Financial Services Reform Amendment Act 2003 (141 of 2003)

Schedule 1   Amendment of the Corporations Act 2001 relating to unsolicited offers to purchase financial products off-market

7   After Division 5 of Part 7.9

Insert:

Division 5A - Unsolicited offers to purchase financial products off-market

1019C Definitions

In this Division:

date of offer has the meaning given by subsection 1019I(1).

offeree , in relation to an offer to which this Division applies, has the meaning given by subsection 1019D(1).

offeror , in relation to an offer to which this Division applies, has the meaning given by subsection 1019D(1).

offer to which this Division applies means an offer to which this Division applies because of section 1019D.

1019D Offers to which this Division applies

(1) This Division applies to an offer in relation to which the following paragraphs are satisfied:

(a) the offer is an unsolicited offer to purchase a financial product made by a person (the offeror ) to another person (the offeree );

(b) the offer is made otherwise than on a licensed market;

(c) one or more of the following apply:

(i) the offer is made in the course of a business of purchasing financial products;

(ii) the offeror was not in a personal or business relationship with the offeree before the making of the offer;

(iii) the offer is made in circumstances specified in regulations made for the purposes of this subparagraph;

(d) the offer is not:

(i) made to the issuer of the financial products; or

(ii) to buy back shares under a buy-back authorised by section 257A; or

(iii) made under a compromise or arrangement approved at a meeting held as a result of an order under subsection 411(1) or (1A); or

(iv) to acquire securities under an off-market bid; or

(v) to compulsorily acquire or buy out securities under Chapter 6A; or

(vi) to acquire shares from a dissenting shareholder under section 414; or

(vii) made in relation to particular financial products that are specified in regulations made for the purposes of this subparagraph; or

(viii) made in circumstances that are specified in regulations made for the purposes of this subparagraph;

(e) the offer is made or received in this jurisdiction.

(2) The regulations may clarify:

(a) when an offer is, or is not, made in the course of a business of purchasing financial products; or

(b) when an offeror was, or was not, in a previous personal or business relationship with an offeree.

Regulations made for the purposes of this subsection have effect despite anything else in this section.

1019E How offers are to be made

(1) An offer to which this Division applies must not be made otherwise than by sending an offer document in printed or electronic form to the offeree in accordance with the following requirements:

(a) the document must be sent to an address of the offeree (which may be an electronic address);

(b) either the envelope or the container in which it is sent, or the message that accompanies it, must be addressed to the offeree.

(2) The offer document must be sent to the offeree as soon as practicable after the date of offer.

1019F Prohibition on inviting offers to sell

A person must not invite another person to make an offer to sell a financial product in circumstances in which, if the invitation were instead an offer to purchase the financial product, that offer would be an offer to which this Division applies.

1019G Duration and withdrawal of offers

(1) An offer to which this Division applies cannot remain open more than 12 months after the date of offer.

(2) The offer may be withdrawn by the offeror at any time, but not within 1 month of the date of offer.

(3) The offer may only be withdrawn by the offeror by sending a withdrawal document in printed or electronic form to the offeree in accordance with paragraphs 1019E(1)(a) and (b). The withdrawal document must identify the offeror and be dated.

(4) A purported withdrawal of the offer contrary to subsection (2) or (3) is ineffective.

1019H Terms of offer cannot be varied

(1) The terms of an offer to which this Division applies, as set out in the offer document, cannot be varied.

(2) A purported variation of the terms of the offer is ineffective.

(3) This section does not:

(a) affect the offeror’s obligation under section 1019J to update the market value of the financial product to which the offer relates; or

(b) prevent the offeror from withdrawing the offer in accordance with section 1019G or paragraph 1019J(2)(a) and making another offer on different terms; or

(c) prevent the offeree from making a counter-offer on different terms.

1019I Contents of offer document

(1) The offer document by which an offer to which this Division applies is made must identify the offeror and be dated (this date is the date of offer ).

(2) The offer document must also contain the following:

(a) the price at which the offeror wishes to purchase the financial products;

(b) if the financial product is able to be traded on a licensed market and there is a market value for the product as traded on that market - the market value of the product as at the date of offer;

(c) if paragraph (b) does not apply - a fair estimate of the value of the product as at the date of offer, and an explanation of the basis on which that estimate was made;

(d) the period during which the offer remains open (which must be consistent with subsection 1019G(1));

(e) a statement to the effect that the offer may be withdrawn by sending a withdrawal document to the offeree, but generally not within 1 month of the date of offer;

(f) any other information specified in regulations made for the purposes of this paragraph.

(3) The regulations may clarify:

(a) the manner in which a fair estimate of the value of a financial product (see paragraph (2)(c)) is to be worked out; and

(b) the level of detail required in the explanation of the basis on which the estimate was made.

Regulations made for the purposes of this subsection have effect despite anything else in this section.

(4) The offer document must be worded and presented in a clear, concise and effective manner.

