New Zealand Law Society - Takeovers Panel advises on failure to comply with exemption condition

Takeovers Panel advises on failure to comply with exemption condition

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The Takeovers Panel has outlined its views on failure to comply with an exemption condition.

It the latest issue of its Code Word newsletter, the Panel notes that where an exemption from the Takeovers Code relates to ongoing increases of voting control over a period of time, the exemption may contain ongoing disclosure conditions that must be fulfilled throughout the duration of the increase period.

"Section 2(2) of the Takeovers Act 1993 provides that a contravention of a term or condition of an exemption from the Code is a contravention of the Code. This means that a Code company's failure to comply with any ongoing disclosure conditions results in the Code company breaching the Code.

"In addition, any person who has relied on the exemption to increase their voting control in the Code company, may also be in breach of the Code. This includes any increases of voting control made in reliance on the exemption prior to the breach."

The Panel says if a Code company conducting a buyback does not comply with the annual report or website ongoing disclosure conditions, the Code company will breach the Code.

"Further, when an exemption condition is breached, the exemption ceases to apply and can no longer be relied upon by any person P. All increases in voting control by person P purported to be made in reliance on the exemption both before and after condition breach would result in a breach of rule 6(1) of the Code."

Considering remedies, the Panel says as with any breach of the Code, the Panel will take into account all relevant facts when deciding on an appropriate remedy for a breach of an exemption condition or the Code, "including where a person breaches the Code as a result of the actions (or inaction) of a third party".

It says the Panel executive is available to discuss any issues that may arise out of such a breach.