CAMAC has recommended the removal of the 'headcount'
test, which requires a majority in the number of shareholders
voting to approve a Scheme in addition to 75% of votes being cast
in favour of the Scheme. The test is viewed by many as out of line
with other shareholder approval processes and unnecessary,
particularly in light of the development of statutory shareholder
oppression remedies. Further, it can have the effect of giving
disproportionate weight to minority shareholders in the Scheme
approval process. By removing the headcount requirement, minority
shareholders would be unable to increase their influence through
share splitting in order to block Schemes.
Despite protests from certain quarters, who argue that the
headcount test is required to protect minority shareholders, CAMAC
considers that there are already adequate protections in place,
such as the courts' discretion to block unfair Schemes, the
requirement for an independent expert's report and the duty of
directors to act in the shareholders' best interests.
Anti-avoidance of takeover provisions
Section 411(17)(a) of the Act currently provides that a Scheme
cannot be approved if it is proposed for the purpose of avoiding
the takeover provisions in Chapter 6 of the Act. However, CAMAC has
indicated that it considers that Schemes present a flexible and
practical procedure which can be used to effect a number of forms
of corporate reorganisation and noted that it has no preference
between a Scheme and a bid as a means to change corporate control
where both are available, acknowledging that certain circumstances
are better suited to Schemes. Accordingly, CAMAC considers that
section 411(17)(a) serves no real purpose and has recommended its
This recommendation has received strong support by industry
practitioners as the provision has frequently been used by
objectors attempting to block Schemes in the past.
Scheme booklet disclosure
CAMAC has recommended the introduction of a 'clear, concise
and effective' requirement for scheme booklets which is the
same test as currently applies to prospectuses. CAMAC emphasised
the importance of focussing on key information in the scheme
booklet to promote readability and recommended that information of
secondary or marginal importance should be able to be incorporated
It has also recommended that the specific disclosure
requirements in the Corporations Regulations be repealed subject
Dissenting directors being given the right to have their views
included in the Scheme booklet.
Retention of the requirement for the provision of an
independent expert's report (which CAMAC suggests should be
inserted into the Act).
Some of the submissions to CAMAC's report suggested that the
court should be given the power to make binding determinations on
class composition at the first hearing as this would provide
certainty and reduce the likelihood of shareholders arguing that
the Scheme should be disallowed at the second hearing on the basis
that the classes were wrongly constituted. Rejecting these
submissions, CAMAC has recommended instead giving the court express
curative powers at the second court hearing to approve a Scheme
notwithstanding that the classes may have been improperly
constituted or if there are other extrinsic factors that may
otherwise result in the court overturning a Scheme vote.
Currently, the due diligence defence is available to directors
who issue disclosure documents in IPOs and bid documents in
takeovers; however, there is no equivalent for Scheme
documentation. Having regard to the similar function of these
documents, CAMAC has recommended a review as to whether they should
continue to receive different treatment.
Extension of scheme provisions
Acknowledging that managed investment schemes, such as property
and infrastructure trusts, constitute a significant proportion of
the securities market, CAMAC recommended that the Scheme procedure
be extended to apply to managed investment schemes (and stapled
groups that include a managed investment scheme).
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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
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