Annual Report for the year ended 30 June 2011

 

STATEMENT OF SERVICE PERFORMANCE
for the year ended 30 June 2011

PERFORMANCE STANDARDS AND MEASURES FOR THE OUTPUTS OF THE PANEL

The delivery of the Takeovers Panel services is funded under Vote Commerce Non-Departmental Output Class - Administration of the Takeovers Code.

OUTPUT 1: Recommendations for changes to takeovers law:

  • To keep under review the law relating to takeovers and to recommend to the Minister of Commerce changes as appropriate;
  • To keep under review practices relating to takeovers of Code companies for the purpose of recommending changes to the law.

Impact:
Improvements in the efficiency of the Code through the making of recommendations to the Minister of Commerce to achieve changes to the Code and takeovers law more generally.

Activities and actions to include:

  • reviewing the provisions of takeovers law;
  • identifying areas of the Code which require correction or would benefit from improvement;
  • reviewing the practices relating to the takeover of Code companies;
  • developing policy papers, guidance notes and practice notes on issues arising under the Code and its administration;
  • supporting implementation of the recommendations to the Minister of Commerce, on the interaction between the provisions of company law and takeovers law as they apply to schemes of arrangement and amalgamations effected under Parts 13 and 15 of the Companies Act 1993;
  • developing proposals for public comment on proposed recommendations to the Minister, as necessary;
  • making recommendations to the Minister for changes to that law, where appropriate.

Actual performance against planned performance standards and performance measures for 2010/2011:

Quantity and Quality Forecast Actual 10/11 Actual 09/10

Keep the Takeovers Code and the Takeovers Act 1993 under review and recommending amendments to the Code and Act as necessary.

  The Panel intends to make 20 recommendations to the Minister by June 2011 for technical (low policy content) changes to the Code and to have its recommendations approved by the Minister.   No recommendations made. A number have been prepared but are being held back until the full review of technical amendments has been completed.   No recommendations made. A number have been prepared but are being held back until the full review of technical amendments has been completed.
Participate as required on projects and reviews.   To be invited to make 3 submissions or contributions on relevant issues.   3 submissions: Legislation Bill, Review of Securities Act, Public Sector Cost Cutting.   3 submissions: On Capital Market Task Force Report, on proposals for drafting exemptions, and on summary offence provisions.
Keep under review practices relating to takeover activities by observing market activity through various media each working day.   Continuous.   Continuous.   Continuous.
Inquiries into market practice with a view to recommending amendments to the Takeovers Code and to the Panel's policies and publishing proposed changes to the Code and Panel policies for public comment.   Complete 3 inquiries into market practice.   1 initiated (upstream takeovers). As a result policy published on Panel's approach to exemptions for these transactions.   2 (foreign currency consideration and collateral consideration on takeovers).
Timeliness            
Recommendations for amendments to the Code will be made in accordance with Work Programme.   20 recommendations for changes to the law to be made by 30 June 2011.   No recommendations were made during the year. Timeliness is affected by the decision to delay making recommendations to the Minister until the full technical review is completed.   No recommendations were made during the year. Timeliness is affected by the decision to delay making recommendations to the Minister until the full technical review is completed.
Revenue   Nil   Nil   Nil
             
Cost:   $362,000   $430,107   $449,774

The complexity of some of the policy issues, resulted in greater time and resource being expended on the consultation process in 2010/2011 than budgeted for. Making recommendations at the end of the process is the least-resource intensive aspect.

OUTPUT 2: Approvals:

The approval of the appointment of independent advisers, where required under Rules 18, 21 or 22 of the Code or by the terms of an exemption granted, and the appointment of independent experts where required by Rule 57 of the Code.

Impact:
The improvement in the quality of advice and independent adviser reports to recipients of takeover offers and to shareholders entitled to vote to approve Code-related allotments and acquisitions.

Activities and actions to include:

  • processing applications from advisers for approval under the Code;
  • ensuring that appointed advisers are both independent and competent to do the job required;
  • assessing, where necessary, previous work of advisers to determine their experience and competence;
  • reviewing draft independent advisers' reports and making suggestions for improvement;
  • meeting with advisers on an ongoing basis to discuss and obtain feedback on any issues and concerns;
  • appointing independent experts where required under the compulsory acquisition provisions of the Code;
  • processing applications for consent to withdraw offers, and in relation to approval of defensive tactics.

Actual performance against planned performance standards and performance measures for 2010/2011:1

Quantity Forecast Actual 10/11 Actual 09/10
Applications for approval of independent advisers and independent experts.   40-45   22   34
             
Applications for consent to withdrawal of offers, and in relation to defensive tactics.   2   0   0
             
Quality            
The Panel aims to improve the quality of independent advice given to shareholders involved in Code transactions by setting high standards of independence and competence for advisers approved by the Panel and by reviewing and commenting on their draft reports.   As quality proxy, to reduce Panel executive comments on draft independent adviser reports to 2 substantive comments per report.   Of the 11 reviewed, 5 had 2 or less comments. The remainder had between 3 and 6 comments.   69% of 16 reports reviewed had 2 or less comments.
             
