the Takeovers Act 1993 and 
the Takeovers Code






a meeting held under s 32 of the Takeovers Act 1993 to determine whether E-CADEMY HOLDINGS LIMITED and/or MATRIXIP PTY LIMITED and/or MATRIX GLOBAL TRAINING PTY LIMITED may have acted or may not be acting or may intend not to act in compliance with the Takeovers Code.



1 August 2001



J C King (Chairperson) 
K J O'Connor 
D J Quigg 
D M D Rawstorne



Mr R F Wallis and Ms A Studd for E-cademy Holdings Limited 
P G Foley and I W Duncan for Cube Capital Limited 
P D McKenzie QC as counsel assisting the Panel



P R Atkinson and N Stolp (as representatives of E-cademy Holdings Limited) 
K G Morrell and M R Bearsley (from Panel Executive)



2 August 2001



A duly convened meeting of the Panel was held on Tuesday 24 July 2001 at 1.45 p.m. The purpose of the meeting was to consider whether E-cademy Holdings Limited ("E-cademy") and/or MatrixIP Pty Limited ("MatrixIP") and/or Matrix Global Training Limited ("Matrix Global") may not have acted, may not be acting, or may intend not to act in compliance with the Takeovers Code ("the Code") in relation to the allotment of shares and options by E-cademy on or about 5 July 2001 to Matrix Global, MatrixIP or another nominee of MatrixIP.

The Notice of Meeting was given by Mr King, Chairperson of the Panel. Mr King directed that the powers of the Panel in relation to the meeting and any matter arising from the meeting be exercised by a division of the Panel consisting of the members set out above.

The meeting on 24 July 2001 was called at the initiative of the Panel on the basis of information provided to the Panel by the Panel executive.

At its meeting the Panel, having considered all the information before it and having weighed up the appropriate action that should be taken, made a number of resolutions including the following:

(a)  On 4 July 2001 E-cademy Holdings Limited held a special meeting of shareholders in Auckland. At that meeting a resolution was passed "that the issue of 200 million ordinary shares and a grant of 100 million share options in the company to MatrixIP Pty Limited or its nominee, on the terms set out in the Explanatory Notes be approved". Subsequently, by notice to the New Zealand Stock Exchange dated 5 July 2001, E-cademy Holdings Limited advised the Exchange that it had issued 200 million ordinary shares to the nominee of MatrixIP Pty Limited, Matrix Global Training Pty Limited, and had also issued 100 million options in the company. According to information provided to the shareholders the 200 million shares represented 57.4% of the voting shares of E-cademy Holdings Limited after the issue of shares. The Panel considered that the allotments of shares and options by E-cademy Holdings Limited to MatrixIP Pty Limited, Matrix Global Training Limited or their nominees may be a transaction that is in breach of rule 6 of the Takeovers Code.

As a consequence, the Panel considered that, on the information available to it, E-cademy Holdings Limited and/or MatrixIP Pty Limited and/or Matrix Global Training Limited may not have acted or may not be acting or may intend not to act in compliance with the Takeovers Code.

(b)  The Panel will hold a meeting on 1 August 2001 at 10.00 a.m. at the offices of the Takeovers Panel in Wellington for the purposes of determining whether to exercise its powers under section 32 of the Takeovers Act.

(c)  The Panel made the following orders, to expire on the close of Friday 3 August 2001:

(i)  Restraining Matrix Global from disposing of securities or any interest in or rights relating to securities in E-cademy;

(ii)  Restraining Matrix Global from exercising any right to vote attaching to securities in E-cademy or any other right relating to such securities.

On Monday afternoon 30 July 2001 the Panel received a request for leave to appear at the hearing from Cube through its legal advisers, Rudd Watts & Stone, Wellington. The Panel convened a meeting at 5.30 p.m. on Monday 30 July 2001 to consider the request for leave. After careful consideration, including of comments from E-cademy and MatrixIP, the leave application was granted.

MatrixIP did not attend the Panel meeting on 1 August 2001 but provided written submissions.

Factual Background

E-cademy is a company listed on the New Zealand Stock Exchange ("NZSE") which required funding in order to continue as a going concern. It is apparent that negotiations were entered into with various parties, including Cube for the provision of funding but these did not proceed. On 2 April 2001 MatrixIP approached E-cademy with a proposal and following negotiations an offer was made dated 24 May 2001 under which MatrixIP agreed to provide equity capital and a loan facility to E-cademy.

The offer made by MatrixIP was conditional upon the satisfaction of each of a number of conditions. The first of these conditions required the approval of the shareholders of E-cademy to be obtained by 30 June 2001 (or such later date as Matrix may agree) to:

(a)  the issue to Matrix of the Shares and the Options (and the subsequent ability to exercise the Options in accordance with their terms);

(b)  the appointment to the Board of three nominees of Matrix;

(c)  the entry by E-cademy into the loan agreement; and

(d)  any other matters required by the NZSE.

The directors of E-cademy resolved to accept the offer and it was signed and accepted by E-cademy on 30 May 2001.

E-cademy took immediate steps to call a meeting of shareholders to be held on 29 June 2001. E-cademy has informed the Panel that the reason such prompt action was taken was because of the urgency of the funding situation and was not driven by a desire to avoid the application of the Takeovers Code. It was submitted that the directors of E-cademy at all times believed that the transaction into which the company had entered was outside the application of the Takeovers Code by reason of s.23(b) of the Takeovers Act.

E-cademy applied for an NZSE waiver under Listing Rule 9.2.1 and the time involved in obtaining that approval meant that the date for holding the meeting had to be enlarged and with the agreement of Matrix the meeting was rescheduled for 4 July 2001.

