The Professional Underwriters Exemption Notice exempts professional underwriters from the fundamental rule in respect of any increase in their percentage of voting rights resulting from fulfilling their obligations under a bona fide underwriting arrangement. Like the previous class exemption it is subject to the conditions that:

• any increase in voting control above 20% is eliminated within 6 months; and
• the additional voting rights are not exercised before that elimination.

However, under the conditions of the new notice the exemption will apply only if:

• the purpose of the underwriter’s entry into the underwriting or subunderwriting contract was to earn fees, commission or similar remuneration; and
• neither the underwriter nor any upstream party of the underwriter had a collateral purpose or intent, in entering into the underwriting or subunderwriting contract, of enabling any person to increase their voting control; and
• immediately before the underwriter’s entry into the underwriting or subunderwriting contract, the aggregate of the control percentages of the person and the person’s associates did not exceed 5%.

Where a code company is making a rights issue to existing shareholders and the underwriter would not satisfy the conditions of the Professional Underwriters Exemption Notice, the underwriter will not be able to increase its control of voting rights in the code company above the 20% level unless it is able to obtain a specific exemption from the Panel.

The Panel meets the markets

Although the Takeovers Panel is a Crown Entity with its offices in Wellington, it likes to keep in touch with the market and to hear market participants’ views on how it is doing its job.

To this end the Chairman, Deputy Chairman, some Panel members, and members of the executive met recently with market participants at two meetings in Wellington and one in Christchurch. These followed similar lines to two successful meetings in Auckland last year.

Some 17 financial advisers and interested persons from Auckland and Wellington came to the first Wellington meeting. The Panel’s policies for approving independent adviser appointments, its approach to appointing independent experts, and the Panel executive’s role in reviewing draft independent adviser reports were discussed along with other current issues.

The second Wellington meeting was attended by 18 lawyers from Auckland and Wellington who are active in the takeover market. Discussion was wide-ranging, covering the Panel’s policies relating to the approval of independent advisers and appointment of experts, the granting of exemptions from the Code, and the approach to enforcement issues. Nine market participants attended the Christchurch meeting where discussion covered a similar range of issues.

These meetings are a significant commitment by Panel members and the executive, but the Panel believes it is important to hear directly from key market participants in an open forum where everyone has the opportunity to make their views known to the Panel.

Technical amendments to the Code

The Panel recommended a number of technical changes to the Code to the Minister of Commerce late last year. These recommendations followed the Panel’s consideration of detailed submissions on a discussion paper outlining changes to the Code proposed by the Panel.

The changes range from a few proposals which aim to clarify the wording of the Code, to several proposals designed to make the Code work better in particular circumstances. None of the proposals would make fundamental changes to the Code’s structure. All the proposals result from the market’s experience with the operations of the Code in the first three years it has been in force. The Panel’s proposals are currently being considered by officials of the Ministry of Economic Development. The Panel is assisting this process as required. The next steps will be formal consideration by the Government and then final drafting of changes by Parliamentary Counsel Office.

The Panel hopes that the changes could be implemented in September/October 2004.

How to contact us

Takeovers Panel
Level 8, Unisys House
56 The Terrace
PO Box 1171
Wellington

Phone: 64 4 471 4618
Fax: 64 4 471 4619
Email: takeovers.panel@takeovers.govt.nz
Website: www.takeovers.govt.nz