ASIC’s latest regulatory guidance update set out for investors wanting to take collection active against the companies they invest in has become clearer and easier after some tweaks were made following consultation with industry.
Collective action in this context involves investors in a company joining forces to make changes or actively discuss problems. The action may include talks, meetings, voting, and involve the company board.
Investor engagement is an important element in running a company, particularly as size becomes a factor, with investor influence actually increasing the value of companies in several ways without having to go against the underlying principles of a takeover and substantial holdings provisions.
Submissions were made by at least seven organisations, including AustralianSuper, the Australian Council of Superannuation Investors, and the Law Council of Australia.
Guide 128 (Collective action by investors) has been formulated after a consultative process undertaken in February 2015, however is still in draft format.
The guidance includes:
- examples of where certain types of conduct will trigger the takeover and substantial holdings provisions;
- ASIC’s approach to enforcing the provisions as it refers to collective action by investors – is the behaviour control-seeking or promoting good corporate governance?; and
- an overview of legal and regulatory issues that may arise in the process of investor action or engagement.
Changes in this policy update include a discontinuation of a class order relief that allowed facilitated voting agreements between institutional investors, with the removal due to the general absence of this form of engagement of entities and institutional investors.