Notifying a market operator about directors’ interests in company securities

This is Information Sheet 50 (INFO 50). It is for directors of listed companies. It explains when and how to notify a relevant market operator about relevant interests in company securities. It also outlines the penalties that may apply if a director does not notify the relevant market operator about relevant interests.

What does the Corporations Act require?

If you are a director of a listed company, the Corporations Act 2001 (Corporations Act) requires you to notify the relevant market operator, such as the Australian Securities Exchange (ASX), about holdings and changes to relevant interests in securities of your company: see section 205G.

Note: In this information sheet, all references to section 205G are to the Corporations Act.

When do you have 'a relevant interest'?

The basic rule is that you have a relevant interest in a security if you are the holder of the security or if you have the power to control the voting or the disposal of the security. You may have a relevant interest in securities even when you do not directly or indirectly own the securities. For example, a family trust may own the securities. Alternatively, your spouse or children may be the registered holder of the securities. Or the securities may be held by a company in respect of which you have direct or indirect control over 20% of the voting power.

Further details about the types of interest that are covered by section 205G are set out at the end of this information sheet.

Do you need to notify the market operator about small holdings?

Yes. Section 205G requires you to notify the relevant market operator about any of your holdings and any changes to your holdings, no matter how small. This section of the Corporations Act is different from the substantial shareholding provisions and covers a wider variety of securities. However, if you are a substantial shareholder, and you have lodged a substantial shareholder notice that includes the matters required under section 205G, then you do not need to lodge another notice under section 205G.

How soon do you have to notify the market operator?

Within 14 days. You must notify the relevant market operator (e.g. ASX) of your interests within 14 days of appointment or listing of the company (whichever is relevant) and thereafter within 14 days of any change.

Who is responsible for notifying the market operator?

The Corporations Act makes the director personally responsible, not the company secretary. The company secretary may organise the preparation and lodgment of section 205G notifications, but this works only if directors provide the company secretary with timely and accurate information.

The 14-day time limit means that you may face a penalty if you are late. Responding only to intermittent requests that you advise any changes in your interests will almost certainly make some section 205G notifications late.

How do you notify the market operator?

There is no prescribed format under the Corporations Act that you must use, but there are details that you must include: see What must you include in your notification?

If the ASX is your relevant market operator, we encourage you to use one of their forms. These are:

• Appendix 3X Initial Director’s Interest Notice
• Appendix 3Y Change of Director’s Interest Notice
• Appendix 3Z Final Director’s Notice.

What must you include in your notification?

In your first notification, you must provide the date of your appointment as a director or the date of listing of the company (whichever is relevant).

In the case of a subsequent notification, you must provide the date of the last form lodged and the date your interest changed.

You must also set out the number and type of securities you hold, and state whether you are the registered holder or beneficial owner of the securities. If you are not, you must explain the circumstances giving rise to your relevant interest.

What if you do not notify the market operator?

Section 205G, together with the insider trading prohibition and the continuous disclosure requirements, plays an important role in maintaining an informed market.

A breach of section 205G(1) is an offence. This means that if you do not notify the relevant market operator about relevant interests, or if you notify the market operator outside the required timeframe, you can be prosecuted.

Since 13 March 2019, an offence against section 205G(1) can be prosecuted as:

• a fault-based offence – the failure to notify the market operator of the changes to a director’s interest is deliberate, negligent or reckless, or
• an offence of strict liability – this is where a proof of fault is not required; the mere failure to comply with section 205G(1) constitutes the offence.

Penalties

A fault-based offence against section 205G(1) carries a maximum penalty of:

• for an individual:
• imprisonment for two years
• a penalty of up to 240 penalty units, or
• both
• for a body corporate, a penalty of up to 2,400 penalty units.

An offence of strict liability against section 205G(1) carries a maximum penalty of:

• for an individual, a penalty of up to 30 penalty units
• for a body corporate, a penalty of up to 300 penalty units.

Note: See www.asic.gov.au/penalties for more information about penalties, including the value of a penalty unit.

Which interests must be notified?

This is how section 205G describes the types of interests that must be notified:

• relevant interests in securities of the company or a related body corporate
• contracts to which the director is a party or under which the director is entitled to a benefit and that confer a right to call for or deliver shares in, debentures of, or interests in a managed investment scheme made available by, the company or a related body corporate.

Where you can get more information

For more information, see Regulatory Guide 193 Notification of directors’ interests in securities – listed companies (RG 193), which provides information for directors of Australian listed public companies about their obligations under section 205G.

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.