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Close look from ASIC

COMMERCIAL lawyer Neal Fearis believes the Australian Securities and Investments Commission has tightened its scrutiny of schemes of arrangement during the past year.

“I think they are responding, quite understandably, to investor disquiet,” said Mr Fearis, a partner of law firm Fearis Salter Power Shervington.

He said ASIC had taken a closer interest following criticism of international companies HBOS and Xstrata for their use of schemes of arrangement to effect the takeover of BankWest and MIM respectively.

 “One thing they are focusing on now are valuations of the two companies seeking to merge,” Mr Fearis said. “ASIC has had quite a lot of input into the level of disclosure. Its overwhelming preference is for the scheme booklet to include an independent valuation.”

He said an independent expert’s report was mandatory in cases where the two companies seeking to merge had a common director, or the ‘surviving’ company had a 30 per cent stake in the ‘target’ company.

Where these conditions do not apply, it was preferable for companies to obtain independent valuations, he said.

Mr Fearis has been involved in four schemes of arrangement over the past 12 months, including advising Spinifex Gold on its merger with Gallery Gold.

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