Most Read Contributor in New Zealand, September 2016
Tough regulations to protect the public against
unsolicited offers for securities were signed off by the Governor
General this week and will come into force on 1 December
They have been a long time in the making as they
originated in response to a series of low ball offers made by
Bernard Whimp in December 2010 and were provided for under the
Securities Markets Amendment Act which was passed back in April
But they are a welcome addition to the statute books and
should give offerees clearer disclosure and reasonable time to
consider the offer and to take independent advice.
If a subsequent offer is made, it will be presumed that the
intention was to make that offer at the time the first offer was
made unless the offeror can prove the contrary.
The offeror must give written notice to the issuer at least five
and not more than ten working days before the offer is made.
This notice must be accompanied by a copy of the standard
disclosure document that will be given to the offerees and a list
of the names and addresses of every person to whom the offer will
If the disclosure document is accompanied by other documents, it
must be prominently identified and placed to ensure that it will
come to the offeree's attention.
The document must include the following information:
the price the offeror is offering for each security
the current market price (for listed securities) and a fair
estimate of the value where the security is unlisted
what the total offer will deliver to the offeree and what the
market price/fair estimate would deliver
the website of the registered exchange where the offeree may
check the market price or (for unlisted securities) the basis for
making the value estimates and whether they have been reviewed by
an independent and qualified third party
how and when the payments will be made (and, if by instalment,
the amount of each instalment)
the date by which payment will have been made in full.
The offer period
must be no shorter than 30 days and no longer than 12
offers can be withdrawn only with the consent of the Financial
Markets Authority (FMA) and the terms of the offer cannot be
an offeree can cancel an agreement to sell by giving notice
within ten working days of the acceptance, and by repaying any
Offerors will no longer be able to put investors under time
pressure by urging them to "act now" as "first in
first served" offer terms are not permitted. All offerees must
have at least 30 days to consider the offer.
The FMA has the power to order a correction or to seek civil
remedies or penalties from the Court. This is in addition to the
powers it was given under section 49 of the Financial Markets Act
to require low ball offerors to attach a warning disclosure
statement to any offer documents.
We have been pushing hard to have this gap in the law closed and
have submitted and written extensively on the issue. Our
submissions and earlier commentaries are available
The Regulations should provide offerees with clearer disclosure,
and a reasonable time period for offerees to consider the offer.
Issuers will have sufficient time to also contact investors, and
investors will have the opportunity to reconsider hasty
In addition to the Regulations, provisions in the Financial
Markets Conduct Bill will make it a strict liability offence to use
data from an issuer's securities register to contact people or
send them direct marketing material unrelated to the financial
product or to disclose investor details to third parties knowing
that the disclosure is likely to be abused.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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