AMENDMENTS TO THE TAKEOVERS ACT AND THE CODE

The passage of the Securities Legislation Bill, which amends significant areas of securities and takeovers laws, has resulted in amendments to the Takeovers Act 1993 and the Takeovers Code in four significant areas, three of which have immediate effect.

The four areas are:

1. the definitions of “code company” in the Code and“specified company” in the Takeovers Act have been changed;
2. the Code and Act will specifically empower the Panel and Court to deal with misleading and deceptive conduct in relation to all Code-related transactions and events (these provisions are to come into effect at a later date, expected to be early-to- mid 2007);
3. the Panel’s enforcement powers have been expanded; and
4. the penalties and remedies under the Takeovers Act have been increased and broadened.

The changes in paragraphs 1, 3 and 4 came into effect on 25 October 2006.

CHANGES TO THE DEFINITION OF CODE COMPANY

The definition provisions in the Code and in the Takeovers Act that specify the companies to which the Code applies have been changed for both listed and unlisted companies.

The definitions relating to listed companies had provided that a “code company”, or a “specified company”, was a company that was -

1. a party to a listing agreement with a registered exchange;
2. not a party to a listing agreement with a registered exchange but was a party to a listing agreement with a registered exchange at any time during the period of 12 months before any date or the occurrence of any event referred to in the code.

Under the old definitions, all listed companies were caught by the Code. This meant that companies that had only nonvoting securities quoted on an exchange were caught by the Code. However, it was not intended that the Code should apply to such companies (because the Code is concerned with voting rights) and the Panel has granted a number of exemptions from compliance with the Code as a result.

The “code company/specified company” definitions have now been changed to exclude listed companies that have only non-voting securities quoted on an exchange.

Accordingly, the new definition of a Code company will be a company that –

1. is a party to a listing agreement with a registered exchange and has securities that confer voting rights quoted on the registered exchange’s market; or
2. was within paragraph (a) at any time during the period of 12 months before a date or the occurrence of an event referred to in the code.