The Panel received a number of different views on its suggested amendments to the Code and the Companies Act regarding schemes.

Most submissions in favour of comparability of rights and protections available to shareholders of code companies regardless of whether a merger is structured as an offer, scheme or amalgamation, are generally supportive of the Panel's proposed amendments.

ABN AMRO state that the Courts should be required to take into account the principles of the Code in approving schemes of arrangement. They express the view that the recommendations of the Panel would assist the Courts in determining whether the proposed scheme or amalgamation complies with the broader provisions of the Code.

The NZX and Harmos Horton Lusk express similar views.

Harmos Horton Lusk state that the Courts should be obliged to take into account the views of the Panel and the Panel should have the ability to be heard at the first hearing prior to the Court making orders at the request of the applicant with regard to the convening of meetings, voting thresholds etc.

Harmos Horton Lusk note that there is no "amicus curiae" requirement in the scheme legislation. They suggest that this deficiency would be remedied by giving the Panel standing to appear at the first hearing and by allowing other interested parties sufficient notice to be heard also.

Two submissions which are supportive of the need for changes to the Code and the Companies Act regarding schemes expressed concerns about the changes proposed by the Panel:

(a)

Mr Wheeler, an investor and retired accountant, is concerned that if the Code no longer applied to schemes the Courts could be persuaded by clever argument to approve schemes in a manner not consistent with the intentions of the Code or Takeovers Act to the detriment of minority shareholders. He states that if schemes were to be carved out the Code, the need to maintain the principles of the Code would need to be absolutely clear;

(b)

Paul Ridley-Smith did not support legislative changes that provide the High Court or the Panel with wider discretions. In his view such amendments would increase uncertainty for the market. He made an alternative suggestion which is discussed below.

The main reservation expressed by parties supportive of the Panel's suggested amendments is the meaning of the term "the principles of the Code" in the context of the Courts consideration of a proposed scheme and the Panel's recommendations to the Court.

The NZX notes that in the absence of further guidance being provided it is likely that the meaning of the term will be a matter for submissions at the time the Court is considering a scheme. NZX state that whilst this may be appropriate the market will favour advance certainty as this makes doing business less costly and more timely to effect.

The parties which consider that the current relationship between the Code and the reconstruction provisions of the Companies Act is appropriate and that there is no need for consistency of shareholder protections (Bell Gully, Simpson Grierson, Chapman Tripp and Cameron Partners) are not in favour of the amendments suggested by the Panel regarding schemes and amalgamations.

They do not consider that the Court should be required to consider the principles of the Code in respect of a proposed scheme. In their view it is important that the Court retains a wide discretion, currently conferred by Part XV of the Companies Act, to be exercised in accordance with principles established by the body of case law that has developed over many decades.

Submissions opposed to the Panel's suggested amendments regarding schemes of arrangement state that shareholders of code companies already have sufficient rights and protections in respect of scheme proposals because they require the active support of the directors of the code company and the approval of the Court, which determines the required level of shareholder support for a transaction to proceed.

Simpson Grierson suggest that instead of an approach based on code principles it may be more appropriate to instead reinforce and clarify the role of the board of a company which is the subject of a scheme in respect of the scheme approval process. They suggest that clarifying the role of the board would ensure that the interests of code company shareholders are properly taken into account.

Cameron Partners also suggest that target company shareholders are better served by current duties of directors than the proposals outlined in the discussion paper. They note that boards have a fiduciary responsibility to act in the best interests of all shareholders and have specific knowledge about the code company and the proposed transaction to effect this.

However, some of those parties suggest that it may be appropriate for the Panel to seek to be heard by the Court in respect of some proposed schemes but they do not consider that Panel submissions should be given any particular status. The weight to be given to Panel submissions should be a matter for the Court to decide. One party suggest that the Panel should only be permitted to make submissions when a shareholder of the code company has objected to the arrangement.

Parties opposed to the Panel's suggested amendments regarding schemes also expressed concern about meaning of "principles of Code". They state that the phrase lacks clear meaning and parties seeking to enter into substantial transactions require certainty on which to plan and commence a transaction.

Simpson Grierson suggest that the Panel should identify a set of criteria by which it could evaluate schemes in order to determine whether the principles of the Code are adequately addressed. They suggest that any decision to require the Court to take into account the principles of the Code when considering whether to approve a scheme should only be against a clear statement as to those principles and the manner in which they are to be applied.

Two of the respondents, Bell Gully and Simpson Grierson, although opposed to the Panel's proposed amendments, suggest that there may be grounds to introduce some amendments to the Companies Act to prevent the use of schemes of arrangements where a transaction is being structured as a scheme for the sole purpose of avoiding the operation of the Code in a way that prejudices shareholders.

Bell Gully suggest that to prevent the use of schemes where a transaction is being structured as an arrangement for the sole purposes of avoiding the operation of the Code in a way that prejudices shareholders a test similar to that in section 411(17) of the Australian Corporations Law could be adopted i.e. that a scheme can only be used to effect a merger involving a code company if the relevant regulator provides a "no objection" letter or the Court is satisfied that a scheme is not being utilised to avoid the requirements of takeovers law.

Simpson Grierson also discussed the Australian approach in their submission. However, they referred to difficulties the Panel had in applying the compelling reasons test in its policy on exemptions for schemes and are concerned that the same issues would arise in determining which schemes the Panel should seek to prevent. In their view any subjective test has the potential of putting the Panel in a position where it might be accused of merit regulation.

The Panel received some alternative suggestions to the proposed amendments set out in its discussion paper.

While generally supportive of the need for consistent protection for shareholders regardless of a merger mechanism, Paul Ridley-Smith does not support legislative changes that provide the High Court or the Panel with wider discretions. In his view such amendments would increase uncertainty for the market. Mr Ridley-Smith suggests that in certain circumstances where there is a suspicious choice of procedure the Code should apply directly. He considers that one of the strengths of the Code is that an experienced practitioner can by reading the Code get a good idea of what is or is not permissible. That benefit would be lost if a general discretion is given to the High Court.

Michael Lorimer of Grant Samuel suggests that changing the compulsory acquisition threshold in the Code to 75% of outstanding shareholders at the time of a transaction would be appropriate.