Questions over proposed Takeovers Code solutions
The New Zealand Law Society says it is generally supportive of solutions the Takeovers Panel proposes for problems identified with the Takeovers Code, but there are still a few issues.
The Law Society has released its comments on the Panel’s consultation paper “Further Technical Issues with the Takeovers Code”. It says it supports the Panel in identifying concerns about the problem caused by the absence of an obligation to publicly notify the status of the conditions during the offer period, and in suggesting preferred options to address the problem.
On behalf of the Law Society, its Commercial and Business Law Committee says it particularly agrees that the Code should be amended to provide for a requirement for the offeror to provide details of the status of defeating conditions prior to the close of the offer period.
“The Committee also accepts the Panel’s conclusion that the absence of such requirements puts the New Zealand market out of step with comparable jurisdictions, notably Australia, and as a result puts investors at a disadvantage.”
While the Committee says it supports proposals to improve the level of information available for the market and market participants, it is also mindful of the need for New Zealand not to appear to be out-of-step with comparable overseas jurisdictions. This could mean a risk of imposing barriers to further international investment into the New Zealand market.
As a result, the Committee questions the Panel’s proposal to replace a clause in the Code with a reference to “strategic expectations”, saying this may be too wide-reaching when used in the context of New Zealand-scale Code companies. The Committee suggests using “intentions” as a suitable alternative, and points out that this is used in Australia.
The Committee also says that the expansive wording suggested in one part appears to put New Zealand in the position of market leadership in relation to the disclosure of the offeror’s intentions for the target. It says this causes it some concerns, and leads it to question whether – in light of other provisions which require the offeror to disclose information that could reasonably be expected to be material to the offeree’s decision-making process – this requirement is “simply a step too far”.
The Committee also makes a number of suggestions which would tidy up some drafting anomalies and inconsistencies to proposals in the consultation paper.