- The key takeovers regulators are the Australian Securities and Investments Commission (ASIC) and the Takeovers Panel.
- ASIC has general supervision of the Corporations Act including the takeovers rules, and has the power to modify and grant relief from the takeovers rules.
- The Takeovers Panel is the forum for resolving takeover disputes. It has the power to declare circumstances unacceptable (even if they do not involve a breach of law) and to make remedial orders.
- Neither ASIC nor the Takeovers Panel has the power to make upfront binding rulings on a proposed structure or proposed course of action.
- Courts play a very limited role in takeover transactions conducted via a takeover bid structure. However, courts play a vital role in takeover transactions conducted via a scheme of arrangement, in that a scheme requires court approval.
The takeovers rules in the Corporations Act are administered by ASIC, with takeover disputes largely being determined by the Takeovers Panel (other than in the context of schemes of arrangement once they become subject to the court’s scrutiny). In the case of acquisitions of an ASX-listed entity, the rules of the ASX also become relevant. The court has a central role in considering and approving schemes of arrangement, but otherwise has a limited role in takeovers.
Other bodies also have a role in regulating control transactions, depending on the circumstances. These include the Australian Competition and Consumer Commission in respect of competition matters, and the Foreign Investment Review Board in respect of foreign investment approval matters.
ASIC is a government body which has general supervision of all aspects of the Corporations Act including takeovers. ASIC is invested with broad facilitative, regulatory and enforcement powers including (insofar as they relate to takeovers):
- to modify and grant relief from provisions of the takeovers rules in the Corporations Act, which ASIC can do (and has previously done) through policy instruments called ‘class orders’ which apply widely or through transaction-specific modification and relief instruments;
- to review ‘scheme booklets’ to be sent to target shareholders in a company scheme of arrangement before such booklets can be submitted to the court for approval to despatch to shareholders;
- to make submissions to the court in respect of a scheme of arrangement and, where it considers it appropriate, to issue a no-objection statement;
- to apply to the Takeovers Panel for declarations of unacceptable circumstances and remedial orders, and to make submissions on applications made by others;
- to investigate suspected breaches of the law and in so doing require people to produce books or answer questions; and
- to seek civil penalties from the courts and to commence certain prosecutions.
As part of its supervisory role ASIC has a practice of reviewing takeover and takeover-related documents (such as ASX announcements, bidder’s statements and target’s statements) and, if a document appears to raise a legal or policy issue, making informal enquiries of the relevant persons. These enquiries can be a precursor to a formal investigation.
It must be noted that, other than making decisions about applications for modifications of or relief from the takeovers rules, ASIC does not (and does not have the power to) provide upfront binding rulings on whether a proposed course of action will comply the takeovers rules. Nor is ASIC a forum for resolving takeover disputes – that role is performed by the Takeovers Panel.
4.3 Takeovers Panel
The Takeovers Panel is a specialist tribunal for resolving takeover disputes. It has near-exclusive jurisdiction to hear disputes in relation to a takeover bid, and broad non-exclusive jurisdiction in relation to control transactions and acquisitions of voting securities that do not involve a takeover bid. It also has jurisdiction to hear matters relating to a proposed scheme of arrangement before the courts are involved.
The Panel’s objective is to determine takeover disputes in an efficient manner by focusing on commercial and policy issues rather than technical legal points. To this end, the Panel comprises part-time members appointed by the government from the ranks of public company directors, senior investment bankers, academics and lawyers. Each application to the Panel is heard by a sitting Panel of three of those members. The Panel is supported by a full-time executive team.
The Panel’s primary power is to declare circumstances unacceptable in relation to a takeover bid for, or the control of, an Australian publicly listed company or trust. The Panel can make such a declaration if it appears to the Panel that the circumstances:
- are unacceptable having regard to the effect that the Panel is satisfied that the circumstances have had, are having, will have or are likely to have on:
- the control or potential control of a listed company or listed managed investment scheme; or
- the acquisition or proposed acquisition of a substantial interest in a listed company;
- are otherwise unacceptable having regard to the purposes of the takeovers rules (ie. the fundamental principles in section 1.4); or
- are unacceptable because they constitute or are likely to constitute a breach of the black letter takeover rules or the provisions relating to substantial shareholding notices or tracing provisions,
and after having regard to the public interest.
If the Panel makes a declaration of unacceptable circumstances, it has very broad powers to make orders to protect the rights of persons (especially target security holders) 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. This includes divestment orders and orders affecting the rights of third parties.
As with a court, the Panel cannot act of its own accord. It can only make a declaration of unacceptable circumstances in response to an application brought by ASIC or an interested party (eg a target entity, target securityholder, or a competing bidder).
However, the similarities to a court end there. Unlike a court, the Panel does not make decisions on the basis of black letter takeovers rules. The Panel is required to, and in practice does, take a purposive approach to the takeovers rules – the upshot being that structures and courses of action which technically avoid the operation of any takeover rule but which may be inconsistent with the fundamental takeovers principles are at risk of being struck down by the Panel. Also, unlike a court the Panel is not bound by rules of evidence, thereby giving the Panel greater flexibility in determining what information it can take into consideration when ruling on an application. Further, unlike a court, virtually all Panel cases are conducted by written submissions and involve a fairly short timetable.
The Panel also has the power to review ASIC decisions whether to grant modifications of or relief from the takeovers rules. This power is not commonly exercised, as relatively few applications for such review have been made to date.
The Panel has published a number of guidance notes which discuss the policy the Panel considers relevant in control transactions. Prior Panel decisions (roughly 15-35 each year since the Panel was established in 2000) are also a useful source of guidance. However, it must be noted that, unlike the London Takeover Panel, the Australian Takeovers Panel does not (and does not have the power to) provide upfront binding rulings on whether a proposed course of action complies with the takeovers rules or is immune from a declaration of unacceptable circumstances.
The ASX does not specifically regulate the manner in which takeovers are conducted, aside from settlement rules regarding the electronic processing of takeover bid acceptances and other rules relating to reporting of information and restrictions on security issuances by a target entity following a takeover bid being announced. In addition, the ASX is normally involved in approving securities trading arrangements to facilitate the implementation of a scheme of arrangement.
In respect of a takeover, the ASX’s focus is to ensure that ASX-listed entities comply with the ASX Listing Rules, particularly the continuous disclosure obligations. In short, each ASX-listed entity is obliged to disclose all price-sensitive information once it becomes aware of that information, unless the information falls within a limited exception. ASX-listed entities who are the subject of a confidential takeover approach need to be particularly mindful of their continuous disclosure obligations.
4.5 The courts
Given the Takeovers Panel’s near-exclusive jurisdiction to hear disputes in relation to takeover bids, courts play a very limited role in takeover transactions conducted via a takeover bid structure. In contrast, courts play a vital role in takeover transactions conducted via a scheme of arrangement structure – namely to order the convening of the scheme meeting and to confirm the scheme once approved by target shareholders (which is required for implementation of the scheme).
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