MinterEllison has made submissions on ASIC's proposal to effectively prohibit the offer of scrip in proprietary companies, or public companies with a custodian holding arrangement, as consideration in a scheme or takeover.

Under ASIC's proposal, ASIC would prohibit:

  • the offer of scrip in proprietary companies as part of a control transaction; and
  • the use of a custodian holding arrangement to avoid exceeding the 50 shareholder limit.

ASIC requested submissions in response to ASIC's consultation paper on its proposal. Submissions were due by 17 July 2019.

Key points

  • MinterEllison's position is that all shareholders should have a choice as to whether to accept proprietary company scrip consideration as part of a control transaction, provided the risks are clearly disclosed.
  • MinterEllison considers that ASIC's proposal is more appropriately dealt with by Parliament making appropriate amendments to the Corporations Act, if Parliament agrees with ASIC that there is an issue.
  • Outside of the consultation, the market can also respond by employing alternative stub equity structures that can achieve the commercial aims of bidders without using an Australian public company. Alternative stub equity structures that are not impacted by ASIC's proposed changes include the use of offshore companies as the holding company.