flexibility to adjust the scope of the exemption based on emerging issues or other developments in markets and the broader economy over time. For example, the Minister could require notification where there are changes from sole control of an entity to joint control, or changes in the identity of those who jointly control an entity. The power may also be used to ensure the scope of the exemption from notification can be appropriately limited.

Acquisitions of shares in the capital of Chapter 6 entities (Chapter 6 exemption)

2.59 An acquisition of shares in the capital of a body corporate is not required to be notified if:

•

the body corporate is a Chapter 6 entity, and

•

the acquisition does not result in any person's voting power (within the meaning of the Corporations Act) in the body corporate increasing:

-

from 20 per cent (or below) to more than 20 per cent; or

-

from a starting point that is above 20 per cent and below 100 per cent.

[Schedule 1, item 35, subsection 51ABT(1) of the CCA]

Meaning of Chapter 6 entity

2.60 For the purposes of the CCA, a Chapter 6 entity is:

•

a listed company (within the meaning of the Corporations Act);

•

an unlisted company with more than 50 members (within the meaning of the Corporations Act), counting joint holders of a particular parcel of shares as one person; or

•

a listed registered scheme (within the meaning of the Corporations Act).

[Schedule 1, item 35, subsections 51ABJ(1) and (2) of the CCA]

2.61 References to Chapter 6 of the Corporations Act in sections 603 (extends Chapter 6 to some listed bodies that are not companies), 604 (extends Chapter 6 to listed registered schemes) and 605A (Chapter 6 does not apply to mutual capital instruments) of that Act are taken to include references to the definition of a Chapter 6 entity in subsections 51ABJ(1) and (2) of the CCA, as well as Subdivision B of Division 2 (provisions relating to particular kinds of acquisitions that do not result in control or involve the acquisition of shares in the capital of Chapter 6 entities), and Subdivision D of Division 6 of Part IVA (surprise hostile takeovers).

[Schedule 1, item 35, subsection 51ABJ(3) of the CCA]

2.62 This provision provides a 'safe harbour' for acquisitions that do not result in a person having voting power above 20 per cent. This threshold is the point at which takeovers of certain widely held entities are regulated under Chapter 6 of the Corporations Act. Acquisitions below the takeover threshold in Chapter 6 are not required to be notified because they generally fall short of the point beyond which control of the entity could be said to have passed: see ASIC Regulatory Guide 6: Takeovers: exceptions to the general prohibition at RG 6.7. This is intended to provide certainty for acquisitions involving publicly listed companies, widely held companies (that is, unlisted companies with more than 50 members) or listed registered scheme (such as managed investment trusts) that they do not need to notified to the Commission, and minimise the impact on financial and capital markets.

2.63 When determining whether an acquisition meets the voting power threshold, a person is not considered to have acquired a 'relevant interest' (within the meaning of the Corporations Act) in the shares until the contract, arrangement, or understanding becomes binding.

[Schedule 1, item 35, subsection 51ABT(2) of the CCA]

2.64 This approach clarifies, for the purposes of applying the safe harbour, the interaction between:

•

the timing of when a person acquires a 'relevant interest', and accordingly 'voting power' under section 608 of the Corporations Act (which can be when a person first enters into a conditional agreement: see subsection 608(8) of the Corporations Act); and

•

the treatment of conditional contracts under the acquisitions provisions discussed in paragraphs 2.36 and 2.37, where an acquisition is not considered to occur until all conditions are satisfied and the agreement becomes binding.

Notification waiver determinations

Notification waiver process

2.65 The new law introduces a notification waiver process that allows parties to an acquisition to request that the Commission relieve them of the obligation to notify an acquisition that would otherwise be required to be notified. For the avoidance of doubt, a notification waiver does not exempt an acquisition from the operation of section 50 of the Act.

Notification waiver applications

2.66 A person may apply to the Commission for a determination that an acquisition is not required to be notified. The application must comply with requirements set by the Minister in a legislative instrument, which may include specific forms, information, and payment of a fee.

[Schedule 1, item 35, subsections 51ABU(1) to (5) of the CCA]

2.67 A determination made by the Minister under subsection 51ABU(3) specifying requirements for notification waiver applications is a legislative instrument.

2.68 A determination may include requirements for an application to be in a particular form, include particular information and be accompanied by any applicable application fee. The application form and requirements for information and documents will be set by legislative instrument so that these requirements can be modified from time to time. This will allow the Commission to perform its functions and duties in an efficient manner.

