Re Buddy Technologies Ltd.; Re Buddy Technologies Ltd. - (22 Mar 2022)

In order to be eligible for declaratory relief, shares must not have been suspended from trading for more than five days in the previous 12 months

Commercial

In present matter, on 1 March 2022, the Plaintiff, Buddy Technologies Limited (Buddy Technologies), filed an originating process seeking orders under Section 1322(4)(a) of the Corporations Act, 2001 relating to a number of contraventions of Section 707(3) of the Act. The contraventions occurred as a result of sales of shares in the Plaintiff between 1 April 2021 and 31 January 2022, without a valid cleansing notice or cleansing prospectus having been lodged. On 2 March 2022, the Plaintiff lodged a cleansing prospectus in respect of these shares pursuant to Section 708A(11) of the Act.

Part 6D.2 of the Act imposes disclosure obligations in relation to the issue and sale of shares. In certain circumstances, these obligations can be satisfied by lodging what is commonly referred to as a cleansing notice or a prospectus. If disclosure has not been made by the issuer and the shares are on-sold within 12 months, the party to whom the shares are issued may be obliged to make disclosure.

Companies are entitled to relief from these reporting requirements under the Act in certain circumstances. These include where shares are issued under an 'employee incentive scheme' covered by the Class Order. However, in order to be eligible for relief under the Class Order, shares must not have been suspended from trading for more than five days in the previous 12 months.

There is no evidence of any substantial misconduct, serious wrongdoing or flagrant disregard of the corporate law or the company's constitution so as to warrant refusal of the relief sought. There is nothing in the evidence that suggests any minority shareholder interest might be oppressed or any other interest might be affected.

All shareholders as well as the ASX and ASIC have been notified of Buddy Technologies' contravention of the Act and given notice of this hearing. No shareholder or either regulator has sought to intervene in the hearing or given notice they want to be heard on the application. In exercising the discretion to grant relief under Section 1322(4) of the Act, a relevant factor is the promptness with which the plaintiff has sought to remedy the irregularity, once it has been identified.

Buddy Technologies acted diligently in relation to the issues once they were drawn to its attention. Relief should be granted in the terms sought by the plaintiff. The conduct of Buddy Technologies in failing to lodge a cleansing prospectus which was required under the Act was inadvertent and not in blatant disregard of its obligations. Present Court do not consider that public policy will be undermined by granting the relief sought.

Tags : SHARES SALE CLEANSING PROSPECTUS