CODEWORD

When the Takeovers Code comes into force on 1 July 2001, it is intended that the new law should have full effect from that day. The market is expected to have planned for the changes. However, the Takeovers Act 1993 sets out rules to deal with the transition to the regulatory regime that applies under the code. These provisions are in:

• section 23 of the Takeovers Act;
• section 49 of the Takeovers Act; and
• section 12(2) of the Takeovers Amendment Act 2001 which repeals sections 3(2)(c) and 3(2)(d) of the Securities Act 1978.

Section 23 of Takeovers Act

A person will not be in breach of the Takeovers Code when it comes into force simply because they acquired before 1 July a particular proportion of securities (e.g. more than 20 percent of the voting securities in a Code company) (section 23(a)).

However, the Code will apply to any increase in voting rights that a person holds or controls from 1 July.

In addition, the Code does not apply to any acquisitions of securities by a person on or after 1 July if that acquisition arises from performing a contractual obligation incurred, or exercising a right acquired, before 1 July (section 23(b)). Whether section 23(b) applies in any particular case will depend on the precise nature of the relevant contractual obligation or right. Anyone proposing to rely on this provision should seek legal advice.

New section 49 of Takeovers Act

 This section was inserted into the Takeovers Act by section 12(1) of the Takeovers Amendment Act 2001.

Section 49(1) repeals the Companies Amendment Act 1963 from 1 July. However under section 49(2) the Companies Amendment Act 1963 continues in force where notice of a takeover scheme has been served on a company under section 4 of the Companies Amendment Act before 1 July. The Takeovers Code may also apply to the takeover, unless the transitional provisions in section 23 of the Takeovers Act apply.

Section 12(2) of Takeovers Amendment Act

This section repeals sections 3(2)(c) and 3(2)(d) of the Securities Act 1978 on 1 July 2001. These provisions deal with scrip offers in takeovers. From 1 July any offer of scrip in a takeover will have to comply with the Securities Act, subject to any exemption granted by the Securities Commission. The Commission recently released a public consultation document (Offers of Securities in Takeover Bids) on the question of a possible exemption for scrip offers