Australia: Corporate Law News - November 2007

Last Updated: 26 November 2007
Article by Leigh Brown



New Regulatory Guides For Independent Expert Reports

ASIC has released two new regulatory guides updating its policies in relation to independent expert reports. RG111 The Content of Expert Reports and RG112 Independence of Experts are aimed at improving the overall quality of expert reporting.

RG111 provides guidance to experts on how to draft an expert report. RG112 outlines ASIC's views on the independence requirements for expert reports. RG112 was released in response to a growing perception in recent years that some expert reporting has not proved sufficiently independent.

RG111 can be accessed via the following link:$file/rg111.pdf

RG112 can be accessed via the following link:$file/rg112.pdf

Revised Auditor Registration Scheme

ASIC has released revised guidelines for individuals and companies seeking registration as a company auditor or authorised audit company.

RG180 Auditor Registration merges all previous guidelines about registration into one document. The changes effected by the new guidelines come into effect immediately, however, applications already lodged with ASIC, or applications which have been signed but not yet lodged, will be treated by ASIC as subject to the previous guidelines.

RG180 can be accessed via the following link:$file/rg180.pdf

New Guide To Disclosure For Unrated And Unlisted Debentures

ASIC has released a draft regulatory guide and new consultation paper as part of its 'Three Point Plan' for better disclosure for unrated and unlisted debentures.

RG69 Debentures – improving disclosure for retail investors outlines benchmark reporting standards for market issuers to retail investors based on an 'if not, why not' philosophy.

CP94 Debenture Advertising describes a draft regulatory guide for issuers and publishers of debenture advertising. Further comment has been called for by ASIC and a final guide is scheduled for release in January 2008.

RG69 can be accessed via the following link:$file/rg69.pdf

CP94 can be accessed via the following link:$file/CP_94_Debenture_advertising_final.pdf

First Successful Australian Prosecution Of Directors For 'Share Warehousing'

Two company directors have been sentenced in the District Court of Western Australia on 29 charges brought by ASIC. The charges relate to their activities as directors in relation to two publicly-listed companies, formerly, Hallmark Gold NL and Welcome Stranger Mining Company NL.

The two directors were found guilty pursuant to the Corporations Act 2001 (Cth) of:

  • not disclosing relevant interests in company shares during the period in which they were directors of the two companies;
  • controlling these shares through the use of off-shore entities and using their holdings to vote on related party resolutions at general meetings, delivering them financial benefits; and
  • providing false and misleading information to ASIC and the ASX in documents lodged which should have disclosed their relevant share interests.

Both men were sentenced to 3 years imprisonment.


APRA And ASIC Propose Streamlined Breach Reporting

APRA and ASIC have released a discussion paper proposing a new online breach reporting system. The proposal aims to simplify the process involved in reporting breaches and reduce reporting duplication for institutions regulated by both APRA and ASIC.

Under the proposed system, all APRA regulated institutions (ie general insurers, life insurers, friendly societies and superannuation licensees) will be able to report breaches to APRA online. Dual-regulated institutions will be permitted to lodge a single breach report with either regulator in full satisfaction of their reporting requirements.

A copy of the discussion paper can be accessed via the following link:


Record Penalties Imposed In Visy Packaging Cartel Case

On November 2, the Federal Court ordered a record penalty of $36 million against Visy Board Pty Ltd and its owner and director, Richard Pratt. The court also ordered penalties of $1.5 million and $500,000 respectively against Visy Group Chief Executive, Harry Debney and former Visy Board General Manager, Rod Carroll.

The decision by Justice Heerey followed findings that Visy had engaged in price fixing and market sharing in contravention of the Trade Practices Act, by co-operating with its competitor, Amcor Limited, in the market for corrugated fibreboard packaging. His Honour noted that the penalties are 'reflective of the fact that this must be, by far, the most serious cartel case to come before the Court in the thirty plus years in which price fixing has been prohibited by statute'.

The ACCC and the Visy parties had filed an agreed statement of facts with the Federal Court on Tuesday 16 October. Each party also made submissions on the proposed penalties.

Amcor informed the ACCC of the arrangement and was subsequently granted immunity from prosecution in accordance with the ACCC's then Leniency Policy, since replaced by its Immunity Policy.

