In brief 

This article outlines how shareholders can access the benefits of full ownership of a company by compulsorily acquiring minority shareholdings.


A person with a full beneficial interest in 90% of a class of securities in a company can compulsorily acquire the remaining securities in that class, in the absence of a takeover bid, under Part 6A.2 of the Corporations Act 2001 (Cth) (the Act).

Other ways to achieve full ownership in a company is to eliminate minority shareholders through internal reconstruction by a scheme of arrangement under section 413 of the Act, or by capital reduction in a company achieved by cancelling shareholdings of the minority.

A primary benefit of using this compulsory acquisition regime under Part 6A.2 is that it provides a relatively quick and inexpensive way to eliminate minority shareholders when compared with the possible alternatives. This article examines the process involved in compulsorily acquiring minority shareholdings under section 664A of the Act. 

Benefits of full ownership

Important benefits can flow from total ownership of a company generally, including substantial savings in administrative and reporting costs and the ability for directors of a wholly owned subsidiary to act in the best interests of its holding company, if provided for in the subsidiary's constitution.

One of the most significant benefits of full ownership is the ability to group tax losses, where a wholly owned subsidiary can offset deductions against income of the parent company or another wholly owned subsidiary in the group, resulting in substantial tax savings.

Other benefits include eliminating possible conflicts of interest between partially owned companies in a group and protecting confidentiality of business plans and developments.


Section 664A of the Corporations Act provides that a person may apply to compulsorily acquire all securities in a class of securities if the following conditions are met:  

  1. the person is a '90% holder' of securities within a particular class; and 
  2. the person lodges a compulsory acquisition notice under section 664(2)(a) within six months after that person becomes a 90% holder in relation to that class of securities.

A person can become a ‘90% holder’ either where:  

  • the person (together with any related bodies corporate) holds full beneficial interests in at least 90% of the securities (by number) in that class; or 
  • where the person’s voting power in the company is at least 90% and the person holds (together with any related bodies corporate) full beneficial interests in at least 90% by value of all the securities of the company on issue.

What constitutes a full beneficial interest is somewhat unclear, as it is not defined in the Act. However, ASIC has stated that a person who owns securities in a commercial sense, such that they have both the benefit and risk attached to those securities, should not be precluded from enjoying the benefits of full ownership of the company. Therefore a person may meet the 90% full beneficial interest test where the holder has granted a mortgage, charge or other security interest over their holding, or where the holding is scheme property of a registered managed investment scheme.

A 90% holder has a period of 6 months from the time the person first becomes a 90% holder to exercise its compulsory acquisition power. This six-month limitation is in place to protect minority shareholders from uncertainty, whilst providing 90% holders with a reasonable amount of time to act. The defined period does not restart if a person’s holding falls below 90%. This is to prevent 90% holders from selling down their holdings and repurchasing when ready to compulsorily acquire the securities.

Section 664B states that a 90% holder can only offer cash to minority shareholders, and the same offer must be made to each remaining shareholder. Under section 664D, no extra benefit can be offered to particular shareholders to induce them to accept the offer. This is to avoid greenmailing by, or selective discrimination against, minority shareholders.


To compulsorily acquire securities, a 90% holder must: 

  1. Request ASIC in writing to nominate a person to prepare an expert's report. Within 14 days after receiving a request, ASIC must nominate an appropriate person to prepare the report or nominate up to 5 people for the 90% holder to choose from to prepare the report.
  2. Prepare a notice in the prescribed form that: 
    1. sets out the cash sum the 90% holder proposes to pay for the remaining securities;
    2. specifies the period of at least one month during which a     shareholder may return a form objecting to the acquisition;
    3. informs the minority shareholders of their right to object to the acquisitions; and
    4. sets out other information set out in section 664(c)(i).  
  3. Engage an expert nominated by ASIC to prepare a report which states whether, in the expert's opinion, the terms proposed in the notice give a fair value for minority shareholders' securities.
  4. Lodge the prescribed form and the expert’s report with ASIC (and the ASX if the company is listed), and on the same day or next business day provide minority shareholders and the company with a copy of the notice, expert's report and an objection form. Importantly, the notice cannot be withdrawn.

If holders of 10% or more of the remaining shares object to the compulsory acquisition, the 90% holder can either elect not proceed with the acquisition, or apply to the court for approval of the acquisition, despite the objections.

If the shareholders object and the court does not approve the acquisition, the 90% holder will have lost the right to use the compulsory acquisition power in the future. For this reason, we recommend that companies carefully consider the timing of becoming a 90% holder and implications of this course of action.