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The Corporations Amendments (Takeovers) Bill 2007 was
introduced into the House of Representatives on 14 February 2007
and was passed on 28 February 2007. It was then introduced into
the Senate on 1 March 2007. The purpose of this Bill is to
implement legislative amendments to the Takeovers Panel (the
Panel) provisions of the Corporations Act 2001 (the Act).
The amendments are intended to allow the Panel to continue to
act in an effective, efficient and expeditious manner when
resolving disputes during takeover bids, relying on the
specialist expertise of its members so that the outcome of any
takeover bid can be resolved by the target shareholders on the
basis of its commercial merits.
Chapter 6 of the Act regulates company takeovers. The present
regulatory framework is meant to ensure that the acquisition of
control in a company 'takes place in an efficient, competitive
and informed market'. To facilitate this objective, the Panel
was established to provide a specialised body capable of dealing
with disputes arising in the course of an official takeover and
to provide an alternative to litigation.
The Panel has wide powers. Its primary power is to declare
circumstances, in relation to a takeover, or to the control of
an Australian company, to be unacceptable circumstances.
The Panel has the power to make orders to protect the rights
of persons (especially target company shareholders) during a
takeover bid and to ensure that a takeover bid proceeds (as far
as possible) in a way that it would have proceeded if the
unacceptable circumstances had not occurred.
In recent times, the Panel's role has been compromised by
increasingly sophisticated commercial transactions circumventing
the rules relating to company takeovers. The amendments proposed
by the current Bill would allow the Panel greater scope in
granting orders based on a wider set of considerations.
The proposed amendments are discussed below.
Substantial interest
An important concept in the present takeover regulations is
that of a 'substantial interest'. The Bill addresses the
definition of 'substantial interest' by introducing a new
section 602A, which describes what a 'substantial interest' is not.
A 'substantial interest', under the new provisions, would not
be limited to a relevant, legal or equitable interest. This
negative formulation enables the Panel to make declarations
directed at a broader segment of relevant parties, which should
give the Panel the flexibility required to carry out its role.
If a situation arises whereby the legislation is incapable of
clear implementation, the proposed section 602A would allow for
the provision of regulations determining whether a particular
interest falls within the notion of 'substantial interest' or
not.
Grounds for making a declaration under section 657A
Currently, a bidder, a target, ASIC or any other party with
an interest affected by the relevant circumstances can, under
section 657C, apply to the Panel for a declaration. Once a
declaration is made under section 657A, the Panel may make
orders under section 657D.
Section 657A(2)(a) currently provides that the Panel may make
a declaration where the effect of the circumstances, which are
the subject of the application, are unacceptable in terms of the
requirements in subsections (i) and (ii). There is a concern
that the Panel may not be able to make a declaration based on
consequences that are apprehended but have yet to eventuate
(section 657A(2)(b)). In these circumstances, the Panel would
have to wait until the circumstances arise before its
jurisdiction could be invoked.
In order to avoid such a situation, the Bill would amend
section 657A(2)(b) to allow the Panel to make declarations
where, to the satisfaction of the Panel, 'circumstances have
had, are having, will have or are likely to have' an
unacceptable effect.
Orders protecting rights
Once a declaration is made by the Panel, the Panel can make
orders under section 657D. When making such orders, the Panel
must allow for submissions. The proposed amendments in the Bill
would limit the scope of allowable submissions by replacing the
category encompassed by section 657D(1)(a), 'each person to whom
the proposed order relates', by the narrower rule that
submissions can only be made by those to whom the order is
directed.
Orders can be made by the Panel to protect the rights or
interests of any person affected by the circumstances that have
been declared unacceptable (section 657D(2)(a)). The amendments
would widen the scope of this power to include interests and
rights (past, present or future) of any person or group of
persons not directly affected by the circumstances, but still,
nevertheless, affected.
Other amendments
The Bill includes an additional subsection (5) under section
657EA (Internal Panel reviews) to set a time limit on when the
Panel can make a final declaration. Declarations would need to
be made either within three months of the circumstances in
question arising or at the end of one month after an application
for review (whichever ends last).
This article appeared in the July 2007
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