Very Interesting Developments......
2. The policy underpinning Listing Rule 10.1The policy that underpins Listing Rule 10.1 starts from
the premise that a 10.1 party is likely to be in a position toinfluence whether the entity acquires a substantial asset from them, or disposes of a substantial asset to them, aswell as the terms on which the acquisition or disposal takes place.
The harm it seeks to protect against is that the10.1 party will exercise that influence to favour themselves at the expense of the entity.
To address the potential conflicts involved and to minimise the risk of this harm occurring, Listing Rule 10.1displaces the general rule that the board of directors (or, in the case of a listed trust, the responsible entity2(“RE”
)is responsible for managing the business of the entity to the exclusion of its security holders and requires thetransaction to be approved by the holders of ordinary securities in the entity. The counterparty to the transactionand their associates are precluded from voting on the resolution to approve the transaction.
Listing Rule 10.1 operates side-by-side with Chapter 2E of the Corporations Act 2001 (Cth),3 which regulatestransactions between a public company or registered managed investment scheme4 on the one hand and its relatedparties on the other. Chapter 2E seeks to protect the interests of members by requiring the company or scheme toobtain approval from its members before it gives a financial benefit to a related party unless an exception applies.5
Listing Rule 10.1, however, is different in scope to Chapter 2E. Listing Rule 10.1
only applies to an acquisition ordisposal of a substantial asset, whereas Chapter 2E applies to all forms of financial benefits, including a purchaseor sale of assets.6 Conversely,
Listing Rule 10.1 extends to a broader range of “connected” parties than just relatedparties and also does not include the broad exclusion that Chapter 2E has for transactions on arm’s length terms.7
3.1 “Asset”
The term “asset” is not defined in the Listing Rules. In ASX’s opinion, given the reference to accounting conceptsand values in Listing Rule 10.2, the term
should be understood as including any tangible or intangible property orright that has value and that would ordinarily be recognised as a current or non-current asset in an entity’saccounts.8It includes, without limitation, freehold and leasehold interests in land; interests in mining or petroleumtenements; intellectual property rights; interests in child entities;
investments; loans and other receivables; plantand equipment; and inventory. It also includes the assets that make up all or part of a business.9
3.2 “Substantial asset”
Listing Rule 10.2 provides that an asset is substantial if, in ASX’s opinion, its value or the value of the considerationbeing paid or received by the entity for it is 5% or more of the equity interests of the entity, as set out in the latestaccounts given to ASX under the Listing Rules.
