Australia: Lantern Hotel Group - flexibility required on s609(7) Corporations Act

Key points

  • Demonstrates the need for more flexibility by ASIC in its approach to s609(7) of the Corporations Act.
  • Takeovers Panel highlighted the 'potential issue' with a major shareholder being permitted to vote in favour of a buy-back which may result in a significant increase in its interest in the company.


Lantern Hotel Group (Lantern) is an ASX listed stapled entity. Lantern stapled securities comprise one ordinary share in Lantern Hotel Group Limited and one unit in the Lantern Real Estate Trust.

Millinium Asset Services Pty Limited (as trustee for the Borg Fund) holds approximately 24.3% of Lantern's securities. Three Pillars Portfolio Managers Pty Limited (Three Pillars) is the investment manager of the Borg Fund. Torchlight GP Limited (Torchlight) holds approximately 30.2% of the Lantern securities.

On 4 February 2014, Three Pillars made an irrevocable offer to Lantern to sell to Lantern (via a buy-back) Millinium's 24.3% interest. The offer was open until 21 March 2014, and Lantern's acceptance was conditional upon "security holder approval and any necessary regulatory relief being obtained"1. If the buy-back was effected, Torchlight's relevant interest in Lantern securities would increase to approximately 40.3%.

On 28 February 2014, Millinium granted a call option to Totem Holdings Pty Limited (Totem) to acquire approximately half of Millinium's holding in Lantern. A separate call option in respect of the remainder of Millinium's holding in Lantern was granted by Millinium to CVC Limited. Lantern filed proceedings in the Supreme Court of NSW seeking orders to restrain Millinium from transferring its securities in Lantern under the call options.

On 11 March 2014, Totem sought a declaration of unacceptable circumstances from the Takeovers Panel. It submitted that, as a result of the buy-back offer, Lantern had acquired a relevant interest in Millinium's 24.3% interest in contravention of s606 of the Corporations Act. It sought orders that included Lantern being restrained from accepting the buy-back offer, and Torchlight being prevented from voting in favour of any resolution to approve the buy-back.

Relevant interest and s609(7)

Totem seemed to argue that the Millinium's irrevocable buy-back offer to Lantern was akin to the grant of an enforceable right by Millinium to Lantern to acquire a relevant interest in Millinium's 24.3% interest. As a result, Lantern acquired a relevant interest in these securities when the irrevocable offer was made by Millinium under s608(8).

Ultimately the Panel was of the view that, even if the buy-back offer attracted the operation of s608(8), it would be unlikely to be unacceptable because either the exception under s609(7) applied to prevent the acquisition of a relevant interest or the policy of that section meant that any breach was not unacceptable. Section 609(7) prevents a relevant interest from arising by reason of an agreement that is conditional on either shareholder approval under item 7 of s611 or ASIC relief, provided the agreement does not:

  • confer any control or influence over voting rights attaching to the securities; and
  • restrict the disposal of the securities for longer than 3 months.

It seems correct that the policy behind s609(7) should mean that any breach of s606 arising from the buy-back offer should not be unacceptable. However, ASIC (and the Panel) have taken a stringent approach to this section in recent times. For example, in Tigers Realm2 the Panel agreed with ASIC who submitted that to rely on s609(7) there needed to be certainty that such approval would be sought. ASIC also submitted that in order to rely on s609(7) the agreement needed to expressly provide that any disposal restrictions on the securities would fall away after 3 months3. The buy-back offer was not specific on the approvals required to implement the buy-back (noting that s609(7) would not commonly be relied on to effect a buy-back) and there was no express 3 month limitation on any disposal restrictions. Although the authors believe the Panel approach was correct in this instance, it may mean that ASIC needs to be a little more flexible on its approach to s609(7) to ensure that inconsistencies, and uncertainty around the application of that section, do not arise.

Voting by Torchlight

Totem sought orders that Torchlight be prevented from voting in favour of any resolution to approve the buy-back, which could see its relevant interest in Lantern securities increase from 30.2% to 40.3%. The Panel was of the view that it was premature to determine whether Torchlight should be prevented from voting in favour of the buy-back, given the uncertainty around whether the buy-back would actually proceed. It noted the 'potential issue' involved in permitting Torchlight to vote in favour of the buy-back and referred to the Panel's decision in Village Roadshow4. In that decision, the Panel considered that it would be unacceptable for a major shareholder to both vote in favour of a buy-back and have its interest in the company materially increase as a result.

The Panel noted that if the buy-back did proceed, it would be open to ASIC or another interested party to bring a fresh application before the Panel on this issue.

Voting on buy-back

If the buy-back were to proceed, there is some doubt over whether it would be approved even if Torchlight was permitted to vote in favour of it. As a selective buy-back, it would need to be approved by special resolution (ie. 75% or more), with no votes cast in favour of the resolution by Millinium. Although Millinium would be prevented from voting in favour of the resolution, it would not be prevented from voting against it. If Millinium voted against the resolution, it would be almost impossible for Lantern to achieve the required 75% approval to effect the buy-back.

It could be difficult for Lantern to argue against Millinium's entitlement to exercise its voting rights in this manner, as any control or influence over the voting rights attaching to Millinium's securities would be contrary to the provisions of, and policy behind, s609(7). Presumably, had the Panel been of the view there were any restrictions imposed on Millinium's voting rights, they would not have made the conclusions they did about Lantern's ability to rely on s609(7) or the policy behind it.


1Lantern Hotel Group [2014] ATP 6 at [22]
2Tigers Realm Coal Limited [2014] ATP 2.
3Tigers Realm Coal Limited [2014] ATP 2 at 67.
4Village Roadshow Limited 03 [2004] ATP 22.

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.

Kemp Strang has received acknowledgements for the quality of our work in the most recent editions of Chambers & Partners, Best Lawyers and IFLR1000.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.