Home Financial Reporting and Stock Exchange Continuous Disclosure – Exemptions

Continuous Disclosure – Exemptions

You have asked whether we must announce details of the “special arrangement” to the stock exchange.

The ASX has a general Listing Rule 3.1 which states that once a company is (or becomes) aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the company’s shares, the entity must ‘immediately’ announce that information to the ASX.

This L/R is strengthened by Section 674 of the Corporations Act pursuant to which stock exchange listed companies have an obligation to comply with the L/R’s.

Effect on Price or Value

Whilst potential ‘material effect on price or value’ may be subjective in many situations, Sec.677 attempts to define it as what a reasonable person would be taken to expect if the information would or could influence persons who commonly invest in shares in deciding whether to buy or sell (the company’s shares).

Exemptions

There are, however, exemptions to this rule under L/R3.1A which states as follows:

Listing rule 3.1 does not apply to particular information while all of the following are satisfied:

A reasonable person would not expect the information to be disclosed. The information is confidential and ASX has not formed the view that

the information has ceased to be confidential. One or more of the following applies:

  • It would be a breach of a law to disclose the information.
    • The information concerns an incomplete proposal or negotiation.
  • The information comprises matters of supposition or is insufficiently definite to warrant disclosure.
  • The information is generated for the internal management purposes of the entity.
  • The information is a trade secret.

Guidance

For further commentary on ‘continuous disclosure’ and the exemptions see ASX Guidance Note 8.

Unlisted Companies

Disclosing Entities* which are not stock exchange listed are governed by similar continuous disclosure requirements under Sec.675 – and, whilst not specifically stated therein, in my opinion should also enjoy the ASX exemption carve-outs.

Disclosure Obligations

In light of above, I consider that the “special arrangement” in this case could fall within the exemption because it is an incomplete and confidential proposal/agreement that is still subject to contract and remains dependent upon finalising the deal with the other parties.

  • Part 1.2A of the Corporations Act relates to Disclosing Entities.

Under Sec.111AC a Disclosing Entity is a corporation that issues Enhanced Disclosure securities (“EDS”).

Briefly, Sec.111AF defines EDS as shares or other securities issued where:

  • a prospectus (or other disclosure document requiring lodgement with ASIC) has been issued, and
  • there are 100 or more shareholders

whether or not the corporation is listed on an Australian stock exchange.

*Originally written by Company Secretary, an Australian virtual company secretary service.

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