Prohibition on certain acquisitions of relevant interests in voting shares

Offence title:

Prohibition on certain acquisitions of relevant interests in voting shares

Act:

606 Corporations Act

Offence:

(1)   A person must not acquire a relevant interest in issued voting shares of a company, if:

(a)   The company is:

                                           i.         Listed; or

                                         ii.         Unlisted, but with more than 50 members; and

(b)   The interest is acquired by the person, by a transaction in relation to securities entered into by or on behalf of the person; and

(c)    As a result of the transaction, that person’s or someone else’s voting power increases:

                                           i.         From less then 20% to greater than 20%; or

                                         ii.         From a starting point above 20% but below 90%.

(2)   A person must not acquire a legal or equitable interest in securities of a body corporate, if to do so would mean:

(a)   Another person acquires a relevant interest in issued voting shares in a company that is:

                                           i.         Listed; or

                                         ii.         Unlisted, but with more than 50 members; and

(b)   someone else’s voting power increases:

                                        iii.         From less then 20% to greater than 20%; or

                                        iv.         From a starting point above 20% but below 90%.

(3)   In determining the number of members, joint shareholders are counted as a single person.

(4)   A person must not

(a)   make, or cause an offer to be made, which, if accepted, would breach ss. (1) or (2); or

(b)   issue, or cause an invitation to be made, which would breach ss. (1) or (2), if an offer were made in response to the invitation and the offer were accepted.

(4A) A person commits an offence if they breach ss. (1), (2) or (4).

(4B) A person commits an offence of absolute liability if they breach ss. (1), (2) or (4).

Penalty:

(4A) 5 years imprisonment – fault based

(4B) 60 penalty units – absolute liability

Summary/Indictable/mixed:

(4A) Mixed

(4B) Summary

Jurisdiction:

(4A) Local, District or Supreme Court

(4B) Local Court

How committed:

(1)   A person seeking to take over a business, buys a controlling stake in the voting shares to impose his own will on the other members. He does so in a way that is not excepted by s. 611.

(2)   In similar circumstances above, the director causes another to embark on the clandestine share purchase, for the director’s benefit, unless excepted by s. 611.

(4)   The director makes an offer to another to, via a third party, which, if successful, would put the director in a controlling position in terms of the voting shares.

Important note:

Defence:

(1A) s. 611 sets out exceptions to this ss. (1).

(2A) s. 611 sets out exceptions to this ss. (2).

(5)   It is a defence to the prosecution of a person for contravening subsection (1), (2) or (4) if the person proves that they contravened the subsection:

(a)   because of inadvertence or mistake; or

(b)   because the person was not aware of a relevant fact or occurrence.

In determining whether the defence is available, disregard the person’s ignorance of, or a mistake on the person’s part concerning, a matter of law.

(6)   A person is taken for the purposes of subsection (1) or (2) to acquire a relevant interest in voting shares in a company if:

(a)   securities in which the person already had a relevant interest become voting shares in the company; or

(b)   there is an increase in the number of votes that may be cast on a poll attached to voting shares that the person already had a relevant interest in.

The acquisition occurs when the securities become voting shares or the number of votes increases.