For some time, there has been widespread concern that
independent expert reports are fast losing relevance due to
concerns that the expert is not truly independent.
ASIC has responded to these concerns with the release of
Regulatory Guides 111 and 112 to promote higher quality expert
reports that are clear, concise and effective. ASIC has also been
much more active in scrutinising the content of independent expert
The Takeovers Panel has now shown a willingness to critically
review the conclusions reached by experts, with the Review Panel in
Bowen Energy Ltd 02R finding that there were material
deficiencies in that report giving rise to unacceptable
circumstances. The Review Panel ordered that a new report be
obtained from an independent expert who was satisfactory to
The Review Panel's orders in Bowen Energy Ltd 02R
are consistent with the push for regulatory reform to give ASIC a
much greater role in the appointment of experts to restore
confidence in the "independence" of those reports.
Better expert reports
For certain transactions such as takeovers or schemes of
arrangement where the acquirer and target companies share common
directors, companies are required to provide investors with an
independent professional opinion on the merits of the
Such protection is usually afforded where particular risks are
present in the transaction, such as where a party may dominate
investors because of associations, control or unequal bargaining
In some instances, companies voluntarily choose to provide
investors with the benefit of an independent expert report,
assisting them to make an "informed choice" in respect of
the particular transaction, or to help satisfy the company's
legal disclosure obligations. Often the expert report is used to
validate the steps taken by the Board.
While the rationale for providing investors with an independent
professional opinion in these circumstances should be lauded, in
practice the views of the expert are often criticised as being
biased towards the views of the company providing the report.
These perceptions are not helped by the fact that it has been
unusual to see an expert prepared to provide an opinion which
differs from the position advocated by the company obtaining the
ASIC Regulatory Guides 111 and 112 were released in 2007 in
direct response to this continuing public perception that expert
reports might not express a view that is sufficiently independent
from the interests of the client. Those new Regulatory Guides were
intended to enhance market confidence regarding the independence of
experts and to improve the quality of reports.
However, despite the release of these Regulatory Guides,
concerns over the independence of experts remains.
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.
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