{"id":"F2020L01199","name":"ASIC Corporations (Stub Equity in Control Transactions) Instrument 2020/734","slug":"asic-corporations-stub-equity-in-control-transactions-instrument-2020-734","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":440605,"registerId":"F2020L01199-fast-fetch-1775956173767","compilationNumber":null,"startDate":"2026-04-12","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"ASIC Corporations (Stub Equity in Control Transactions) Instrument 2020/734","content":"---\nmeta-content-style-type: text/css\nmeta-content-type: application/xhtml+xml; charset=utf-8\ntitle: ASIC Template (Principal Legislative Instruments - Jan 2019)\n---\n\n![Commonwealth Coat of Arms and ASIC logo](image.001.png)\n\nASIC Corporations (Stub Equity in Control Transactions) Instrument 2020/734\n\nI, Grant Moodie, delegate of the Australian Securities and Investments Commission, make the following legislative instrument.\n\n \n\nDate  22 September 2020\n\n \n\n \n\n \n\n \n\n \n\n \n\nGrant Moodie\n\n \n\nContents\n\n[Part 1—Preliminary](#_Toc51657261)\n\n[1 Name of legislative instrument](#_Toc51657262)\n\n[2 Commencement](#_Toc51657263)\n\n[3 Authority](#_Toc51657264)\n\n[4 Definitions](#_Toc51657265)\n\n[Part 2—Declaration](#_Toc51657266)\n\n[5 Mandatory custodial arrangements in control transactions](#_Toc51657267)\n\n[6 Proprietary scrip in control transactions](#_Toc51657268)\n\n \n\nPart 1—Preliminary\n\n1 Name of legislative instrument\n\nThis is the ASIC Corporations (Stub Equity in Control Transactions) Instrument 2020/734.\n\n2 Commencement\n\nThis instrument commences on the day after it is registered on the Federal Register of Legislation.\n\nNote: The register may be accessed at [www.legislation.gov.au](http://www.legislation.gov.au).\n\n3 Authority\n\nThis instrument is made under sections 655A and 741 of the Corporations Act 2001.\n\n4 Definitions\n\nIn this instrument:\n\nAct means the Corporations Act 2001.\n\nPart 2—Declaration\n\n5 Mandatory custodial arrangements in control transactions\n\nChapter 6 of the Act applies to all persons as if the following provisions were modified or varied:\n\n(a) in items 1 to 4 and 17 in the table in section 611, add on a new line:\n\n“See also section 615A.”\n\n(b) after section 615, insert:\n\n“615A Mandatory custodial arrangements—exceptions 1 to 4 and 17\n\n(1) This section applies to an acquisition of relevant interests where the consideration offered for the acquisition includes securities in a public company that must be held under a custodial arrangement.\n\n(2) The exceptions in items 1 to 4 (in relation to a takeover bid) and item 17 (in relation to a compromise or arrangement) of the table in section 611 only apply to the acquisition of relevant interests if the custodial arrangement includes conversion and termination provisions which can only be amended by a special resolution of beneficial owners.\n\n(3) In this section:\n\narrangement means a contract, agreement, understanding, scheme or other arrangement (as existing from time to time).\n\nconversion and termination provisions, in relation to securities in a public company held under a custodial arrangement, means provisions to the effect that, if the public company applies to ASIC under section 163 to change its type to a proprietary company at a time when it has more than 50 non-employee beneficial owners:\n\n(a) the custodial arrangement will terminate once the change of type takes effect; and\n\n(b) the beneficial owners will be registered as holders of the securities.\n\ncustodial arrangement means an arrangement between a person (the custodian) and another person (the beneficial owner) (whether or not there are also other parties to the arrangement) under which securities are held on trust for, or on behalf of, the beneficial owner by the custodian or its nominee.\n\nspecial resolution of beneficial owners, in relation to conversion and termination provisions included in a custodial arrangement, means a resolution that has been passed by at least 75% of the votes cast by beneficial owners where:\n\n(a) only beneficial owners can vote on the resolution; and\n\n(b) each beneficial owner is entitled to cast a vote for each security held on trust for, or on behalf of, the beneficial owner under the custodial arrangement; and\n\n(c) Part 2G.2 applies as if each beneficial owner were a member of the company.”.\n\n6 Proprietary scrip in control transactions\n\nChapter 6D of the Act applies to all persons as if section 708 were modified or varied by, after subsection (18), inserting the following subsection:\n\n“Limitations\n\n(18A) Subsections (17) and (18) do not apply to an offer of securities in a proprietary company.”