The question is about whether EMC Limited should disclose to the ASX that it is currently having private discussions with Elco Ltd about a possible merger. I do not think that it is required to disclose.
The ASX has issued Guidance Note 8 – Continuous Disclosure regime and indicated in Rule 3.1 that listed companies must immediately notify ASX of any information which may have a material effect on the price or value of the entity’s shares or affect investment decisions, and information in which shareholders, investors and ASX have a legitimate interest. This regime also has statutory backing in Section 674, 675 and 677 of Corporations Act. The objectives of this regime are to provide timely information and fair access to information for market participants. When considering whether a disclosure is required or not, the companies need to Identify whether the information to have a material effect on the price or value of the entity’s shares; Decide whether the information would affect investment decisions; Consider whether the ASX and shareholders have a legitimate interest. If the companies find that the answer to all these questions is “Yes” then they need to further consider whether 1. A reasonable person would not expect the information to be disclosed; 2. The information is confidential
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3. One or more of the following applies
It would be a breach of law to disclose
The information includes an incomplete proposal
The information is insufficiently definite
The information is foe internal management purpose
The information is a trade secret
If the answer to all these three questions is “Yes” then a disclosure is not required to be made.
In this case, this potential merger would probably have a material effect on the price or value of the entity’s shares and affect investment decisions.