1019J Obligation to update market value

(1) This section applies if:

(a) the offer document by which an offer to which this Division applies is made states the market value of the financial product to which the offer relates as at the date of the offer; and

(b) while the offer remains open, there is an increase or decrease in the market value of the product when compared to:

(i) unless subparagraph (ii) applies - the market value (the currently stated value ) stated as mentioned in paragraph (a); or

(ii) if this section has previously applied in relation to the offer and one or more supplementary offer documents have been sent to the offeree - the market value (the currently stated value ) stated as mentioned in paragraph (3)(c) in the supplementary offer document most recently sent to the offeree; and

(c) the increase or decrease, expressed as a percentage of the currently stated value, exceeds the percentage specified in the regulations for the purposes of this paragraph.

(2) The offeror must, within 10 business days of this section applying because of a particular increase or decrease in value:

(a) withdraw the offer by sending a withdrawal document, in printed or electronic form, to the offeree in accordance with paragraphs 1019E(1)(a) and (b):

(i) that identifies the offeror and that is dated; and

(ii) that contains a statement to the effect that the offer is withdrawn because of a change in the market value of the product, and that withdrawal for this reason is permitted even within 1 month of the date of offer; or

(b) send a supplementary offer document (see subsection (3)) in printed or electronic form to the offeree in accordance with paragraphs 1019E(1)(a) and (b).

Nothing in section 1019G affects the effectiveness of a withdrawal of the offer under paragraph (a) of this subsection.

(3) A supplementary offer document must:

(a) identify the offer to which it relates; and

(b) be dated; and

(c) state the market value of the financial product to which the offer relates as at that date; and

(d) state the price that was stated in the offer document as required by paragraph 1019I(2)(a), and contain a statement to the effect that this is still the price at which the offeror wishes to purchase the product and that the terms of the offer remain unchanged; and

(e) contain a statement to the effect that the document has been prepared because the market value of the product has changed.

(4) A supplementary offer document must be worded and presented in a clear, concise and effective manner.

(5) In this section, a reference to stating a market value of a financial product includes a reference to purporting to state the market value of the product.

1019K Rights if requirements of Division not complied with

First situation covered by this section - offers to which this Division applies

(1) This section applies if, in relation to an offer to which this Division applies, the offeree (the seller ) accepts the offer and enters into a contract for the sale of the financial product to the offeror (the buyer ), and one or more of the following paragraphs applies:

(a) section 1019E was not complied with in relation to the offer;

(b) the offer was accepted after the period referred to in subsection 1019G(1);

(c) the offeror gave the offeree an offer document and either:

(i) the offer document did not comply with section 1019I; or

(ii) there was a misleading or deceptive statement in the offer document;

(d) in a situation to which section 1019J applies, either:

(i) subsection 1019J(2) was not complied with; or

(ii) subsection 1019J(2) was complied with, but the offeree did not receive the withdrawal document, or the supplementary offer document, as the case requires, until after the offeree had accepted the offer;

(e) in a situation to which section 1019J applies, the offeror gave the offeree a supplementary offer document and either:

(i) the supplementary offer document did not comply with subsection 1019J(3); or

(ii) there was a misleading or deceptive statement in the supplementary offer document.

Second situation covered by this section - invitations prohibited by section 1019F

(2) This section applies if, in response to an invitation prohibited by section 1019F, a person (the seller ) makes an offer to sell a financial product to the person who made the invitation (the buyer ), and that person accepts the offer and enters into a contract for the purchase of that financial product from the seller.

Seller’s right to refuse to transfer, or to seek the return of, the financial product

(3) The seller has:

(a) the right to refuse to transfer the financial product to the buyer; or

(b) if the seller has already transferred the financial product to the buyer - the right to have the financial product returned to the seller, if the buyer still holds the product.

The seller’s right under paragraph (a) or (b) is conditional on the seller repaying any money that has been paid to the seller for the purchase of the financial product.

How the seller’s right is to be exercised

(4) The seller’s right under subsection (3) must be exercised by notifying the buyer in one of the following ways:

(a) in writing;

(b) electronically;

(c) in any other way specified in regulations made for the purposes of this paragraph.

Also, if the regulations require the seller to comply with other requirements in order to exercise that right, those other requirements must be complied with.

(5) The seller’s right under subsection (3) can only be exercised during the period of 30 days starting on the day the contract was entered into.

Effect of exercise of seller’s right

(6) On the exercise of the seller’s right under subsection (3), the contract referred to in subsection (1) or (2) is, by force of this section, terminated from that time without penalty to the seller.

Regulations may provide for certain matters

(7) The regulations may provide for consequences and obligations (in addition to those provided for by subsection (6)) to apply if the seller’s right under subsection (3) is exercised.

(8) The regulations may provide that, in specified circumstances, the amount to be repaid as mentioned in subsection (3) is to be increased or reduced in accordance with the regulations.