In its 9 November 2007 determination the Panel found that Jonathan McHardy and Hamish McHardy had breached the Code by being directly and knowingly concerned in Lawrence Fletcher’s breach. In contrast to its 18 October 2007 finding that Alan Thompson was directly and knowingly concerned in Anbran and Emma Eastwood’s breaches of the Code, this was a determination by the Panel for the purposes of the exercise of its enforcement powers. The law that applied to the Lawrence Fletcher transaction was different from that which applied to the Anbran transactions. The Takeovers Amendment Act 2006 came into force on 25 October 2006 and, among other things, expanded the definition of “contravention of the Code” to include secondary conduct such as aiding, abetting or being knowingly concerned in a breach of the Code. The Panel found Jonathan McHardy and Hamish McHardy in breach under this new expanded definition. The Panel’s determination was not that Hamish McHardy and Jonathan McHardy knew that
Lawrence Fletcher’s proposed acquisition would have breached rule 6. Rather, the Panel’s determination was that Hamish McHardy and Jonathan McHardy were acting “in concert” with Lawrence Fletcher in respect of the proposed acquisition and were therefore knowingly concerned in it. They had knowledge of and were assisting in Lawrence Fletcher’s proposed acquisition.
Conclusion
The Kerifresh matter demonstrates the Act and the Code
in action. It provides guidance on the application of the
Code, and the Panel’s approach to enforcement and its
interpretation of various aspects of the “associates” concept.
The “associates” definition was intentionally drafted to allow
flexibility as an anti-avoidance mechanism. The Kerifresh
matter illustrates circumstances where persons are associates
under rules 4(1)(a), 4(1)(d) and 4(1)(e).
Broker handling fees are sometimes offered to brokers in connection with a takeover offer made under the Code.
Generally, the offeror pays the fee to brokers for ‘handling’ target company shareholders’ acceptances of the offer. Evidence is provided of the broker having handled the shares, for example, by the broker’s stamp appearing on the acceptance form relating to the shares.
The payment of broker handling fees by takeover offerors is now becoming a more common practice in New Zealand. The practice is relatively common in Australia.1
The Code does not prevent the payment of broker handling fees. However, the Panel considers that the commitment by an offeror, to pay brokers fees for handling target company shareholders’ acceptances, constitutes a term of the offer. Therefore the terms and conditions of any arrangement to pay a broker handling fee should be included in the offer document.
If the terms and conditions of a broker handling fee are not included in the terms of the offer, any announcement of an intention to pay such a fee may amount to a variation of the offer which is not permissible under rule 27 of the Code. The Panel considers that broker handling fees are not simply a matter between the offeror and the brokers. The payment and the conditions pertaining to the arrangement have implications for shareholders because shareholders will necessarily be approached by brokers and may be invited to pursue a particular course of action, involving use of the broker in relation to their acceptance of the offer.
This was an issue which the Panel had to address recently. In December 2007 the Canada Pension Plan Investment Board (CPPIB) made a partial takeover offer for Auckland International Airport Limited (AIAL). CPPIB wished to obtain a 40% stake in AIAL. The Code’s partial offer rules required CPPIB to provide voting forms for the AIAL shareholders (to accompany the offer document and acceptance forms sent to the shareholders) so that the shareholders could vote on whether to approve or object to CPPIB making a partial offer for less than a majority stake in the company.