Re Delecta Ltd; Ex Parte Delecta Ltd. - (10 May 2022)

In exercising the discretion to grant relief under Section 1322(4)(a) Corporations Act, 2001, a relevant factor is the promptness with which the Plaintiff has sought to remedy the irregularity

Commercial

The plaintiff, Delecta Limited (Delecta), by way of originating process seeks relief under Section 1322(4)(a) of the Corporations Act, 2001 relating to a number of contraventions of Section 707(3) and Section 727(1) of the Act. The contraventions occurred as a result of sales of shares in the Plaintiff between 11 October 2018 and 2 November 2021, without a valid cleansing notice or cleansing prospectus having been lodged.

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.

There is no evidence of any substantial misconduct, serious wrongdoing or flagrant disregard of the corporate law or constitution so as to warrant refusal of the relief sought. There is nothing in the evidence that suggests that 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 the plaintiff's contraventions of the Act and given notice of this hearing. No shareholder or either regulator has sought to intervene in the hearing or given notice that they want to be heard on the application.

In exercising the discretion to grant relief under Section 1322(4)(a), a relevant factor is the promptness with which the plaintiff has sought to remedy the irregularity once it was identified. In this case, on 30 March 2022, Mr Burness of the plaintiff became aware of the issues with the Share Issues. The plaintiff immediately sought legal advice and commenced these proceedings on 31 March 2022. Further, the plaintiff informed the market of the issue on 6 April 2022 and informed the recipients of the Share Issues on the same day. The plaintiff has acted diligently in seeking to remedy the matters the subject of the application.

Relief should be granted in the terms sought by the plaintiff. First, a number of the shares in each of the Share Issues have been subsequently traded. As it is difficult to ascertain with any certainty which shares were bought and sold and whether any were the Share Issues shares, there exists potential for title issues for parties to those sale transactions. It cannot be discounted that there may have been resales of these shares. The conduct of Delecta in failing to lodge a cleansing prospectus which was required under the Act was inadvertent and not in blatant disregard of its obligations. Fourth, Delecta acted promptly upon realising the error, preparing the required paperwork and approaching the court. Public policy will not be undermined by granting the relief sought.

Tags : CLEANSING NOTICE CONTRAVENTION PROVISION