Explanatory Note

This note is not part of the regulations, but is intended to indicate their general effect.

These regulations, which come into force on 1 July 2007, amend the Takeovers Code (the code). The amendments are technical only and arose out of discussion papers by the Takeovers Panel (the Panel) and recommendations to the Minister of Commerce in the period 2003-05. These documents are available on the Panel's website at www.takeovers.govt.nz.

Broadly, the amendments clarify, streamline, and enhance various aspects of the shareholder meeting and takeovers procedures under the code. Some of the more significant changes are described in general terms below:

• new rules 15(b)(iv) and 16(b)(iv): in the notice of meeting sent to shareholders, the disclosures of the control percentages of voting securities that will be held or controlled by the person acquiring voting securities under rule 15 or the person to whom the voting securities are being allotted under rule 16 must now include also the voting securities that will be held or controlled by those persons and their associates:
• new rule 19A: this requires that documents sent or published in respect of shareholder meetings held to approve acquisitions or allotments under the code must also be sent to the Panel:
• rule 22 and new Schedule 3: the independent adviser's report on fairness between classes (the rule 22 report) must now accompany the target company statement when it is sent to offerees (see new clause 19A of Schedule 2, which sets out the obligations of the target company to send a rule 22 report or a further rule 22 report with the target company statement). Information required in a rule 22 report is set out in new Schedule 3:
• new rules 24A and 24B: these rules clarify the position in relation to the extension of the offer period. In particular, offers generally cannot be extended beyond the 90-day maximum period. However, full offers that are or have become unconditional as to a minimum level of acceptances can be extended (at any time during the offer period) for up to 60 days, even if that takes the offer period beyond the 90-day maximum:
• rule 28: there are new requirements for the information that must accompany a notice of variation for offers that contain consideration alternatives or for a variation that adds a cash alternative to an offer:
• rule 30: the changes to rule 30 (which relates to further rule 22 reports) reflect the changes made in respect of the initial rule 22 report. The variation notice must also describe how the consideration and terms of the offer, as varied, have been calculated so as to be fair and reasonable as between classes of securities:
• new rules 31 and 32: the rules relating to the variation of consideration and consideration alternatives have been rewritten with a number of new obligations for offerors and offerees. The changes ensure that all offerees can accept a consideration alternative that has been increased or added to an offer, even if they have already accepted the offer. In order to be able to switch, offerees must return any consideration that has already been sent to them:
• new rule 36: old rule 36 relating to acquisitions is mostly reproduced in new rule 36(1) (old rule 36(b) has been revoked). New rule 36(2) sets out the notice requirements in relation to an acquisition of securities under new rule 36(1):
• new rule 41(2) and (3): this prescribes the documentation that must accompany the takeover notice sent to a prospective target company if the offer will include an offer of securities to which the Securities Act 1978 applies:
• new rule 41A and rule 42: these rules require the offeror and the target company, in the case of a listed target company, to send copies of the takeover notice and accompanying documents to the registered exchange. Both the offeror and the target company also have obligations to provide copies, free of charge, of the takeover notice and accompanying documents to anyone who requests them:
• new rules 42A and 42B and rule 44(3): these new rules require that a target company, on receiving a takeover notice, informs the prospective offeror of all the classes of securities that would be subject to an offer, and the prospective offeror may vary the final terms and conditions of the formal takeover offer accordingly without the prior approval of the target company's directors:
• new rules 43 to 43B: these replace and largely replicate old rule 43. Under new rule 43A(4) the offeror may change the record date; the offer can proceed under the original takeover notice if the offer can still be made within the 14- to 30-day period prescribed by the code. The result is that the offeror may be saved from having to restart the whole offer process:
• new rule 47: this rule expands the category of documents that must be supplied to the Panel and includes any statements or information published or sent to offerees by or on behalf of the offeror or target company:
• new rule 49A: the offeror must notify the Panel and the target company (and the registered exchange, if either the offeror or the target company is listed) of each increase of acceptances of 1% or more of the total issued securities in each class under offer:
• new rule 54(2) and (3): old rule 54 is largely replicated except that, if the dominant owner becomes the dominant owner by reason of acceptances of an offer, the acquisition notice must be sent not later than 30 days after the end of the offer period. If the dominant owner becomes a dominant owner by a code mechanism other than an offer, the acquisition notice must be sent not later than 30 days after the dominant owner becomes the dominant owner:
• new rule 56(3): for the purpose of determining the compulsory acquisition consideration under rule 56(2), new rule 56(3) excludes equity securities controlled by the dominant owner, or held or controlled by associates of the dominant owner, from the calculation of the percentage of voting rights obtained through acceptances of an offer:
• new rule 56A: this rule sets outs the rights of an outstanding security holder to elect the type of consideration to be paid for compulsory acquisition where a dominant owner has become dominant owner through acceptances of an offer and the offer provided for alternative consideration options. The rule is designed to prevent coercion of acceptances by comparisons with an unattractive default consideration on compulsory acquisition:
• rule 57: the changes in new rule 57(1) affect the requirement of certification by an independent adviser of a cash sum as fair and reasonable in a case where the consideration under a compulsory acquisition could not be determined under rule 56. The effect of the changes is that an independent adviser's report is required under new rule 57(1) only if there was no takeover offer made, or if the takeover offer was not for cash or did not include a cash alternative, and acceptances were received for 50% or less of the equity securities under the offer:
• new clauses 6 and 7 of Schedule 1: changes to the requirements of disclosure in the offer document about ownership of, and trading in, securities of the target company have been streamlined. The obligation to disclose certain information in the offer document has been removed and transferred to the target company statement requirements in Schedule 2 (see new clause 6 of Schedule 2):
• new clause 17 of Schedule 1: if there is more than 1 class of securities under the offer, the offeror is now required to state in the offer document how the consideration and terms offered for each class have been calculated to be fair and reasonable as between classes. If there is only 1 class of security, the offer document must explain that no rule 22 report is required:
• clause 19 of Schedule 1: the certificate that must be signed by directors and senior officers of the offeror as to the accuracy of the offer document must now also be signed, in the same way, for the draft offer that accompanies a takeover notice:
• new clause 6 of Schedule 2: changes to the requirements of disclosure in the target company statement about trading in securities of the target company have been streamlined. Trading information about the target company's substantial security holders must now be disclosed in the target company statement instead of the offer document:
• new clauses 13 and 13A of Schedule 2: the requirement of disclosure by the target company of interests in material contracts to which the offeror or its related company is a party has been modified by dropping the qualification of "material" in the case of a director or senior officer of the target company or their associates. This means that the interests of those persons in all contracts to which the offeror or its related company is a party must be disclosed. However, the extent and monetary value of those interests, whether an interest is the interest of a director, senior officer, or substantial security holder of the target company, need not be disclosed in the case of contracts entered into in the ordinary course of business of the offeror.

Issued under the authority of the Acts and Regulations Publication Act 1989.
Date of notification in Gazette: 24 May 2007.
These regulations are administered by the Ministry of Economic Development.