Takeovers Panel takes steps to mitigate use of schemes of arrangement for the protection of shareholders

The Takeovers Panel has revoked its class exemption for initial public offers which has been relied upon in some schemes of arrangement involving code companies. This follows the Panel's release of a consultation paper on 4 April 2006 which asked for public responses to a series of questions on the refining of takeover laws to prevent companies avoiding Takeovers Code scrutiny by merging through schemes of arrangement under the Companies Act.

The Panel is reviewing its policy regarding the use of its exemption powers to facilitate changes of control of code companies resulting from schemes of arrangement under Part XV of the Companies Act 1993. The two areas which it considers should be revised are:

• the threshold that must be satisfied in order for an exemption to be granted; and
• the conditions for shareholder approval which the Panel will be likely to impose, particularly those designed to protect minority shareholders.

The Panel's existing policy on exemptions for schemes of arrangements was published in July 2003.

The consultation paper also addresses the legislative framework regarding changes of control of companies and the relationship between the Takeovers Code and the Companies Act.

Bell Gully has made submissions on the matters raised in the consultation paper and these can be viewed on Bell Gully's website (see below).

In its media release on 15 May 2006, the Panel notes that it is likely to recommend amending legislation to the Government on the relationship between the Takeovers Code and the Companies Act. Pending this review, the Panel has announced that it:

• will exercise its power to be heard by the High Court when the Court considers proposed schemes of arrangement involving code companies; and
• has revoked the class exemption for initial public offers contained in clause 7 of the Takeovers Code (Class Exemptions) Notice (No.2) 2001. Future applications for exemptions for new company floats will be considered on a case-by-case basis.

For further details, visit the Takeovers Panel's website at www.takeovers.govt.nz.

To download the consultation paper, visit the Takeovers Panel's website or click here.

To view Bell Gully's submissions on the consultation paper see www.bellgully.com or click here.

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For more information on any of the cases, articles and features in Commercial Quarterly, please email Diane Graham or call her on 64 9 916 8849.