ASIC has moved to make the JSE Securities Exchange South Africa (JSE) an ‘approved foreign exchange’ for the purposes of an exemption from the main takeover prohibition under the Corporations Act 2001 (the Act). The approval will take effect on 4 April 2005 to give the market time to consider its impact before it comes into force.

Once the JSE becomes an ASIC approved foreign exchange people may rely on an exemption allowing downstream acquisitions of shares in Australian companies as a result of upstream acquisitions in companies listed on the Main Board of the JSE.

The main takeover prohibition applies to the acquisition of voting power by people in an Australian company if their voting power exceeds 20 per cent. A person may be deemed to acquire voting power in an Australian company (downstream acquisition) through an acquisition in a foreign body corporate holding Australian company shares (upstream acquisition). The upstream acquisition may indirectly breach the takeover prohibition.

Although the exemption allows downstream acquisitions resulting from acquisitions on a market conducted by an approved exchange, where those downstream acquisitions are inconsistent with the purposes of the Takeovers Chapter, they may be subject to review by the Takeovers Panel.

ASIC approved a number of foreign bodies conducting stock exchanges in January 2001 and in doing so set out the criteria upon which ASIC approves foreign exchanges under the Act (IR 01/03 ASIC approves overseas exchanges: safe harbour for downstream acquisitions).