ASIC is inviting industry feedback on proposed updates to its policy relating to downstream acquisitions which can occur as a result of an acquisition in another company.
Consultation Paper 170 Downstream acquisitions: update to RG 71 (CP 170) details ASIC’s plans to update guidance on the takeovers exception for downstream acquisitions set out in item 14 of s611 of the Corporations Act 2001. A downstream acquisition occurs when a person acquires a relevant interest in more than 20% of the voting securities in an Australian company (downstream entity) as a result of an acquisition in another company, including a foreign body corporate (upstream entity). Acquisitions of this kind can have a significant impact on the control of the downstream entity and therefore, its shareholders.
ASIC’s policy on downstream acquisitions is currently set out in Regulatory Guide 71 Downstream acquisitions (RG 71). The proposed updates will take into account the significant developments in Australian takeover law since the guide was last updated in 1996. These developments include amendments to the exception for downstream acquisitions in item 14 and an extension of the takeovers regime in Chapter 6 to listed managed investment schemes.
The consultation paper also includes proposed changes to the conditions that may apply when we grant relief for a downstream acquisition that is not exempt under item 14.
Finally, ASIC’s updated guide will provide entities and their advisers with our current views on how the exception in item 14 applies, and our policy on granting relief.
ASIC is seeking comments on the proposed updates to RG 71 by 16 January 2012 and plans to publish a final guide later in 2012.