The ASX Listing Rules are the primary rules relating to communications made by a company to its shareholders. As outlined in question 17, the ASX Listing Rules impose continuous disclosure obligations on listed companies. As such, 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 entity’s securities, the entity must immediately inform the ASX of that information, unless each of the following is satisfied in relation to the information:
- the information is confidential and the ASX has not formed the view that the information has ceased to be confidential (eg, because of market leaks or rumours);
- a reasonable person would not expect the information to be disclosed; and
- the information is insufficiently definite, concerns an incomplete proposal, is generated for internal management, is a trade secret or where breach would result in a breach of law.
In addition to continuous disclosure obligations, the ASX has also imposed various periodic disclosure requirements under the ASX Listing Rules. Periodic disclosure generally involves:
- annual disclosure;
- half-yearly disclosure;
- quarterly disclosure; and
- additional disclosure in connection with specific transactions such as takeovers or capital raisings.
All relevant information that is required to be disclosed under the ASX Listing Rules must be disclosed on the ASX platform. Subject to an exception for dual-listed entities, ASX generally requires the information be released on the ASX platform first before it is given to anyone else.
Outside of the mandatory disclosure regime under the ASX Listing Rules, companies can and often do use various other advertising and media methods to discuss and relay news of the company to shareholders, provided that information must first be made available through the ASX platform or does not otherwise contain additional materially price-sensitive information.
Shareholders, on the other hand, are not required to disclose to the public any information known to them, even if the information would have a material adverse effect on the price of the shares. Activists are therefore more likely to use social media platforms to seek to promote their views to shareholders, sell-side analysts and institutional investors. Having said that, communication from an activist is still required to comply with certain general sections of the Corporations Act. For example, shareholder activists must ensure that any information they provide or release does not contravene the insider trading or misleading and deceptive conduct prohibitions.
There are various tactics that can be used by a company to solicit votes from shareholders. There is no formal process prescribed by the Corporations Act or the ASX Listing Rules. The most common ways are for the company to meet directly with its largest shareholders in order to have an informed conversation with them, and to reach out to professional proxy advisers who are influential in recommending how institutional investors and managed and super funds should vote. Care must be taken during this process so as not to disclose additional price-sensitive information about the company that is not already known to the market.
Where a resolution to be put to shareholders is ‘contentious’ or complex, and votes may come down to a few percentage points either way, companies will try to reach out to as many smaller shareholders as possible by calling them directly. Given shareholders’ addresses may not always be up to date in the members register and that some overseas shareholders may be difficult to reach by mail, conversations with those shareholders can be conducted by telephone. The making of phone calls to shareholders as a tool for soliciting favourable votes from shareholders is a commonly adopted strategy. These phone calls are usually done in a strategic way and investor relations experts are often engaged by the company to craft messages that resonate, by tailoring each message to the relevant class of shareholders or types of shareholders (eg, fund managers v retail shareholders). It is also important to ensure companies deliver a clear and consistent message when engaging in shareholder solicitations. In larger and strategic transactions, it is also not uncommon for the chairman of the company to present the views of the company board through a chairman’s letter, which is sent to all shareholders via mail and also announced on the ASX.
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