The Australian Securities and Investments Commission (ASIC) has successfully overturned a Federal Court decision to dismiss an application by the regulator in relation to Wellington Capital Limited.
The Full Court of the Federal Court found Wellington improperly distributed shares in Asset Resolution Limited (ARL) to unit holders in the Premium Income Fund (PIF), for which it acts as the responsible entity.
The court also ordered declarations that Wellington did not have the power to make an ín specie distribution of shares, as opposed to cash, to unit holders in the PIF and that Wellington had acted contrary to the PIF constitution in doing so.
The court said that Wellington's conduct "amounted to a partial retirement from office other than in accordance with the provisions of the [Corporations] Act…and without the consent of the unit holders".
The move by ASIC to overturn the decision to dismiss the application follows proceedings in the Federal Court in October last year during which the regulator asserted that constitution of the PIF did not permit Wellington to distribute shares in ARL to the PIF unit holders. The distribution had taken place in September, with ASIC claiming Wellington had not consulted with or obtained consent from the PIF unit holders.
At the time the Full Court declared that by making the in specie transfer of ARL shares to unit holders of PIF, Wellington did not operate the PIF and perform the functions conferred on it by PIF's constitution, and contravened relevant sections of the Corporations Act 2001.
ASIC is seeking clarification from Wellington on what disclosure it will make to unit holders as a result of the Full Court's declarations, and on the manager's intention for an extraordinary meeting of PIF unit holders set for next week.
At that meeting PIF unit holders will be asked to vote on whether all remaining assets of PIF be transferred to ARL with a similar in specie distribution of shares to unit holders as occurred in September 2012, resulting in unit holders becoming shareholders in ARL.
ASIC stated that it had received notice, via two releases on the National Stock Exchange, that Wellington would apply for leave to appeal the Full Court's decision to the High Court.
