Explanatory Memorandum
Circulated by the authority of the Parliamentary Secretary to the Treasurer, the Hon David Bradbury MPChapter 2 Aevum Case Changes
Outline of chapter
2.1 The Bill amends section 1019G of the Corporations Act to clarify that any unsolicited offer that is made to purchase financial products off-market must remain open for at least one month from the date of the offer.
Context of amendments
2.2 Subsection 1019G(2), of the Corporations Act states that an unsolicited offer to purchase financial products off market (predominantly the acquisition of shares), may be withdrawn at any time, but not within one month of the date of the offer. This has been interpreted to date to mean that such an offer must remain open for at least one month from the date the offer is made.
2.3 In 2004, National Exchange Pty Limited (National Exchange) made an unsolicited and off-market share offer to members of Aevum Ltd for $0.35 per share, compared with the market value estimate of between $0.90 -$1.29 per share. Aevum brought an action against National Exchange in the Federal Court regarding the formulation of the offer, asserting that the offers were not sent as soon as possible after the date of the offer and that they were not expressed to remain open for at least one month.
2.4 The Federal Court found that National Exchange contravened:
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- section 1019E(2) of the Corporations Act in that its written offer was not sent to shareholders as soon as practicable after the date of offer; and
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- section 1019G(2) of the Corporations Act in that the offers were not expressed to remain open for at least one month.
2.5 In hearing the case, the Federal Court Judge noted that the wording of section 1019G(2) was written in terms of the withdrawal of an offer and not that an offer must remain open for at least one month, and that perhaps this should be amended, to reflect this intention of the provision.
2.6 This amendment provides clarity in the wording to avoid further misreading or misinterpretation of the relevant provision.
2.7 This amendment, amongst others, was canvassed in an options paper Access to Share Registers in the Regulation of Unsolicited off Market Offers , issued in May 2009. Submissions received were in favour of the proposed amendment.
Summary of new law
2.8 The provision has been amended to make it clear that the offer must remain open for a period of at least one month from the date of the offer. The related existing provision addressing how long the offer must remain open has also been moved into this subsection.
Comparison of key features of new law and current law
| New law | Current law |
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The amendment substitutes new wording to make it clear that an offer made under this Division must remain open for at least one month from the date of the offer. Consequential minor amendments have also been made to two other subsections to ensure the correct cross reference to this revised provision. |
The provision notes that an offer made under this Division may be withdrawn at any time, but not within one month of the date of the offer. |
Detailed explanation of new law
2.9 Division 5A in Chapter 7 of the Corporations Act sets out the legal requirements for making an unsolicited offer (ie. offers other than those made on a licensed financial market) to purchase financial products off-market. Division 5A principally establishes a disclosure regime in relation to these offers. To date these kinds of offers have only been made to acquire shares.
2.10 Section 1019G sets out the rules regarding the duration and withdrawal times when making these offers. Currently the 'offer may be withdrawn by the offeror at any time, but not within one month of the date of offer', which previously had been interpreted as requiring that an offer must remain open for at least one month of it being made.
2.11 However, in Aevum ACN 087 648 691 v National Exchange Pty Limited ACN 006 079 974 [2004] FCA 1781, the Court found this provision to be ambiguous and suggested consideration be given to revising the wording to clearly state that an offer must remain open for at least one month.
2.12 Proposed subsection 1019G(1) provides revised wording to achieve more clarity and to avoid further doubt about how long an offer made under this Division must remain open. [Schedule 1, Items 13 and 14]
Application and transitional provisions
2.13 These amendments apply to offers made after this schedule commences. [Schedule 1, Item 20]
Consequential amendments
2.14 Subsequent amendments to references to the substituted provision are also to be made to subsections 1019K(1)(b) and 1021)(3)(c). [Schedule 1, Items 13 and 14]