On the afternoon of 2 July 2001 Cube presented E-cademy with a new proposal which it wished to be placed before shareholders as an alternative to the MatrixIP proposal. E-cademy, acting on legal advice, declined to adjourn the shareholders meeting, but permitted Cube to attend and present its proposal to the meeting, notwithstanding the fact that Cube was not a shareholder.

Cube attended the meeting of shareholders on 4 July 2001 and presented its proposal to those shareholders who were present at the meeting. A resolution to adjourn the meeting was not carried and the original resolutions for approval of the MatrixIP proposal were put and supported by the majority of shareholders.

Following the meeting, the contracted shares and options were allotted on 4 July 2001 to MatrixIP's nominee and the equity capital agreed to be provided by MatrixIP was paid over to E-cademy. The NZSE was informed of the share issue on 5 July 2001.

As a listed company, E-cademy was required to comply with the Takeovers Code which came into effect on 1 July 2001, unless the transaction in question was covered by the transitional provision in s.23(b) of the Takeovers Act. MatrixIP (and as a party to the transaction, E-cademy) informed the Panel that they have not complied with the Code requirements because they considered that s.23(b) applied to this transaction.

Question For Determination By The Panel

In the present case there has been an acquisition of securities in a specified company (E-cademy) after the Code came into force on 1 July 2001 in a manner which did not comply with the Code. The question for the Panel is whether compliance with the Code was not required by reason of s.23(b).

The question for the Panel requires interpretation of s.23(b) which provides:

"Nothing in the Takeovers Code shall require any person to comply with the Code - …

b.  By reason of the acquisition of securities in a specified company whether by that person or any other person, on or after the coming into force of the code, if the acquisition arises from the performance of a contractual obligation incurred, or the exercise of a right acquired, before the date on which an approved takeovers code comes into force under section 28(4) of this Act."

E-cademy and MatrixIP have submitted that s.23(b) applies to the issue of the shares and options to MatrixIP on 4 July 2001 because the acquisition by MatrixIP of these securities arises from a contractual obligation incurred prior to 1 July 2001, notwithstanding that performance of the contractual obligation took place after that date when the securities were allotted on 4 July 2001.

Cube submitted that on a proper analysis of the contractual position, the only obligation incurred by E-cademy or its directors as at 1 July 2001 was to call a meeting of shareholders and seek the approval of that meeting to the issue of the shares and options. It was argued that MatrixIP had no contractual right to have the shares issued and allotted to it until the approval of the shareholders had been given. Accordingly, the acquisition of the securities did not arise from the performance of a contractual obligation incurred, or the exercise of a right acquired, before 1 July 2001.


Section 23(b) of the Takeovers Act sets out the transitional arrangements in relation to transactions entered into before the commencement of the Takeovers Code on 1 July 2001 but not completed until after that date. It removes from the application of the Code any transaction which comes within the scope of this provision. There are two limbs to s.23(b):

(a)  An acquisition of securities which arises from the performance of a contractual obligation incurred before 1 July 2001;

(b)  An acquisition of securities which arises from the exercise of a right acquired before 1 July 2001.

The former limb is directed particularly (but not exclusively) to the position of the company that is issuing the securities. The latter limb is directed particularly to the position of the person acquiring the securities where that person holds a right (which may not necessarily be a contractual right) the exercise of which gives rise to the acquisition of the securities. An option to acquire securities, where the right to hold that option is acquired prior to 1 July 2001, but the exercise of the option may not take place until some later date, is a type of transaction to which this limb is particularly directed.

The Panel considers that s.23(b) should be interpreted having regard to the purpose of the provision which, in substance, enables transactions to be completed after 1 July 2001 where those transactions have been put in place before that date.

The present case concerns a conditional contract as at 1 July 2001. Any right, on the part of MatrixIP to acquire the shares and options was conditional on shareholders' approval. We do not consider that the general terms in which s.23(b) is expressed requires a strict analysis to be undertaken as to whether the condition stated in the contract is a condition precedent or condition subsequent, an analysis which the Courts in recent cases have generally found to be unhelpful. In any event, the condition in this case cannot properly be described as a condition precedent to the formation of the contract. Even on the strict analysis of the contract put forward on behalf of Cube, the company or its directors were at least contractually bound prior to 1 July 2001 to call and seek the approval of the shareholders' meeting. The performance of that contractual obligation led to the approval of shareholders being given, and under the terms of the contract, the company was then bound to issue the securities.

Earlier cases relating to the issue of shares need to be treated with caution when regard is had to the significant role, in this respect, which the Companies Act 1993 now places on the Board of a company. Section 42 provides that:

"Subject to this Act and the constitution of the company, the Board of a company may issues shares at any time, to any person, and in any number it thinks fit."

Consistent with that provision are clauses 19 and 21 of E-cademy's constitution which provide for the Board to issue shares and other equity securities, but require, in certain cases (including a case such as the present) that the precise terms and conditions of the specific proposal to issue the securities are to be approved by the relevant resolutions of shareholders. In the present case, the obligation to issue the securities arose when the contract was accepted on 30 May subject to the approval of shareholders. Although this approval was not given until after the commencement of the Takeovers Code, the approval was given under and in performance of contractual obligations which were incurred under a contract entered into prior to 1 July and the securities were issued pursuant to that contract.

The Panel has, therefore, determined that it is satisfied that the transaction under which the shares and options were acquired in the present case comes within s.23(b) of the Takeovers Act 1993 and that the Takeovers Code does not apply to the acquisition of those securities.

The Panel's interim restraining orders will expire at 5.00 p.m. on Friday 3 August 2001.

DATED at Auckland this 2nd day of August 2001.

Signed for and on behalf of the Takeovers Panel by the Chairperson:

               John C King