Many readers and their clients would have seen “offers” for shares at either well below market price or at market price with the proceeds payable over a 15 year period. Some “specialist” operators have been extremely successful and become very wealthy out of these offers.


For many years it has been permissible to obtain a copy of the register of shareholder from a company or its share registry. Before the electronic age this was not so useful. Given new software developments the transformation of share registry data into marketing documents is as easy as the click of a few buttons. Combine this with the massive uptake of shareholdings from mum and dad investors in recent times following demutualisation’s and you have a recipe for financial gain.

At present despite various Government attempts to stop the practice, any individual or corporation can obtain a copy of a share registry in a form it desires including formatted into addresses, shares held and even when the shares were last transacted (but not the SRN). It then decides for example to send an offer to all shareholders who became shareholders in say 2001 and have not traded since for their shares at say 50% of the current market value. Furthermore they offer this at zero brokerage!! The form of the offer is generally made by a Victorian based organisation so as to enjoy a little lee way in the form of the power of attorney required.

The recipient of the offer, who may not be that up-to-date with financial headlines and values and who would generally have acquired the shares in an off market fashion and therefore does not typically have a share broker or financial advisor, simply signs the offer letter which provides the soliciting business with a power of attorney under which they can demand the Shareholder SRN and that the shares be transferred to their name. The registries are obliged to process these within a few days of receipt.

The Government is trying no help!!

In May 2009, the Government released the options paper, Access to Share Registers and the Regulation of Unsolicited Off‑Market Offers. The options paper sought views on the appropriateness of the current framework for regulating the continuing practice of making undervalued, and often predatory, unsolicited off‑market offers to purchase shares, and canvassed a number of options for reform. Finally after receiving many views, the Government in February this year developed four proposals which would amend the Corporations Act 2001. If enacted, these proposals would:

  1. require a proper purpose for accessing a register to be demonstrated before a company is required to provide access;
  2. set down a three‑tiered fee structure for obtaining access to a register, with the fee chargeable to be based on the number of members a company has;
  3. require a company to provide an electronic copy of its register in a format compatible with the requestor’s software; and
  4. require a requestor who seeks access to a company’s register which is kept electronically to view that register on computer.

The first point is probably the most pertinent. A non‑exhaustive list of improper purposes would be specified in theCorporations Regulations. Some purposes that have already been identified as improper uses of the register are:

  • the solicitation of donations from shareholders by specific groups in the community, such as charities;
  • the solicitation of clients by brokers;
  • the gathering of information regarding the personal wealth of shareholders; and
  • the making of an off‑market offer to purchase securities in a listed company, other than for a takeover.

The last of these is the particular point that will hopefully put an end to this type of predatory behaviour.

Of course, after drafting and becoming an Act of Parliament whether one of these businesses finds a loophole remains to be seen!

Beware Current Offers

The above pending legislation has not halted the practice and in fact seems to have led to an increase in activity. Hassle Free Share Sales (HFSS) are soliciting to buy BHP shares at $20.56 and Woolworths shares at $13.99 which at the time of the offers was less than half the then market price.

Please advise any clients – not to sign anything!!!

PUBLICATION: ENVOY – The newsletter of The New Zealand Institute of Legal Executives
DATE: July 2010
AUTHOR: Andrew Johnstone, APEARS, Sydney, Australia

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