GN 23 Shareholder Intention Statements - Public Consultation Response Statement [11/12/2015] The Takeovers Panel

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GN 23 Shareholder Intention Statements
Public Consultation Response Statement

11 December 2015

Introduction

On 7 July 2015, the Takeovers Panel released a Consultation Paper seeking public comments on a new Guidance Note on Shareholder Intention Statements.

Comments on the Consultation Paper were due by 1 September 2015 and the Panel received 8 submissions in response. The Panel thanks the respondents. Attached to this response statement are the submissions (Annexure A).

Consistent with the Panel's published policy on responding to submissions, this statement sets out the Panel's response to the public consultation.

Material comments received and Panel's conclusions

The Panel sought comments on the following issues in particular:

Issue: Whether the statement "The Panel does not encourage or discourage shareholder intention statements" is helpful (see paragraph 4 of the Consultation Paper GN).

Comment

A number of submissions thought that the statement should be more discouraging of shareholder intention statements, particularly (said one) if the shares encompassed in solicited statements, when aggregated with the bidder's holding, would exceed 20% of the shares in the company.

A number of others thought that the statement should make it clear that shareholder intention statements are not unacceptable as such, but may be unacceptable if issues arise with them.

Response

The Panel has modified paragraph 4 of the GN to reflect that shareholder intention statements may give rise to concerns.

Issue: Whether a time frame should be specified, and if so what time frame (see paragraph 10(a) of the Consultation Paper GN). If a time frame should be specified, is it applicable to a statement made after the offer period has started? Why?

Comment

The submissions were split between those that thought it would be useful to specify a time, in which case 21 days was the appropriate time, and those that thought there was no need to be prescriptive.

Response

The Panel has amended paragraph 10(c) of the GN so that a time limit is expected if the shareholder intention statement is qualified by reference to a superior proposal. In that case, the time would generally be expected to be 21 days from opening of the offers, but it may be shorter if, for example, the statement is made after offers have opened or following a variation (from the date of the variation). See new footnote 12.

Issue: Whether, in disclosing details of the holding, it is necessary for the shareholder's holding to be material before it is disclosed (see paragraphs 8(c) and 11(b) of the Consultation Paper GN). Is guidance needed as to the meaning of 'material'?

Comment

A number of submissions considered that there was no need to define materiality, another considered it should be set at the 5% level, yet another at the 1% level, and others considered that, if disclosure was desirable, then materiality must be explained.

Response

The Panel agrees with the submission of ASIC that the better approach to take is that if the bidder or target considers it necessary or desirable to make a shareholder intention statement, then the holding should be considered material. Accordingly it has amended paragraphs 8(c) and 11(b) of the GN by deleting reference to materiality.

Because of this approach there is no need to give guidance as to the meaning of 'material'.

Issue: Whether, in disclosing aggregate holdings, it is necessary to disclose the identity and holdings of all the shareholders whose holdings are aggregated (see paragraph 11(d) of the Consultation Paper GN).

Comment

All but one submission said that identity should be disclosed. One of those supporting disclosure suggested that the identity should only be disclosed if the holding exceeded 1%.

Response

Paragraphs 11(b) and 11(d) of the GN have been amended by deleting reference to materiality, thus indicating that disclosure of the identity of the maker of the shareholder intention statement is required in all cases.

Issue: Whether consent to the making of a statement is always required, and if not, in what circumstances it should not be required (see paragraphs 11(c) and (d) of the Consultation Paper GN).

Comment

All but one submission said that consent should be required; although 3 of those said that it should not be required if the shareholder intention statement was reporting on statements already public. The other submission suggested that consent should be a matter for the bidder or target to decide.

Response

Paragraph 11(c) of the GN has been amended to make it clear that, if consent is not provided with a shareholder intention statement that is made outside of a bidder's statement or target's statement, then the Panel will look more closely at the statement.

Issue: Is the guidance clear and helpful for smaller companies? If not, please suggest what further guidance is necessary for smaller companies.

