Takeovers Panel to be heard by the High Court on proposed schemes of arrangement involving code companies
The New Zealand Takeovers Panel (Panel) has issued a statement confirming that it intends to take immediate action to exercise its right to be heard by the High Court when the Court considers a proposed scheme of arrangement under Part XV of the Companies Act 1993 (Act), where that scheme is being used as a means of avoiding the shareholder protections in the Takeovers Code (Code) and Act. The Panel is likely to seek that the Court impose conditions on scheme proposals to provide similar shareholder protections as those in the Code and elsewhere in the Act.
The Panel has indicated its growing concern at the use of schemes of arrangement and the use of the amalgamation provisions contained in Part XIII of the Act, to avoid the effect of the Code, and is seeking a legislative review of all relevant legislation affecting such transactions.
Recent examples of transactions structured as either a scheme of arrangement or amalgamation, which would commonly be considered a takeover, include the proposed merger between New Zealand-based Contact Energy Limited and Australian-based Origin Energy Limited, and the proposed merger between New Zealand-based Waste Management NZ Ltd and Australian-based Transpacific Industries Group Ltd.
Sarah Miller, senior associate (Wellington)
Shorter and better prospectuses
In February 2006, ASIC issued a draft Policy Statement reflecting its desire to see more clear, concise and effective prospectuses.
ASIC wishes to encourage clearly organised and navigable prospectuses which:
- Highlight important information.
- Are written in plain English.
- Remove 'boilerplate' wording.
- Include more specific risk disclosure.
Criticisms set out in submissions received by ASIC include:
- The difficulty in succinctly describing complex financial products may result in the loss of an advantage Australia currently enjoys over other countries in being able to offer them.
- The risks highlighted in ‘pro forma’ risk disclosures are relevant to most offerings.
- Legislation dealing with the content of prospectuses does not support a requirement for ‘short’ documents.
- The ‘over-disclosure’ of which ASIC complains is a reflection of detailed content requirements and a manifestation of a desire to limit liability. Issuers should not be required to expose themselves to liability because of a requirement that the document be ‘short’.
Despite this, ASIC is keen to implement this policy and has indicated that one form of ‘encouragement’ might be that prospectuses longer than 120 pages might be targeted for surveillance.
The finalised Policy Statement is expected around July 2006.
Johnny Short, senior associate (Melbourne)
Agreement between Australian and New Zealand governments on regime for mutual recognition of securities offerings
The Australian and New Zealand governments signed a treaty in February that forms the basis of a regime to allow the mutual recognition of securities offerings. The regime will allow an issuer offering securities or managed investment scheme interests to the public to extend an offer in one country to investors in the other country using the same offer documents and offer structure (with some limited additional requirements). The aim is to reduce redtape and costs for issuers and allow for increased trans-Tasman investment and choice for investors. Currently, New Zealand and Australian issuers cannot use their home jurisdiction offer documents when making a trans-Tasman securities offer as they have to comply with the relevant fundraising requirements in both countries (unless operating under an exemption). The regime could come into force later this year once the necessary details are implemented through each country’s legislation or regulations.
The regime is part of the wider work programme developed under the Memorandum of Understanding on Business Law Coordination (MOU) between Australia and New Zealand. The revised MOU, also signed in February, provides the framework for the coordination of business law between Australia and New Zealand. The revised MOU proposes an extensive work programme to increase trans-Tasman coordination in business regulation, such as increasing the coordination and information sharing amongst regulators, the further coordination of disclosure regimes in securities law through mutual recognition/coordination of disclosure requirements, the consideration of mutual recognition and/or further coordination of the regulation of financial intermediaries, the coordination and enforcement of insurance regulation, and the coordination of anti money laundering supervisory frameworks. This is in addition to work recently done in the areas of banking supervision and information sharing between the competition regulators in both countries.
Tracey Cross, partner (Wellington)
Matt Kelleher, solicitor (Wellington)
Proposed reforms to Australian takeover Laws
The Financial Services Institute of Australia (‘Finsia’) recently released a proposal to reform Australia’s takeover laws to encourage more takeover bids while improving protections for minority shareholders.
Finsia’s key proposals include:
- Increasing the takeover threshold from 20 per cent to 30 per cent, while removing the ‘3 per cent creep in 6 months’ rule. This proposal is consistent with most overseas jurisdictions including the UK, Hong Kong and Singapore.
- Adopting a Pre-bid Commitment Rule, allowing a bidder to enter into an agreement to acquire more than the designated takeover threshold from a single major shareholder, subject to the same offer being made to all other shareholders.
- Removing inconsistencies between schemes of arrangement and takeovers under Chapters 5 and 6 of the Corporations Act 2001 (Cth), respectively.
- Restricting the exemptions that apply to acquisitions by underwriters or subunderwriters resulting from rights issues to ensure that they are not exploited to circumvent the takeovers restrictions.
Each of the proposals contained in Finsia's Takeovers Package have been presented to the Parliamentary Secretary to the Treasurer, Chris Pearce, and other interested stakeholders and are likely to generate significant debate.
Chris Skordas, solicitor (Melbourne)
Mark Burger, partner (Melbourne)
Other points of note
Amendments to NZX Listing Rules now in force
The amendments to the listing rules of the NZ Equity Security Market and NZ Debt Security Market (NZSX/NZDX) took effect on 10 May, other than the amendments to Appendix 1 and its related rules which take effect on 1 July. The amendments were described in the last issue of Corporate Alert.
NZX advises re-prints of the new rules will be available by 31 May. In the meantime, a summary of the amendments and copies of the amended rules are available from the NZX website, www.nzx.com/regulation.
This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.