2.69 If an application is made according to the requirements set out by the Minister's legislative instrument, it is considered a valid notification waiver application.

Notification waiver determination

2.70 Upon receiving a valid application, the Commission may determine in writing that the acquisition is not required to be notified or not to make the determination applied for.

[Schedule 1, item 35, subsections 51ABV(1) and 51ABV(6) of the CCA]

2.71 In making this determination, the Commission must comply with any requirements determined by the Minister by legislative instrument and the Commission must have regard to:

•

the object of the Act,

•

the interests of consumers,

•

if circumstances are determined under subsection 51ABP(1) (Notification thresholds) the likelihood that, if the acquisition were put into effect, those circumstances would apply, and

•

the likelihood that the acquisition would, if put into effect, have the effect of substantially lessening competition (as mentioned in paragraph 51ABZE(2)(c)).

2.72 An instrument may determine a requirement that in specified circumstances the Commission must not make the determination applied for, or provide for Tribunal review of decisions in relation to notification waiver applications.

[Schedule 1, item 35, subsections 51ABV(2) to (4) of the CCA]

2.73 The Commission must give written notice and a written explanation of why it made the determination to the applicant.

[Schedule 1, item 35, subsection 51ABV(5) of the CCA]

2.74 The notification waiver process offers a flexible mechanism for parties to seek relief from the notification requirement. This process is intended to reduce the regulatory burden on businesses while ensuring that all acquisitions with potential competition concerns remain subject to the Commission's review.

Confidential review processes

2.75 To balance effective regulatory oversight with the commercial realities of time-critical or commercially-sensitive acquisitions, the new law introduces confidential review processes for certain acquisitions, specifically:

•

Surprise hostile takeover bids involving the acquisition of shares in a body corporate; and

•

Certain acquisitions involving voluntary transfers under the FSTR Act.

2.76 These processes enable the Commission to assess certain acquisitions without disclosing the notification on the acquisitions register for a specified period.

Surprise hostile takeovers

2.77 The requirement to notify the Commission of a proposed acquisition and the subsequent inclusion of the notification on a public register may unduly impact the ability to make a surprise takeover bid where on-market acquisitions commence immediately after a bid is publicly proposed. To accommodate these kinds of takeover bids, a bidder proposing to acquire shares in a Chapter 6 entity through a bid that has not been publicly proposed may request that the notification be kept confidential.

2.78 This confidential review process is available if all of the following conditions are met:

•

the body corporate is a Chapter 6 entity;

•

the acquisition is a takeover acquisition in relation to a proposed takeover bid;

•

the proposed bid has not been publicly proposed; and

•

the notifying party makes a written request for confidentiality at the time of notifying the Commission.

[Schedule 1, item 35, subsection 51ABZZL(1) of the CCA]

Request for confidential review

2.79 The written request must state that:

•

the bidder (within the meaning of the Corporations Act) intends that the bid will be a takeover bid to which paragraphs (c) and (d) of item 2 of the table in section 611 of the Corporations Act 2001 apply (that is, the bid is for all the voting shares in the bid class, and the bid is either unconditional or subject only to certain prescribed conditions);

•

the bidder has not entered into any agreement with, nor obtained support from, the target's board for the proposed bid; and

•

if the Commission determines that the acquisition may be put into effect in Phase 1, the bidder will submit a bidder's statement (within the meaning of the Corporations Act) to the target within one business day after the day the Commission gives the notifying party written notice of its determination.

[Schedule 1, item 35, paragraph 51ABZZL(1)(d) and subsection 51ABZZL(2) of the CCA]

Effect of confidentiality request

2.80 If a valid confidentiality request is made, the Commission must not include information or documents relating to the notification on the acquisitions register before the 17th business day after the effective notification date.

[Schedule 1, item 35, subsection 51ABZZL(3) of the CCA]

2.81 If the Commission decides to cease considering the notification within this period (under section 51ABZD), no information about the notification will be published on the register at all.

