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Important notice: You may use this material for your own personal reference only. The material may not be used, copied or redistributed in any form or by any means without a LAWLEX enterprise wide subscription. Corporate Law Bulletin Bulletin No. 90, February 2005 Editor: Professor Ian Ramsay, Director, Centre for Corporate Law and Securities Regulation Published by LAWLEX on behalf of Centre for Corporate Law and Securities Regulation, Faculty of Law, the University of Melbourne with the support of the Australian Securities and Investments Commission, the Australian Stock Exchange and the leading law firms: Blake Dawson Waldron, Clayton Utz, Corrs Chambers Westgarth, Freehills, Mallesons Stephen Jaques, Phillips Fox. Use the arrows to
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Detailed Contents |
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1. Recent Corporate Law and Corporate Governance Developments
1.1 Seminar
(Sydney and Melbourne) - The Takeovers Panel: Key issues for companies and
advisers - Seminar to mark the 5th anniversary of the new Panel
2.1 Small
capitalisation companies and fundraising disclosure
3.1
Equity market reforms 4. Recent Takeovers Panel Developments 4.1
Universal Resources Ltd: Panel accepts undertakings and declines to make a
declaration 5.
Recent Corporate Law Decisions
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1. Recent Corporate
Law and Corporate Governance Developments |
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In March 2005 the Takeovers
Panel celebrates its fifth anniversary as the main forum for resolving
takeover disputes. In this time the Panel has delivered almost 150 decisions
on a range of important matters relating to takeovers.
Speakers: Dates: Times: 5.30pm - 7.30pm. Refreshments
will be served afterwards. Melbourne Seminar $90 + $9 GST = $99 For further information please go to http://cclsr.law.unimelb.edu.au/news/
1.2 New
book – directors’ duties The authors are Justice Robert Austin, Professor Harold Ford and Professor Ian Ramsay. The book is an important
publication given the economic significance of directors, the intensity of
debate about their functions and accountability, and the breadth of public
interest in the subject of company directors. The book will be of use to
practising lawyers, company directors, company secretaries, in-house counsel
and academics as well as those with an interest in company directors and
corporate governance.
More information about the book is available at: http://www.lexisnexis.com.au/aus/products/promotions/CompanyDirectors.pdf
1.3 Report on board self-assessment in mutual funds
1.4 Myners report on pre-emption rights published On 10 February 2005 Paul Myners' report on pre-emption rights was published. The report concludes
that more active shareholder engagement is the key to Paul Myners concludes that while the principle of shareholders having pre-emptive rights is valuable and should not be eroded, the current blanket approach to disapplying these rights - due to a rigid interpretation of the existing guidelines - is not working as intended. The report recommends that:
The report follows Paul Myners' study of pre-emption rights, which give existing shareholders first refusal on any new shares that a company issues to raise cash, commissioned by DTI in September 2004. The "Bioscience 2015" report, published by the Bioscience Innovation and Growth Team in November 2003, suggested that the guidelines constrained the growth of companies seeking to finance the transition from the R&D stage to the launch of a product. The full report and the responses to the Invitation to Comment are available on the DTI website at http://www.dti.gov.uk/cld/public.htm
1.5 CESR’S final recommendations for consistent implementation of the EU regulation on prospectus
On 10 February 2005 the Committee of European Securities Regulators (CESR) published its final recommendations for the consistent implementation of the European Commission’s Regulation on Prospectus (Ref. CESR/05-054b) and a feedback statement (Ref. CESR/05-055b) which sets out how CESR has taken into account the comments received. The final set of recommendations follows an extensive consultation with industry that has enabled the views from market participants and end-users to be fully considered when drafting the recommendations which are now in their final form. The Prospectus Directive and
accompanying Regulation establishes a harmonised format for prospectuses in During the consultations that CESR undertook in order to develop the level two advice for the European Commission and in the responses to the call for evidence published by CESR in March 2004, market participants expressed the need for a consistent approach to be adopted by competent authorities in the different jurisdictions when implementing the Regulation’s requirements. In particular, there was a strong demand for guidance on a number of items of the Regulation. In response to these demands, CESR members decided to start co-ordinating their views and started a consultation process that has now been finalised with the publication of the paper on 10 February 2005. The aim of CESR when issuing these recommendations is to provide greater clarity for issuing companies regarding the provision to disclose information on a range