29 May 2009

Minister Releases Options Paper On Unsolicited Off-Market Share Offers

Senator Nick Sherry, Minister for Superannuation and Corporate Law, has today released for public consultation a range of reform options to significantly reshape the regulation of undervalued, often predatory, unsolicited off-market share offers made to shareholders of publicly listed companies and the related issue of access to share registers.

"I believe that more must be done to protect less financially literate people from making decisions they may later regret as a result of undervalued, often predatory unsolicited off-market share offers. This is particularly important as people also feel the financial effects of the global recession."

"The reform options I am releasing today reflect serious concerns by the Rudd Government and the community about unsolicited share offers – and I know this is a view shared by many industry groups, listed companies and consumer advocates."

"The Parliamentary Joint Committee on Corporations and Financial Services report Better Shareholders - Better Company released last year and a recent Federal Court decision have also highlighted the need for action on both unsolicited offers and access to share registers more generally," said Minister Sherry.

The reform options for addressing issues on share register access include:

  • implementing a proper purpose test for access to a register;
  • replacing the current "marginal cost" fee arrangement with either a reasonable cost, full cost, market cost, negotiated cost, a prescribed fee based on the takeovers access prescribed fee, or a combination of these; and
  • modernising the rules around the format of share registers.

The reform options for boosting consumer protections include:

  • introducing a cooling off period of between 1-3 months for the accepting shareholder to withdraw from the contract or acceptance document before it becomes binding;
  • including a warning statement in offer documents like the health warnings on cigarettes;
  • put in place a pre-emptive right to be given to companies to intervene in sales of their shares that do not reflect the market value of the shares; and
  • establish a "do not contact" register.

"I expect the outcome of this consultation process will result in a much improved regulatory and consumer protection regime governing these predatory offers."

"That said, access to share registers for legitimate purposes must be maintained – so this is about striking the right balance."

"I also welcome the strong support of Australian listed companies for significant reform in the area of unsolicited share offers. The Government is also aware that there must be a balance between maintaining investor protection and ensuring there are no excessive or unnecessary regulatory burdens on business," said Minister Sherry.

Today, Minister Sherry also announced action to better protect consumers who are offered instalment payment arrangements as part of an unsolicited offer.

The options paper Access to Share Registers and the Regulation of Unsolicited Off Market Offers is available at www.treasury.gov.au. The consultation period ends on 24 July, 2009.