A copy of the ACCC's media release can be accessed via the following link:

Note: Richard Murphy, of the Melbourne office, is currently acting for Rod Carroll in relation to these proceedings.

Distributors, Not Franchisors

On October 18, the Federal Court handed down its decision in ACCC v Kyloe Pty Limited. The case concerned the nature and substance of franchise agreements. The ACCC alleged that the respondents had contravened the Franchising Code of Conduct and s51AD of the Trade Practices Act 1974 (Cth) (the Act).

The respondents were involved in the distribution of drink machines and the resale of associated products. One of the respondents had entered into a number of 'subdistribution agreements' with third parties. The primary issue before the Court was whether the 'sub-distribution agreements' entered into between the respondent company and the third parties constituted 'franchise agreements' for the purposes of the ACCC's cause of action.

Justice Tracey held that the legal relationship between the respondent company and their 'sub-distributors' as described by the 'sub-distribution agreements' did not constitute franchise arrangements. The sub-distributors were not entitled to protection under the Franchising Code of Conduct and the respondent companies were held not liable for alleged breaches of the Act.

A copy of the judgment can be accessed via the following link:


Submissions Regarding Sons Of Gwalia

The position of shareholders in relation to claims made as creditors in the external administration of a company was redefined by the decision in Sons of Gwalia v Ltd v Margaretic [2007] HCA 1.

CAMAC is inviting submissions in relation to a discussion paper released by its Advisory Committee in September, which considers the implications of the High Court's decision on future policy.

Submissions close on Friday, December 21.

CAMAC's discussion paper can be accessed via the following link:$file/Sons_of_Gwalia_DP_Sep07.pdf


Consolidated Minerals Ltd 03 – Panel Orders

The Takeovers Panel (Panel) has made a declaration of unacceptable circumstances against Pallinghurst Resources Australia Limited (Pallinghurst) in relation to its offmarket takeover bid for Consolidated Minerals Limited (Consolidated Minerals).

On October 12, Pallinghurst lodged a secondary supplementary bidder's statement for its off market takeover bid of Consolidated Minerals with the ASX (Pallinghurst Offer). The statement included an alternative form of consideration, in the alternative to the already stated $4.50 cash offer, of $4.50 cash plus a "Top-up note". The Top-up note was intended to operate as a further cash payment to defeat any subsequent offer made by Pallinghurst's takeover competitor, Palmary Enterprises (Australia) Pty Limited (Palmary).

Pallinghurst initially lodged its statement with the ASX at 2.16pm but then lodged an amended statement at 4.32pm which included a provision stating that the Pallinghurst Offer would close at 7pm on October 24 and declaring that there would be no further voluntary extensions of time beyond this date.

On October 15, Palmary made an application to the Panel.

On October 31, the Panel declared unacceptable circumstances in relation to the Pallinghurst Offer on two grounds:

  • the Top-up note would likely have the effect of contravening section 602 of the Corporations Act 2001 (Cth) (the Act) by discouraging competing bids for the takeover target by creating a situation where a competitor's bid could not 'beat' the Pallinghurst Offer; and
  • the declaration of no further voluntary extensions was misleading, as it did not advise that Pallinghurst could voluntarily trigger an automatic extension of the offer period. For example, by adjusting its bid consideration before the closing date, Pallinghurst could effect an extension not classified as voluntary but of the same effect. The Panel held that this should have been explained.

Pallinghurst has lodged a notice of appeal pursuant to section 657EA the Act.

The Panel's Orders can be accessed via the following link:


Meeting Of Colonial First State Private Capital Limited (CFI) Ordinary Shareholders Ordered For 30 November 2007

Justice Lindgren has ordered a meeting of Colonial First State Private Capital Limited (CFI) ordinary shareholders be convened on November 30 to consider the merits of a proposed share transfer to Sunsuper Pty Ltd (the trustee of Sunsuper Superannuation Fund).

Under the proposed share transfer arrangement, CFI would become a wholly owned subsidiary of Sunsuper Pty Ltd and cease trading on the ASX.

The decision approved CFI's draft explanatory statement of the share transfer and ordered the matter to be brought back to the Federal Court on December 7, subject to the outcome of the meeting of ordinary shareholders, for final approval.

Minter Ellison Lawyers in Sydney represented CFI in the proceedings. A copy of the judgment can be accessed via the following link:

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