of areas and to promote greater transparency in the way in which supervisors will apply the Regulation, without imposing further obligations on issuers. Following the result of the consultation, CESR has decided to introduce a number of amendments to the original proposals. As suggested, CESR has taken into consideration the overarching principle of the Directive whereby the information included in a prospectus has to be given according to the particular nature of the issuer and of the securities offered to the public or admitted to trading. It has, therefore, clarified what types of securities each recommendation should apply to, bearing in mind that investors need a different level of disclosure depending on the type of securities offered or admitted to trading. In addition, CESR has decided not to issue recommendations on those items included in the consultation paper where there has been a clear consensus in the market on the fact that there is no need for further clarifications, as the Regulation is self explanatory. Moreover, CESR has clarified the scope of its recommendation in relation to forecasts made outside the prospectus, for instance in the context of a road show; the recommendation on the capitalisation and indebtedness statement has been redrafted to address the concerns from respondents on the need to calculate and publish the level of profits at the date of the statement. A number of amendments have been introduced in the specialist issuers section. Following criticism from market participants CESR decided to allow the valuation report required for property companies to be dated up to one year prior to the prospectus. In addition, CESR has clarified that the recommendation on scientific research based companies applies only to companies that can be defined as start-up companies. Moreover, for start-up companies, CESR decided not to require a valuation report on the services/products of the issuer. After due consideration of the pros and cons as put forward by the respondents, it was decided that this report should be voluntary.
The measures included in the paper cover:
Further information is available on the CESR website at: http://www.cesr-eu.org/popup2.php?id=3001
1.6 Parliamentary Committee report on international accounting standards
On 10 February 2005, the
Parliamentary Joint Committee on Corporations and Financial Services
published its report on adoption in In its report, the Committee considered 41 new accounting standards. It is stated in the report that the “Committee took the view that the current inquiry should focus on whether the proposed standards meet the formal requirements of the Corporations Act, and whether any unforeseen anomalies have been identified, particularly by companies preparing to implement the standards. The Committee did not intend that this inquiry should provide encouragement to parties to revisit arguments about the technical content of the standards.” The Committee supports the new accounting standards but does recommend that small and medium enterprises be permitted additional time to report to ASIC for that enterprise’s first reporting year under the new standards. The Committee’s report is available at: http://www.aph.gov.au/senate/committee/corporations_ctte/aas/report/index.htm
1.7 Leaders of accountancy bodies commit international support to clarifying professional responsibilities
The International Federation of
Accountants (IFAC), the global organisation for the accountancy profession representing
163 accountancy organizations with more than 2.5 million accountants in
public practice, education, government service, industry and commerce,
convened a meeting in Representatives of the World Bank and the United Nations Conference on Trade and Development (UNCTAD) also attended the meeting. The group discussed a global agenda for enhancing the accountancy profession’s contributions to economic growth and development. Participants agreed that the international profession should strengthen accountancy in developing nations, address professional responsibility in financial reporting, clarify the role of accountants in corporate governance, provide support and guidance for professional accountants in business, and focus on supporting small and medium enterprises and practices. The group agreed that the following actions need to be addressed:
In addition to this list of recommendations, during the meeting IFAC received support for several initiatives that are already underway:
Member bodies and regional accountancy organisations indicated their commitment to achieving convergence to international standards on accounting and auditing and expressed their dedication to supporting developing countries in establishing a profession based on internationally recognised competencies and standards.
1.8 Discussion paper on strengthening bankruptcy laws
On 8 February 2005 the Australian Attorney-General Philip Ruddock announced the release of a discussion paper on changes to bankruptcy laws designed to target high income earners who use bankruptcy to avoid paying debts they can afford to pay. Amendments targeting this issue were released as an exposure draft in mid-2004 and were later withdrawn. The Insolvency and Trustee Service Australia (ITSA) will also soon convene stakeholder focus groups on these issues. The discussion paper is available on ITSA's website.
