Corporate Finance Update - Issue 20

Issue 20, December 2024

New fees payable on completion of certain Part 5.1 schemes of arrangement, trust schemes and takeover bids

On 12 December 2024, the Governor-General made the Corporations (Fees) Amendment (Takeovers) Regulations 2024 (Takeovers Fee Regulations) which commence on 1 January 2025.

The Takeovers Fee Regulations apply new and increased fees, from 1 January 2025 to 31 December 2027, on lodgements necessary to implement acquisitions of Australian entities through takeover bids and schemes of arrangement.

Documents attracting the new fees are those lodged under ss411(10), 601GC(2), 661B(1)(b) and 662B(1)(b) of the Corporations Act 2001.

The value of the consideration payable under a transaction determines the bracket for calculating the fee. Market participants should read the Explanatory Statement to interpret the Takeovers Fee Regulations and determine the applicable fee under the new definition of “threshold value.”

If the threshold value is …	then the fee is …
greater than $500 million	$194,198 - $195,000.
(a) less than or equal to $500 million; and (b) equal to or greater than $100 million	$144,198 - $145,000.
(a) less than $100 million; and (b) equal to or greater than $35 million	$49,198 - $50,000.
(a) less than $35 million; and (b) equal to or greater than $10 million	$9,198 - $10,000.

As explained in the Explanatory Statement, the new fees are distinct from fees under ASIC’s Industry Funding Model, because the fees are not for cost-recovery purposes.

ASIC will update the ASIC Regulatory Portal to facilitate payments under the Takeovers Fee Regulations.

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Is your foreign nominee authorised to provide custodial or depository services?

Entities considering an appointment as a foreign holder nominee for the purposes of s615 or s619(3) of the Corporations Act 2001 (Corporations Act) are reminded that they may require authorisation to provide custodial or depository services under their Australian financial services licence (AFS licence).

The provision of these services is captured by s766E of the Corporations Act, which includes arrangements where a ‘provider’ holds a financial product in trust for, or on behalf of, another person. This means that under certain circumstances, a separate authorisation must be included under a foreign nominee’s AFS licence to comply with their financial services licensing obligations under Part 7.6 of the Corporations Act.

Where an AFS licensee is not authorised to provide custodial or depository services, it should consider whether an appropriate exception applies to it under s766E(3) of the Corporations Act or reg 7.1.40 of the Corporations Regulations 2001 before accepting an appointment.

The above requirements are in addition to the usual authorisations an AFS licensee needs to deal in a financial product on behalf of another person for the purposes of s766C(1) of the Corporations Act and should not be considered as an exhaustive list.

Issuers applying to ASIC for the approval of a foreign nominee under s615 or s619(3) of the Corporations Act should enquire whether their intended nominee carries the relevant authorisations before making an application. Applying to appoint a foreign holder nominee who is not appropriately authorised may cause additional delays in processing the application or refusal.

For more information on the foreign nominee procedure see Regulatory Guide 6 Takeovers: Exceptions to the general prohibition (RG 6) at RG 6.110 in respect of rights issues and Regulatory Guide 9 Takeover bids (RG 9) at RG 9.74 in the context of scrip bids.

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Reminder to Expert Licensees: regularly review your internal policies and procedures

We remind independent experts that they should regularly review internal policies and procedures to ensure they are both sufficiently documented and applied in practice.

We accepted a court enforceable undertaking from Australian Financial Services (AFS) licensee PKF Melbourne Corporate Pty Ltd (PKF Melbourne), under which the licensee will cease providing independent expert reports (IERs) until an independent expert completes a review of policies and procedures for PKF Melbourne’s IER engagements, and PKF Melbourne have implemented all review recommendations.

The enforceable undertaking followed an investigation, which reviewed three IER engagements, in which we identified concerns that the licensee failed to have:

• documented internal policies and procedures demonstrating compliance with its AFS licensee obligations and ASIC’s regulatory guidance;
• documented internal policies on valuation methodology selection and application;
• documented its assessment of the competence of the technical specialists or its review of their reports;
• robust processes and procedures for managing conflicts of interest to ensure the absence of any conflicts prior to and during IER engagements; and
• processes of review of its internal policies and procedures to account for any changes in law, regulatory guidance, or professional practice.

• Read the media release.

