Acquisitions of shares and businesses in Australia are regulated by:
Depending on the method of acquisition, several issues may need to be considered when acquiring shares or businesses in Australia.
Acquisitions of substantial interests in Australian companies are regulated by the takeover provisions of the Corporations Act. Subject to a few exceptions (including unlisted companies with 50 or fewer members), if a person wishes to acquire a ‘relevant interest’ in more than 20% of the issued share capital of a company, that person must make a takeover bid. The concept of ‘relevant interest’ covers a broad range of direct and indirect interests in securities and a person can reach the 20% threshold without becoming a registered holder of securities.
If a person acquires interests in more than 90% of the voting shares of a company under a takeover offer, the compulsory acquisition provisions may be used to acquire the balance, if certain criteria have been met. Compulsory acquisition provisions can be used in other circumstances where thresholds are met.
As an alternative to a takeover bid, it is common for Australian companies to merge by way of scheme of arrangement. These schemes are highly regulated including the requirement for shareholder and Court approvals.
Sometimes a change of control may be achieved through a reduction of capital. Reductions of capital are regulated under the Corporations Act. A reduction of capital requires shareholder approval and must be fair and reasonable for creditors.
Other restrictions that may apply to a particular transaction include:
The Corporations Act also regulates the circumstances in which a company may financially assist a person to acquire shares in itself.
A company can only do this if:
Trading in securities while in possession of information that is not generally available to the public and that, if it were available, would have a material effect on the price of the securities is prohibited by the Corporations Act under insider trading provisions.