Corporate law developments

By Vijay Cugati
Mergers & Acquisitions

In brief

Welcome to our monthly snapshot of regulatory updates and other developments in corporate law. We know you are busy, so our focus is on capturing key issues.

We'd love to hear from you. Please do let us know if you need more detail about an issue, or if there is something in particular you'd like to hear about, and feel free to call any of your Allens contacts.

What you need to know

  • ASIC released Report 569 – Market Integrity Report: July to December 2017, emphasising its recent focus on cyber resilience, client money and sell-side research. Practitioners should note the report flags ASIC's intention to focus on technology and cyber resilience, conduct and controls over all market-based activities, and the effectiveness of capital markets, in the coming months.
  • ASIC has published its Summary of 2017–18 indicative levies, which will be applied in connection with ASIC's industry funding arrangements, which became law in July 2017. Indicative levies have been provided for approximately 80 per cent of ASIC-regulated entities. Under the industry funding arrangements, all organisations regulated by ASIC will be required to contribute to its regulatory costs incurred in the previous financial year. Once actual regulatory costs for the 2017–18 financial year are known, industry funding invoices for that year will be issued in January 2019.
  • Following the passage of legislation to establish the Australian Financial Complaints Authority (AFCA) in February, March saw ASIC release Consultation Paper 298 – Oversight of the Australian Financial Complaints Authority – Update to RG 139 and a draft updated version of Regulatory Guide 139 – Oversight of the Australian Financial Complaints Authority. The consultation paper and draft regulatory guide set out ASIC's proposed approach to its oversight of AFCA. AFCA will begin receiving complaints by 1 November 2018.
  • ASIC has updated Regulatory Guide 83 – Reinstatement of companies to reflect minor changes to law relating to reinstatements and to ASIC's policies, management and administration of reinstatement applications. Practitioners should note the requirement for applications to include evidence that those who were directors of the company before the reinstatement have been notified.
  • ASIC continued to press forward with bilateral agreements to enhance cooperation on fintech regulation, signing an Enhanced Innovation Hubs Enhanced Co-operation Agreement with the UK's Financial Conduct Authority.
ASX: Update to Guidance Notes

ASX released updates to GN 1 Applying for Admission, GN 8 Continuous Disclosure, GN 12 Significant Changes to Activities, and GN 16 Trading Halts and Voluntary Suspensions.

Key changes are as follows.

  1. Guidance Note 1 Applying for Admission – ASX Listings: Further materials in section 3.8 on using artificial means to achieve spread, and in s3.19 on ASX's good fame and character requirements.
  2. Guidance Note 8 Continuous Disclosure: Listing Rules 3.1-3.1B
    • Additional guidance in s4.15 on disclosure expectations for acquisition and disposal agreements and material customer contracts. ASX has separately noted that there have been a number of recent incidents where disclosures by listed entities about their contracts with customers have fallen short of the required standards. Eg, when there are announcements of contracts with major customers that don't include details of the nature or substance of the contract or its significance to the entity.
    • Expanded guidance in s5.10 to address the new insolvent trading safe harbour for directors in s588GA of the Corporations Act 2001 (Cth) and what should be disclosed when an entity requests a voluntary suspension to complete a transaction necessary for its survival.
  3. Guidance Note 12 Significant Changes to Activities: Updated to reflect a change in policy in backdoor listings, effective immediately, that requires all directors or proposed directors to provide evidence of their good fame and character, including existing directors who have been elected by shareholders to the board.
  4. Guidance Note 16 Trading Halts and Voluntary Suspensions: Updated to reflect the changes to s5.10 of Guidance Note 8 described above.

In March the Security of Critical Infrastructure Bill 2018 was passed by both Houses of Federal Parliament. The purpose of the legislation is to strengthen the Government's capacity to manage national security risks arising from foreign investment in Australia's critical infrastructure assets. The legislation will regulate approximately 140 critical infrastructure assets in, what the Government has considered to be, the highest-risk sectors, of ports, electricity, gas and water (in addition to the telecommunications sector, which is being separately regulated by the Telecommunications and Other Legislation Amendment Act 2017 (Cth)). It will do this by establishing a Register of Critical Infrastructure Assets and associated reporting requirements, and by providing the Government with a 'last resort' directions power, which allows the relevant Minister to issue a direction to an owner or operator of a critical infrastructure asset to do, or not do, something to mitigate risks that are prejudicial to security. The legislation will assist the Federal Government's Critical Infrastructure Centre (established in January 2017) in its undertaking of national security risk assessments and its provision of national security advice to FIRB regarding proposals by foreign persons to acquire critical infrastructure assets.


In March, the ACCC gave the green light to two acquisitions.

  • It did not oppose the acquisition of Mantra Group Limited by AAPC Limited (Accor), which will create the largest accommodation provider in Australia. The ACCC found that, while the Accor/Mantra group will gain some advantages from being part of a multi-regional chain, competition in accommodation services occurs predominantly at a local level and, in each of those markets in which it operates, the group will continue to face competition from a range of international and domestic accommodation providers.
  • The ACCC did not oppose the acquisition of Monsanto Corporation by Bayer AG, following the European Commission's conditional approval of the deal. The approvals are contingent upon Bayer's commitments to globally divest major parts of its herbicide, traits and seeds business, along with other research and development functions and projects.
  • The ACCC considers that if the divestments occur, the acquisition will not substantially lessen competition in the supply of weed management systems for use on canola crops and in research and development of new crop protection technologies. The ACCC also considered Australia-specific issues regarding Bayer's cotton seed businesses, finding that there would be sufficient constraints to prevent any anti-competitive conduct by the combined entity, and that Bayer's decision to cancel its cotton seed breeding program was unconnected to the proposed acquisition.

