Regulatory Authorities
ASIC
Disclosure relief for rights issues extended
ASIC has given Class Order relief ensuring that non-traditional rights issue structures are covered by the prospectus and PDS disclosure exemption for rights issues.
The disclosure exemption for rights issues was introduced in 2007 and allows listed entities to conduct a rights issue without a prospectus or PDS. The current exemption is limited to quoted securities or interests, but ASIC now considers that any rights issue should fall within the disclosure exemption where it provides an equal opportunity to all holders to participate and does not compromise retail investor protection.
Class Order (CO 08/35) Disclosure relief for rights issues (Class Order), is designed to encourage companies to use pro rata rights issues, rather than placements, so retail investors can participate in fundraising offers. The Class Order provides relief: for accelerated offers to institutions; from the requirement to lodge multiple cleansing notices; for disposal of a shortfall; and to make offers of shares to convertible security holders.
To correspond with the Class Order, ASIC has released Regulatory Guide 189: Disclosure relief for rights issues (Regulatory Guide) and Report 128: Report on submissions to CP 91 Non-traditional rights issues (Report).
Click here to access the media release, the Class Order, the Regulatory Guide and the Report.
ASX
Consultation paper released on Foreign Exempt companies
On 6 May 2008, ASIC and Standard & Poor's Index Services (S&P) released a consultation paper seeking market feedback on a proposal to make Foreign Exempt companies on ASX eligible for index inclusion, provided the primary listing of the stock is on a 'developed market exchange'.
The 'Foreign Exempt' classification seeks to avoid regulation of companies that are already well regulated by the rules of an overseas primary market. The classification entitles certain ASX listed companies to comply with a subset of ASX Listing Rules, so ong as ASX is satisfied that they are subject to and comply with the listing rules of their home exchange. Companies classified as Foreign Exempt are obliged to report to ASX all information that is both public and supplied to their home exchange.
Foreign Exempt companies are currently excluded from index eligibility due to previously held concerns regarding the timing and disclosure of relevant corporate actions. However, recent analysis by ASX and S&P has indicated that these concerns are not valid. The disclosure requirements of developed overseas market exchanges are sufficient to satisfy S&P's global index maintenance requirements. Therefore there is no basis for exclusion from index eligibility provided all other criteria are met.
Submissions in response to the consultation paper are invited by 31 May 2008.
Click here to access the press release and the consultation paper.
Takeovers Panel
BioProspect Limited 01 panel publishes reasons
On 12 May 2008, the Takeovers Panel (Panel) published the reasons for its decision on an application from BioProspect Limited (BioProspect) in relation to its affairs. As previously reported in CLN, the Panel found that the circumstances involving the acquisition of shares by ANZ in BioProspect through a securities lending transaction did constitute unacceptable circumstances and was minded to make a such a declaration. However, the Panel considered that the unacceptable circumstances would be properly remedied by undertakings offered by ANZ. Accordingly, the Panel did not feel the need to make any declaration or orders.
Click here to access the Panel's reasons.
Programmed Maintenance 02 declaration of unacceptable circumstances
On 7 May 2008, the Panel made a declaration of unacceptable circumstances and final orders in relation to an application by Spotless Investment Holdings Pty Ltd (Spotless) in relation to the affairs of Programmed Maintenance Service Ltd (Programmed).
By way of background, on 2 April 2008 Spotless made an off-market takeover bid for all shares in Programmed. The Panel considered two issues. Firstly, two weeks after the takeover bid, Programmed lodged an investor presentation with ASX. The investor presentation contained charts which disclosed Programmed's calculations of the takeover premium for the bid, based on 6-month and 12-month Volume Weighted Average Prices (VWAP) ending 26 March 2008 of Programmed, and compared it with the closing price of Spotless on 2 April 2008, being the date of lodgement of the bidder's statement. Secondly, on 22 April 2008, Programmed sent a letter and an accompanying leaflet to shareholders which contained a number of quotes from the media in relation to the bid.
The Panel considered that these circumstances were unacceptable. In relation to the investor presentation the Panel considered that where a target or bidder selects a particular premium implied under the offer, it needs to be prepared to explain the basis upon which that presentation has been selected. In this instance, Programmed insufficiently disclosed why 6-month and 12-month VWAP were chosen compared with Spotless' closing price on 2 April 2008, in calculating the premiums.
In relation to the material sent to Programmed shareholders, the Panel noted that it should be prepared to the same standard as if it were included in the target's statement. As a result, if such material includes a quote from another person, the target directors are effectively adopting that statement as their own and should be prepared to substantiate and corroborate it. In this instance, two quotes from the media concerning the potential undervaluing of Programmed were made without sufficient substantiation from the target.
The Panel made a declaration of unacceptable circumstances with regard to the public interest and matters in section 657A(3) of the Corporations Act 2001 (Cth). The Panel ordered Programmed to send a clarification letter in a form approved by the Panel to shareholders.
Click here to access the Panel's media release, declaration and orders.
Mount Gibson Iron Limited panel publishes reasons
The Takeovers Panel (Panel) has now published the reasons for its decision on an application from Mount Gibson Iron Limited (Mount Gibson).That decision has previously been reported in CLN.
Click here to access the Panel's reasons.
Cases
Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Limited [2008] FCA 594
Justice Ray Finkelstein has held that a lender of securities under a securities lending agreement does not have an equity of redemption or other equitable estate immediately upon or after the 'loan' of those securities.
The test case, following the Opes Prime collapse, rejected the argument put forward by Beconwood Securities, that they retained ownership of shares seized by secured creditor ANZ Bank.
Click here to view the judgment in full.
Proposed Legislation
Amendment to Corporations Act 2001 (Cth) and Australian Securities and Investments Commission Act 2001 (Cth)
The Private Health Insurance Legislation Amendment Bill 2008 (Cth) (Bill) proposes to amend both the Corporations Act 2001 (Cth) (Corporations Act) and the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act). The Bill was introduced into the House of Representatives on 15 May 2008.
The Bill seeks to amend the Corporations Act and the ASIC Act, among others, to ensure health related businesses that are conducted through a health benefits fund remains solely regulated by the Private Health Insurance Administration Council. The Bill effectively removes APRA's regulation of such businesses and requires all private health insurers to be companies under the Corporations Act, strengthening accountability, regulation and governance.
The proposed Bill seeks to amend the Corporations Act and the ASIC Act to redefine 'financial product', to accommodate the above aims.
Click here to access the Bill.
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