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Schemes of Arrangement And Amalgamations Involving Code Companies
Recommendations to the Minister of Commerce
The Panel's recommendation to the Minister regarding amalgamations
246. Taking into account the views expressed by the market, submissions received on its proposed amendments and the relationship between the Code and the Companies Act, and its own concerns, the Panel in its function of keeping the law relating to takeovers under review has decided to recommend to the Minister that the provisions of both the Code and the Companies Act, those Acts be amended as follows:
- (a)
- the Code be amended to no longer apply to changes of control resulting from an amalgamation under Part XIII of the Companies Act; and
- (b)
- Part XIII of the Companies Act be amended to require that:
- (i)
- parties to a proposed amalgamation must obtain the approval of the Panel to the amalgamation process; and
- (ii)
- the Panel, in giving approval for an amalgamation process, take into account the principles of the Code.
247. A copy of the suggested amendments to the Code and Part XIII of the Companies Act are attached as Appendix H.
248. In terms of conditions which the Panel would impose as conditions of approval of an amalgamation proposal, the Panel would impose conditions regarding:
- (a)
- The information to be provided to code company shareholders in respect of the amalgamation proposal (which should reflect that which would be required in respect of a code transaction); and
- (b)
- The level of shareholder approval required in order for the scheme to proceed.
249. In respect of determining an appropriate shareholder approval threshold as a condition of approval:
- The Panel will first consider whether the proposed transaction is akin to a compulsory acquisition (or force out) or is in the nature of a merger of shareholder interests.
If the transaction is an amalgamation in which code company shareholders are offered cash or other consideration for their shares and will not be continuing as shareholders in a merged entity, the transaction will be in the nature of a compulsory acquisition rather than a merger of shareholder interests. In such situations the Panel will impose as a condition of approval that the proposal is approved by shareholders holding 90% of total voting rights, i.e. the same as the compulsory acquisition threshold.
- If the transaction is in the nature of a merger of shareholder interests the Panel would be likely to require that the amalgamation be approved by:
- (i)
- At least 75% of the votes cast at a meeting at which all shareholders can vote, provided that the resolution represents more than 50% of the total voting rights in the code company; and
- (ii)
- At least 75% of the votes cast at the meeting of independent shareholders.
- The Panel would of necessity need to ensure that it considered the particular circumstances of each case in applying the guidelines described above.
250. An amendment of the Code and Companies Act as suggested by the Panel would mean that code companies wishing to put an amalgamation proposal to shareholders would need to make an application to the Panel for approval of the proposal amalgamation process. This would increase the costs to the Panel in respect of amalgamations involving code companies.
251. The Panel suggests that it would be appropriate for parties promoting amalgamation proposals to meet this cost.
252. The Panel suggests that the Takeovers (Fees) Regulations 2001 be amended to enable the Panel to pass the cost of considering applications regarding amalgamation proposals to those applicants.
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