1.9 Shareholder participation reforms On 7 February 2005 the Parliamentary Secretary to the Australian Treasurer, the Hon Chris Pearce MP, released a package of draft legislation relating to shareholder participation. The legislation would remove the so called ‘100 member rule’, which currently requires companies to hold special general meetings at the request of only 100 shareholders. A minimum of 5 per cent of total voting shares would be required to requisition a special general meeting. Mr Pearce said the 100 member rule has been criticised by many, including the judiciary on the following grounds:
A number of new proposals have been developed to enhance the capacity of shareholders to participate in scheduled meetings. These proposals include making it easier for minority shareholders to place resolutions on the agenda of scheduled company meetings and to require companies to distribute members’ statements along with notices of meetings. There will also be greater scope for resolutions and statements to be distributed electronically to members. Finally, the reforms will require proxy holders to vote in accordance with shareholder instructions. This will improve shareholder confidence in proxy voting by preventing the questionable practice of ‘cherry picking’ proxies, whereby proxy holders’ lodge votes that accord with their own views while withholding contrary votes. The draft legislation will be contained in the proposed Corporations Amendment Bill (No 2) 2005. The Parliamentary Joint Committee on Corporations and Financial Services has announced that it will hold an inquiry into the proposed reforms. The draft legislation is available on the Treasury website.
1.10
Pricing practices of On 3 February 2005 the New
Zealand Securities Commission announced that it had completed its inquiry
into the pricing practices of fund managers. The Commission found that
neither market timing nor late trading was commonly practised in "Market timing" is trading in units based on an out of date price. Short-term investors use market timing to make quick trades to exploit a stale fund price. A fund price is stale when the price of the units in the fund does not reflect all the available information about that fund. "Late trading" is the buying and selling of units after the close of trading but using a price that was current when the market closed. Late trading allows certain preferred investors to trade after the cut-off time for accepting buy or sell instructions. The inquiry followed
concerns raised last year in the In There is a greater potential for market timing where historical pricing, rather than forward pricing, is used. This is because a forward pricing model ensures that the price of the units is not publicly known at the time buy or sell instructions are issued by investors. The Commission notes that most fund managers have taken steps to detect and deter market timing activities. The Commission supports these steps. The Commission:
The Commission conducted its inquiry by seeking written and signed statements from fund manager firms. The Commission's findings are based on the information provided by those firms.
1.11
Choice of fund in
Around 7.5% of total superannuation assets are likely to move as the superannuation industry changes shape following the introduction of choice of fund in July this year, according to a new report released on 2 February 2005 by the Association of Superannuation Funds of Australia (ASFA). But caution is the byword for consumers, with the report referring to anecdotal reports of mis-selling already underway. The ASFA Report ‘Implications of choice of superannuation fund legislation for members, employers and funds’ suggests that 5.7 million Australians will have a statutory right to choose their own super fund, and of those around 8%, or some 456,000, will exercise choice. Based on survey data of fund
members, choice of fund will lead to gross flows between fund sectors of
about 6% of members over time. Because individuals most likely to change
funds will also tend to have higher account balances, the percentage of
assets that will move over time will be higher, at some 7.5%. Super assets in
Most public sector employees and many employees in large organizations covered by industrial agreements will be exempt from choice of super fund. The report cautions that fund members must be wary of unlicensed financial advisors, and that the regulator (ASIC) needs to be vigilant. The ASFA Report, prepared by Principal Researcher Ross Clare, states that self managed super funds (SMSFs) look set to gain from choice, with retail funds appearing most likely to lose members. Recent surveys have suggested a higher proportion of retail fund members plan to change funds, for a variety of reasons, ranging from fund performance to fee levels. However, both retail and industry funds will gain market share from the closure of certain corporate funds. With twenty two per cent of superannuation assets currently held in SMSFs, ASFA expects this to be boosted over time by 4% of total superannuation assets. Employers whose employees are not exempted from choice of fund will almost certainly be making contributions to more funds from 1 July. A very large employer might be contributing to around 50 super funds on behalf of employees. The ASFA Report warns employers to be careful who they allow to provide educational or marketing material in the workplace to their employees. There have already been reports of “educational seminars” that have recommended inappropriate or unwise courses of action to employees. ‘Implications of choice of superannuation fund legislation for members, employers and funds’ can be accessed at the ASFA website.