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Are your cleansing notice templates up to date?

Listed entities should ensure that their cleansing notice templates are consistent with the requirements in 708AA(7) and 708A(6) of the Corporations Act. Subparagraphs s708AA(7)(c)(ii) and 708A(6)(d)(ii) changed in 2021 to require a statement in the cleansing notice that the body has complied with sections 674 and 674A of the Corporations Act.

ASIC also expects that a listed entity’s board should be involved in the process of approving a cleansing notice, and not delegate that approval alone to the company secretary. Responsibility for complying with Chapter 6D rests with directors.

Entities who have not complied with the requirements in s708AA and 708A, should consider the consequences that may arise in respect of their offer under the Corporations Act. This includes the potential that the offer may, in certain circumstances, require orders by the Court to address non-compliance.

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ASIC invites feedback on proposed guidance on sustainability reporting

ASIC is seeking feedback on proposed regulatory guidance on the new mandatory sustainability reporting obligations. The consultation period closes on 19 December 2024.

Our draft regulatory guide includes proposed guidance on who must prepare a sustainability report, how the sustainability reporting obligations will interact with other existing legal requirements and how ASIC will administer the obligations. This includes specific guidance on ASIC’s approach to granting relief from the obligations and use of its new directions power.

The draft regulatory guide also addresses specific content issues and sustainability-related financial disclosures outside the sustainability report such as in Ch 6D disclosure documents.

ASIC Consultation Paper 380 Sustainability Reporting (CP 380) seeks stakeholder feedback on the draft regulatory guide, whether any ASIC legislative instruments that grant relief in relation to financial reporting or audit requirements should be extended to sustainability reporting and any other areas where ASIC should support the introduction of the sustainability reporting obligations.

We encourage preparers, users and other stakeholders to engage closely with CP 380 and our draft regulatory guide and make a submission.

We remind preparers and their advisors that ASIC has adopted a pragmatic and proportion approach to supervision and enforcement of the sustainability reporting obligations as they are phased in.

• Read the media release.

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Lodging prospectuses and other documents during the holiday close-down period

While our offices will be closed from Wednesday 25 December 2024 to Wednesday 1 January 2025 (inclusive), documents (including prospectuses) can still be lodged through the ASIC Regulatory Portal.

Lodgements made between 3 pm AEDT on Tuesday 24 December 2024 and 8 am AEDT on Thursday 2 January 2025, may not appear on the register and the Offer Notice Board until after 2 January 2025.

We remind issuers that prospectuses lodged during this time will automatically have the exposure period extended.

In 2018, we issued ASIC Corporations (ASIC Close Down Period) Instrument 2018/1034. This instrument continues to automatically extend the exposure period to 14 days for disclosure documents lodged between:

• 5 pm AEDT on Tuesday 17 December 2024, and
• 9 am AEDT on Thursday 2 January 2025.

Issuers should consider this carefully when lodging fundraising documents during this period.

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Related party transactions under Chapter 2E of the Corporations Act

We remind directors that related party financial benefits approved by members in accordance with Chapter 2E of the Corporations Act must be given within 15 months of receiving that approval.

In recent meeting materials we have observed instances where related party benefits are to be given:

• within three years after the meeting; or
• shortly after the meeting and in any event not later than three years after the meeting.

Although ASX Listing Rule 10.15.7 states that securities should be issued within 3 years of the date of the meeting, for the purposes of member approval under Chapter 2E of the Corporations Act, the financial benefit must be provided within 15 months of the member approval.

In addition, we consider that it is best practice to specify when the related party benefit will be given, as far as practically can be known, e.g. within 5 days after the meeting.

We also remind directors to provide sufficient reasons when making a recommendation about a related party resolution.

Recently in meeting materials we have seen instances where directors recommend a related party resolution, but do not state their reasons for that recommendation. In other instances, we identified that the reasons provided were not sufficient. In one instance, a director recommended that shareholders vote in favour of a resolution that would allow another director to participate in a capital raising. The reason for the recommendation was that approval would allow the director to participate in the capital raising. The director failed to set out the basis why they considered it in the interests of shareholders to allow the director to participate in the capital raising.

Table 2 of Regulatory Guide 76 Related party transactions (RG 76) sets out further information on ASIC’s expectations.

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