Some Lessons From The Humm Situation

 IN BRIEF

• When a takeover proposal is received, the board must rigorously assess whether any director has a personal interest that could be affected by the outcome of the proposal. If there is any reasonable perception of a lack of independence — even if the director believes they can act impartially — that director should be excluded from the board's consideration of the matter and an independent board committee should be formed.
• ASX announcements must accurately reflect the board's actual position on a proposal. Stating that a proposal is being 'carefully evaluated' when the board has in substance already decided to reject it is likely to be found misleading.
• A target board must substantively engage with a takeover proposal. The Panel will scrutinise whether the board's actions are consistent with its public statements and may substitute its own views on what constitutes genuine engagement.

Some lessons from the Humm situation

You have probably read about the protracted takeover situation involving Humm Group Limited. For what is a small company, the media coverage has been turned up to eleven.

The company received a takeover approach shortly after engaging with an earlier, less favourable proposal from its own Chairman. The response to the second approach led to a drawn-out sequence of events, culminating in the Takeovers Panel declaring that circumstances were ‘unacceptable’. The Panel recently published its reasons, which provide lessons about conflicts of interest, the formation of independent board committees and disclosure obligations when responding to a takeover proposal. I summarise the key aspects below, but the reasons are worth reading in full.

Recap of facts

Humm Group, a non-bank financial services provider listed on the ASX, was subject to a takeover proposal in June 2025 by TAG, a company controlled by the Chairman of Humm (Mr Andrew Abercrombie), which owned 26.4% of issued shares. The price proposed was 58 cents per share, a significant premium to the then share price of 43 cents. The Board quickly resolved to engage with TAG via an independent board committee (or IBC) and offered due diligence. However, after four months, the proposal was withdrawn when it became apparent it would not be supported by other shareholders. At the AGM a short time later, the Chairman declined to rule out TAG making another proposal.

A few weeks later on 19 November 2025, Credit Corp Group, another ASX listed company, made a confidential proposal. It offered 77 cents per share under a scheme of arrangement to acquire 100% of the shares in Humm or, if that did not proceed, 72 cents per share under a takeover bid conditional on 50% acceptances. That structure took account of the ability of the Humm Chairman to block a scheme given that would require a 75% vote. 

The Board of Humm (including the Chairman) met and, based on legal advice from the law firm which had previously advised TAG on its proposal, decided that the whole Board would consider the proposal, no IBC was required and that the Chairman would be responsible for liaising with Credit Corp.

Consistent with the ASX listing rules, as the proposal was non-binding, indicative, conditional and confidential, the Board did not announce the proposal to the ASX.

Soon after, the Chairman spoke to Credit Corp’s CEO and said that the proposal was ‘of no interest’ to him and that he hoped ‘not too much time and money would be wasted’ on the matter. In view of the earlier engagement with the TAG proposal at a lower price, Credit Corp wrote to the whole Board in early December, expressing concern that its proposal was not being afforded similar treatment to the TAG proposal. 

In mid-December, a number of shareholders who had concerns about governance at Humm advised the company that they would be seeking to spill the Board.

The Board decided to announce to the ASX the fact that a Board spill motion was proposed and also to announce the Credit Corp proposal. The announcement said that the Board was ‘carefully evaluating’ the Credit Corp proposal and said it was willing to give due diligence subject to a market standard non-disclosure agreement being agreed. After the announcement, the Chairman purchased a further 3% of shares on ASX, having received approval under Humm’s securities trading policy.

By late January 2026, a non-disclosure agreement with Credit Corp had not been executed and due diligence had not started. A shareholder applied to the Takeovers Panel arguing, amongst other things, that the Credit Corp proposal was not being afforded the same treatment as the TAG proposal, the implication being that Humm was ‘slow walking’ the proposal. 

Eventually, on 13 March 2026, an NDA was executed and Credit Corp commenced due diligence a few days later. Discussions between the parties did not lead to an agreed transaction and discussions ceased in late June.

Takeovers Panel decision

The Panel considered a very large amount of detail, much of which goes beyond the scope of this article. However, I want to draw your attention to findings that have direct implications for how boards should respond to takeover proposals.

