In this edition of Gilbert + Tobin’s Corporate Advice Update, we focus on key legal developments from the past month that are particularly relevant to corporate lawyers.
ASX consults on listing rules updates that will impact IPOs and secondary raises
ASX issued a consultation document seeking comments on a series of proposed listing rule changes in December 2022. Submissions must be submitted by May 27, 2022.
If implemented in their proposed form, the changes:
- impact certain ASX admission requirements for companies undertaking an IPO; and
- limit the allocation policies that ASX-listed companies can adopt when undertaking share purchase plans, rights issues and institutional placements, as well as introduce additional disclosure requirements regarding the allotment of shares in these offers.
The proposed changes will go through a period of consultation with the market before being finalized and implemented. We expect the ASX’s proposed encroachment on board discretion over allocations – particularly rights offerings – to be discussed.
ASX consults on enhancements to ASX investment product offering
A recent ASX consultation paper consults on possible improvements to the ASX investment product offering with a view to identifying improvements and alignment with current regulations. Currently, ASX’s investment product offering consists of the following three sets of products governed by three separate regulations:
- listed investment companies, listed investment funds, real estate investment trusts and infrastructure funds listed and listed on the ASX under the ASX Listing Rules;
- exchange-traded funds, managed funds and structured products listed on the ASX in accordance with the AQUA Product Rules in Schedule 10A of the ASX Operating Rules; and
- Warrants listed on the ASX under the Warrant Rules in Schedule 10 of the ASX Operating Rules.
The aim of the ASX is to ensure that there is a clear and consistent framework of rules that protects the interests of investors, while providing issuers with the flexibility to innovate and bring new products to market, and without imposing costs or undue compliance charges.
The ASX invites comments on a range of relevant policy questions and submissions must be submitted by June 24, 2022.
Phase 2 of the consultation, likely to take place in early 2023, will then seek comments on specific proposed changes to the ASX rules, procedures and guidelines for investment products.
ASX anticipates that, subject to regulatory approvals, the amendments will be published in mid to late 2023 and will become effective no earlier than January 1, 2024.
The employee shareholding reform will start on October 1, 2022
As part of the 2022/23 budget announcements, a series of amendments to the Companies Act 2001 (Cth) will come into force on 1 October 2022. They aim to extend the availability of employee share plans and allow more employees to participate in the growth. and business success. The reforms will be of particular interest to start-ups and other “cash-poor” businesses looking to be more competitive in recruiting and retaining staff.
These reforms follow the abolition of the employee share ownership plan tax deferred on termination effective July 1, 2022.
The reforms are set out in Annex 4 of the Treasury (Cost of Living Support and Other Measures) Amendment Act 2022.
Where an employee share plan falls within the exemption, the standard regulatory requirements under the Companies Act for companies offering shares and financial products to retail customers will not apply so that:
- a system can operate without AFSL and general financial advice can be provided in relation to the system without AFSL;
- the restrictions on advertising and peddling of securities and financial products and the design and distribution requirements under the Companies Act do not apply to the Scheme;
- where the program does not require payment to participate, no disclosure requirements will apply and where a program requires payment, a simplified set of disclosure requirements will apply.
The relief also applies to any contribution plan or loan linked to the plan.
The main relief criteria are:
- equity issued, sold or transferred to participants under the scheme falls within certain categories of eligible equity (e.g. shares or options);
- plan participants are directors, employees or service providers;
- if the program requires payment to participate:
- certain disclosure documents are provided with the offer;
- if the scheme has a contributory scheme, loan or trust, the contributory scheme, loan or trust meets certain requirements;
- the total number of products issued under the program in the previous three years does not exceed a specified percentage of the issued capital of the legal entity (5% for listed legal entities and 20% for an unlisted legal entity), except provision to the contrary in the regulations or the corporate constitution of the company); and
- for an unlisted legal entity, there is a monetary ceiling of $30,000 per year (compared to the previous ceiling of $5,000) (which can be accumulated for unexercised options over a period of five years, up to a maximum of $150,000), plus 70% of dividends and 70% cash bonuses.
TerraCom Ltd v ASIC – important legal privilege reminders on how to reduce risk of waiver
A recent decision of the Federal Court of Australia opportunely recalls, in the context of reports prepared by third-party experts, the importance of:
- when making a privileged communication, ensure that evidence will be available to support a claim of privilege over the communication, should it become necessary to make such a claim in the future. In particular, when engaging an expert to prepare an internal investigation report, ensure that any mandate or engagement letter clearly indicates the preferred purpose of the expert’s recruitment;
- once a privileged report or communication has been made, ensure that appropriate safeguards are in place to prevent conduct that could amount to a waiver of privilege over the communication; and
- as the case shows, depending on the nature and structure of the privileged expert report, disclosure of part of the report (even indirectly) may result in the lifting of privilege on the entire report.
Australia welcomes new guidance on improving climate-related financial risk management by banks and supervisors
The Basel Committee on Banking Supervision recently released its 2022 Draft Principles. G+T Partner Ilona Millar, Special Counsel Louise McCoach and Paralegal Shanae Streeter outline recent developments for APRA-related entities in climate-related financial risk, comparing the Basel Committee’s draft principles with publications from other regulators and what these developments mean for Australian banks.
Domination in Australia: 2022
G+T Partner Elizabeth Avery and Special Counsel Liana Witt contributed to Lexology/Getting The Deal Through – Dominance 2022 by writing the Australia chapter.
This quick reference guide includes Australia’s general legal framework and industry rules, the definition of collective dominance and the relevance of dominant buyers; abuse of dominance and related defenses; specific forms of abuse, enforcement, sanctions, remedies and appeals; and current trends.
Read more: Domination in Australia: 2022