ASIC releases updated regulatory guide relating to s444GA transfer of shares

Today ASIC released an updated regulatory guide outlining when it will grant Chapter 6 relief for share transfers under s444GA of the Corporations Act¹: click here to view.

Independence

The updated policy provides that ASIC generally requires an independent expert report to be prepared in accordance with Regulatory Guide 112 (IER).  This has not previously been the case for reports for the purpose of s444GA.

The ASIC guidelines state that ASIC will not generally accept reports prepared by a deed administrator (or another member of the deed administrator’s firm) – this includes any major reports to creditors pursuant to the Insolvency Practice Rules, for the reasons set out below.

Firstly, reports prepared by the deed administrators for creditors have a different focus in subject matter to those required with respect to s606 relief.

Secondly, there are concerns as to independence, perceived and in some cases likely actual, where:²

• the deed administrator acts as agent of the company;
• the work performed by the administrator for creditors is ‘strategic planning’ and it is possible and likely that the administrator and subsequent deed administrator may be involved in assisting the formulation of a DOCA proposal; and
• there is a possibility that recovery of the deed administrator’s fees is dependent on the success of a DOCA.

Other requirements

The Regulatory Guide provides that ASIC may provide relief from s606 where an IER concludes that members have no residual equity in the company, the court grants leave under s444GA and the company's members are provided with an explanatory statement at least 14 days before the court hearing that:³

• explains the nature of the application to court;
• explains that members have a right to object;
• explains the requirements for relief from s606;
• includes a copy or link to the IER; and
• includes a copy of the originating process documents.

Lavan comment

The new ASIC guidelines provide clarity on ASIC’s requirements for relief from s606 where there is a s444GA application, including in relation to an IER.

Deed administrators should liaise with ASIC regularly prior to and throughout a s606 and s444GA application.