Good morning - I am John King, and I am Chairman of the Takeovers Panel which administers and enforces the New Zealand Takeovers Code.

My history, and that of the New Zealand Takeovers Code, have been linked for over a decade. The Code was a long time coming, but it came into force on 1 July 2001.

It is a Code designed for the New Zealand situation so although it has features in common with Codes in other jurisdictions, it is not exactly the same as any other Code.

Our Code applies to companies which fall within the definition of a "code company". These are companies which

• are listed on the New Zealand Stock Exchange; or
• have been listed on the NZSE in the past 12 months; or
• have 50 or more shareholders and $20 million or more of assets.

Fundamental Rule

Central to the New Zealand Code is the fundamental rule which prevents any person from becoming the holder or controller of more than 20% of the voting rights in a Code company except in compliance with the Code.

The fundamental rule is based on the control of voting rights and the word "control" is defined as "having directly or indirectly, effective control of the voting right". A person who holds or controls 20 per cent or more of a Code company may not increase its voting rights except as permitted by the Code.

The fundamental rule has anti-avoidance provisions which deal with situations where groups of people act jointly, or in concert, or together as associates.

The Takeovers Panel

The Panel administers and enforces the Code in the following ways:

• Considers and grants exemptions from the Code - exemptions are needed to overcome technical difficulties in complying with the Code. The Panel considers applications for exemption and grants them when it is appropriate to do so. It is always at pains to ensure that the objectives of the Code are not compromised. From the beginning there have been several class exemptions in place. These provide a standard form of exemption for common classes of transactions. The terms and conditions of the class exemptions are designed to ensure that the underlying purpose and intent of the Code are fulfilled. Where the circumstances of a case do not fit a class exemption specific exemptions need to be sought. In its first 18 months of operation the Panel has granted a further 24 exemptions.
• Appoints independent advisers - independent adviser reports are required on the merits of takeover offers and acquisitions and allotments requiring shareholder approval. The Panel takes the task of appointing independent advisers very seriously so that only suitably qualified advisers who are, and are seen to be, independent are appointed. To date the Panel has appointed more than 40 independent advisers.
• Enforces the Code - the Panel has extensive enforcement powers under the Takeovers Act. When it suspects a breach of the Code it can call a meeting under the section 32 to decide whether to exercise its powers. If the Panel is not satisfied that the Code is being complied with, it can issue restraining orders and where necessary seek orders from the Court. The Court has wide powers including the power to order the disposal or forfeiture of shares, the removal of voting rights, the avoidance of agreements and the payment of compensation. The rights of other parties to apply to the Court are limited. In the first 18 months the Panel has held 10 meetings under section 32 of the Act.

In the future

We feel that the Takeovers Code is working well. Takeovers are now taking place in an orderly fashion and investors are kept well informed.

The Panel will be seeking to promote some technical changes to the Code but to date have no reason to review the basic policies and procedures of the Code. The feedback from the marketplace seems to indicate general satisfaction with the Code.