Respondent
...
TO Beneficial Ownership and Transparency Unit
Market Conduct and Digital Division
Treasury
Langton Cres
Parkes ACT 2600
By email: beneficialownership@treasury.gov.au
CONFIDENTIAL 16 DECEMBER 2024
Dear Sir / Madam
Proposed enhanced disclosure of ownership of listed entities: Consequences under Foreign
Acquisitions and Takeovers Regulations
This submission responds to the consultation paper released by Treasury on 14 November 2024, concerning
a proposed draft bill that proposes changes to the Corporations Act 2001 (Cth) (Corporations Act)
concerning disclosure of equity derivatives in respect of securities in listed entities, including changes to
the definition of “relevant interest” which impact the calculation of “substantial holdings” under Chapter
6C of the Corporations Act.
Australian entities are deemed to be foreign under the Foreign Acquisitions and Takeovers Act 1975
(FATA) if two or more persons have an aggregate substantial interest of 40% or more. The Regulations
provide an exception to this for listed entities that do not have a 20% or more holder and “substantial
holdings” as defined under the Corporations Act amount to less than 40% of the issued voting shares in the
entity – see Regulation 47 and the relevant definitions in the FATA. The effect being that the listed entity
does not count under 5% foreign holders in the assessment of whether it is a foreign person by virtue of
the 40% aggregate test.
If the proposed amendments are made there is a clear risk that listed companies and trusts that are not
currently foreign under FATA will become foreign persons simply because foreign parties hold cash-settled
equity derivatives that give them no control over the voting or disposal of the underlying shares but are
included in substantial holdings. As presently drafted, the consultation draft could also have this
consequence if foreign persons invest in index derivatives or derivatives over baskets of stocks which
clearly give the investor an even more remote economic interest in the underlying securities.
An Australian company or trust that is deemed to be foreign is then obliged to comply with FATA and FIRB
requirements for future asset acquisitions and registration of interests adding further regulatory burden.
We do not believe that this consequence was considered or intended by the proposed reforms.
We submit that this is yet a further reason (in addition to those set out in other submissions) for the
proposed amendments to be limited to disclosure of derivative interests without changing the definition of
“relevant interest” and thus the identification of “substantial holdings”. Alternatively, interests arising
under equity derivatives should be disregarded for the purposes of FATA.
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Yours sincerely
Tim Bednall | Partner
King & Wood Mallesons
T +61 2 9296 2922
E tim.bednall@au.kwm.com
Partner profile
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