1.12 Criminal penalties for serious cartel behaviour
On 2 February 2005 it was announced that the Australian Government will amend the Trade Practices Act 1974 to introduce criminal penalties for serious cartel conduct. The Review of the Competition Provisions of the Trade Practices Act (the Dawson Review) recommended the introduction of criminal penalties for serious cartel conduct, recognising the growing international experience that suggests they are effective in deterring serious cartel conduct. However, the Dawson Review also indicated that a number of problems with the introduction of criminal penalties needed to be resolved before such penalties could be introduced. Principally, the problems identified in the Dawson Review centred on appropriately defining a criminal offence and implementing an effective leniency or immunity policy in the Australian context. The proposed criminal cartel offence will prohibit a person from making or giving effect to a contract, arrangement or understanding between competitors that contains a provision to fix prices, restrict output, divide markets or rig bids, where the contract, arrangement or understanding is made or given effect to with the intention of dishonestly obtaining a gain from customers who fall victim to the cartel. To ensure the offence targets serious cartel conduct that causes large scale or significant economic harm, and that minor breaches are dealt with through civil rather than criminal proceedings, the DPP and the ACCC will enter into a formal, publicly available Memorandum of Understanding (MOU) establishing procedures for the investigation of the cartel offence and the circumstances in which the ACCC will refer a case to the DPP for prosecution. The MOU will also specify that in making an independent determination as to whether to prosecute a particular matter, the DPP will consider factors such as the impact of the cartel and the scale of detriment caused to consumers and the public, and previous admissions to or convictions for cartel conduct. The ACCC will issue guidelines, prepared in consultation with the DPP, to outline the factors that will inform any decision to pursue a criminal investigation. Appropriate protection for whistleblowers that come forward to uncover cartel conduct will be provided though a clear and certain immunity policy. International experience suggests immunity for whistleblowers is critical in uncovering cartels. Guidelines will be published setting out the conditions for immunity to be granted by the DPP, upon the advice of the ACCC. The respective roles and responsibilities of the ACCC and the DPP will also be defined in the MOU. The maximum penalties for the offence will be a term of imprisonment of five years and a fine of $220,000 for individuals and a fine for corporations that is the greater of $10 million or three times the value of the benefit from the cartel, or where the value cannot be determined, 10 per cent of annual turnover. In accordance with the intergovernmental Conduct Code Agreement, the Australian Government will consult with the States and Territories over the next three months. Further information is available on the website of the Treasurer.
1.13 Global CEO survey: governance, risk management and compliance
On 26 January 2005 Pricewaterhouse Coopers published its 8th Annual
Global CEO Survey. According to the survey, building robust corporate
governance systems and processes, managing risk on a global scale, and complying with an increasingly vast web of
regulatory requirements is difficult, costly and time consuming work;
however, CEOs worldwide, think it is well worth the
effort. The survey shows
that there are clear benefits to effective GRC; however, responses overwhelmingly
demonstrate that CEOs face numerous challenges when
it comes to implementation and, ultimately, to realising these benefits.
The full report is available on the PWC website.
