The Corporations and Securities Panel advises that it will generally require a bidder's statement for a scrip bid under new Chapter 6 of the Corporations Law to contain the type of information as would be required in a prospectus issued by the bidder for the securities offered as consideration. This is both the intention of Parliament and a reasonable requirement for offerees to make of offerors.
In accordance with this policy, it is likely that the Panel will generally declare circumstances unacceptable if a bidder under a scrip bid, in reliance on a reading of section 636 which goes against the policy of the provision, withholds information which it would have to provide in a prospectus. In consequence, the Panel will also likely order the bidder to obtain and provide any such information which is available to it and its related bodies.
The Panel developed this policy after practitioners drew its attention to new section 636(1)(g) of the Corporations Law, which requires a bidder's statement for a scrip bid to contain type of information specified in sections 710 to 713 ('prospectus information') about the securities offered as consideration, if the bidder is, or controls, the issuer of that scrip.
Often, the issuer of the scrip does not make the bid itself, but causes a subsidiary to make the bid. On one view, the words of section 636(1)(g) do not apply to this situation, because the issuer controls the bidder, not the other way about. An alternative view is that the section will often apply, because the issuer will be a bidder because it is a person who causes or authorises the making of the offers under the bid (see sections 9 and 52).
The policy of section 636 can be seen from the note to section 708(18) and from the relevant Explanatory Memorandum, which says that 'a bidder's statement for a bid offering securities as consideration must contain information for a prospectus offering those securities'. That policy is that prospectus information should be provided whenever scrip is offered as consideration for a bid, and the bidder and the issuer of the scrip are under the same ultimate control.
The same result flows from the more general policy of section 602(a), that takeovers should take place in an efficient, informed and competitive market, and (b)(iii), that shareholders should be given enough information to assess the merits of a proposal under which a person would acquire a substantial interest in the company. To make an informed decision whether to accept a scrip offer, offerees need prospectus information about the bidder's scrip.
The Panel is considering whether to make a rule under section 658C of the Corporations Law in relation to this issue. The rule would supplement section 636 to ensure that the intentions expressed in the explanatory memorandum, and the general policy of section 602 are achieved. The rule would require that whenever scrip is offered as consideration for a bid, and the bidder and the issuer of the scrip are under the same ultimate control, the bidder's statement must contain the type of information specified in sections 710 to 713.
The Panel invites comments as to whether any such rule is now necessary or appropriate. A draft rule would be issued for comment, before any rule was made. The Panel also invites comment as to whether it would be appropriate to deter such inappropriate conduct by a rule or by inclusion in a Panel policy statement on unacceptable circumstances.
The Panel notes the Information Release published by the Australian Securities and Investments Commission on 7 March 2000. The Panel has consulted with ASIC and the Department of Treasury in developing this policy.
Submissions or comments on this matter should be sent to
The Executive Corporations and Securities Panel
GPO Box 5179AA
Melbourne, VIC, 3001
or emailed to : firstname.lastname@example.org
The closing date for submissions is 31 March, 2000.
For further information contact:
Corporations and Securities Panel
Tel: (03) 9280 3299