Ann: Litigation Proceedings Commenced by Sandfire Resources, page-87

Thanks @retrac

Datt capital deserves the credit as my comment was only possible due to Datt’s exceptional analysis.

On further thinking, however, I’ve got a few more points.

1/ Can 10.11.3 waiver even be received without ADT (investee) co-operation?

I’m not entirely sure whether it is SFR or ADT that needs to make the application for waiver from 10.11.3. So far, we all assumed it is SFR, but is that the case?

Take a close look at 2.11 of guidance note 25
https://www.asx.com.au/documents/rules/gn25_issues_of_equity_securities.pdf
Everywhere it talks about an entity (in our case ADT) and the strategic security holder (in our case SFR if at all, there is still a strategic relationship)

Refer last para of 2.11 of guidance note 25 which is also in red block by Datt
https://www.datt.com.au/blog/adriatic-metals-and-sandfire-resources-a-complex-relationship
https://www.asx.com.au/documents/rules/gn25_issues_of_equity_securities.pdf

It mentions that entities (ADT?) that had the benefit of 6.18 waiver should approach ASX about concurrent waiver of 10.11.3 to allows issue of securities to strategic security holder (SFR?)

As I mentioned yesterday, in point 4 (MMI-Greenstone case), I got the impression that case might not even go through unless the investee company (in our case ADT) co-operates because the waiver has to not cause harm to ADT.
https://hotcopper.com.au/threads/an...re-resources.5528288/page-79?post_id=46251746
http://www.aspecthuntley.com.au/asxdata/20200417/pdf/02225959.pdf
In that case too, the 10.11.3 waiver has been granted to the investee company and not the strategic holder.

Also refer original 6.18 waiver dated Aug 30, 2018 linked by Datt where it is ADT who has received the waiver and not SFR.

So, this could be a further positive for ADT as IMO, ASX might have not even be entertaining a possibility that strategic holder (in this case SFR) can challenge the investee company (in this case ADT) as one of the central themes of anti dilution right seems to be no harm to minority holders of ADT

This is a point to consider subject to interpretation and I’m sure ADT will get more appropriate legal guidance.

2/ Strategic relationship applicability

As @retrac pointed out in yesterday’s excellent comment, there are several grounds for claiming that strategic relationship does not exist anymore. Most shareholders would agree that there seem to be no benefits from very long time from this so called relationship

https://hotcopper.com.au/threads/an...re-resources.5528288/page-80?post_id=46251806

This is very important because it is one of the most central themes of ASX waivers under 6.18 and 10.11.3 that a strategic relationship exists. So ADT in coming months must once and for all seek legal guidance on whether any strategic relationship can claim to exist, or whether it has long ceased.

3/ Applicability of listing rule 6.18 again after 6 months

I think right now 10.11.3 clearly applies to SFR because of their nominee director who was there till very recently (also refer DAtt's question on this matter).

I’m however not sure if this same issue can come about again after 6 months, as SFR could claim that 10.11.3 no longer applies to them (in Jan 2021 for eg.) since they don’t have a director (who has now resigned).

Here is relevant stuff -
Waivers for anti-dilution rights

“Under the current version of LR 6.18, entities must not grant options over a percentage of their capital. ASX has in the past granted waivers from this to facilitate strategic investors being given anti-dilution rights.[59]

From 1 December 2019, issues of equity securities to 10% substantial holders who have nominated a director to the board in accordance with an agreement with the entity will require securityholder approval under LR 10.11.[60] This will capture any anti-dilution rights proposed to be given to those investors.

Noting this, ASX will no longer issue LR 6.18 waivers to strategic investors of that type. ASX encourages any entities that currently have a waiver of this type to engage with them regarding waiving the new LR 10.11.3 subject to certain criteria being met.[61]” – relevant extract

https://www.kwm.com/en/au/knowledge...rules-reforms-summary-of-key-changes-20191106

I was trying to find ASX waivers of 6.18 after Dec 1 2019 and could not find any.

I again hope ADT seeks legal guidance on this matter as to whether ASX is not giving 6.18 waivers in all cases or only those cases where the strategic holder has a nominee director. As mentioned, this issue is not relevant now (as 10.11.3 applies) but might be relevant 6 months later, as 10.11.3 talks about 6 months (Again it is not clear if 6 months applies to only 10% holding or directorship).

4/ Anti dilution – use it or lose it

Again refer 2.11 of guidance note 25 fine print no. 43 at bottom
https://www.asx.com.au/documents/rules/gn25_issues_of_equity_securities.pdf

When analysing whether strategic holder (in this case SFR) has maintained it holding, in ASX’s view, these anti dilution rights should operate on a “use it or lose it” basis.

In our case, SFR has used their rights for the 2 capital raises, but IMO, ASX’s language could also be interpreted that if at all any other right exists, it should be used and exercised immediately. I got the impression that ASX might not encourage suddenly waking up after long and claiming that some rights existed.

5/ Conclusions

Just some thoughts and not legal or investing advice. Please DYOR as it could definitely be subject to different legal interpretations, and especially since 10.11.3 is a new clause since Dec 2019.

Pretty difficult to form exact conclusions as IMO ADT should be seeking proper legal guidance on all these issues, which they are of course doing now.

However, since one of the main themes is no harm to the entity (ADT) and its minority shareholders, ideally ADT could be having a strong case. Also the fact that SFR could have topped up at several points along the way including March 2020 where price fell below 80c.