1.14
Research on
Better disclosure on directors' pay is leading to improved dialogue between companies and shareholders according to new research published on 25 January 2005 by the UK Trade and Industry Secretary, Patricia Hewitt. In a written statement to Parliament, Patricia Hewitt said that rules on pay disclosure introduced by the Government (Directors' Remuneration Report Regulations 2002) had had a "positive impact" and that the independent report by Deloitte and Touche published on 25 January 2005 underlines the effectiveness of the Government's action in making directors' remuneration subject to closer scrutiny by shareholders. As a result of the findings, the UK Government has decided against new provisions on directors' remuneration in the forthcoming Company Law Reform Bill. The findings show:
Patricia Hewitt called on the Association of British Insurers and National Association of Pension Funds, and the Confederation of British Industry, to develop a common set of best practice guidelines on directors' contracts. The research identifies minor changes to the Regulations in order to further clarify what is required of companies with regard to some elements of their annual remuneration report and suggests some additional improvements to the transparency and quality of the information provided. Consideration will be given by the UK Government to the need for the changes suggested by the report in the light of views expressed by stakeholders and better regulation principles. The Trade Secretary stated that if, as a result, the changes are considered necessary, they should not involve additional costs or additional regulatory burdens on companies or shareholders. The full text of the Deloitte and Touche report is available on the website at: http://www.dti.gov.uk/cld/Deloitte_Rep_DRRR_2004.pdf or via the main DTI homepage. The research was based on a detailed analysis of companies' latest annual reports and a survey of the views of shareholders, institutional shareholders' representative bodies, the CBI, IMA and the IMA. The full text of Patricia Hewitt’s written statement is available at: http://www.parliament.uk
1.15 Supervising financial services in an integrated European single market: discussion paper
On 24 January 2005 the UK Financial Service Authority, HM Treasury and the Bank of England published a discussion paper titled “Supervising financial services in an integrated European Single Market”. The following is an extract from the executive summary: As There is no single or simple way to achieve supervisory convergence: the issues are complex and the solutions are multiple and multi-faceted. This paper sketches out five related challenges that need to be addressed to make progress on achieving convergence of supervisory practice, and offers some proposals for how this can be achieved. Such proposals do not require new EU legislation but rather focus on practical solutions to this complex issue. Taken together, these challenges and proposals present an ambitious framework for action:
The full text of the discussion paper is available at: http://www.fsa.gov.uk/pubs/other/tripartite_dp.pdf
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2.1 Small capitalisation companies and fundraising disclosure
On 23 February 2005 the Australian
Securities and Investments Commission (ASIC) announced a campaign aimed at
improving the disclosure in fundraising documents issued by small
capitalisation companies (Small Caps Campaign).
ASIC expects to release a report on the results of its campaign report by June 2005. Further information is available from the ASIC website.
2.2
ASIC releases policy on approving codes of conduct
A copy of the Policy Statement can be obtained from ASIC's Infoline by calling 1300 300 630 or from the ASIC website.
2.3 ASIC
releases preliminary results of 2004-05 financial reporting surveillance
project (a) Financial reporting surveillance Following a review of
400 financial reports, ASIC has sought information and explanations in relation
to the accounting treatments adopted by 32 listed entities.
As a result of ASIC's inquiries, Consolidated Global Investments Limited
amended and re-lodged its financial report on 23 December 2004. The amended
annual report disclosed that the consolidated loss from ordinary activities
before income tax increased from $496,796, as previously reported, to
$848,439. The company made the adjustments in order to comply with AASB1041
'Revaluation of Non-Current Assets' as an asset revaluation had been
incorrectly taken to profit. ASIC examined the disclosures of
more than 1,100 listed entities with 30 June 2004 balance dates concerning
their progress towards adoption of IFRS and its impact on those entities.
General findings were released in November 2004.
'Qualified financial reports
alone are of limited use to investors and others for making important
investment decisions because the audit qualification is an indication that
the financial report is unreliable', Mr Pound said. (d) Audit Where an entity has not
complied with accounting standards and the audit report was unqualified, ASIC
may refer the auditor's conduct to the Companies Auditors and Liquidators
Disciplinary Board. Company: Action: Central West Gold NL Re-lodged financial statements Chameleon Mining NL Announcement Empire Oil & Gas NL Re-lodged financial statements Garratt's Limited Announcement Harrington Group Ltd Disclosed in a prospectus IYS Instalment
Receipt Re-lodged financial statements Linden & Conway Ltd Announcement Mount Conqueror
Re-lodged financial statements Telezon Limited Announcement
2.4 ASIC
review of high-yield debentures
This surveillance campaign follows an ASIC consumer alert relating to investment in debentures in July 2004 (Media Release 04-242: $1.8 billion at stake: warning to investors in high-yield debentures) and three previous warnings in 2003–2004 in relation to defective debenture prospectuses and the risks of investing in high-yield debentures. ASIC initiated the surveillance campaign to assess the validity of concerns about high-yield debentures. The main objectives of the campaign were to:
ASIC discovered that many of its concerns relating to debentures were present in the marketplace. Stop orders issued during the debenture campaign - Company and Action taken/ results:
A copy of the report containing ASIC's findings ‘High-yield debentures - ASIC surveillance report’ is available on the ASIC website.
