Who can access your member register?: unsolicited offers to shareholders and David Tweed

Companies are sensitive to requests for access to their list of shareholders.

Under section 173 of the Corporations Act 2001, companies are required to provide a copy of their register of members within seven days to a person requesting access to the register and paying the required fee.

What prevents persons obtaining a copy of the shareholder register and writing direct to shareholders to buy their shares in situations where the takeover rules do not apply ?

Corporations Act Part 7.9 Division 5A was introduced in 2003 to deal with unsolicited off-market offers, short of a takeover offer (section 1019D).

In summary, a person who makes an unsolicited offer to buy shares off market for a certain price must provide:

* a written statement setting out the market value of those shares on the day the offer is made; and
* a minimum of one month in which to accept the offer. (Section 1019I)

Although it is not illegal to make an unsolicited offer to buy someone’s shares, it is against the law to mislead or deceive retail shareholders into accepting an offer.

Division 5A was introduced to regulate the activities of share traders such as David Tweed and his associated companies including Direct Share Purchasing Corporation and National Exchange Pty Ltd. Tweed typically offers to buy shares from small shareholders at an
underprice or by annual instalments over periods of up to 15 years.

National Exchange was the subject of the first litigation in relation to Division 5A (see ASIC v National Exchange Pty Ltd  in which the Full Federal Court refused to overturn the original decision that the offer was not misleading or deceptive, or unconscionable.)

ASIC has intervened or issued warnings in respect of Tweed’s advances in respect of Clime Capital, OneSteel, Aevum and ColesMyer.

In November 2006 ASIC permanently banned David Tweed from providing financial services.

Mr Tweed was banned after ASIC found that he had
failed to comply with a financial services law and believes he will not
comply with a financial services law in future. The breach of financial services laws over a period
of time, which led to the banning order against Mr Tweed, related to
the way in which Mr Tweed and National Exchange made a number of
unsolicited offers to purchase shares in OneSteel and Aevum.

However the banning of Mr Tweed from the financial services industry will not
prohibit him from making unsolicited offers to investors. Making an
unsolicited offer to purchase shares on one’s own behalf does not
require an AFS licence. 

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