The 20 per cent rule: section 606 and its exceptions

Three terms carry the weight. The first is “relevant interest”: ASIC’s RG 5, issued 30 July 2026, is the guide to it, and discusses what a person must consider in deciding whether they have one. The second is “voting power”, which the Act works out in section 610, counting the votes of a person and their associates. The third is “someone else’s”: the rule is broken if the transaction lifts anyone’s voting power across the line, not only the buyer’s.

The lower line is 20%, and the upper one is 90%. Between the two, any increase at all is caught. When counting whether an unlisted company has more than 50 members, joint holders of a particular parcel of shares count as one person.

Section 606(4) says a person must not make an offer, or issue an invitation, if accepting it would break subsection (1) or (2). Subsection (2) catches the indirect case: acquiring a legal or equitable interest in securities of a body corporate, where that gives another person a relevant interest in issued voting shares of a listed company, or of an unlisted company with more than 50 members, and someone’s voting power crosses the same lines.

Section 606(6) treats two things as acquisitions as well: securities a person already holds becoming voting shares, and an increase in the votes attached to shares they already have a relevant interest in. The Act’s examples are converting a non-voting preference share into an ordinary share, and paying up partly-paid shares with limited votes.

Contravening subsection (1), (2) or (4) is an offence (section 606(4A)), and also an offence of absolute liability (section 606(4B)). Section 606(5) gives a defence if the person proves they contravened the subsection “because of inadvertence or mistake” or “because the person was not aware of a relevant fact or occurrence”. The same subsection closes one door: in deciding whether the defence is available, a person’s ignorance of, or mistake about, a matter of law is disregarded.

Section 611 sets its exceptions out as a table, covering acquisitions exempt from the prohibition in section 606(1) and those exempt from section 606(2). The seven below are a selection. The table holds more, including dividend reinvestment (item 11), underwriting of fundraising (item 13) and acquisitions through a listed company (item 14).

Two of these are routes with their own guides: takeover bids, step by step, and schemes of arrangement.

ASIC’s RG 6, issued 30 July 2026, is written for listed and unlisted entities, investors and their advisers who want to rely on the exceptions to the general prohibition in section 606. It explains how ASIC administers the exceptions and how it may use its discretionary powers, including modifying how they operate and granting exemptions where appropriate. A decision by ASIC on whether to grant an exemption from, or modification of, Chapter 6 can itself be reviewed by the Takeovers Panel.

RG 5 now covers a second idea beside the relevant interest: the “deemed economic interest”. ASIC’s note on the guide says it “includes guidance about requirements that Sch 1 to the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025 inserts into the Corporations Act”, and that “Those requirements commence on 4 December 2026.” The substantial holding rules they bring are set out in the guide to substantial holding notices.