The Corporate Law Economic Reform Program (Audit Reform and
Corporate Disclosure) Act 2004 (CLERP 9) introduced a new requirement
that auditors provide a declaration as to whether the auditor is aware of any
contraventions of the audit independence provisions of the Act and codes of
professional conduct. A copy of the Class Order can be obtained from ASIC's Infoline by calling 1300 300 630 or from the ASIC website.
2.6 ACCC
and ASIC release draft debt collection guideline
2.7 ASIC
seeks comment on draft updated practice note: consent to quote
The draft updated PN 55 reflects
legislative changes arising from the Corporate Law Economic Reform Program Act 1999 and the Financial Services Reform Act 2001, in particular, the new
application of the consent requirement to a PDS. Further information on the Practice Note 55 disclosure documents is available on the ASIC website.
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Following extensive consultation ASX has made a number of decisions regarding the structure of the equities market. These changes are separate to the introduction of the CLICK XT for all markets although some of the changes will occur with the change to the new system. The key decisions are:
The detail of ASX decisions can be found in the paper: “Enhancing the Liquidity of the Australian Equity market: Decisions on Reform” available on the ASX website.
3.2 Corporate governance – assistance for companies using alternative practices The Implementation Review Group (IRG) of the ASX Corporate Governance Council (Council) has released its second report on the implementation of the Council’s corporate governance Principles and Recommendations. The IRG’s key conclusion is that whilst the current arrangements offer the best framework for listed companies, many – particularly smaller companies – have not embraced the flexibility of Australia’s: “if not why not” disclosure requirements. Under ASX Listing Rule 4.10.3, listed companies must disclose in their annual reports the extent to which they have adopted the Council’s 28 Recommendations. A company is free to adopt alternative governance practices. However, it must disclose its reasons for doing so. The report follows a review of submissions and actual governance disclosure by smaller companies, predominantly junior mining and exploration companies. The key findings of the IRG’s report are:
In order to help companies understand how to prepare exception reporting for the annual reports, the IRG has developed examples of “if not, why not?” reporting, covering selected corporate governance recommendations. The examples are not a template and so should not be copied. They guide companies through the thought process involved in constructing disclosure which accurately reflects each company’s situation. The IRG describe good exception reporting as addressing 3 elements:
The report and examples are available from the ASX website.
3.3
Financial reporting - rule amendment proposals The draft is available from the ASX website.
3.4
Proposed listing rule amendments - change of implementation date
ASX considers it preferable for practical reasons that both these amendments and the amendments relating to financial reporting (see 3.3 above) are implemented at the same time. Accordingly, it is now expected that the implementation date for both rule amendments packages will be in May. A further update regarding timing will be provided to companies in late March/early April.
3.5 AIFRS
- reminder For more information please visit the ASX website.
