Australia: The road to control is paved with shareholder intentions (GN23) - 17 December 2015

Last Updated: 22 December 2015
Article by Michele Muscillo and Luke Dawson

Following a short consultation period, the Australian Takeovers Panel (Panel) has now released Guidance Note 23: Shareholder intention statements (GN23) on 11 December 2015.

In this alert, Partner Michele Muscillo and Associate Luke Dawson examine the underlying requirements of a Shareholder Intention Statement in the context of GN23 and the differences between the final GN23 and the draft guidance note published by the Panel in its initial Consultation Paper in July 2015 (Consultation Paper).

Background

A "Shareholder Intention Statement" is a statement regarding the intention of a shareholder (which must have been made or authorised by that shareholder), in the context of a takeover bid, scheme of arrangement or a shareholder vote for the purposes of Item 7 of Section 611 of the Corporations Act 2001 (Cth) (Corporations Act).

Shareholder Intention Statements are often used in the context of a takeover bid or scheme either in support of the proposal or against the proposal1 and can often influence the decisions of other shareholders.

Common Shareholder Intention Statements include:

  • Shareholder, a holder of # Shares (X% of the Company's Shares), intends to accept the Offer by Y in the absence of a superior proposal; or
  • Shareholder, a holder of # Shares (X% of the Company's Shares), does not presently intend to accept the Offer by Y (however reserves the right to do so in the case of an increase in Offer Price).

Because of their potential influence, the Panel is vigilant to ensure that such statements do not inhibit:

  • the acquisition of control over voting shares taking place in an efficient, competitive and informed market;2 and
  • shareholders and directors being given enough information to enable them to assess the merits of a proposal.3

Requirements for a Shareholder Intention Statement

The Panel has provided in GN23 the following guidance in respect of Shareholder Intention Statements:

  1. Shareholder Intention Statements must be clear in their meaning

For example, an intention expressed as a "present" intention without a clear additional statement that the shareholder reserves the right to change its mind (with an appropriate qualification) may be insufficient to counterbalance the effect of the "last and final statement" on a shareholder. That is, any departure from the statement by the shareholder may risk a declaration of unacceptable circumstances.4

The Takeovers Panel have also stated in Bullabulling Gold Limited [2014] ATP 8, that where statements are intended to reflect a shareholder's intentions at a point in time, in the absence of express words to this effect, the Panel does not consider that (whatever the intentions of the shareholder) a [present intention] statement will convey this message. This reflects the guidance given by the UK Panel which treats present intention language as being firm rather than qualified.

  1. If Shareholder Intention Statements are qualified, they must not be ambiguous

Shareholder Intention Statements are able to be qualified (and we would recommend that in most circumstances they should be to preserve flexibility to some degree), but if they are qualified, that qualification must not be ambiguous.

For example, if the relevant Shareholder Intention Statement was:

Shareholder, a holder of # Shares (X% of the Company's Shares), does not presently intend to accept the Offer by Y (however reserves the right to do so should no superior proposal emerge),

and the Shareholder then accepted the offer without waiting a reasonable amount of time for a superior proposal to emerge, it would likely constitute unacceptable circumstances.

The Panel has noted that while the amount of time required in each situation will depend on the specific circumstances, the Panel has noted that generally a reasonable amount of time will be 21 days after the offer has opened.

  1. Shareholder Intention Statements must be published with detailed information regarding the holding(s) to which the statement relates

The identity of the shareholder providing their consent to the publication of the Shareholder Intention Statement needs to be disclosed, along with details of their shareholding in terms of number and percentage.

If a bidder/target wishes to aggregate a number of shareholdings, they should ensure that:

  • all of the statements they have received contain the same qualifications (that is, they are not given on different terms which would preclude aggregation); and
  • all of the shareholders whose shareholdings are to be aggregated have consented to their shareholding being aggregated with other shareholdings (although they are still required to be separately identified in the statement).

Changes between the draft GN23 and the issued GN23

On 11 December 2015, the Panel also issued "GN 23 Shareholder Intention Statements Public Consultation Response Statement" (Response Statement).

The Response Statement notes, that in response to submissions received on the draft GN23:

  • the Panel has removed the statement "The Panel does not encourage or discourage shareholder intention statements" and instead included in GN23 a statement that Shareholder Intention Statements may give rise to concerns (depending on how they are obtained and used);5
  • where a shareholder intention statement is qualified by reference to a "superior proposal", a period of time is expected to elapse prior to acting in respect of that intention (the Panel would generally expect this time frame to be 21 days from the opening of the relevant offer);
  • irrespective of the number or percentage of Shares held, the details of a holding related to a Shareholder Intention Statement must be disclosed (that is, there is no materiality threshold prior to the disclosure obligation arising);[6]
  • consent for the making of a Shareholder Intention Statement is required (if consent is not provided with a Shareholder Intention Statement that is made outside of a bidder's statement or target's statement, then the Panel has noted that they may look more closely at the statement);
  • the Panel does not believe that any further guidance is required for smaller companies; and
  • the Panel does not believe that further guidance is required on whether shareholder intention statements give rise to relevant interests or associations.

Concluding thoughts

Shareholder Intention Statements are a useful tool in the context of control transactions. Ensuring that Shareholder Intention Statements are appropriately crafted and qualified can be essential to the success (or otherwise) of a transaction.

Footnotes

1 The Consultation Paper notes that in 2014, 45% of takeovers and 86% of schemes were announced together with a statement of shareholders' intentions in response to the proposal.
2 Section 602(a) of the Corporations Act.
3 Section 602(b)(iii) of the Corporations Act.
4 The Panel's guidance on Shareholder Intention Statements operates in parallel with ASIC's guidance in ASIC Regulatory Guide 25: Takeovers: false and misleading statements, commonly referred to as "truth in takeovers" policy.
5 For example, where the interests the subject of the statement, when aggregated with the bidder's interest, exceed 20% - see MYOB Limited [2008] ATP 27.
6 This guidance is also applicable to aggregated holdings.

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

2015 AFR Beaton Client Choice Awards:
Best Law Firm (revenue $50m - $200m)
Best Professional Services Firm (revenue $50m - $200m)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific 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.

Authors
Michele Muscillo
 
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”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
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).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.