Equal access share buy-backs: the 10/12 limit, the offer documents and the timetable

An equal access scheme offers to buy back the same percentage of every ordinary shareholder’s holding on the same terms. Because it treats holders equally, it needs no shareholder approval provided it stays within the 10/12 limit. That single exemption is what makes it the default structure for returning capital to a spread register, and the reason the drafting effort goes into the offer document rather than the notice of meeting.

What makes a scheme equal access

Section 257B(2) of the Corporations Act 2001 (Cth) sets out the conditions. All of them must hold:

• the offers relate only to ordinary shares;
• the offers relate to the same percentage of each holder’s ordinary shares;
• the terms of all the offers are the same;
• before the offers are made, each person who holds ordinary shares has a reasonable opportunity to accept; and
• buy-back agreements are not entered into until a specified time for acceptances closes.

Section 257B(3) preserves the scheme where differences arise only from the number of shares held, from an intention to round holdings, or from an intention to preclude odd lots. Anything else that differentiates between holders takes the scheme out of the equal access limb and into the selective buy-back procedure, with the special or unanimous resolution that goes with it. That line is crossed more often by well-intentioned drafting than by design.

The 10/12 limit

The 10/12 limit is 10 per cent of the smallest number, at any time during the last 12 months, of votes attaching to the company’s voting shares. The relevant number is the smallest in the period, not the number today. A company that has raised over the past year will find its limit anchored to a smaller historical figure than its current register suggests.

Within the limit, an equal access scheme needs no shareholder approval. Above it, section 257C requires an ordinary resolution, and the notice of meeting must include all information known to the company that is material to the decision how to vote. Shares bought back under any buy-back in the period count towards the limit, so a company running successive schemes needs to track the aggregate rather than each scheme in isolation.

The procedure

• The section 257A gateway. The buy-back must not materially prejudice the company’s ability to pay its creditors, and the Division 2 procedure must be followed.
• Lodge the offer documents. Section 257E requires the terms of the offer and any accompanying document to be lodged with ASIC, using a Form 280, before they are sent to shareholders. ASIC accepts the form as a signed PDF by email or by post, and there is no lodgement fee.
• 14 days. Section 257F prevents the company entering into a buy-back agreement until 14 days after lodgement. Lodge a Form 281 notice of intention where the Form 280 will go in less than 14 days before the relevant date.
• Disclose when the offer is made. Section 257G requires the offer documents to include all information known to the company that is material to the decision whether to accept. RG 110.17 to RG 110.25 set out what ASIC expects to see.
• Cancel and notify. Shares are cancelled under section 257H(3) immediately after the transfer to the company is registered, with notice to ASIC under section 254Y within one month.

If the entity is listed

• Appendix 3C. Listing Rule 3.8A requires the buy-back to be notified using the Appendix 3C online form. Since June 2021 a single Appendix 3C carries the whole event lifecycle: the initial announcement, updates, the daily buy-back notification (previously Appendix 3E) and the final notification (previously Appendix 3F). The separate appendices no longer apply, and notices built off an old precedent will be rejected.
• Daily notification. For an equal access scheme, a daily buy-back notification must be given at least half an hour before trading opens on the business day after any day on which securities are bought back.
• Timetable. Section 11 of Appendix 7A sets the buy-back timetable. Trading commences on an ex buy-back basis on the business day before the record date.
• Cancellation. An Appendix 3H notifies ASX of the cancellation. Do not lodge an ASIC Form 484 for an ASX quoted class.
• Listing Rule 7.33 does not apply. The cap of 5 per cent above the volume weighted average market price over the last five days on which sales were recorded governs on-market buy-backs only. An equal access scheme is priced in the offer document, which is precisely why boards reach for it where an on-market programme would be constrained.

Choosing between the structures

The three realistic options for a company returning capital to a broad register are an equal access scheme, an on-market buy-back and a selective buy-back. The equal access scheme is the fairest and the slowest, and it treats every holder identically whether or not they want to sell. An on-market buy-back is flexible and continuous but is capped by Listing Rule 7.33 and depends on liquidity, which is a real constraint at small-cap scale. A selective buy-back is fast and targeted but carries the approval and disclosure burden. Decide by reference to the register and the objective before anything is drafted.

Common traps

• Calculating the 10/12 limit off the current share count rather than the smallest count in the last 12 months.
• Building a minimum or maximum acceptance condition into the offer in a way that differentiates between holders and quietly converts the scheme into a selective buy-back.
• Sending the offer documents to shareholders before ASIC has received the Form 280.
• Testing the creditors position in section 257A against the balance sheet before the buy-back is funded rather than after.
• Treating an equal access scheme and an on-market buy-back as substitutes. The procedure, the disclosure and the price mechanics are all different.

How Luma Legal can help

We structure and document buy-backs for listed and unlisted companies, including the 10/12 analysis, the offer document, the ASIC lodgement sequence and the ASX notification lifecycle. The structure question is worth settling before the board resolves to proceed, because the choice drives the timetable and the disclosure.