3.6 Government gives in principle approval to new ASX clearing support arrangements
On 15 February 2005 the Parliamentary Secretary to the Treasurer, the Hon Chris Pearce MP, announced that he had given in principle approval to an application from the ASX to restructure its clearing support arrangements. Under the ASX’s proposed new arrangements, responsibility for clearing support will be transferred from the National Guarantee Fund (NGF) to the Australian Clearing House Pty Limited (ACH). ACH is a wholly owned subsidiary of Australian Stock Exchange Limited. It operates as the central counterparty for transactions on ASX markets. In recognition of ACH’s additional responsibilities, approximately $70 million is expected to be transferred from NGF to ACH once the application receives final approval. Stringent conditions will be attached to the future use of any funds that are transferred to ACH. Most importantly, the funds can only be used for clearing support. They will not be available for other purposes. ASX plans to contribute capital of its own to ensure that ACH has sufficient financial backing. The restructuring of ASX’s clearing support arrangements will provide ACH with greater flexibility to provide a wider range of services. It will also result in better risk management. The creation of a single body with responsibility for managing clearing risk in relation to ASX markets will enable ACH to become fully compliant with the Reserve Bank’s Financial Stability Standards for Central Counterparties. The change will not affect the NGF’s investor protection role. The rights of clients of ASX participants to make claims against the NGF will remain unchanged. The Government has stated that it has ensured that the NGF will have enough money to deal with future investor protection claims.
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4.1 Universal Resources Ltd: Panel accepts undertakings and declines to make a declaration On 21 February 2005, the Takeovers Panel announced that it had accepted an undertaking from Universal Resources Limited (Universal) in relation to the application by CopperCo Limited (CopperCo) under section 657C of the Corporations Act 2001 on 9 February 2005 concerning CopperCo’s takeover bids for all of the ordinary shares and options in Universal. In light of the undertaking, the Panel has declined to make a declaration of unacceptable circumstances. CopperCo’s application concerned disclosures made in a letter which Universal sent to its shareholders on 2 February 2005 in advance of Universal’s target’s statement. The Panel considered that there were deficiencies in, and omissions from, that letter in that it included:
The Panel considered that it was appropriate that Universal shareholders be provided with a corrective letter to rectify the above deficiencies. Given that Universal was about to dispatch its target’s statement to Universal shareholders the Panel considered it sensible to require the letter to be sent to Universal shareholders with the Universal target’s statement. The Panel accepted an undertaking from Universal to send a copy of the letter, in the form reviewed by the Panel, to each Universal shareholder at the same time as, and in the same envelope as, the target’s statement. Based on that undertaking, the Panel concluded its proceedings on the basis that it was not in the public interest to make a declaration of unacceptable circumstances and that no order was required. In accepting Universal’s undertaking, the Panel noted that Universal had confirmed that it would commence dispatching its target’s statement (and therefore the letter) by 21 February 2005 (as required by the Corporations Act). Further information about the decision is contained in the Panel’s media release at: http://www.takeovers.gov.au/display.asp?ContentID=920
4.2 LV Living Limited: Panel makes declaration of unacceptable circumstances and final orders and accepts undertakings On 15 February 2005 the Takeovers Panel announced it had made a declaration of unacceptable circumstances in response to an application from Geoff Woodham Financial Services Pty Ltd (GWFS) under section 657C of the Corporations Act in relation to the affairs of LV Living Limited (LV Living). The Panel also made final orders and accepted undertakings. The application related to:
The Panel’s declaration and orders, and the undertakings accepted by the Panel, relate to the issues of shares to Peridon and ACP, and ancillary concerns in relation to the level of substantial holding disclosure in relation to LV Living. (a) Unacceptable circumstances The Panel considered that unacceptable circumstances existed in that:
(b) Associate relationships In reaching the above conclusions as to voting power:
