Takeovers Panel Consults on Buybacks Class Exemption


04 May 2009

The Takeovers Panel has published a consultation paper on one of the class exemptions for buybacks contained in the Takeovers Code Class Exemptions Notice. The particular class exemption allows a person, who together with associates holds or controls more than 20% of a Code company, to increase their percentage control with appropriate shareholder approval by not selling into the buyback.

The Panel wishes to ensure that the class exemptions relating to buybacks operate effectively and efficiently. For this purpose the paper discusses the operation of this class exemption, identifies some issues in relation to it and then sets out a range of potential options for addressing the issues. The Panel identifies its preferred option.

The issues identified by the Panel, include:

  • the class exemption may contain insufficient disclosure requirements in relation to buybacks occurring over a period of several years where a shareholder wishes to increase their control through another transaction. As a result, shareholders of the Code company may make their decision on whether to give their approval to a person's other control increase on less than a fully informed basis
  • the class exemption contains no ongoing disclosure requirements in respect of the buyback. As a result, in relation to buybacks occurring over a period of several years, new shareholders coming in may be unaware of the maximum voting rights increases permitted to a person under this class exemption
  • some of the provisions of the class exemption are partly unclear on their face. Greater clarity would assist the market and help prevent unnecessary compliance costs being incurred.

The Panel invites comment on the options, especially its preferred option using the questionnaire in the consultation paper.

The consultation paper is available on the Panel's website at www.takeovers.govt.nz

Closing date for submissions is 12 June 2009.