Overview
Australia’s substantial holding disclosure rules for listed companies and managed investment schemes are becoming significantly more complex.
The Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025 will lead to a transformative shift in the regime under Chapter 6C of the Corporations Act 2001.
This reform requires investors to aggregate derivative exposures with their traditional "relevant interests" e.g. shareholdings when determining if they have reached the 5% substantial holding threshold. The aim is to increase transparency around who has significant economic exposure to listed entities, even where they do not technically own the underlying shares.
In practical terms, investors will need to assess:
Direct holdings + relevant interests + certain derivative exposures
when calculating whether they have crossed the 5% substantial holding threshold which has to be disclosed.
For example, an investor that directly owns 3% of a company’s shares and also has a cash-settled derivative exposure equivalent to another 3% may now be treated as holding a 6% interest that must be disclosed.
The reforms are likely to have the greatest impact on superannuation funds, asset managers, hedge funds, trustees, responsible entities and large financial groups that manage investments across multiple funds, custodians and legal entities.
Current law
Under Chapter 6C of the Corporations Act 2001 (Cth), a person who acquires voting power of 5% or more in a listed entity must lodge a substantial holding notice within two business days. The same requirement applies whenever their holding changes by 1% or more.
Currently, the rules mainly apply to physical shareholdings and physically settled derivatives.
Key changes from 4 December 2026
Cash-settled derivatives will count
The new regime expands the test so that investors must also include certain cash-settled long equity derivatives when assessing whether they have crossed the 5% threshold.
Group-wide aggregation will be required
Trustees, responsible entities and related companies will need to aggregate holdings and derivative exposures across all funds, schemes and group entities they manage.
This means organisations may need a consolidated, group-wide view of positions held across different systems, custodians and investment vehicles.
More complex derivative calculations
Different derivative products will need to be treated differently:
- Linear derivatives will generally count at full notional value.
- Non-linear derivatives will require a “delta-adjusted” calculation using accepted pricing models.
ASIC is still consulting on the final methodology.
Strict disclosure deadlines and penalties
Substantial holding notices must still be lodged within two business days of crossing the threshold or moving by 1%. Failure to comply can result in criminal liability and AFSL breach reporting obligations.
Importantly, the regime operates on a strict liability basis in many cases, meaning a lack of knowledge may not be a defence.
Practical implications
Data and systems challenges
Many large organisations currently hold equities, derivatives and custodial information across separate systems that do not easily integrate.
To comply with the new rules, firms may need systems capable of consolidating positions across the entire group and monitoring disclosure thresholds in near real time.
Governance and accountability
Boards and senior management should ensure there is:
- clear ownership of disclosure obligations;
- appropriate escalation and breach reporting procedures; and
- visibility over the organisation’s readiness before the reforms commence.
Automated disclosure processes
Given the short two-business day reporting window, manual processes may no longer be sufficient. Many entities will likely need:
- automated threshold monitoring;
- streamlined notice preparation workflows; and
- audit trails documenting calculations and disclosure decisions.
What should organisations do now?
Affected entities should consider taking the following steps ahead of the December 2026 commencement date:
- Map all listed equity and derivative exposures across the group.
- Identify gaps in existing data and reporting systems.
- Develop internal methodologies for derivative calculations.
- Review governance, escalation and compliance frameworks.
- Consider engaging with ASIC consultation processes and industry bodies.
Final thoughts
These reforms are not a minor compliance update. They materially expand Australia’s substantial holding disclosure regime and will increase both the volume and complexity of disclosures required from institutional investors and financial groups.
For many organisations, the biggest challenge will not be understanding the legal changes - it will be building the systems and processes needed to comply with them in practice.
For more information or assistance on preparing for these changes, contact our Capital Markets and Solutions team.
Authors
This article was authored by Liam Hennessy, Partner, Scott Gibson, Partner, Nicholas Antonas, Partner, Anastasia Reeve, Law Clerk.