Section 610 of the Corporations Act contains a complicated definition of "voting power" for the purpose of the Act’s takeover provisions in Chapter 6. The definition aims to prevent persons from collectively "warehousing" shares in separate entities to avoid the 20% threshhold which requires a takeover offer to be made.

ASIC have announced that Mr Stuart Adrian Corp, of Subiaco in Perth, and Mr
Brian Millwood Smith, of East Perth, have been sentenced in the
District Court of Western Australia on a total of 29 charges brought by ASIC related to share warehousing.

The charges, which arose from Messrs Corp and
Smith’s conduct as directors of two Australian publicly-listed
companies, formerly known as Hallmark Gold NL (Hallmark Gold) and
Welcome Stranger Mining Company NL (Welcome Stranger), represents the
first successful prosecution relating to the use of offshore entities
to avoid disclosure of director’s interests.

Messrs Corp and Smith were each sentenced to three
years in prison, to be released on a recognisance after serving 16
months. They had been found guilty by a jury in relation to the charges
on Thursday 4 October 2007.

Messrs Corp and Smith were found to have:

• engaged in conduct concerning the undisclosed
  relevant interest in shares in Hallmark Gold and Welcome Stranger while
  they were directors of those companies;
• controlled shares through the use of
  offshore entities, and used those shares to vote on related party
  resolutions at general meetings of Hallmark Gold and/or Welcome
  Stranger which delivered them financial benefits; and
• provided false and misleading information
  to ASIC and the Australian Securities Exchange (ASX) in documents
  required to be lodged under the Corporations Law which should have
  showed that they had an interest in those shares.

Mr Smith was jailed in relation to:

• six charges of knowingly providing misleading information as to his relevant interest in shares to ASIC and the ASX;
• six charges of failing to act honestly and hereby breaching his duty as a director; and
• two charges of unlawfully permitting voting on related party resolutions at general meetings of the shareholders.

He had been found not guilty in relation to six further charges.

Mr Corp was jailed in relation to:

• seven charges of knowingly providing misleading information as to his relevant interest in shares to ASIC and the ASX;
• six charges of failing to act honestly and thereby breaching his duty as a director; and
• two charges of unlawfully permitting voting on related party resolutions at general meetings of the shareholders.

Mr Corp had been found not guilty in relation to six further charges.