media release

11-311AD New guidance for acquisitions of control approved by members

Published

ASIC today released updated guidance on a key part of Australia’s takeover regulation. The guidance is set out in Regulatory Guide 74 Acquisitions approved by members (RG 74).

The Corporations Act 2001 prohibits a person acquiring more than 20 per cent of a company with more than 50 members, a listed company or a listed managed investment scheme, unless an exception applies.

A common exception is where members approve the acquisition, as set out in item 7 of s611. ASIC’s guidance emphasises that members asked to make such a decision must be fully informed about the acquisition’s consequences.

The changes in RG 74 follow a consultation process (see Consultation Paper 159 Acquisitions approved by shareholders: update to RG 74 (CP 159)).

As foreshadowed through consultation, the update takes into account developments in the law since RG 74 was first published, including the extension of takeovers regulation to listed managed investment schemes.

The updated guide provides entities and advisers with ASIC’s views on how the item 7 exception applies, how ASIC monitors compliance with item 7’s requirements and ASIC’s policy on relief in relation to those requirements.

RG 74 indicates that acquirers need to take care in structuring transactions so that reliance on the item 7, s611 exception by acquirers is consistent with the policy underlying the exception. That is, members affected by the acquisition make an informed decision. An item 7 transaction that is inter-conditional with another transaction having significant control implications can cause concerns in this regard.

ASIC encourages entities to provide us with draft notice of meeting documents for member approvals and to raise potential structuring issues with ASIC before any transaction announcement.

Download Regulatory Guide 74 Acquisitions approved by members (RG 74)

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