In the latter regard, ACP and Peridon were both parties (along with other persons, including RPS) to a Cooperation Agreement dated 29 October 2004. The Panel concluded that the Cooperation Agreement evidenced an ongoing business relationship regarding the conduct of a joint venture involving LV Living, but that it did not evidence an ongoing association between the parties to it with respect to the control of LV Living. There was no evidence of an ongoing agreement concerning the accumulation or exercise of voting power, nor any agreement constraining the disposal of shares in LV Living. However, the Panel did consider that an association existed at the time of the shareholder meeting to approve the issues of securities to, amongst others, Peridon and ACP. The Panel reached its conclusion with respect to the absence of an ongoing association with some hesitation. The Panel has noted that if the future conduct of ACP, Peridon and their respective associates evidences an association between the ACP persons and the Peridon persons in relation to the exercise of voting power in LV Living, it will be open to a future Panel to declare that the association constitutes unacceptable circumstances which, given the way in which the associates originally acquired their relevant interests in LV Living shares, justifies that future Panel in making divestment orders to reduce the collective voting power of the associates to 20%. (c) Inadequacy of shareholder approvals Although LV Living obtained shareholder approvals in relation to the issue of securities to Mr West, Peridon and ACP, those shareholder approvals were not expressed to be for the purpose of item 7 of section 611 and were inadequate to prevent unacceptable circumstances existing. Amongst other things, the Panel noted that:
The Panel had a number of other concerns, including that Peridon and its associates voted on the resolution approving the issue of convertible notes to ACP – notwithstanding that Peridon was associated with ACP at the time of the meeting. (d) Order and undertakings The Panel noted that, at 22.39%, the voting power of Peridon and its associates was within a single ‘3% creep’ from the 20% threshold in section 606. The Panel also noted that, at 25.48%, the voting power of ACP and its associates was within two ‘3% creeps’ of the 20% threshold. Accordingly, the Panel has made orders and accepted undertakings, with the combined effect that:
The Panel has also made orders and accepted undertakings restricting the use of the ‘3% creep’ exception and disposals of LV Living shares other than in the ordinary course of trading on ASX by:
The Panel has indicated that it would be prepared to vary its orders and waive compliance with the undertakings if shareholders in LV Living ratify the acquisition of all relevant interests consequent on the issue of shares to Peridon or ACP in December or subsequent on-market acquisitions of LV Living shares by Lidcombe or Mr Radford. In addition, the Panel made orders and accepted undertakings requiring complying substantial holding notices to be lodged with ASX and LV Living by 15 February 2005. Further information about the decision is contained in the Panel’s media release at:http://www.takeovers.gov.au/display.asp?ContentID=918
4.3 Panel releases revised Guidance Note 7: Lock-up devices
The revised lock-up devices guidance note is available on the Panel's website.
4.4 Southcorp Limited: Panel decision
4.5 WMC Resources Ltd: Panel concludes proceedings
4.6 Lachlan Farming Limited: Panel makes declaration:
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5.1 Status of subscribing shareholders and creditors under an administration
5.2 Non-provision of sufficient information to creditors will result in a failure to ‘fix’ administrators’ remuneration under section 449E of the Corporations Act and the power to ‘fix’ remuneration under the section cannot be delegated to a committee
5.3 Transferring proceedings pursuant to the Corporations Act: what is in the ‘interests of justice’?
The applications to transfer the proceedings were dismissed.
5.4 Application for a court order approving compulsory acquisition under Part 6A.2 Division 1 of the Corporations Act
(ii) The relevant legislative provisions
5.5 Termination of a partnership agreement
This was the main issue for consideration in Ryder v Frohlich.
Cripps AJ held that the partnership had been dissolved when Mr Ryder went to work for Salomons.
5.6 Transferring a Western Australian association into a corporation
The main issues raised in proceedings were: (i) The requirement to provide evidence
5.7 Application for an extension of the limitation period for commencing proceedings in respect of voidable transactions
Section 588FF(3) provides that: “An application under subsection (1) may only be made:
The two main factors causing delay were:
5.8 Article in constitution restricting directors from putting company into liquidation valid
Article 19 of the constitution of Amaca Pty Ltd provides that: The issues before the Court were:
5.9 Scheme of arrangement utilised to amalgamate subsidiaries and their members
Jacobson J made orders, amongst others:
5.10 Share valuation and the test of “fair market value”
Spigelman CJ Mason P and Hodgson JA agreeing. (i) The meaning of fair market value (iv) Offer as evidence of value (v) The trial judge’s valuation of the shares was correct
5.11 Removal and appointment of directors and officers
(i) Removal of PH as a director (ii) Appointment of AH as a director (iii) Appointment of MH and AH as governing directors (iv) Appointment of directors at the EGM of 28 September 2004 (i) Removal of PH as a director (ii) Directorship appointments
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Centre for Corporate Law and Securities Regulation 2004
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