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CONTENTS
Corporations Law Amendment (ASX) Bill 1997
Date Introduced: 18 November 1997
House: Senate
Portfolio: Treasury
Commencement: Royal Assent
To facilitate the conversion of the Australian Stock Exchange
(ASX) to a public company and to clarify the responsibilities of a
demutualised ASX as a self regulatory organisation.
At present, Australian Stock Exchange Limited is a company
limited by guarantee, i.e. the liability of its members is limited
to the respective amounts that the members undertake to contribute
to the property of the company if it is wound up.The ASX is owned
and controlled by its members and run on behalf of its members
under its own constitution and operating rules.Its member are the
brokers who use the Exchange to deal in the securities of
businesses and governments. They are either corporations or firms
that are licensed stockbroking organisations, or individuals who
are senior employees or directors of stockbroking
organisations.
This form of company is to be contrasted to a company limited by
shares which is based on the liability of members being limited to
any amount which is unpaid on their shares in the company.
Each member of the ASX has an equal interest in the
company;hence the use of the description of the ASX as a 'mutual'
organisation.
On 22 October 1996, the members of the ASX voted 540 to 22 to
demutualise.This will involve the ASX converting from a company
limited by guarantee to a company limited by shares.An equal number
of shares will be issued to all members resulting in a windfall to
those members of about $250,000 each.(1) The Corporations
Law permits certain types of companies to change their status
to another type of company, however, a change from a company
limited by guarantee to one limited by shares is not provided for
by the Corporations Law.Consequently, one of the purposes
of this Bill is to permit the ASX to undertake that change in
status.
As well as the role that the ASX plays in facilitating the
trading of securities in listed companies, the ASX performs a
regulatory role through the use of its listing rules and its
ultimate power to delist a company which does not comply with those
rules.Concerns have arisen as to the ASX's future as a regulator
and it has been suggested that the Australian Securities Commission
may eventually absorb most of the ASX's regulatory functions.(2)
The two reasons given for this are firstly the expense associated
with the regulatory activities and their non-financial return and
secondly that it will be difficult for the Federal government to
allow a privately owned, profit motivated company to retain such a
powerful slice of corporate regulation.
The amendments to the Corporations Law are effected by
way of a Schedule of amendments.
Item 4 inserts new Part 7.1A
into the Corporations Law.Proposed new section
766A is the operative provision which allows the ASX to
change its status to a company limited by shares.
It is specifically provided that the change of status does not
create a new entity and does not affect the ASX's existing rights
or obligations (proposed new section 766D).
Proposed new sections 766E to
766I have the effect of prohibiting any person
from being entitled to more than 5% of the voting shares in the
ASX.
This ownership limit is restrictive in comparison to limits
placed on other types of organisations (e.g. banks where there is a
general limit of 10% for an individual shareholder).The
justification for the limit is that it would not be in the public
interest for any one person to gain control of the ASX.
Proposed new sections 769A to
769D deal with the ASX's ongoing regulatory
role.The ASX must do all things necessary to ensure that each stock
market of the exchange is an orderly and fair market and that there
are adequate arrangements for monitoring and enforcing compliance
with its business rules and listing rules (proposed section
769A).If the Treasurer is of the opinion that an exchange
is not complying with those requirements, he or she may publish a
notice directing the exchange to do specified things to promote
compliance with those requirements (proposed section
769B).
Each exchange must report annually on the extent to which it has
complied with the requirements of section 769A (proposed
section 769C).
It will be interesting to hear the views of market participants,
over the next few years, as to the effectiveness of the ASX in
performing its regulatory function.Provided the performance of that
function is not adversely affected, it would appear that from the
viewpoint of the general public, this Bill does not raise any
controversial issues.
- The Age, 'More debate needed on ASX plan to
demutualise', Stephen Bartholomeusz, 25 April 1997.
- ibid.
Lee Jones
28 November 1997
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 1997
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Published by the Department of the Parliamentary Library,
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Last updated: 28 November 1997
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