For unlisted companies, the definitions had applied to companies that had “50 or more shareholders and $20,000,000 or more of assets”. The asset threshold has been removed from the definition, so that the Code and Takeovers Act apply now to every company that has 50 or more shareholders. (This is in line with Australian legislation).

The result of these definition changes is that any listed company with only non-voting securities quoted (for example, debt securities) is no longer a “code company/specified company”. The 12-month ‘look back’ for previously listed Code companies is retained. Every company with 50 or more shareholders, regardless of its assets, falls within the “code company/specified company” definitions.

MISLEADING AND DECEPTIVE CONDUCT

Another significant change to the Code and to the Takeovers Act is the introduction of new provisions which will prohibit misleading or deceptive conduct in a broad range of circumstances in relation to transactions or events governed by the Code. The principal new provision is a new rule 64 in the Code.

Rule 64 states:

1. A person must not engage in conduct that is -
   1. conduct in relation to any transaction or event that is regulated by this code; and
   2. misleading or deceptive or likely to mislead or deceive.
2. A person must not engage in conduct that is -
   1. incidental or preliminary to a transaction or event that is or is likely to be regulated by this code; and
   2. misleading or deceptive or likely to mislead or deceive.

This new rule addresses a deficiency in the Code that has limited the Panel's ability to deal with misleading conduct occurring outside of signed takeover documents. Because takeover offer documents and target company statements must be certified as being true and correct and not misleading, by directors and senior executives of the offeror and the target, respectively, the Panel has been able to take action where such documents have been found to be misleading. However, the Panel has not been able to exercise its enforcement powers for misleading conduct that may have occurred other than in the signed takeover documents.

The new rule 64 in the Code is cast very broadly and will enable the Panel to exercise its enforcement powers for any misleading or deceptive conduct that relates to any transaction or event that is or is likely to be regulated by the Code. Misleading or deceptive conduct that is incidental or preliminary to events or transactions that are or are likely to be regulated by the Code will also be subject to the

Panel’s enforcement powers.

In addition to the new rule 64, it will also be a criminal offence under a new section 44C of the Takeovers Act to make or disseminate materially false or misleading statements or information in relation to any transaction or event regulated by the Code or incidental or preliminary to a transaction or event that is or is likely to be regulated by the Code.

These new misleading and deceptive conduct provisions are anticipated to be brought into force in early to mid-2007. At the time that these new provisions become operative, the Fair Trading Act will no longer apply to conduct that is regulated by the Code and the Takeovers Act. The Panel will provide further information on these new provisions closer to their commencement date.

CHANGES TO THE PANEL’S ENFORCEMENT POWERS

Section 32 of the Takeovers Act provides the Panel with its principal powers for dealing with concerns about compliance with the Takeovers Code.

Once the Panel considers that a person may not have acted or may not be acting or may intend not to act in compliance with the Code, it can call a meeting and make temporary restraining orders. These orders are issued with the notice that is sent to the relevant parties notifying them of the date for holding the meeting under section 32 of the Act to determine whether the Panel will exercise its enforcement powers. The temporary restraining orders are set out in section 33 of the Act. They must expire within two days after the section 32 meeting. Their purpose is to preserve the status quo until the Panel has issued its determination regarding whether it is satisfied or not satisfied as to the person’s compliance with the Code.

If the Panel determines that the person has not complied with the Code, it can make further section 33 restraining orders that have effect for up to 21 days. Because of the timelines for takeovers that are set up by the Code, these orders, although temporary, can often result in a complete remedy for the breach. If not, they maintain the status quo for sufficient time to enable the matter to be determined by the High Court.

The Panel’s enforcement powers have now been enlarged, enabling the Panel to make a number of permanent compliance orders in addition to temporary restraining orders.

The permanent compliance orders are set out in new section 33AA of the Act, as follows: