CODEWORD

Phase 1 of the Financial Markets Conduct Act 2013 (the “FMC Act”) came into effect on 1 April 2014.

The FMC Act introduces a number of new exclusions from disclosure for offers of financial products. Some exclusions, such as for crowd funding through licensed intermediaries and for “small offers”, are aimed at making it easier for small and medium sized companies to raise capital.

A company becomes subject to the Code as soon as it has 50 or more shareholders (holding voting shares) and 50 or more share parcels. The Panel is not averse to companies deciding to structure their holdings so that they do not fall under the definition of “Code company”, provided that the structuring is undertaken in a manner that complies with the Code (see paragraph 25 of the Panel’s Guidance Note for Small Code Companies).

Issuers of securities under the FMC Act may wish to seek advice from a lawyer experienced in takeovers and corporate structuring if they are in doubt as to how the Code might impact on them. Licensed intermediaries offering crowd funding services can also help by encouraging issuers to take specific legal advice.

Companies taking advantage of the exclusions from disclosure under the FMC Act to raise capital need to be aware that they could become, or may already be, subject to the Takeovers Code and to other regulatory regimes.

The Panel has published its Guidance Note on Schemes of Arrangement and Amalgamations under Part 15 of the Companies Act 1993 in advance of the Companies and Limited Partnerships Amendment Bill being passed into law. At this stage, the Panel does not have an indication of when the Bill might be passed. The Guidance Note outlines the process for applying for the no objection statement required by proposed new section 236A of the Companies Act.

The Guidance Note is expressed as if the Bill has been enacted.

The Panel views schemes as a legitimate and valuable means for undertaking complex corporate transactions in New Zealand. Until the Bill is passed, the Panel will aim to facilitate schemes by granting exemptions from the Code, on the condition that the no objection statement process outlined in the Guidance Note is followed.

The Guidance Note can be found here.

The Panel has published two new Guidance Notes as part of the ongoing review and consolidation of the guidance material on the Panel’s website.

The Panel has also updated two Guidance Notes to keep them up to date with current Panel policy.

Consolidated Guidance Note on Target Company Statements

The Panel has issued a Guidance Note on Target Company Statements that consolidates the numerous guidance documents published since 2001 relating to the requirements for target company statements under Schedule 2 of the Code. The consolidated Guidance Note supersedes the nine previous relevant publications. The content of the original publications has been retained. However, the Panel has updated its guidance relating to the disclosure in target company statements of the assumptions underlying prospective financial information.

Consolidated Guidance Note on “Creeping” under Rule 7(e)

The Panel has published a new consolidated Guidance Note on “Creeping” under Rule 7(e) of the Code. The new Guidance Note replaces two previous publications. The substantive material from the previous publications has been retained in the new consolidated Guidance Note.

Updated Guidance Note on Exemptions

The Panel has updated its Guidance Note on Exemptions to include sections on the following:

Effect of amalgamation on a pre-existing exemption

The Panel has declined a recent application for an exemption from the fundamental rule of the Code on the basis that the exemption was unnecessary. The application involved a question of whether an amalgamated company would retain the benefit of a pre-existing exemption that applied to one of the amalgamating companies. An explanation of the application is set out in the Guidance Note.

Explanation of the class exemptions for proxies and associates

From time to time the Panel receives enquiries about the meaning of the exemptions in the Takeovers Code (Class Exemptions) Notice (No 2) 2001 that exempt proxy holders and certain associates from rule 6(1) of the Code. An explanation of these exemptions is set out in the Guidance Note.

Scrip offers and overseas shareholders

The Panel has updated its policy for granting exemptions from rule 20 of the Code for scrip takeover offers made to shareholders who reside in jurisdictions other than New Zealand.

In order to better facilitate the making of scrip offers, the Panel has decided that applicants seeking an exemption from rule 20 will no longer be required to take the step of obtaining legal advice on compliance with securities legislation in overseas jurisdictions.

Updated Guidance Note on Independent Advisers

The Panel has updated its Guidance Note on Independent Advisers to explain its role in approving independent advisers

In summary, the Panel is not required to, and does not consider the merits of an independent adviser’s opinion. However, the prohibition on misleading or deceptive conduct (rule 64 of the Code) applies to every person, including to independent advisers in relation to their opinions.

Updated Comments on Anti-Avoidance Rules

The Panel has declined two recent applications for exemptions from the fundamental rule of the Code. Each application related to a deeming rule in rule 6(2) of the Code and was declined on the basis that the relevant transactions involved would not infringe the fundamental rule and therefore could be put into effect without the need for an exemption. The examples are illustrative of the Panel’s interpretation of rule 6 and the deeming rules. 

The Panel is pleased to announce the appointment of Richard Hunt to the Panel from 1 May 2014.

Mr Hunt is a principal of Fort Street Advisers in Sydney, Australia and was appointed as a member of the Australian Takeovers Panel in 2012. Prior to establishing Fort Street Advisers, Mr Hunt worked for UBS Australia for 16 years where he held a number of senior roles including Co-head of Investment Banking Australasia, Head of Real Estate Australasia and was a member of a number of global Investment Banking boards and committees.

The Panel would also like to acknowledge the work and contribution of Peter Scott who has retired from the Panel this year. Mr Scott was the Australian member of the New Zealand Panel from July 2008 until March 2014.

The Panel has published a Basic Guide for Shareholders and a Basic Guide for Directors.

The Basic Guide for Shareholders aims to help Shareholders in Code companies to understand how the Code protects their rights. The Basic Guide for Directors aims to help directors of Code companies to understand their obligations under the Takeovers Code.