Australia: Corporate Law News – April 2008

Last Updated: 8 April 2008



Online financial service disclosure

ASIC has released a Consultation Paper proposing to facilitate disclosure of financial services information via email and the internet. The proposal would enable providers to give financial services disclosures to their clients by sending an email with a hyperlink to the relevant information, or by notifying them that the information is available on a certain website. Additionally, ASIC is proposing relief to enable trustees of superannuation entities to use a website as the default method of delivering annual superannuation information. This proposal is similar to the current treatment of company annual reports.

Submissions on the Consultation Paper are invited by 28 May 2008.

Click here to view the media release and access the Consultation Paper.

Report released on relief applications

ASIC has released a report outlining its recent decisions on applications for relief from the corporate finance, financial services and managed investment provisions of the Corporations Act 2001 (Cth) (Act) between 1 September and 30 November 2007.

The report provides an overview of situations where ASIC has exercised or refused to exercise its exemption and modification powers from the financial reporting , managed investment, takeovers, fundraising and financial services provisions of the Act.

Click here to access the report.

Changes to Class Order 98/1418 relief and new class order relief for disclosing Entities

ASIC has announced a number of changes to Class Order, CO 98/1418 Wholly owned entities. As a result of the changes, certain wholly owned subsidiaries are relieved from preparing financial reports. CO 98/1418 provides conditional financial reporting preparation, audit and lodgement relief to a company that is party to a deed of cross guarantee.

For CO 98/1418 to be applicable, the company must be a wholly owned subsidiary of another company (Holding Entity), the company and its Holding Entity must enter into a deed cross guaranteeing each other's debts, the Holding Entity must lodge a consolidated financial report covering at least those group companies relying on the relief, and other conditions of CO 98/1418 must be satisfied.

The changes include removing the requirement for a three year compliance history with the financial reporting requirements of the Corporations Act 2001 (Cth) and replacing the requirement to lodge an annual notice concerning the use of CO 98/1418 with a requirement to only lodge a notice when the relief is first applied or the group Holding Entity changes.

ASIC has also announced new relief under Class Order 08/15 Disclosing entities – halfyear financial reporting relief. CO 08/15 relieves a disclosing entity from the requirement to prepare and lodge a half-year financial report during the first financial year of the entity, where the first financial year lasts for eight months or less.

Click here for the media release including full details of all the changes, editorial notes to CO 98/1418 and a copy of Class Order 08/15.


ASX's new Disciplinary Processes and Appeals Rulebook

The ASX's new Disciplinary Processes and Appeals Rulebook became effective on 31 March 2008. The move creates a single rulebook, providing uniform disciplinary and appeal processes for participants in both the cash and futures markets. The new rulebook also establishes one peer review Disciplinary Tribunal that integrates the existing ASX, Australian Clearing House and ASX Settlement and Transfer Corporation Tribunals with the existing SFE Business Conduct and Market Practices Committees.

ASX has also altered its fining process to complement the new rulebook. A new Breach Notice process which streamlines minor disciplinary issues and applies a fixed penalty of $2,000 for all such matters, will be introduced. At the other end of the scale, the maximum penalty for the most serous market abuses will increase from $250,000 to $1,000,000.

Click here to view more information on the new rulebook including a Guidance Note regarding the disciplinary proceedings.

Public Consultation on Short Selling

In response to the Treasurer's decision to pursue legislative changes to ensure that all 'covered' sales will be reportable, ASX has released a pubic consultation paper inviting comments regarding the implementation of related reporting requirements.

As a result of the legislative change, clients will be obliged to report to their broker all selling where borrowing and/or the purchase of securities takes place in order to meet settlement obligations. This would remove the ambiguity in the Corporations Act 2001 (Cth) around the disclosure requirements of 'covered' short sales.

The ASX is seeking feedback on a range of initiatives, including daily reporting requirements, the possibility of short term measures pending the legislative changes and an alteration of its settlement fail fee.

Comments on the paper are requested by Thursday, 24 April 2008.

Click here to view the media release and the consultation paper in full.


Woolworths action on green marketing issue

On 18 March 2008, the ACCC announced that Woolworths had taken action to address the ACCC's concerns about 'green claims' in its labelling of certain tissue products. The ACCC has recently been applying a particular focus on green marketing representations and has issued a publication entitled Green Marketing and the Trade Practices Act dealing with these issues.

The ACCC's concerns with the Woolworths tissue products related to claims made about the sustainability of fibre used in the products and the producer's environmental management. Woolworths cooperated with the ACCC and will introduce new packaging which does not contain the claims. It has agreed to place stickers over claims until the new packaging is produced.

Click here to read the media release in full.

Click here to access the ACCC's guide on green marketing, Green Marketing and the Trade Practices Act.

Franchising Code of Conduct amendments are now law

Amendments made to the Franchising Code of Conduct came into effect on 1 March 2008. The ACCC published a number of new and updated guidance documents for franchisors and franchisees, including a Franchising Code of Conduct compliance manual.

Click here to view the new and updated franchising publications.

Validity of Franchising Agreements

Meanwhile, a High Court appeal to the decision of the New South Wales Supreme Court in Ketchell v Master Education Services Pty Ltd [2007] NSWCA 161 is on foot, subject to Master Education Services Pty Ltd undertaking to fund the legal costs of the respondent regardless of the case's outcome.

The Court of Appeal decision, delivered in July 2007, could have significant implications if upheld, particularly in situations where there has been a technical failure to comply with the Code.

Click here to view the full Court of Appeal decision.

Click here for more information about the implications of this case.


Mount Gibson Iron Limited – declaration of unacceptable circumstances

On 1 April 2008, the Takeovers Panel (Panel) made a declaration of unacceptable circumstances and final orders in relation to the affairs of Mount Gibson Iron Limited (Mount Gibson).

The application referred to a proposed transaction involving approximately 19.72% (156.8 million shares) of Mount Gibson's share capital. The proposed transaction consisted of two parts – the conditional sale of 77,436,215 shares in Mount Gibson by Gazmetall Holding (Cyprus) Ltd (Gazmetall) to Shougang Concord International Enterprises Company Limited (Shougang); and the granting of an option by Gazmetall to Shougang to acquire a further 79,333,682 shares in Mount Gibson (proposed transaction).

It was submitted by Mount Gibson that there was an association between Shougang and APAC Resources Limited (APAC), which owned 160.8 million shares in Mount Gibson (20.19% of Mount Gibson's share capital).

The Panel made a declaration of unacceptable circumstances on alternative bases. Firstly, Shougang was associated with APAC and therefore the circumstances give rise to a contravention of Chapter 6 of the Corporations Act 2001 (Cth). Secondly, the relationship between Shougang and APAC was such that there would be an unacceptable effect on the control, or potential control of, or on the acquisition or proposed acquisition of a substantial interest in Mount Gibson if Shougang acquired Gazmetall's shares in Mount Gibson pursuant to the proposed transaction.

In reaching this conclusion the Panel considered a number of issues including the role of directors, executives and advisers of Shougang entities and APAC and the relationships between these individuals; transactions in Shougang and APAC shares before the proposed transaction; transactions and other circumstances relating to Mount Gibson before the proposed transaction; and the circumstances surrounding the sale by Gazmetall.

The Panel's indicated that it would issue its full reasons shortly.

Click here to access the Panel's media release, declaration and orders.

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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