The Australian Securities and Investments Commission has started proceedings in the Federal Court in Sydney challenging whether Wellington Capital is legally able to distribute shares, as opposed to cash, to the unit holders in the Premium Income Fund (PIF).
On 5 September 2012 Wellington, as responsible entity of the PIF, announced that Asset Resolution Limited (ARL) had acquired AUD90.75m in assets of the PIF in return for which the PIF acquired shares in ARL.
Following this ARL transaction Wellington took steps to have the ARL shares issued to the individual PIF unit holders.
Wellington did not consult with or obtain the consent of the PIF unit holders concerning the distribution of the PIF’s ARL shares to the PIF unit holders. Such a distribution results in each individual unit holder becoming a shareholder in ARL.
ASIC asserts that the constitution of the PIF does not permit Wellington to distribute the ARL shares to PIF unit holders. As a consequence, ASIC has applied to the Court seeking a declaration that any such distribution of ARL shares to the PIF unit holders would be or is invalid, and that the ARL shares remain the property of the PIF.
The matter was before the Court on the 11 and 12 October 2012 and will next be heard at the Federal Court in Sydney on 17 October 2012.