Need for an IBC

The Panel was highly critical of the Board for not forming an IBC (which excluded the Chairman) to consider the matter. 

The Panel considered that the Chairman had a conflict given that he was a potential bidder for the company and that one possible outcome of the Credit Corp proposal was that he would no longer be the major shareholder but would become a minority shareholder if the takeover bid was successful. In that circumstance, the Panel considered that it was inappropriate for the Chairman to participate in board decisions on the matter. 

Once the Panel's views became apparent, Humm offered an undertaking to establish an IBC (which, incidentally, was tasked to review whether to appoint a fresh law firm).¹ 

Misleading ASX announcement

The Panel was concerned that the December announcement of the Credit Corp proposal was misleading in material respects. The announcement said the Board was ‘carefully evaluating’ the proposal. The Panel considered that, on the contrary, the Board had already decided to reject the proposal (or, at least, had acquiesced to the Chairman’s statements to Credit Corp) and that fact had not been stated in the announcement.² 

Failure to engage substantively with Credit Corp

After receiving extensive submissions, the Panel was critical of Humm’s engagement with Credit Corp and did not consider it sufficient to be properly characterised as ‘substantial engagement’ on the takeover proposal.

The Panel noted that it took 114 days for Humm to agree the terms of the NDA (and that was well after the Panel proceedings commenced). Further, the Panel said that ‘based on our commercial experience’ it would have expected that there would have been various other activities undertaken by Humm after the receipt of the proposal if Humm had intended to genuinely engage with Credit Corp. This would include: 

• instructing the company’s financial advisers to update the valuation of the company (previously provided to the company months ago in October 2025);
• discussions between senior representatives of Humm and Credit Corp about the value of the acquisition proposal given the fact Credit Corp had been told that its proposal would not receive a board recommendation; 
• a substantive written response to the letter from Credit Corp to the Humm Board sent in early December; and 
•  discussions about the status (and progress) of the Credit Corp proposal at meetings of the Humm directors. 

However, the Panel considered that it did not receive evidence of any of these activities taking place. In the context of public statements that ‘the board was willing to engage’, this meant the circumstances were ‘unacceptable’.

Key lessons

The key lessons for directors are as follows:

• When a takeover proposal is received, the board must rigorously assess whether any director has a personal interest that could be affected by the outcome of the proposal. If there is any reasonable perception of a lack of independence — even if the director believes they can act impartially — that director should be excluded from the board's consideration of the matter and an independent board committee should be formed.
• Any ASX announcement of a takeover proposal must accurately reflect the board's position. If the board has formed a preliminary view — including a negative view — that must be disclosed. An announcement that says the board is 'carefully evaluating' a proposal when, in substance, it has already decided to reject it, is likely to be found misleading.
• While the Panel generally has regard to the commercial business judgment of a target board, it may be prepared to review the board’s actions and substitute its own views.

The Panel's decision was affirmed on review by a further Panel. The Chairman then commenced proceedings for judicial review, and we are awaiting the court's decision.

Having advised the independent directors since March, I feel some sympathy for the position in which they found themselves. They followed legal advice at all times, were assisted by experienced financial advisers and there was always a chance that the Credit Corp proposal would not progress (as turned out to be the case eventually). 

Nevertheless, the above points stand as a reminder that, when a takeover proposal is received, great care needs to be taken to ensure all decisions are fair and will withstand scrutiny should they be examined at a later date.

One final point is that the situation underlines the critical importance of advance preparation. A takeover proposal can arrive at any time, including when the board is already managing governance tensions or other pressures. Directors should not wait until a proposal arrives to address potential conflicts, appoint defence advisers or settle disclosure processes. These should be treated as standing governance matters, reviewed periodically, so that the board is in a position to respond promptly and properly when a proposal is received.

Footnotes

1. That led to me being appointed to advise the IBC.

2. That in turn meant that the Panel considered that the Chairman’s purchase of the 3% stake was made when the market was not properly informed, leading to orders in relation to the shares purchased.