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Thursday 16 January 2020

20-009MR ASIC consults on s444GA share transfers under a Deed of Company Arrangement

ASIC has released a consultation paper on a proposal to formalise its policy on share transfers made under s444GA of the Corporations Act. ASIC will seek public input on the proposal until Tuesday 28 February 2020.

Section 444GA permits a court to grant leave to allow an Administrator to transfer shares as a part of a Deed of Company Arrangement (DOCA), where it will not 'unfairly prejudice' the interests of shareholders. The Courts will generally allow the transfer if evidence shows that the shares have no value.

Where a transfer under a DOCA results in a shareholder's voting power in the company increasing above 20%, ASIC relief from Section 606 is required.

ASIC is proposing to formalise its policy on giving relief from s606 in these circumstances.

Consultation Paper 326 Chapter 6 relief for share transfers using s444GA of the Act (CP 326) seeks views on ASIC providing relief where:

  • shareholders are provided with explanatory materials prior to the s444GA hearing, including an Independent Expert Report ('IER') prepared under RG 111: Content of Expert Reports;
  • the IER is prepared by an independent expert (not the administrator); and
  • the IER is prepared on a liquidation basis.

ASIC Commissioner John Price said, 'The aim of these proposals is to provide certainty for all stakeholders and ensure that shareholders receive information equivalent to a standard control transaction. We encourage submissions on how we can achieve these goals'.

Submissions should be sent to by Tuesday 28 February 2020.



Since 2014, ASIC has been involved in 11 matters involving s444GA via a DOCA. As shareholders are having their shares expropriated, often for no consideration, some of these matters have been highly public, controversial transactions where shareholders have exerted their rights to object in Court.

The explanatory memorandum to the Corporations Amendment (Insolvency) Bill 2007 (EM) introduced s444GA in 2007 to allow deed administrators to transfer shares without shareholders consent to better reflect the object of Part 5.3A of the Act aimed at:

  • maximising the chances of the company continuing to exist; or
  • where that's not possible, a better return for creditors and shareholders than would result from a liquidation.

To safeguard the interests of shareholders who do not provide their consent to the transfer of their shares, the Court needs to grant leave for the share transfer to occur. ASIC was also specifically given a regulatory role in this process, including:

  • the right to object in Court to such a transfer; and
  • the requirement to give relief from s606, as no statutory exception to the takeovers prohibition in s606 was included for s444GA transfers.

In granting Section 606 relief to date, ASIC has generally made the relief conditional on:

  • ASIC being provided with an independent expert report (IER) prepared in accordance with RG 111: Content of Independent Expert Reports opining on the valuation of the company in question on both a going and non-going concern (liquidation) basis;
  • shareholders being provided with an explanatory statement that explains the nature of the application and their right to object, as well as providing links to the IER and the originating process; and
  • the Court making the s444GA order.

We are seeking to update ASIC policy in RG6: Takeovers – exceptions to the general prohibition to formalise the existing market practice of providing an Independent Expert Report valuing shareholders' residual interest in a company. This ensures shareholders receive equivalent information to 'standard takeovers' in making their decision in whether to object in court.

Last updated: 16/01/2020 12:00