ECM: Equity derivative positions over 5% – disclosure required from 4 October 2021

Following consultation in 2019, the Takeover Panel’s revised guidance note on equity derivatives is finally about to take effect.

What happens after 4 October?

The key changes and noteworthy commentary contained in the revised guidance are discussed in our paper, “Equity Derivative Positions – Do You Need to Disclose Your Holdings?” (14 May 2019).

But in short, from Monday 4 October 2021:

  • the Panel will expect all long equity derivative positions over 5% (whether cash-settled or exchanged for physical shares) to be disclosed, irrespective of whether a control transaction has commenced;
  • takers are expected to disclose sufficient information to allow the market to understand fully the nature of its long position. This includes:
    • the identity of the taker (but not the writer);
    • the type of derivative, and entry date;
    • the security to which the derivative relates, including the number;
    • the price (including reference price, strike price, option price etc as appropriate);
    • any material changes to information previously disclosed to the market;
    • long positions held by the taker and its associates (including the identity of the associates and calculation of relevant interests);
    • short equity derivative positions that offset long positions, including short positions of more than 1% that are acquired after a long position is disclosed;
    • any cap and/or collar arrangements; and
    • the extent to which the writer has hedged (if known);
  • disclosure may be made by written notice to the company or as an annexure to a substantial holder notice (if otherwise required), which the company is then expected to disclose to ASX; and
  • the timing for disclosure is benchmarked against the requirements for substantial holder notices – i.e. within 2 business days of becoming aware or, in a bid period, by 9.30am on the next trading day.

What to do before 4 October?

It would be timely for all holders of long positions over 5% who are yet to disclose their positions, to prepare their disclosures now ahead of the revised guidance coming into effect.

For those holders who have already disclosed, consider whether adequate disclosure has been made having regard to the revised guidance, and whether any material changes have occurred since the last disclosure was made.

If you are unsure whether the new disclosure guidelines apply to you, or whether you have satisfied the new requirements, our corporate team would be happy to assist.

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