Following the Australian Securities and Investments
Commission's (ASIC) recent overhaul of its regulatory guidance
on takeovers, ASIC has demonstrated its commitment to enforcing its
takeovers policy and maintaining market integrity by intervening in
two separate corporate transactions involving Laneway Resources
Limited (Laneway), and PR Finance Group Limited (PR Finance).
On 21 June 2013, ASIC released four new regulatory guides on
takeovers and related topics. These new regulatory guides update
and consolidate 17 former regulatory guides, and make ASIC's
guidance in this area clearer and more accessible.
ASIC has enforced its newly implemented guidance on rights
offerings that have control implications by intervening in the
Laneway was proposing to make a AUD22 million rights offering,
to be underwritten (and sub-underwritten) by entities associated
with its Chairman, Mr. Bizzell (Bizzell Entities).
The rights offering had the potential to allow Bizzell Entities
to increase its voting power in Laneway from 23.7% to 86.4%.
Laneway sought to rely on the rights issue and underwriting
exceptions in the Corporations Act 2001, which allow a person to
acquire voting power in a company above 20%, without obtaining
shareholder approval (or making a takeover bid).
ASIC raised concerns that the proposed rights issue did not
comprise commercial arrangements, and enabled Bizzell Entities to
effectively gain control of Laneway without the non-associated
shareholders having the opportunity to approve the acquisition of
such a controlling interest. In accordance with the new Regulatory
Guide 6 "Takeovers: exceptions to the general
prohibition" (Regulatory Guide 6), ASIC considered this to be
an abuse of the rights issue and underwriting exceptions under the
Corporations Act and applied to the Takeovers Panel for a
declaration of unacceptable circumstances.
The Takeovers Panel indicated that it was likely to declare
unacceptable circumstances in relation to the rights issue, and as
a result, Laneway withdrew its proposed rights issue.
ASIC recently intervened in Keybridge Capital Limited's
proposed acquisition of PR Finance by way of a scheme of
arrangement. Shareholders did not receive audited accounts for PR
Finance as promised in the scheme booklet prior to the shareholders
meeting to vote on the scheme of arrangement. ASIC believed that
shareholders were not given material information they needed to
make an informed decision about the future of the company, and as a
result, did not provide a "no objection letter" at the
court hearing to approve the scheme.
The Federal Court agreed with ASIC and adjourned final approval
of the scheme to allow for lodgement of the audited accounts and
further consideration by shareholders.
This case demonstrates that ASIC takes its role in schemes
seriously. ASIC will among other things:
consider any objections to a scheme before issuing a standard
"no objection letter" for the court hearing to approve
closely examine schemes that offer collateral benefits or
assess schemes that result in a reverse takeover on a
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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