\n","sortOrder":0}],"analysis":{"flash_summary":{"complexity_score":4,"scope_assessment":{"changed":true,"description":"The instrument narrows the circumstances in which Chapter 6 takeover/exemption exceptions apply by requiring custodial arrangements to include conversion/termination provisions amendable only by a 75% special resolution of beneficial owners (see s615A insertion). It also removes s708 disclosure/exemption coverage for offers of securities in proprietary companies by inserting s708(18A), thereby changing the prior scope of the s708 exemptions (see s6)."},"complexity_factors":["Amendment interacts with Chapter 6 takeover and control exemptions (items 1–4 and 17 in s611), requiring careful mapping of when exceptions continue to apply.","Insertion of a new section (615A) introduces technical definitions (custodial arrangement; conversion and termination provisions; special resolution of beneficial owners) that link to existing company law voting rules (Part 2G.2).","A 75% special-resolution voting rule for beneficial owners changes amendment mechanics for custodial contracts and may create coordination and consent problems among dispersed beneficial owners.","Modification of s708 (inserting 18A) narrows disclosure/exemption treatment by excluding offers of proprietary company securities, affecting offer structuring choices.","Compliance burden shifts to custodians, bidders and target advisers to ensure custodial arrangements include mandated clauses and to evidence voting rights and outcomes.","Limited drafting scope (two targeted insertions) reduces legislative breadth but requires precise interaction analysis with existing takeover, trust and company registration provisions."],"plain_english_summary":"This instrument changes the Corporations Act so that where a control transaction offers ‘‘stub’’ equity held under a custodial arrangement, the usual takeover/exemption exceptions only apply if that custodial arrangement contains conversion and termination clauses that can be amended only by a special resolution of beneficial owners (75% voting threshold) (see inserted s615A). It also makes clear that the s708 disclosure exemptions do not apply to offers of securities in a proprietary company (see inserted s708(18A))."},"flash_summary_failed":{"failed":true,"reason":"A positive credit balance is required for all requests, including BYOK, so fallback providers remain available. Add credits at https://vercel.com/d?to=%2F%5Bteam%5D%2F%7E%2Fai%3Fmodal%3Dtop-up to continue.","source":"analysis-cron"},"kimi_summary":{"content_quality":"ok","complexity_score":4,"scope_assessment":{"changed":false,"description":"The instrument appears tightly scoped to its stated purpose of regulating stub equity in control transactions. It addresses specific technical issues regarding custodial arrangements for shares received in takeovers and disclosure requirements for proprietary company scrip, without apparent scope creep beyond these targeted amendments."},"complexity_factors":["Moderate cross-referencing: modifies multiple items in section 611 table and inserts new section 615A in Chapter 6, plus modifies section 708 in Chapter 6D","Nested definitions: defines 'arrangement', 'conversion and termination provisions', 'custodial arrangement', and 'special resolution of beneficial owners' within the new section 615A","Conditional logic: the exceptions in section 611 only apply if specific custodial arrangement conditions are met","Conceptual density: requires understanding of 'relevant interests', 'control transactions', 'custodial arrangements', and the distinction between public and proprietary companies","Relatively short length: approximately 2 substantive sections with modifications"],"plain_english_summary":"This ASIC rule protects shareholders who receive shares in a public company as takeover consideration by requiring custodial arrangements to include automatic conversion/termination terms so beneficiaries become registered owners if the company later becomes proprietary. Any change to those protections needs a special resolution (75% approval, one vote per beneficial share). It also clarifies that disclosure relief for takeover scrip does not apply when the shares are in a proprietary (private) company. Affects bidders, targets, custodians and receiving shareholders."}},"importantCases":[],"_links":{"self":"/api/acts/asic-corporations-stub-equity-in-control-transactions-instrument-2020-734","history":"/api/acts/asic-corporations-stub-equity-in-control-transactions-instrument-2020-734/history","analysis":"/api/acts/asic-corporations-stub-equity-in-control-transactions-instrument-2020-734/analysis","conflicts":"/api/acts/asic-corporations-stub-equity-in-control-transactions-instrument-2020-734/conflicts","importantCases":"/api/acts/asic-corporations-stub-equity-in-control-transactions-instrument-2020-734/important-cases","documents":"/api/acts/asic-corporations-stub-equity-in-control-transactions-instrument-2020-734/documents"}}