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mergerandacquisition.com.auBuying into a company, by Chapter 6

A guide to Chapter 6 of the Corporations Act

Merger and acquisition: the takeover rules for buying into a company

Buying a large stake in a company runs into a line drawn at 20%. Under section 606 of the Corporations Act 2001, acquiring a relevant interest in issued voting shares of a listed company, or of an unlisted company with more than 50 members, is prohibited where the transaction lifts anyone’s voting power from 20% or below to more than 20%, or from a starting point above 20% and below 90%. The acquisition can still happen under one of the exceptions in section 611, and this guide follows the main ones.

General information, not legal or financial advice. The official places to check are ASIC’s regulatory guides on takeovers and the Takeovers Panel. The law quoted here is the compilation of the Corporations Act dated 19 September 2026, read on 9 October 2026.

From 4 December 2026The substantial holding rules change. The Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025 makes the change: its Schedule 1 commences that day, repeals Part 6C.1 of the Corporations Act and substitutes a new one, and ASIC says a single Substantial holding notice will replace Forms 603, 604 and 605. The substantial holding guide sets out both sets of rules.

The stake rule

Five lines between no stake and the whole company

Chapter 6 attaches a rule to particular sizes of stake, counted as a share of the votes. Each line below names the section that draws it.

0% of the votes100%

5%Section 9
A person has a substantial holding once the votes attached to voting shares in which they or their associates have relevant interests reach 5% or more of the total, counting some interests the Act would otherwise leave out, such as market traded options and conditional agreements. A person whose takeover bid for voting shares is under way has one too. In a listed company that brings a notice.
20%Section 606
The prohibition: no acquisition that takes anyone’s voting power past 20%, or higher from a point between 20% and 90%, unless an exception applies.
30%Section 640
If a bidder’s voting power in the target is 30% or more, the target’s statement must include, or come with, an expert’s report saying whether the offers are fair and reasonable.
50%Section 624
If the bidder’s voting power rises above 50% within the last 7 days of the offer period, the period is extended to end 14 days after that happens.
90%Section 661A
A bidder holding relevant interests in at least 90% of the bid class, having acquired at least 75% of what it offered for, may compulsorily acquire the rest, under conditions the section sets.

Who the rules reach

Listed companies, and unlisted ones with more than 50 members

Section 606 covers two kinds of company: a listed company, and an unlisted company with more than 50 members. Joint holders of a particular parcel of shares count as one person when the members are counted. A smaller unlisted company can still be drawn in. The Act’s own note says that if buying into an unlisted company with 50 or fewer members leads to a relevant interest in a listed company, or in an unlisted company with more than 50 members, the acquisition is caught because of its effect on that other company.

Section 602 says what the Chapter is for, including that the acquisition of control of those companies takes place “in an efficient, competitive and informed market”.

Two routes

A bid to each holder, or a scheme the members vote on

Two of the exceptions in section 611 are formal procedures for going past 20%. Item 1 covers an acquisition that results from accepting an offer under a takeover bid. Item 17 covers one that follows from a compromise or arrangement the Court approves under Part 5.1.

The two work differently. In a takeover bid, each holder weighs the offer and the statements from the bidder and the target, and decides whether to accept it. A scheme binds the members only if a meeting ordered by the Court agrees to it by the majorities the Act sets, and the Court then approves it by order. When a takeover is disputed, the Takeovers Panel describes itself as the main forum for resolving it.

Other approvals

Rules that sit beside Chapter 6

Since 1 January 2026 businesses must notify certain acquisitions to the ACCC and wait for its approval before they proceed, under the ACCC’s merger rules. Treasury’s foreign investment framework requires foreign persons, in prescribed circumstances, to notify their proposed actions. This guide stays with Chapter 6, and with shares in a company rather than a purchase of a business’s assets.

The five guides

From the first 5% to a contested bid

  1. The 20 per cent rule
    Section 606 in its own words, the offences, and a selection of the exceptions in section 611, from the 3% creep to a buy-back.
  2. Substantial holding notices
    Who gives notice, to whom and how fast, under the rules in force now and under the rules that start on 4 December 2026.
  3. Takeover bids, step by step
    Off-market and market bids, the minimum bid price, the bidder’s and target’s statements, and the offer period.
  4. Schemes of arrangement
    The meeting the Court orders, the two majorities, the explanatory statement, and the Court’s approval.
  5. The Takeovers Panel
    Unacceptable circumstances, who may apply and by when, the application fee, and reviews.