Timeliness            
For approvals of independent advisers within 3 working days of receipt of complete application. For other applications within 5 working days of receipt of complete application.   To be achieved in 90% of cases.   100%   Achieved in 100% of cases.
             
Revenue (from fees)   $37,000   $40,951   $32,538
             
Cost:   $109,000   $89,302   $56,634

The greatest contributor to the variance between revenue/cost compared to 2009/2010 relates to the significant staff changes in the executive and therefore loss of corporate knowledge. Not all time spent was charged to applicants in recognition of staff development on the job.

OUTPUT 3: Exemptions:

The granting of individual and class exemptions for Code events where relief from the Code's requirements is appropriate and consistent with the objectives of the Code.

Impact:
The improvement in the functioning of the market by alleviating unintended or unreasonable consequences arising from the application of the Code.

Activities and actions to include:

  • considering applications for individual exemptions from the Code;
  • considering applications for class exemptions from the Code;
  • issuing exemption notices for individual exemptions;
  • issuing exemption notices for class exemptions;
  • gazetting the exemption notices;
  • publishing guidance notes to explain the policies being applied by the Panel in relation to various types of exemption.

Actual performance against planned performance standards and performance measures for 2010/2011:2

Quantity Forecast Actual 10/11 Actual 09/10
Applications for individual exemptions from the Takeovers Code will be processed as received.   28 - 36   12   27
Class exemptions from the Takeovers Code when applied for or at Panel initiative.   2 - 4   2   5
             
Quality            
The Regulations Review Committee does not recommend disallowance of notices, and notices are not successfully judicially reviewed.   100%   100%   100%
             
Timeliness            
Within timeframe agreed with applicants. This may vary from 2 days to 3 months depending on the needs of the applicant and the complexity of the exemption sought.   90%   81%   87%
             
Revenue (from fees)   $185,000   $135,898 $203,378
             
Cost:   $544,000   $379,078   $451,893

OUTPUT 4: Enforcement:

Maintaining oversight of takeover activity in the market by reviewing documentation, intervening where necessary in accordance with the Panel's statutory powers, investigating any possible breaches of the Code in accordance with the law and the rules of natural justice.

Impact:
The continuing improvement in the level of compliance with the Takeovers Code by market participants.

Activities and actions to include:

  • reviewing all main takeover offer documents;
  • reviewing Code-related meeting documents;
  • convening formal meetings to exercise the Panel's enforcement powers under sections 32 and 35 of the Code;
  • making applications to the Court to seek orders from the Courts, as necessary;
  • investigating possible Code breaches;
  • investigating complaints by shareholders and other principal parties to a transaction;
  • monitoring NZX company announcements, media and other public information for transactions with Code implications;
  • accepting enforceable undertakings from the party or parties in breach of the Code;
  • issuing determinations and Panel decisions;
  • seeking to be heard in Court proceedings involving the change of control of Code companies being effected through the scheme of arrangement provisions of the Companies Act.

Actual performance against planned performance standards and performance measures for 2010/2011:3

Quantity Forecast Actual 10/11 Actual 09/10
Review all offer documents.   12   7   7
             
Review all meeting documents.   24   7   13
             
Section 32 meetings.   3   0   1
             
Section 35 actions.   1   0   0
             
Investigation of possible Code breaches.   25   2   10
             
Involvement in Court proceedings in relation to schemes of arrangement affecting Code companies.   2   0   1 (Did not seek to appear in Court).
             
Quality  
Documents reviewed for compliance with the law. The effectiveness of the review function is indicated by the reduction in the number of material instances of non-compliance in formal takeover documents. The Panel aims to review all takeover documentation and all documentation relating to shareholder meetings conducted for the purpose of approving Code transactions. The average number of material instances of non-compliance with the Code to be no more, per formal takeover document, than 1. Only 2 out of 10 formal documents had more than 1. Therefore the measure was met. Not available.
Enforcement meetings conducted in accordance with the Panel's procedures with no Court challenges or, where challenged, Court endorsement. 100% as demonstrated by lack of legal challenge to conduct of meetings. 100% One Court challenge to convening of section 32 meeting that Panel has been requested to hold. This issue has not yet been determined by the Court.
       
Timeliness  
Complete enforcement work within timeframes specified in the Takeovers Act 1993. 100% N/A 100%
             
Comply with Court-ordered timetables for legal proceedings under the Companies Act involving Code companies.   100%   N/A   N/A
             
Revenue (from fees):   $129,000   $(5,000)   $200,796
             
Cost:   $661,000   $694,369   $657,481

OUTPUT 5: Public Understanding:

To enhance and improve co-operation and liaison with overseas takeovers regulators on matters of mutual interest.

