The Australian Securities and Investments Commission (ASIC) today provided guidance on some regulatory issues arising from the increased use of stapled securities in the Australian market.

Stapled securities are where two or more different securities are contractually stapled so that they cannot be sold separately. Stapling is commonly used to provide investors with access to returns through the use of tax-effective structures.

Where one of the stapled securities is not subject to Chapter 6 of the Corporations Act 2001, this can make the application of takeovers law uncertain. Where one of the stapled securities is a security of a foreign corporation, it has the potential to see different takeovers laws apply if bids are made in different countries for one of the stapled securities. Australian takeover laws apply to voting shares of companies with 50 or more members incorporated in Australia and to units in listed managed investment schemes established in Australia. They do not apply to foreign companies securities, although a foreign law may regulate takeovers affecting those components of a stapling.

ASIC recommends that issuers proposing offers of stapled securities should ensure that their disclosure to investors is adequate and specifically deals with issues such as:

• whether the stapling can be undone and, if so, in what circumstances
• will the stapling be effective to allow compulsory acquisition of one of the stapled securities which may not be the subject of a formal takeover bid?
• whether all of the stapled securities are subject to the same laws and, if not, what is the expected outcome if there was a conflict, for example a bid launched in different countries for individual parts of the stapled securities.

ASIC has previously provided guidance to the market in the context of takeovers involving stapled securities (see Information Release 99/014: Takeovers involving stapled securities) and relief that may be available to facilitate a bid.