The compulsory acquisition of shares is a right under the Corporations Act 2001 (Cth) (the Act).
It gives a shareholder who holds at least 90% of the shares in a company the ability to compulsorily acquire the remaining shares.
Consequently, the shareholder ends up with 100% of the shares. The compulsory acquisition of shares allows a shareholder to access the benefits and flexibility of fully owning a company. It also encourages company acquisitions and provides shareholders with the prospect of obtaining full ownership. This article outlines the different ways in which the compulsory acquisition of shares may occur and how each works.
General Compulsory AcquisitionSometimes, the takeover provisions under the Act may not cover or apply to someone with 90% of shares in a certain class. This may occur because the company may be too small or is not listed. In such circumstances, a general compulsory acquisition allows that person to compulsorily acquire the remaining shares in that class.A person is a 90% holder of shares in a particular class where the person holds at least 90% of:shares in that particular class; orvoting power and 90% of shares of the company.
The 90% may include issues that are either shares or convertible into shares. After becoming a 90% holder of shares, the person has six months to undertake a general compulsory acquisition of shares.
The Act outlines additional requirements for general compulsory acquisitions to ensure that minority shareholders receive protection.
- The requirements include that the person undertaking the compulsory acquisition must: offer a cash sum for the acquisition of shares unless:
- there are differences in accrued dividends of the shares;
- or there are differences in the amounts paid on the shares (the same amount must be paid for each security); and
- provide to the shareholders whose shares they will acquire an independent expert report that addresses:
- whether the cash to be paid is fair value;
- andany information relevant to whether they should object to the acquisition.
Additionally, if shareholders of 10% or more of the shares object to the acquisition, the person must obtain approval from the court before compulsorily acquiring the shares. There is also the expectation that they will pay for the court proceedings.
https://legalvision.com.au/compulsory-acquisition-of-shares/
