ASIC’s latest Corporate Finance Update (Issue 22) highlights several important regulatory developments impacting corporate governance and disclosure practices. This article explores ASIC’s new guidance on technical specialist appointments, notices of meeting for buy-back approvals, disclosure obligations for Offer Information Statements (OIS), virtual meeting expectations, and sustainability reporting.
Expectations for technical specialist appointments
ASIC recently intervened in a transaction after determining that a technical specialist engaged by an independent expert lacked the necessary competence and recent industry experience to value mining assets. ASIC’s concerns included deviations from industry standards and insufficient disclosure of the underlying assumptions. As a result, the independent expert replaced the technical specialist.
Although the primary responsibility lies with the independent expert, entities should ensure that any appointed experts and their technical specialists are appropriately qualified. ASIC has reiterated that independent experts serve a critical gatekeeping function and must rigorously assess the work of specialists relied upon to ensure investors are not misled.
Notices of meeting for buy-back approvals
ASIC has emphasised the need for clear and comprehensive disclosure in notices of meeting where a buy-back may materially affect the control of a company, particularly where a shareholder’s voting power could significantly increase. Inadequate disclosure of control implications may result in ASIC withholding relief, applying to the Takeovers Panel for a declaration of unacceptable circumstances, or taking other regulatory action.
When assessing a buy-back, ASIC will consider:
- the likely effect on control;
- whether shareholders have an equal opportunity to participate in the benefits; and
- whether the process and disclosure would have substantially satisfied the takeover requirements under Chapter 6 of the Corporations Act 2001 (Cth) (Corporations Act).
Where control implications are more significant, such as a shareholder’s voting power increasing from 40% to 60%, ASIC expects a higher standard of disclosure.
Entities should ensure that notices of meeting clearly outline potential changes in control, identify shareholders likely to benefit, and disclose those shareholders’ intentions regarding the future of the company. This information is considered material for enabling informed shareholder decision-making.
Disclosure requirements for Offer Information Statements
ASIC has reminded issuers using an OIS to strictly comply with the content requirements in section 715 of the Corporations Act. This includes ensuring that the document is accurately dated, properly signed, contains the prescribed financial and sustainability disclosures, and adheres to the $10 million fundraising cap. ASIC has warned that failure to meet these requirements may result in a stop order being issued.
Expectations around virtual meetings
With the increasing prevalence of virtual meetings, ASIC has clarified its expectations to ensure that shareholders have equivalent opportunities to participate as they would at in-person meetings. The updated guidance addresses:
- whether a phone line option is required;
- the limitations of webcast-only formats (i.e. where shareholders can view but not actively participate in meetings); and
- how to notify ASIC when amending a constitution to allow virtual meetings.
Entities should review their virtual meeting practices to ensure they align with ASIC’s expectations. Failure to comply may result in regulatory action, including surveillance and formal investigations.
Guidance on sustainability reporting requirements
ASIC has released Regulatory Guide 280, providing detailed guidance on the new sustainability reporting requirements under Chapter 2M of the Corporations Act. The guide emphasises the need for clear, credible and meaningful climate-related disclosures that align with sustainability reporting standards.
Entities are encouraged to review the guidance and begin preparing for the implementation of these reporting requirements.
This article was written by David Naoum, Partner and Lachlan Pearce, Solicitor.