Impact:
The improvement in the level of co-operation and understanding between the Panel and other international takeovers regulators.

Activities and actions to include:

  • publishing the Panel's occasional newsletter, Code Word, to explain changes to the Code and the Act and key Panel enforcement and exemption decisions;
  • publishing practice notes and guidance notes to inform the market about the Panel's decisions and policies, to assist market participants to relate to the Panel and to explain how the Panel interprets various rules of the Code;
  • improving the market's understanding of takeover matters and Panel activities through public speeches about the Code at relevant conferences and other meetings;
  • receiving feedback from market participants about the Panel's performance through meetings with market participants to both gauge the effectiveness of the Panel in dealing with its stakeholders and to explain issues which have arisen;
  • visiting the most active legal and advisory firms to obtain direct feedback;
  • holding group meetings with other interested market participants;
  • maintaining a website that is kept up-to-date with all Panel decisions, news releases, speeches, discussion papers, practice notes;
  • communicating with affected shareholders through telephone and correspondence explaining the application of the Code in particular circumstances;
  • assisting the media with background information to ensure that the public receives accurate reports on issues of public interest.

Actual performance against planned performance standards and performance measures for 2010/2011:

Quantity, Quality and Timeliness Forecast Actual 10/11 Actual 09/10
Publish a publication designed to provide information about the Takeovers Code and relevant law.   3 times a year, with publication within 1 month of significant changes to the law affecting takeovers. 2 2
 
Issue policy statements, guidance notes and commentaries on current issues.   4 times a year.   2 times.   6 times.
             
Interface with the market through public and private meetings.   12 occasions.   9 occasions.   6 occasions.
             
Provide news media with relevant information about the Panel and the Takeovers Code.   Continuous.   Continuous.   Continuous.
             
Maintain a website with relevant information about the Takeovers Code and Takeovers Act 1993 and activities of the Panel.   All relevant material posted promptly to the website, within 5 working days of the event or decision.   100% of events or decisions.   100% of events or decisions.
             
Receive miscellaneous enquiries from members of the public and professional firms.   Receive 160 enquiries. Respond to enquiries within 3 working days.   136 enquiries received. Responded within 3 days in 100% of cases.   134 enquiries received. Responded within 3 days in 99% of cases.
             
Revenue   Nil   Nil   Nil
             
Cost:   $127,000   $205,941   $134,400

The budget forecast overlooked the costs relating to the two feedback sessions with the market, held in Auckland and Wellington in March 2011. In addition a relatively significant resource went into unbudgeted (for the Panel) work arising from a Securities Commission review of certain exemptions, one of which related to the Code.

OUTPUT 6: International Liaison:

To enhance and improve cooperation and liaison with overseas takeovers regulators on matters of mutual interest.

Impact:
The improvement in the level of cooperation, liaison and understanding between the Panel and other international takeovers regulators. Such improvements enhance international investors' and overseas takeovers regulators' confidence in the New Zealand market and enhance the Panel's administration of the Code's provisions.

Activities and actions to include:

  • continuing the high level of contact with the Australian Takeovers Panel through the Panel Chairman's membership on the Australian Panel and membership of the New Zealand Panel by a member of the Australian Panel;
  • continuing to maintain the good working relationships with the relevant staff of the Australian Panel and of the Australian Securities and Investments Commission by members of the Panel and executive;
  • continuing to support the Australian Panel's promotion of the informal group of international takeovers regulators by attending the group's conferences;
  • cooperating, on request, with overseas takeovers regulators on various regulatory matters within the Panel's powers.

Actual performance against planned performance standards and performance measures for 2010/2011:

Quantity and Quality Forecast Actual 10/11 Actual 09/10
Liaise with comparable overseas bodies, particularly in Australia, to improve the administration and enforcement of takeovers law, and to promote international understanding of New Zealand's laws. Respond to all enquiries within 5 working days. Initiate enquiries of other bodies as required. 2 enquiries. (0,0)

0 enquiries received.
3 enquiries made.

             
Maintain reciprocal membership between Australian and New Zealand Takeovers Panels.   Maintain 1 Australian Panel member on New Zealand Panel and 1 New Zealand Panel member on Australian Panel.   (1,1)   (1,1)
             
Timeliness            
Timeliness Panel representatives to meet regularly with overseas bodies.   1 time per year.   0 time.   1 time.
             
Revenue   Nil   Nil   Nil
             
Cost:   $9,000   $23,692   $12,165

Footnote

  1. Although described as "planned", the number of independent adviser applications reviewed by the Panel is dependent on the level of market activity.
  2. Although characterised as "planned", the number of exemption applications is dependent on the level of market activity
  3. Although described as "planned", the number of offer documents and meeting documents reviewed by the Panel is dependent on the level of market activity