[Schedule 1, item 35, subsection 51ABZZL(4) of the CCA]

2.82 The Commission may, at any time after the confidentiality request is made up to and including the 15th business day after the effective notification date, determine in writing that the confidential review provisions do not apply if it is satisfied that:

•

the bid is not or is not likely to be a bid to which paragraphs (c) and (d) of item 2 of the table in section 611 of the Corporations Act apply;

•

the bidder has done, or intends to do, any of the things it stated it would not do (as per paragraph 2.82 above) (i.e. entering into an agreement with or obtaining support from the target's board); or

•

it is not likely that the bidder will give a bidder's statement within one business day of written notice of the Commission's determination as required.

[Schedule 1, item 35, subsection 51ABZZL(5) of the CCA]

2.83 In such cases, the Commission must give the notifying party written notice of its determination that the confidential review provisions do not apply. Those provisions are considered never to have applied to the notification.

[Schedule 1, item 35, subsection 51ABZZL(6) of the CCA]

Modified stay and Tribunal review

2.84 If the Commission makes a determination under paragraph 51ABZE(1)(a) that the acquisition may be put into effect and the acquisition was subject to the confidential review process for surprise hostile takeover bids immediately before the Commission makes the determination, the usual stay on acquisitions during the Tribunal review period is modified.

2.85 Specifically, subsection 51ABE(3), which imposes the stay, does not apply to such acquisitions, unless an application for review is made, in which case the disapplication of the stay ends when the bidder becomes aware that the application has been made.

[Schedule 1, item 35, subsections 51ABZZM(1) and (2), and 51ABE(3) of the CCA]

2.86 The acquisition is also not stayed at the time it is put into effect, to the extent the acquisition results from an on market transaction (within the meaning of the Corporations Act) that occurs so soon after the bidder becomes aware, or ought reasonably to be aware of it, that the application has been made, that it is not reasonably possible for the bidder to prevent the transaction from occurring.

[Schedule 1, item 35, subsection 51ABZZM(3) and (4) of the CCA]

2.87 If the acquisition is put into effect during the modified stay period, the bidder is not entitled to exercise any voting rights attached to any of the shares acquired. This provision is based on section 613 of the Corporations Act which imposes a similar restriction on voting rights attached to shares acquired on-market where an off-market takeover bid does not proceed.

2.88 The restriction on exercising voting rights ends at the end of the period in which a Tribunal review can be sought. If an application for review under subsection 100C(1) is made, the period ends at the earliest time at which the notification has been finally considered or the period for making a public benefit application (in the case of a determination that the acquisition must not be put into effect).

[Schedule 1, item 35, subsections 51ABZZM(5) and (6) of the CCA]

2.89 However, ASIC may either exempt a person from the restriction on exercising voting rights or make a declaration that the restriction applies to a person as if specified provisions were omitted, modified or varied (as specified in the declaration).

2.90 In exercising this power, ASIC must consider the purposes of Chapter 6 of the Corporations Act (which includes ensuring the acquisition of control takes place in an efficient, competitive and informed market). This power enables ASIC, once relevant competition considerations have been determined, to provide relief to the bidder from the ongoing restraint on their voting rights on terms or conditions that take into account the impact of the interruption to the bid arising from the application to the Tribunal. For example, ASIC may provide relief on condition that a new bid is made to ensure holders of bid class securities have all had a reasonable and equal opportunity to participate in the benefits of the bidder's acquisition of a substantial interest in the target. This relief may be given in conjunction with the exercise of ASIC's powers under section 655A of the Corporations Act.

[Schedule 1, item 35, subsections 51ABZZN(1) and (2) of the CCA]

2.91 The exemption or declaration by ASIC may:

•

apply to all persons, specified persons, or a specified class of person;

•

relate to all bid class securities, specified bid class securities, or a specified class of bid class securities; and

•

relate to any other matter generally or as specified.

[Schedule 1, item 35, subsection 51ABZZN(3) of the CCA]

2.92 If the instrument applies only to a specified person (other than a person specified by membership of a class) or persons associated with that specified person it will be a notifiable instrument. Otherwise it is a legislative instrument.

[Schedule 1, item 35, subsection 51ABZZN(4) of the CCA]

2.93 An exemption may be granted unconditionally or subject to conditions. It is a requirement for a person to comply with any conditions specified in the exemption. If a person does not comply, ASIC can seek an order from the Federal Court to enforce compliance.

[Schedule 1, item 35, subsection 51ABZZN(5) of the CCA]

2.94 An exemption or declaration applies in relation to shares after the relevant acquisition determination is no longer subject to review.

