Takeovers Panel moves to protect shareholders

 

19 June 2006

The Takeovers Panel is seeking public comment on the use of schemes of arrangement and amalgamations to merge or acquire code companies. A code company is a listed company or a company with 50 or more shareholders and assets of $20m or more.

"The media and the market have expressed concerns on the use of schemes and amalgamations under the Companies Act to merge or acquire a code company," Chairman John King said. "The Panel shares those concerns."

The current relationship between the Code and the Act can result in a change of control of a code company under a scheme or amalgamation without shareholders having the rights and protections they have under the Code.

"This is undesirable," John King said. "Companies should be able to choose which process they use to merge with or gain control of a code company. But the rights and protections of code company shareholders should follow consistent principles under all processes."

The Panel has published a discussion paper seeking the views of market participants. 
It will then recommend changes to the law on the use of schemes and amalgamations.

The paper considers amending the Code and the Companies Act so that:

  • schemes and amalgamations are taken out of the Code; and
  • the principles of the Code are included in the provisions of the Companies Act that deal with schemes and amalgamations.

To achieve this the Panel suggests that:

  • the Companies Act relating to schemes be amended to require:
    • the Courts to consider the code principles when approving a scheme, including the level of shareholder approval needed and the information to be given to shareholders; and
    • the Courts to take into account recommendations from the Panel on the Court's requirements for approval of a scheme.
  • the Companies Act relating to amalgamations be amended to require:
    • parties to a proposed amalgamation to obtain Panel approval of the amalgamation provisions; and
    • the Panel to take into account the principles of the Code in determining its requirements for approval.

The discussion paper is on the Panel's website. Submissions close on 30 June 2006.

"The paper raises important policy issues and I urge interested parties to make submissions," John King said.