Nucleus: corporate law developments
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.
- ASIC published a report on corporate finance regulation for January to June 2018 and provided an update on the Regulators' specific focus areas for the next six months. Report 589 – ASIC regulation of corporate finance: January to June 2018 provides statistical data and includes relevant guidance about ASIC's approach to regulation of fundraising transactions, experts, mergers and acquisitions and corporate governance issues. The report also provides practical guidance on the electronic lodgement of corporate finance documents and the role of ASIC's new fee for service regime. Practitioners should note that the next six months will see ASIC particularly focus on information about IPOs appearing outside formal disclosure documents, the independence of experts and climate change risk disclosures.
- ASIC released Report 585 – ASIC enforcement outcomes: January to June 2018, highlighting outcomes from ASIC's enforcement actions in the first half of 2018. The report provides a high-level overview of ASIC's enforcement priorities and highlights important cases and decisions from the period, including cases against major banks for breaches of responsible lending provisions and engaging in manipulation of the BBSW. Practitioners should note that the next six months will see ASIC particularly focus on quality of financial reporting by listed companies, quality of audits, responsible lending practices, supervision of AFS licensee representatives in giving financial advice and financial benchmark integrity.
- ASIC announced it is in collaboration with 11 other international financial regulators and related organisations to consult on the proposed creation of the Global Financial Innovation Network (GFIN). It is expected the proposed network will seek to provide a more efficient way for innovative firms to interact with regulators by helping them navigate between countries as they look to scale new ideas. GFIN will also look to create a new framework for co-operation between financial services regulators on innovation related topics so that different experiences and approaches can be more easily shared. ASIC and the other participating regulators have issued a joint consultation paper on the proposed role the GFIN should play in delivering its objectives and tools it should have at its disposal. The regulators are seeking feedback on the paper by 14 October 2018. ASIC's proposed participation in the GFIN continues its recent trend of focussing on cross-border innovation regulation.
- Many ASIC-regulated entities have been reminded to submit information on the operation of their business via the new online ASIC Regulatory Portal before 27 September 2018 as part of ASIC's new industry funding arrangements. The new funding arrangements require ASIC-regulated organisations to contribute toward the associated regulatory costs incurred in the previous financial year. The information confirmed or submitted through the portal will enable ASIC to calculate invoices for relevant entities. Small proprietary companies are not required to submit data through the portal.
- A speech by ASIC Commissioner John Price at the Risk Management Association Annual Chief Risk Officer Conference on 4 September 2018 highlighted that ASIC's strategic focus and key priorities over the next year would be on improving conduct and restoring trust.
- As we approach AGM season, ASX has reminded entities that voting exclusion statements in notices of meeting may need to be updated to reflect amendments to Listing Rule 14.11. Under the amended Listing Rule, excluded persons and their associates are only precluded from voting in favour of a resolution. Excluded persons and their associates are able to vote against the resolution. ASX has also reminded entities that the definition of 'associate' has been expanded to apply to groups of entities under common control, regardless of whether the controller is an individual, body corporate or some other type of entity.
- ASX has also noted that while ASX has 5 business days to review draft notices of meeting that contain resolutions for Listing Rules purposes, additional time will be required to obtain waivers from Listing Rules. Listed entities should contact their Listings Compliance Adviser to seek advice on how long ASX needs to process a waiver request.
The appointment of former Treasurer Scott Morrison as Australia's 30th Prime Minister has resulted in delays to the FIRB approval process, with FIRB seeking extensions on a number of applications. Entities should allow extra time to navigate the approval process as the new Treasurer, Josh Frydenberg, establishes new procedures and delegations for approvals that are not dealt with personally by the Treasurer.
FIRB Guidance Note 47 on Tax Conditions has been updated, with additional information about the ATO's role in the application review process, the relevant considerations that apply to the process, as well as how tax conditions are applied.
- Deals to (green) light up the out-of-home advertising sector
The ACCC will not oppose two major deals in the out-of-home advertising space. Key to each decision was the finding that the acquirer and target of both proposed transactions largely operated in separate segments:
- JCDecaux SA's proposed acquisition of APN Outdoor Group Limited: The ACCC concluded that the parties were 'businesses that operate for the most part in complementary segments of out-of-home advertising'. Specifically, the ACCC found APN Outdoor 's prominent segment to be in large format billboards and airports, while JCDecaux was found to operate primarily in street furniture.
- oOh!media Limited's proposed acquisition of Adshel Street Furniture Pty Ltd: Similarly, the ACCC found that Adshel predominantly operated in street furniture, while oOh!media operates primarily in the large format billboard, airport and retail categories (and does not operate in the street furniture category).
- More green lights
- The ACCC will not oppose Energizer Holdings' proposed acquisition of Spectrum Brands' battery and portable lighting business. The ACCC found that the proposed acquisition was not likely to substantially lessen competition given that Spectrum enjoyed only limited market share and the market consists of alternative suppliers.
- The ACCC will not oppose the proposed acquisition of Fero Group by DSI Group, which both manufacture and supply ground support products and services in Australia's underground hard rock mining industry. Although the merged entity would hold a significant market share, the ACCC considered that remaining competitors would provide sufficient competitive constraint.
