Australia Treasury Shares Guide IBA Corporate and M&A Law Committee 2014

Transcription

1 Australia Treasury Shares Guide IBA Corporate and M&A Law Committee 2014 Contact John Williamson-Noble Tim Gordon Gilbert + Tobin Tel: Fax:

2 Contents Page INTRODUCTION 2 GENERAL OVERVIEW 2 TREASURY SHARES 4 ACQUISITION OF TREASURY SHARES 4 UTILISATION OF TREASURY SHARES 5 SALE OF TREASURY SHARES 5 TREASURY SHARES AND TAKEOVER LAW 6 Page 1

3 INTRODUCTION This guide intends to provide an overview of the Australian law on the acquisition and sale of treasury shares of Australian companies. We intend to provide a general overview on treasury shares under Australian law, from their acquisition to their sale including the existing restrictions on this matter. It is to be noted that the information in this guide constitutes a general overview and as a consequence professional legal advice should be requested by anyone involved in or considering a buy-back program of shares. GENERAL OVERVIEW Is the buy-back of shares permitted in your jurisdiction? General Yes. In Australia a company may purchase its own shares back from its members. Share buybacks operate as an exception to the general rules on capital maintenance that prevent a company from purchasing its own shares. When a buy-back can occur and the procedures that must be complied with are set out in Part 2J of the Corporations Act 2001 (Cth) (the Corporations Act ). A company may only buy-back its shares under the Corporations Act if: the buy-back does not materially prejudice the Company s ability to pay its creditors; and it follows the procedures laid down by the Corporations Act. The Corporations Act requires shareholder approval for a selective buy-back. There are different types of permitted buy-backs. They include employee share scheme buybacks, equal access schemes, minimum holdings, on market buy-backs and selective buybacks. Part 2J.2 of the Corporations Act regulates share buy-backs and prescribes the procedure which must be followed. Each type of buy-back will involve the following: a directors meeting to authorise the buy-back; a buy-back agreement; and notices to the Australian Securities & Investments Commission (ASIC). Page 2

4 The procedure to be used is dependent on the type of buy-back being considered as set out below: Procedures minimum holding employee share scheme on-market equal access scheme within over within over within over ordinary resolution yes -- yes -- yes -- special/unanimous resolution yes lodge offer documents yes yes yes with ASIC 14 days notice -- yes yes yes yes yes yes yes disclose relevant information yes yes yes when offer made cancel shares yes yes yes yes yes yes yes yes notify cancellation to ASIC yes yes yes yes yes yes yes yes selective buyback Shareholder approval Shareholder approval is required when the proposed share buy-back is either a selective buyback or a buyback that both exceeds the and is an equal access scheme, an onmarket buy-back, or an employee share scheme. If the company is listed, additional notices to the ASX are required. The The is used to determine, for some types of buy-backs, whether shareholder approval is required. If the proposed buy-back would result in more than ten per cent of the voting shares being purchased by the company in the preceding 12 months, then the company will have exceeded the. Buy-back agreement suspends rights attached to shares Once a company has entered into a buy-back agreement, all rights attaching to the shares, subject to the buy-back agreement, are suspended. Because of this, a company should be careful about who is legally making the offer and when the acceptance takes place. The Information Statement Where shareholder approval is required, the notice of meeting to shareholders must be accompanied by an Information Statement. The statement must include all information known to the company that is material to the decision how to vote on the resolution. If the company has already disclosed some information of relevance to shareholders, it does not need to include that information again if it would be unreasonable to require a company to do so. Page 3

5 Effect of Buy-back Once the buy-back is completed the shares cease to exist. Potential liability Some of the key sources of liability for directors in relation to a buy-back are: Failure to follow buy-back procedures if a company fails to follow the buy-back procedures set out in Div 2 of Pt 2J.1, the company contravenes section 259A (selfacquisition) and the directors will be civilly (and possibly criminally) liable. Good faith directors must comply with the fiduciary duty to act in good faith in the best interests of the company, and for a proper purpose the directors will be in breach of this duty if they are not satisfied that the buy-back: is in the best interests of the company; and will not prejudice the company s creditors. Insolvency - directors may be liable for insolvent trading if the company is insolvent at any time during the six months prior to buying back the shares, or becomes insolvent as a result of the buy-back (or a reduction of its share capital as part of the buy-back transaction). TREASURY SHARES What are the characteristics (maximum holdings, voting rights and other rights) of treasury shares? Australia does not have a concept of treasury shares, par value for shares or of authorised capital. An Australian company may issue as many shares as its board considers appropriate and may buy-back shares in accordance with the procedures identified above. For this reason the remaining questions in this questionnaire are not relevant. What are the main reasons to acquire treasury shares? ACQUISITION OF TREASURY SHARES How can a company acquire treasury shares? Are there any restrictions in acquiring treasury shares? (e.g, purpose-wise; accountingwise?) Which authorisation is needed? Page 4

6 What are the publicity requirements in the event of acquisition of treasury shares? Put and call options do they count as acquisition of own shares? UTILISATION OF TREASURY SHARES Are there any statutory obligations to resell or redeem treasury shares? How are treasury shares redeemed? SALE OF TREASURY SHARES How can the company sell treasury shares? Are there any restrictions for selling treasury shares? Which authorisation is needed for selling treasury shares? Can treasury shares be sold other than via the stock exchange or by public tender offer? What are the publicity requirements in the event of a sale of treasury shares? What legal restrictions are there in order to avoid market abuse? Page 5

7 TREASURY SHARES AND TAKEOVER LAW What are the general implications of treasury shares under the applicable takeover law regime? Treasury shares as defence measures? Page 6