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| Code Word
June
2008
McHardys considered associates - Rule 4(1)(d)
Hamish McHardy conceded to the Panel that he and Jonathan
McHardy were “associates” at the time of these acquisitions.
The Panel accepted this and found them to be associates
under rule 4(1)(d) of the Takeovers Code on the basis of
their personal relationship as father and son, their business
relationship as co-investors in Kerifresh and other ventures,
and their ownership relationship as co-trustees of the
Murrayfield Trust.1
Hamish McHardy and Alan Thompson considered
associates - Rule 4(1)(d)
The Panel considered that Hamish McHardy and Alan
Thompson were associates also under rule 4(1)(d) as a
consequence of the business and ownership relationships
stemming from the warehousing agreement. Factors leading
the Panel to this conclusion included:
"
- Hamish McHardy said that he would not invest in shares in Kerifresh unless Alan Thompson made a similar commitment to acquire Kerifresh shares with his own money;
- The [warehousing agreement] was in effect an advance purchase of voting rights in Kerifresh by Alan Thompson because Hamish McHardy could not terminate the [warehousing agreement] other than by giving Alan Thompson 361,000 shares in Kerifresh...
- There was an element of subterfuge in the arrangements because it was the intent of both parties to disguise the identity of the real purchaser of a significant parcel of Kerifresh shares;
- The informal nature of the arrangement, being undocumented and therefore entirely dependent on mutual trust, was indicative of a closer business relationship than a normal commercial borrower-lender relationship.” (paragraph 53 of the Panel’s 18 October 2007 determination and statement of reasons)
Hamish McHardy’s acquisition breached rule 6 of the Codebecause his increase in the percentage of Kerifresh voting
rights that he held, to 9.57%, when taken with the percentage
of voting rights held or controlled by his associates, Jonathan McHardy (8.69%) and Alan Thompson (18.49%), exceeded,
in aggregate, 20%. No rule 7 exception was used to effect this increase.2
Jonathan McHardy and Alan Thompson considered
associates - Rule 4(1)(e)
The Panel also considered that the nature of the relationships
between Jonathan McHardy, Hamish McHardy and Alan
Thompson were such that, under the circumstances of
Jonathan McHardy’s acquisitions, Jonathan McHardy and
Alan Thompson were associates under rule 4(1)(e).3
Whilst there was no evidence that Jonathan McHardy was
directly involved in the negotiation of, or participated in, the
warehousing agreement, the Panel considered that Jonathan
McHardy and Alan Thompson were associates under
rule 4(1)(e) of the Code because:
"
- Jonathan McHardy was aware of:
- Relevant details of the purchase of shares from the Hendls by both his father in his own right and himself and his father as trustees of the Murrayfield Trust;
- The particular financing arrangements... between Hamish McHardy and Alan Thompson, at least in general terms, at the time that the Murrayfield Trust acquired 597,316 Kerifresh shares on 29 May 2002;
- The financial involvement of Alan Thompson in funding part of the purchase of Kerifresh shares acquired by Hamish McHardy was a material factor in Jonathan and Hamish McHardy’s decision, on behalf of the Murrayfield Trust, to purchase 597,316 Kerifresh shares on 29 May 2002.” (paragraph 60 of the Panel’s 22 November 2007 statement of reasons)
This is one of the few occasions on which the Panel has found
persons to be associates under rule 4(1)(e).
Jonathan McHardy’s acquisition breached rule 6 because his
increase in the percentage of Kerifresh voting rights that he
held, to 8.69%, when taken with the percentage of voting
rights held or controlled by his associates Hamish McHardy
(9.79%) and Alan Thompson (18.49%), exceeded, in aggregate,
20%. No rule 7 exception was used to effect this increase.
- Rule 4 of the Code which sets out the meaning of associates provides:
4 Meaning of associate
(1) For the purposes of this code, a person is an associate of another person if- - the persons are acting jointly or in concert; or
- the first person acts, or is accustomed to act, in accordance with the wishes of the other person; or
- the persons are related companies; or
- the persons have a business relationship, personal relationship, or an ownership relationship such that they should, under the circumstances, be regarded as associates; or
- the first person is an associate of a third person who is an associate of the other person (in both cases under any of paragraphs (a) to (d)) and the nature of the relationships between the first person, the third person, and the other person (or any of them) is such that, under the circumstances, the first person should be regarded as an associate of the other person.
- The fundamental rule, rule 6 of the Code, prevents a person from increasing their shareholding to above 20% unless they use one of the exceptions set out in rule 7 of the Code.
See Code Word Numbers 1, 2, and 7 available at the Panel’s website at www.takeovers.govt.nz/publications/
- See footnote 1, above, on the various definitions of “associates”