Australia: ASIC News – December - January 2008

Last Updated: 4 February 2008
Article by Stephen Etkind

Reduced Form Lodging Requirements For Some Companies

(24 December)

ASIC has announced a reduction in form lodging requirements for certain foreign-controlled small proprietary companies.

Previously, these companies were required to lodge a form 384 with ASIC for each financial year they wished to take advantage of financial reporting relief under ASIC Class Order [ CO 98/98] Small proprietary companies which are controlled by a foreign company but which are not part of a large group.

As a result of the change, companies will generally need to lodge a form 384 once only, for the first financial year they wish to take advantage of CO 98/98 relief. The only other requirement will be for some companies to lodge a form 394 if, and when, they cease to take advantage of the relief.

These changes are not expected to affect the quality of information currently contained in ASIC's public records.

Media release

Auditor Notifications About AFS Licensees

(20 December)

ASIC has issued an updated version of Regulatory Guide 34 Auditor's obligations: reporting to ASIC (RG 34). RG 34 provides guidance to help auditors comply with their obligations to report certain matters including contraventions and suspected contraventions of the Corporations Act (the Act) by their audit clients to ASIC. RG 34 has been updated to include guidance for auditors of Australian Financial Services (AFS) licensees.

RG 34 previously only provided guidance for auditors of companies and registered schemes in relation to the reporting of certain contraventions and suspected contraventions of the Act under s311 and s601HG. RG 34 has been updated to include guidance in relation to the requirement for auditors of AFS licensees to report matters under s990K. The updated version of RG 34 will assist auditors by providing more certainty in respect of their obligations under s990K.

ASIC encourages all auditors of AFS licensees to actively consider the requirements of s990K of the Act when conducting an audit of a licensee.

Media release

ASIC Grants Relief To Facilitate On Market Buy Backs By ASX Listed Companies

(13 December)

ASIC has announced relief from certain provisions of the Corporations Act to allow the responsible entity of a registered scheme listed on the Australian Securities Exchange (ASX) to carry out on-market buy-backs of interests.

ASIC has released Regulatory Guide 101: On-market buy-backs by ASX-listed schemes (RG 101). This regulatory guide explains the relief ASIC has given in Class Order (CO 07/422): On-market buy-backs by ASX-listed schemes, and explains what a responsible entity should do when conducting on-market buy-backs of interests.

In order to be eligible for the relief:

  • the scheme's constitution must give the responsible entity power to buy-back interests in the scheme;
  • the buy-back must not materially prejudice the responsible entity's ability to pay the scheme's creditors;
  • the buy-back must be carried out in the ordinary course of trading on the ASX;
  • the responsible entity must comply with the ASX Listing Rules (ASXLRs) in relation to the buy-back as if the scheme were a company listed on the ASX (including ASXLR 7.33 which requires that the buy-back price is not more than five per cent above the average of the market price for interests (or stapled securities));
  • the responsible entity must not dispose of the interests it buys back and must ensure that, immediately after registration of the transfer to the responsible entity of interests bought-back, the interests are cancelled;
  • member approval must be obtained where the buy-back exceeds the '10/12 limit'. (The 10/12 limit refers to 10 per cent of the smallest number, at any time during the last 12 months, of interests in the scheme);
  • a buy-back within the '10/12 limit' must be disclosed to the ASX; and

any discretions in relation to the setting of the buy-back price must be exercised reasonably by the responsible entity, and the exercise of any discretions must be documented.

As a consequence of CO 07/422, the responsible entity of an ASX-listed registered scheme which conducts an on-market buy-back of interests is:

  • not required to specify the right to withdraw or set out adequate provisions for making and dealing with withdrawal requests in the scheme's constitution as would otherwise be required by s601GA(4) of the Act;
  • not required to comply with the withdrawal procedures for non-liquid schemes in Pt 5C.6 of the Act; and
  • exempt from the prohibition in s606 of the Act on certain acquisitions of relevant interests in ASX-listed registered schemes.

ASIC's policy is intended to:

  • enable listed schemes to utilise a cost-effective, transparent and fair means of returning capital to members;
  • avoid placing listed schemes at a regulatory disadvantage to listed companies in relation to capital management techniques where there is no regulatory reason for different treatment of listed schemes and listed companies; and
  • ensure that the special regulatory protections that Parliament intended for registered schemes are not undermined but operate in a commercially sensible manner.

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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