In April 1998 the Australian Treasury, the government department responsible for corporate law reform, issued an exposure draft of proposed reforms to Australia's takeover laws. The stated objective of the proposals is to improve the efficiency of the market for corporate control in Australia.
The most controversial change is the proposed introduction of a mandatory bid rule. At present a party wishing to buy control of a public company cannot buy more than 20% of its shares without passing through one of several gateways. The most commonly used gateways are:
obtaining target shareholder approval; or
making a takeover bid for the whole of the target company.
It is currently not possible to enter into an arrangement to acquire more than 20% of the target's shares before passing through one of the gateways.
The proposed mandatory bid rule will allow a bidder to acquire more than 20% of all shares in the target company from a single shareholder in the target on condition that the bidder then makes a takeover bid for all other shares of the target. The bid must be an unconditional cash bid at a price not lower than the price paid by the bidder to the single shareholder.
Under the proposed rule a bidder will be able to assure itself of control of the target company by buying a controlling stake from a single shareholder, before making its public bid to all shareholders. The proposal has been criticised by the writer and other commentators for locking out from an auction for control of the target all prospective bidders other than the buyer from the single shareholder. An auction with a single bidder may not produce the best possible price for target shareholders.
Major changes are also proposed to the Australian laws dealing with the acquisition of any outstanding securities by a takeover bidder which has acquire more than 90% of all the target company's shares. The changes will enable such a bidder to acquire all outstanding securities of all classes, not just outstanding shares as at present.
Other changes will be made to the rules dealing with the compulsory acquisition of the securities held by minority holders, including facilitating the acquisition of outstanding securities by a party which already holds 90% or more of any securities of the same class.
Another significant proposed change is the proposal to extend Australia's company takeover provisions to apply to listed managed investment schemes. Currently takeovers of these schemes are regulated principally by each scheme's constituent document. As most managed investment schemes are constituted as unit trusts, the constituent document is normally the unit trust deed. The company takeover provisions will not however apply to unlisted managed investment schemes.
For further information please contact Click Contact Link at:
44 Martin Place
Sydney NSW 2000
Main Telephone Number: (+61 2) 9210 4444
Main Fax Number: (+61 2) 9235 2711
E-mail Address: Click Contact Link
Visit our website at Click Contact Link
The information contained in this article has been prepared by the Minter Ellison Legal Group. Professional advice should be sought before applying the information to particular circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Treasurer Scott Morrison recently announced changes to a number of 2016 Budget superannuation contribution measures.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).