Hi @occy I don't follow Talga so my comments are general in nature and not specific to Talga, however I have followed a number of complaints that have been made to the Australian Takeovers Panel (TOV) over recent years, and a declaration of unacceptable circumstances (DUC) is what people are after when they make complaints to the TOV, as a DUC allows the TOV to give enforcable orders (under Australian corporate law) that have to be followed. Such enforcable orders often involve directing people or entities to dispose of (sell) their shares immediately to reduce their proportional shareholding back to what had previously been publicly disclosed, or else down to what they are allowed to hold without lodging a takeover bid.
First I'll give a little background on why the TOV exists, how the TOV tends to be used, why they issue guidelines, then I'll have a go at explaining why the notice was lodged by Pentwater for Talga.
The main reason why people complain to the TOV is because they believe that other parties are acting either alone or together without adequate disclosure of their real effective controlling interest - or that one or more people have effective control of a company without adequate disclosure, which becomes important in company takeovers because it can significantly influence the outcome.
Australian corporate law requires people and entities that own 5% or more of a publicly listed company to disclose the fact that they are substantial shareholders, and that includes when they have an arrangement or a significant documented connection to another party and are therefore deemed to have a controlling interest in shares that may not be registered in their own name. Quick examples of that would be where a family trust owns some of the shares or person A has an agreement with other parties to vote their shares together as a larger block of shares than what they each hold individually. It is also the reason why a number of mirror disclosures are often made - i.e. two notices about the same position from two different entities because one of those entities is regarded as a controlled entity of the second entity, like BKW and SOL, or Morgan Stanley and Mitsubishi UFJ Financial Group (MUFG) where the first entity is regarded as being controlled by the second entity.
There are also rules around anyone owning 20% or more of a company, which relate directly to takeovers and what they are or are not allowed to do, and what they are required to do if the reach 20%, which you can google, as it would take up too much time for me to try to explain all of that.
That is the reason why a number of companies will go up to 19.99% of a company and stop there, and often the easiest way for them to go beyond that level of ownership without making a formal takeover offer is through a situation like an underwriting arrangement of a capital raise. Or by converting money owed into shares by agreement of the majority of shareholders at a company meeting. This is how Shandong ended up owning over 60% of Focus Minerals (FML) without ever having to launch a takeover offer.
The takeovers panel (TOV) is there to determine, after a complaint is made to them, if people or companies (entities) have breached the rules or gone out of their way to intentionally hide the fact that they own or control more of an Australian listed company than they have publicly disclosed via announcements published on the ASX announcements platform.
TOV Guidance Note 20, as I understand it, is there to make clear that it is NOT acceptable to have additional control through financial instruments such as Equity Derivatives if those are not disclosed via the ASX announcements platform. Because Pentwater Capital Management are involved in a cash settled equity swap arrangement (an equity derivative) relating to Talga and the number of shares that the aforementioned equity derivative relates to increased on 23rd May from 23,677,105 Talga shares to 32,677,105 shares (i.e. an increase of 9 million Talga shares), the TOV Guidance note suggests that this should be disclosed so as to avoid the possibility of a later DUC from TOV at a later date if a complaint was to be made to TOV.
In short - these rules, regulations and guidelines are there to ensure a fully informed market, and that includes equity derivative arrangements entered into by substantial shareholders or entities or people who could be regarded as substantial shareholders if those equity derivatives were to be converted into shares at some point.
The rules and guidelines will also clearly capture transactions that have nothing to do with takeovers, which is likely the case here, but that in certain circumstances might be viewed as behind the scenes manoeuvring ahead of a takeover attempt.
Hope that helps @occy.