CODEWORD

Introduction

Following recent transactions and law reform coming into effect, the Panel has approved amendments to the following Guidance Notes:^[1]

• Section 32 of the Takeovers Act 1993;
• Control and Association;
• Upstream Acquisitions;
• Exemptions;
• Independent Advisers; and
• Compulsory Acquisition. 

In summary, the amendments encompass general updates to reflect how the Panel has approached certain issues in transactions and a general review of the relevant guidance notes.

The updated versions of all amended Guidance Notes, along with comparison versions showing all changes, are available on the Panel’s website here (the link to each comparison version is at the end of the webpage relating to the relevant Guidance Note). In addition, a brief summary of the changes to each of the amended Guidance Notes is set out below.

Revisions to the Panel’s Guidance Note on Section 32 of the Takeovers Act 1993

The amendments to this Guidance Note principally arose from the enforcement matters involving Synlait Milk Limited and NZME Limited. 

In summary, the principal updates: 

• emphasise the inquisitorial nature of the section 32 meeting process, and how the Panel might apply the principles of natural justice in this context;
• clarify the role of complaints or requests that the Panel hold a section 32 meeting, in particular, that the Panel may decide to convene a section 32 meeting of its own volition, including where a complaint has not been made;
• clarify the Panel’s policy on Panel members (who are not sitting on the relevant division) acting for clients in relation to a section 32 meeting;
• address procedural matters, such as the relevance of evidentiary rules, how and when submissions might be made and the likely contents of a notice of meeting; and
• clarify timing requirements for section 32 meetings and expand on the Panel’s consideration of practical factors, including information gathering and logistics.

Revisions to the Panel’s Guidance Note on Control and Association

The amendments to this Guidance Note arise primarily from the Panel’s meeting held under section 32 of the Takeovers Act 1993 to investigate whether or not Mr Jim Grenon was associated with certain other shareholders of NZME Limited. Various changes also arise out of the Panel’s consideration of potential association issues in relation to Synlait Milk Limited.

In summary, the principal updates:

• clarify the Panel’s approach to the concepts of “control” of voting rights (including the concepts of direct, indirect and effective control);
• set out the Panel’s approach to interpreting association, including the interrelationship of the different limbs of the definition of associate; and
• clarify the Panel’s approach to the evidence that should be provided to the Panel in relation to an alleged association matter.

In addition, the Panel has relocated certain examples to the Panel’s Guidance Note on Upstream Acquisitions. These are examples of exemptions declined on the basis that the relevant transactions did not infringe a deeming provision in rule 6(2) of the Code and therefore could be put into effect without an exemption from the fundamental rule.

Revisions to the Panel’s Guidance Note on Upstream Acquisitions

The changes to this Guidance Note are intended to clarify the application of the deeming provisions of rule 6(2) of the Code to upstream acquisitions. 

In summary, the principal updates:

• seek to improve the clarity and readability of the Guidance Note;
• describe (in general terms) key types of upstream acquisitions and how the Code applies to each; and
• include examples of declined exemptions under rule 6(2) of the Code, which were previously in the Control and Association Guidance Note.

Revisions to the Panel’s Guidance Note on Exemptions

This Guidance Note has been updated to clarify how the Panel evaluates exemption applications and its approach to retrospective exemptions. 

In summary, the principal updates:

• clarify the two main criteria the Panel considers when assessing exemption applications (i.e., consistency with the objectives of the Code and appropriateness) and what might be considered under each category;
• provide further information on the Panel’s approach to exemption applications intended to rectify breaches of the Code; and
• update and clarify the Panel’s process in considering exemption applications.

Revisions to the Panel’s Guidance Note on Independent Advisers

The changes to the Panel’s Guidance Note on Independent Advisers are consequential – the guidance on appointing independent experts has been moved to the Guidance Note on Compulsory Acquisition and been replaced with a cross-reference. 

Revisions to the Panel’s Guidance Note on Compulsory Acquisition

The changes to this Guidance Note arise from the recent takeover of Rural Equities Limited which presented several novel issues. 

In summary, the principal updates:

• provide a more comprehensive explanation of the circumstances in which a party becomes the dominant owner;
• provide additional guidance on how shareholders can challenge a specified consideration, with the takeover of Rural Equities Limited included as an illustrative example; and
• include additional guidance on the procedure for appointing independent experts to prepare determinations of compulsory acquisition considerations, which were previously included in a more summarised form in the Guidance Note on Independent Advisers.