Changes to the Panel’s enforcement powers
Published 1 November 2006
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:
For the purposes of section 32, a permanent compliance order is an order for one or more of the following:
(a) prohibiting or restricting a person from making any statement or distributing any document that is or that may reasonably be expected to constitute a contravention of the Takeovers Code:
(b) directing a person to disclose in accordance with the order information for the purpose of securing compliance with the Takeovers Code:
(c) directing a person to publish, at the person’s own expense, in the manner and at the times specified in the order corrective statements that are specified in, or are to be determined in accordance with, the order:
(d) for the purpose of securing compliance with any of those orders, an order directing a person to do or refrain from doing a specified act.
The permanent orders are focused on giving the Panel the power to deal decisively with any kind of misleading conduct, by enabling the Panel (without recourse to the Court) to prohibit or restrict persons from making statements or distributing documents, and to direct persons to disclose information or to publish, at the person’s own expense, corrective statements.
While these orders are designed to complement the new rule 64 of the Code (which will prohibit misleading or deceptive conduct in broad circumstances in relation to the Code), they are also available to the Panel to deal with misleading or deceptive takeover documents. They came into effect on 25 October 2006 and are available to the Panel notwithstanding that rule 64 is not yet in force.
A further extension of the Panel’s enforcement powers has occurred through the addition to the Takeovers Act of a definition of ‘contravening the Code’.
Prior to the inclusion of the new definition, the Panel was able to exercise its enforcement powers under section 32 only against the person or persons breaching the Code. Any secondary conduct, such as aiding, counselling or inducing the actual contravener to breach the Code could only be dealt with through the High Court, by way of seeking a pecuniary penalty against the person who engaged in the secondary conduct.
The new definition extends the reach of the Panel’s powers so that restraining orders and compliance orders can be made by the Panel against not only the person who has actually breached or intends to breach the Code, but also in respect of any secondary involvement in the breach. The new definition provides as follows:
In sections 32, 33, and 33AA and in subpart 2 of Part 3 [of the Takeovers Act] (which contain the enforcement powers of the Panel and Court), unless the context otherwise requires, contravene the Takeovers Code or not act in compliance with the Takeovers Code, includes—
(a) a contravention of the Takeovers Code or a term or condition of an exemption from the Takeovers Code; or
(b) an attempt to contravene the Takeovers Code or a term or condition of an exemption from the Takeovers Code; or
(c) aiding, abetting, counselling, or procuring any other person to contravene the Takeovers Code or a term or condition of an exemption from the Takeovers Code; or
(d) inducing, or attempting to induce, any other person, whether by threats or promises or otherwise, to contravene the Takeovers Code or a term or condition of an exemption from the Takeovers Code; or
(e) being in any way, directly or indirectly, knowingly concerned in, or a party to, the contravention by any other person of the takeovers Code or a term or condition of an exemption from the Takeovers Code; or
(f) conspiring with any other person to contravene the Takeovers Code or a term or condition of an exemption from the Takeovers Code.
Accordingly, the Panel can now, after making appropriate findings, make determinations and issue temporary restraining orders or permanent compliance orders against persons engaged in secondary conduct related to breaches or intended breaches of the Code or of terms or conditions of exemptions from the Code. In addition, any of the orders that the Court can make or remedies that it can grant also can relate to secondary involvement in breaches or intended breaches of the Code or of exemptions.