[Schedule 1, item 35, subsection 51ABZZN(6) of the CCA]

2.95 The Corporations Act provisions that allow the Takeovers Panel to review certain ASIC decisions will also apply to ASIC's decisions to exempt a person from, or modify the application of, the CCA restrictions on voting rights for shares acquired during the modified stay period for hostile takeover bids under the CCA. This allows the Takeovers Panel to review decisions of ASIC. For the purposes of those review provisions, references to Chapter 6 of the Corporations Act will be taken to include references to the CCA provisions on hostile takeover bids.

[Schedule 1, item 35, subsections 51ABZZN(7) and (8) of the CCA]

2.96 ASIC must take reasonable steps in writing or otherwise to notify each person affected by a decision of ASIC to exempt or declare under this process, and the person's right to seek review of the decision by the Takeovers Panel. However, ASIC is not required to give notice if it determines that doing so is not warranted, considering:

•

the cost of providing notice; and

•

the way in which the person's or persons' interests are affected by the decision.

[Schedule 1, item 35, subsections 51ABZZO(1) and (2) of the CCA]

2.97 Failure to provide notice does not affect the validity of ASIC's decision.

[Schedule 1, item 35, subsection 51ABZZO(3) of the CCA]

Person must cease to hold shares

2.98 A person must cease to hold shares within 12 months after the Tribunal makes a determination that the acquisition must not be put into effect, or imposes a condition that was not complied with if all the following conditions apply:

•

the Commission makes a determination under paragraph 51ABZE(1)(a) that the acquisition may be put into effect;

•

the acquisition is put into effect at a time at which the acquisition is not stayed because of subsection 51ABZZM(2) or (3) referred to above;

•

an application for Tribunal review is made; and

•

either:

-

on review, the Tribunal determines that the acquisition must not be put into effect; or

-

the result of the review is that the acquisition is subject to a condition that was not complied with and the non-compliance occurred before the Tribunal's determination.

2.99 ASIC may extend the 12-month period once upon application by the person, if the application is made before the end of the initial 12-month period.

[Schedule 1, item 35, subsections 51ABZZP(1), (2) and (3) of the CCA]

2.100 Any voting rights attached to the shares cannot be exercised while the person continues to hold the shares. Continuing to hold shares after the 12-month period (including any extension) is a strict liability offence, with a maximum penalty of 20 penalty units per day.

[Schedule 1, item 35, subsections 51ABZZP(4) to (6) of the CCA]

2.101 A contravention of section 51ABZZP does not affect the validity of any transaction. If voting rights are exercised in contravention of this section, the Court (within the meaning of the Corporations Act) may declare the meeting or resolution (on which the voting rights were exercised) invalid if it is of the opinion that:

•

a substantial injustice has been or may be caused; and

•

the injustice cannot be remedied by any other order of the Court.

[Schedule 1, item 35, subsections 51ABZZP(7) and (8) of the CCA]

Voluntary Transfers

2.102 The confidential review process applies to acquisitions notified to the Commission that are part of a voluntary transfer of business under the FSTR Act, provided that the certificate of transfer states the transfer is necessary:

•

to promote financial system stability in Australia, or

•

if the transferring body is an ADI - to protect the interests of depositors of the ADI, or

•

if the transferring body is a life insurance company - to protect the interests of policy owners or prospective policy owners of the life insurance company.

[Schedule 1, item 35, subsection 51ABZZQ(1) of the CCA]

2.103 If the confidential review process applies:

•

the Commission may make a determination on the acquisition before the earliest time specified under subsection 51ABZI(1) of 15 business days after the effective notification date of the notification in Phase 1; and

•

the Commission must not include any information or documents relating to the notification on the acquisitions register until it makes a determination on the acquisition under subsection 51ABZE(1).

[Schedule 1, item 35, subsection 51ABZZQ(2) of the CCA]

2.104 These provisions facilitate urgent acquisitions where APRA considers the transfer necessary to promote the stability of the financial system or the interests of depositors in an ADI or policy owners or prospective policy owners of a life insurance company. The confidential review process allows the Commission to assess and determine such acquisitions promptly and without public disclosure, minimising the risk of market disruption and protecting sensitive information.

2.105 Enabling the Commission to make determinations earlier than usual means that that urgent acquisitions can be reviewed and put into effect without delay, reducing the potential for market speculation or uncertainty.