04-006 ASIC acts on conflicts of interest in public companies
Thursday 8 January 2004
The Australian Securities and Investments Commission (ASIC) today announced the interim results of its program of reviewing company documents sent to shareholders. The program aims to improve disclosure generally between public company boards and their shareholders.
Since 1 July 2003, ASIC has required amendments to be made to 32 related party documents and obtained further disclosure to shareholders in another 14 instances.
‘Where company boards seek shareholder approval or provide information to shareholders where the directors may have a conflict of interest from a commercial perspective, it is important for shareholders to be given full and accurate information’, ASIC’s Executive Director Policy and Markets Regulation, Mr Malcolm Rodgers said.
‘ASIC will act when it considers that shareholders need further information.'
The following are examples of where ASIC has taken action:
In IT&e Limited, ASIC required further information to be provided to shareholders about a resolution seeking approval to give a financial benefit to NextSet Software Inc and Parwood Pty Ltd, being companies that would become related parties of IT&e in the future. In particular, further information was obtained in relation to the details of the proposed acquisition of NextSet's business and the nature of the benefit being given to Parwood.
In Nova Heath Limited, ASIC required an undertaking from the company that directors involved in underwriting a rights issue would not increase their voting power by more than the takeovers threshold (20%).
In Consolidated Broken Hill Limited (CBH), ASIC required the company to supply shareholders with an independent expert's report in relation to a proposal to issue shares over the takeovers threshold. In addition, following discussions with ASIC, CBH sent to its shareholders information requesting they make no decision on the proposal until they had considered the supplementary information.
In Fexco Investments Australia Ltd's bid for Prudential Investment Company of Australia Ltd, ASIC had previously given relief for a joint takeover bid by a bidding vehicle on the basis that the joint bidders would be required to accept a better rival bid if they did not match that bid. The expert’s report in the target statement concluded that the bid was not fair, but was reasonable as a rival bid was extremely unlikely given the shareholding of the joint bidders. ASIC required the expert’s report to be amended to make it clear that the terms of the relief increased the likelihood of a rival bid. In that case a rival bid was made and the joint bidders increased their bid price from 35c to 57c per share.
In beTRUSTed Australia Pty Limited's takeover for SecureNet Limited, ASIC required SecureNet to lodge a supplementary target’s statement containing additional disclosure in relation to forward looking statements and reasons for entering into the lock-up agreement with beTRUSTed.
In Tranzact Financial Services Limited (Tranzact), ASIC required Tranzact to supply shareholders with an independent expert’s report in relation to an approval for a proposed acquisition by Tranzact’s major shareholder. Further, Tranzact agreed to postpone the meeting until the shareholders had reasonable opportunities to consider the supplementary information.
ASIC also found that related party documents commonly fail to place a value on options being issued to directors and other related parties (see ASIC media releases 03-202 and 03-232)