In addition to its clearances, the ACCC has published a Statement of Issues concerning Pacific National's proposed acquisition of Aurizon's Queensland intermodal freight haulage business and intermodal rail terminal at Acacia Ridge in Brisbane. Its primary competition concerns are that the two entities are the only participants in the intermodal rail linehaul services market in Queensland and compete closely, and that if Pacific National acquired the Acacia Ridge terminal, it would control access to this infrastructure. Although Pacific National has offered to make a s87B undertaking in relation to third party access to the terminal, the ACCC has flagged that such an undertaking would be unlikely to allay its concerns.

Takeovers Panel

The Panel turned its attention to last and final statements in March, with the release of a consultation paper in relation to proposed revisions to Guidance Note 1.

The proposed revisions give an example of unacceptable circumstances following a last and final statement in relation to a takeover bid. The example provides that unacceptable circumstances are likely to arise if, after making a no increase statement, the bidder (or an associate) makes another bid (or proposes a scheme) within four months after the bid closes and offers increased consideration (unless this is contemplated by a clear qualification to the no increase statement).

The proposed guidance is intended to give market participants more certainty, by establishing a time frame before which departure from a no increase statement may give rise to unacceptable circumstances. Comments on the consultation paper are due by Friday, 20 April 2018.

In other news, the Panel received applications in relation to:

  • Auris Minerals Limited (regarding alleged contraventions of the substantial shareholder notice provisions in the Corporations Act);
  • Caravel Minerals Limited (regarding alleged contraventions of the substantial shareholder notice provisions and 20 per cent rule in the Corporations Act); and
  • Flinders Resources Limited (twice, while Flinders Resources is the subject of an unconditional off-market takeover bid by Eastern Field Developments Limited): the Panel declined to conduct proceedings for the first application (by Eastern Field, in relation to disclosures in the Flinders Resources Target's Statement) while the second application (by ASIC, in relation to last and final statements and shareholder intention statements) remains under consideration.

The Panel also published reasons for its review decision regarding Strategic Minerals Corporation NL, and announced the appointment of new Panel members for terms of three years, commencing on 30 April 2018.


Traditionally, the enterprise agreements for fast food and retail employers have included higher base rates of pay, but lower penalty rates, than those in the applicable awards. The intention was that the higher base rate of pay, or 'loaded rate', would compensate the employees for the reduction (or, in some cases, removal) of the otherwise applicable penalty rates, while simplifying the payments made to employees.

This long-standing practice was called into question in 2016, when the Fair Work Commission decided that the 2014 Coles Supermarkets enterprise agreement, which included loaded rates and covered around 77,000 employees, should not have been approved because some employees were not better off under the agreement than they would have been under the award. Importantly, the Commission decided that if there was evidence that any employee was not better off under the agreement than they would be under the award, the agreement would not pass the critical 'better off overall test' (or BOOT) and could not be approved.

Before this decision, the Commission had taken a more holistic view of the BOOT, applying it to categories of employees, rather than individual employees.

Following concern about how this new interpretation of the BOOT would impact bargaining, particularly in the fast food and retail sectors, where the use of loaded rates is high, in October 2017 it was announced that the Fair Work Commission would consider how the BOOT should be applied to enterprise agreements that roll up penalty rates and other benefits into loaded rates of pay. During the review, a number of employers and industry groups have argued that the Commission's interpretation of the BOOT is impractical and unworkable.

Following the receipt of submissions and an initial hearing on 15 November 2017, the Commission is in the process of determining the next steps in the matter.

News and other developments

Long-awaited integrity package on taxation of stapled structures released

On 27 March 2018, Treasury announced a package of tax measures that seek to address perceived sustainability and tax integrity risks posed by stapled structures. Broadly, the measures propose to limit tax rate reductions and exemptions currently available to investors receiving distributions of passive rental income 'converted' from trading income; foreign pension funds and governments; and foreign investors in Australian agricultural land. The measures will apply variously from 1 July 2018 and 1 July 2019, with transitional relief available to certain qualifying arrangements. According to the announcement, the package will have no direct impact on finance staples or stapled structures in the commercial and retail property sectors (eg REITs) to the extent they generate rent from third parties.

Read our Client Update: Long-awaited integrity package on taxation of stapled structures released.

Fines for breach of directors' duties

The Federal Court has imposed penalties of $70,000 and seven-year disqualifications from managing corporations on both Emmanuel and Julie Cassimatis for breaching their duties as directors of Storm Financial. In granting the penalties sought by ASIC, Justice Dowsett remarked that he was 'inclined to think that the penalty sought by ASIC is on the low side'. The decision concludes ASIC's drawn-out civil penalty proceedings, which commenced in 2010.