- The ACCC will not oppose the bid by the Transurban consortium for WestConnex following an undertaking given by Transurban to publish detailed toll data on a quarterly basis that will assist bidders to compete for future toll road concessions.
- And in other news…
- The ACCC will soon commence a public review into the proposed merger between TPG and Vodafone Hutchison Australia, and will also investigate the parties' joint venture arrangements concerning spectrum and potential network sharing.
- Following an application by the ACCC, the Federal Court on 13 August 2018 ordered Aurizon to continue operating its Queensland intermodal business until the ACCC’s cartel case against Pacific National and Aurizon is heard and determined on 19 November 2018.
Baraka Energy and Resources Limited received an application from GTT Global Opportunities Pty Ltd in relation to an alleged contravention of section 671B of the Corporations Act (which states that substantial holding information must be given to a company and the ASX) due to an undisclosed association between shareholders with a combined holding of 5.96% of Baraka's issued share capital. It was alleged that there were unacceptable circumstances due to a favourable heavily discounted placement to friendly shareholders and uncommercial and undisclosed related party transactions. The Panel declined to conduct proceedings as the applicant did not provide a sufficient body of material to justify the Panel making further enquiries.
The Panel also declined to conduct proceedings in respect of an application from Bullseye Mining Limited seeking a declaration of unacceptable circumstances allegedly resulting from two of its shareholders, who had separately requisitioned to call and arrange a general meeting of Bullseye to consider resolutions to remove other Bullseye directors, failing to disclose that they had a relevant interest in other shareholder's shares and that they were associates with a number of other Bullseye shareholders.
In addition, the Panel received an application from a group of shareholders of Tikforce Limited in relation to proposed resolutions including approval of the issue of shares and options in Tikforce. The notice of general meeting and explanatory memorandum did not identify who would receive the shares and only stated that the shares would be issued to holders of convertible notes. The applicants submitted that Tikforce failed to identify the identity of those persons might have control or potential control of Tikforce post-issue of the shares, thus contravening the intention behind section 602(b) of the Corporations Act which states that Chapter 6 is intended to ensure that the holders of the shares and directors of the company know the identity of any person who proposes to acquire a substantial interest in a company. The Panel ultimately declined to conduct proceedings as the ASX issued a letter to Tikforce which included directions in relation to the general meeting. In response to that letter, Tikforce withdrew all the listing rule resolutions from the general meeting and announced that it intended to issue a new notice of meeting which would include additional disclosure as requested by the ASX.
With the Labour Hire Licensing Act 2018 (Act) coming in to force on 26 June 2018, Victoria became the third State to introduce a scheme for regulating labour hire arrangements. To support that scheme, the Victorian Government recently released draft regulations for public consultation.
Significantly, the draft regulations narrow the scope of labour hire arrangements that are captured by the labour hire licensing scheme. Relevantly, businesses will not require labour hire licenses to supply of the following types of workers to other businesses:
- secondees, who are supplied to work for another entity on a temporary basis;
- individuals supplied within the same entity or group of entities that carry on business collectively as one recognisable business;
- managing or shareholding directors of businesses that have no more than two directors who are supplied to perform work for another entity; and
- certain public sector employees, students and individuals undertaking vocational placements.
However, under the draft regulations businesses will be required to hold a license where they supply workers to undertake commercial cleaning, horticulture, meat manufacturing, and meat and poultry processing activities.
The draft regulations also outline the proposed licence fees that will apply under the scheme. The highest fee proposed by the regulations will be approximately $7,687, which will be payable by businesses with an annual turnover of more than $10m.
- Further debate on proposed 4th edition of ASX Corporate Governance Principles: The ASX Corporate Governance Council has released a communique in response to robust debate and media coverage on the proposed changes to the Corporate Governance Principles and Recommendations. The communique has emphasised that the document being commented upon is a consultation draft and not a final or fixed position. The materials in the consultation draft on the concept of the ‘social licence to operate’ appear to be the major cause of concern for stakeholders. The Council states that it will listen carefully to the concerns that have been raised about the term ‘social licence to operate’ and consider how best to express and address this issue in the course of preparing the final version of the fourth edition.
- ASIC's allocations project – guidance from abroad: ASIC is examining the allocations process in both primary and secondary capital raising transactions. It is currently unclear where ASIC will land on its review and what, if any, guidance or other regulatory intervention it may provide/pursue once it concludes its review. However, ASIC has stated that it has also been in discussions with international regulators to understand their regulatory approach to allocations, and it is likely this will influence ASIC's final position on the issue.
Given this, it is useful to consider the approach on allocations that the UK Finanrkets in Financial Instruments Directive (MiFID II). These two offshore examples may provide some insight into where ASIC may eventually land once it concludes its allocations project. Further detail can be found in our Client Update.
- Vijay CugatiPartner, Sector Leader, Investment Firms & Investment Management,
Ph: +61 2 9230 4940
- Kate ToweyPartner, Sector Leader, Real Estate,
Ph: +61 2 9230 5053
- Chris BlanePartner,
Ph: +61 2 9230 4298
- Andrew WongMergers & Acquisitions Counsel,
Ph: +61 2 9230 4141
- Charles AshtonManaging Associate,
Ph: +61 2 9230 5631
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