Small Shareholders Get More Protection
February 9th, 2009
Changes to amalgamations and schemes of arrangement involving changes of control of companies falling under the Takeovers Code are being recommended.
The Takeovers Panel has made recommendations to the Minister of Commerce for changes to the Companies Act 1993 and the Takeovers Act 1993. The panel’s main proposal is changes of control of code companies (those falling under the Takeovers Code) should be able to be effected either under the Takeovers Code, or as schemes of arrangements with Court approval under part 15 of the Companies Act.
The panel does not advocate changes of control should be able to be achieved by way of amalgamation under part 13. The panel recommends for any part 15 scheme which affects voting rights in a code company, the Court would have to be satisfied, before it could approve the scheme, the company shareholders would not be disadvantaged by the transaction not being undertaken under the Takeovers Code.
Alternatively, the promoters of the scheme could produce to the Court a statement from the Takeovers Panel stating the panel has no objection to the scheme. Those requirements will be in addition to the current common law tests applied by the Courts. The proposals follow concerns about the 2006 amalgamation of Waste Management and Transpacific Industries under part 13, and outside the code. At the time, there was considerable media comment suggesting the NZ market would suffer because of avoidance of the code.
Subsequent cases have also sparked debate. The Govt is at present consider the recommendations. Legislation will be required if it decides to implement them.
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