Substantial holding notice

A person who obtains voting power in 5% or more of an ASX-listed company is required to publicly disclose that fact within 2 business days via the filing of a substantial holding notice. A person’s voting power consists of their own ‘relevant interest’ in shares plus the relevant interests of their associates. A further notice needs to be filed within 2 business days after each subsequent voting power change of 1 percentage point or more, and after the person ceases to have voting power of 5% or more.

The notice must attach all documents which contributed to the voting power the person obtained, or provide a written description of arrangements which are not in writing.

Blocking of compulsory acquisition

A person who has a greater than 10% shareholding interest in an ASX-listed company will be able to prevent a majority shareholder from moving to 100% ownership through compulsory acquisition, because the compulsory acquisition threshold is set at 90%.

Takeovers threshold

A person cannot acquire a ‘relevant interest’ in a company’s shares if it would result in that person’s or someone else’s ‘voting power’ in the company increasing from 20% or below to more than 20%, or increasing from a starting point that is above 20% and below 90%, unless the acquisition occurs via a specified exception (such as a takeover bid, scheme of arrangement or with target shareholder approval).

Blocking of scheme of arrangement

A person who owns or has voting control over 25% or more of a company’s shares can unilaterally block the approval of a takeover conducted by a scheme of arrangement, because one of the scheme voting thresholds is approval by at least 75% of the votes cast on the scheme resolution. (In practice, a person can normally block a scheme with less than a 25% interest given voter turnout at scheme meetings is often substantially lower than 100%.)

Blocking of special resolutions

A person who owns or has voting control over 25% or more of a company’s shares can unilaterally block the approval of a special resolution (see below regarding ‘special resolution’), because it requires approval by at least 75% of the votes cast on the resolution. (In practice, a person can normally block a special resolution with less than a 25% interest given voter turnout at company meetings is often substantially lower than 100%.)

Passage of ordinary resolutions

A person who owns or has voting control over more than 50% of a company’s shares can unilaterally pass an ordinary resolution, because it requires approval by a majority of votes cast. Importantly, directors can be appointed and removed by shareholders by ordinary resolution. (In practice, a person can normally pass an ordinary resolution on their own with less than a 50% interest given voter turnout at company meetings is often substantially lower than 100%.)

(Note: where there remain minority shareholders in a company, the company’s directors cannot favour the controlling shareholder over the others because the directors have a duty to consider the interests of the company as a whole. Further, related party dealings that require shareholder approval will likely need to be approved by the minority shareholders alone, with the controlling shareholder(s) excluded from voting.)

Passage of special resolutions

A person who owns or has voting control over 75% or more of a company’s shares can unilaterally pass a special resolution, because it requires approval by at least 75% of the votes cast. Under the Corporations Act, certain matters need to be passed by a special resolution of shareholders, eg amendments to the constitution, change of company name, change of company type, selective reduction of capital, selective buy-back of shares and winding-up. (In practice, a person can normally pass a special resolution on their own with less than a 75% interest given voter turnout at company meetings is often substantially lower than 100%.)

(Note: where there remain minority shareholders in a company, the company’s directors cannot favour the controlling shareholder over the others because the directors have a duty to consider the interests of the company as a whole. Further, related party dealings that require shareholder approval will likely need to be approved by the minority shareholders alone, with the controlling shareholder(s) excluded from voting.)

Entitlement to compulsory acquisition

Generally speaking, where a person owns 90% or more of a company’s shares they can compulsorily acquire the remainder.