The Australian Securities and Investments Commission is revisiting its guidelines around collective action by institutional investors and calling for public comment.

This has become a hotter topic in the past few years with the increasing assertiveness of activist shareholders and recognition that collective action by investors can be good for financial markets.

The practice has traditionally been a concern in relation to takeovers as it can be a way for shareholders to work in concert to grab control of a company without triggering the takeover or substantial holder provisions of the Corporations Act.

The RG128 guidelines broadly define what ASIC regards as “collective action” and when it becomes an “associate relationship” and can therefore trigger the takeover provisions.

But it’s shareholder activism where we increasingly see collective action, such as attempts to turf out allegedly underperforming boards and install the activists’ nominees.

The regulator is proposing to dump the current provision in RG128 that permits certain kinds of collective action, because it has been rarely used. Instead, it proposes to create a very broad definition of collective action but allow it in some circumstances as long as it does not amount to an attempt to obtain a substantial interest in a company or take it over.

It will also illustrate by way of example other collective behaviours it regards as unacceptable, even when they do not trigger the Corporations Act.

You can read the consultation paper here.

Submissions are due by April 20.