Comment

All submissions said that no additional guidance was needed.

Response

No amendment is necessary.

Issue: Is guidance needed on whether shareholder intention statements give rise to relevant interests or associations?

Comment

About half of the submissions thought that it would be beneficial to add some guidance, with one suggesting an ASIC Class Order. Another suggested that guidance was required if qualified intention statements were permissible above the 20% threshold. It suggested that examples be provided.

The others thought that guidance was either not needed or difficult to give.

Response

The Panel has decided not to add guidance on this subject beyond what was already in paragraph 9 of the Consultation Paper version of the GN, but to focus on why the Panel might become interested in examining a shareholder intention statement, namely because it is concerned with whether the statement has an effect that precludes, or might preclude, the opportunity for a competing proposal. It has added this to paragraph 9.

Other amendments

Paragraph 1 has been amended to make it clear that the Panel deals with control transactions, not only takeover bids.

Paragraph 10(e) has been amended to make it clear that a shareholder who makes a shareholder intention statement may have good reason not to accept a superior proposal, which would be a factor in the Panel's consideration of the relevant circumstances.


Annexure A: Submissions

Download the submissions [PDF 3.06MB]

Submissions were received by the following

  • Allens
  • ASIC
  • Baker & McKenzie
  • John Fast
  • Gilbert + Tobin
  • Herbert Smith Freehills
  • Law Council of Australia
  • Norton Rose Fulbright

Annexure B: Mark-up of GN 23 Shareholder Intention Statements from the draft in the Consultation Paper

Guidance Note 23 – Shareholder intention statements

Introduction

  1. This guidance note has been prepared to assist market participants understand the Panel’s approach to statements of intention made by shareholders in the context of a control transaction such as a takeover bid or scheme of arrangement. For convenience, most references are to a takeover bid, but this note applies with necessary adaptation to a scheme or item 7 vote.1
  2. The examples are illustrative only and nothing in the note binds the Panel in a particular case.
  3. The policy bases for this note are that shareholder intention statements should not inhibit:
    • the acquisition of control over voting shares taking place in an efficient, competitive and informed market2 and
    • shareholders and directors being given enough information to enable them to assess the merits of a proposal.3
  4. The Panel does not encourage or discourage shareholder intention statements A shareholder intention statement can give rise to concerns, depending on how it has been obtained and how it is used, particularly where the interests the subject of the statement, when aggregated with the bidder’s interest, exceed 20%.

Shareholder intention statements

  1. In this note, a shareholder intention statement is any statement regarding the intention of a shareholder, which has been made or authorised by the shareholder, in the context of a bid, scheme or a shareholder vote for the purposes of item 7 of section 611.

    Examples:

    1. X, a holder of #%, intends to accept the offer by Y in the absence of a superior proposal.
    2. X, a holder of #%, intends to vote in favour of the scheme proposal with Y in the absence of a superior proposal.
  2. Such statements include ‘acceptance’ statements or ‘rejection’ statements,4 but are not limited to these.5
  3. Guidance Note 7 addresses shareholder intention statements in the context of entry into a lock-up device with that shareholder.6 ASIC’s regulatory guide on false and misleading statements also addresses statements by substantial holders.7
  4. If a shareholder makes a shareholder intention statement, there is a risk that the statement will be misleading, or at least confusing:
    1. if expressed in terms that are unclear in meaning (eg an intention expressed as a ‘present’ intention)
    2. if a qualification is made and that qualification is ambiguous8 and
    3. if published without detailed information regarding the holding(s) where material.
  5. In examining a shareholder intention statement, the Panel is concerned with whether the statement has an effect that precludes, or might preclude, the opportunity for a competing proposal. Market participants should note that For example, a shareholder intention statement could potentially create a relevant interest in the shares the subject of the statement9 or support an inference of association10 which might contravene the Act and undermine the policy of Chapter 6. If it did, it would likely give rise to and also result in unacceptable circumstances.

Unacceptable circumstances

  1. In considering whether the terms of a shareholder intention statement gives rise to unacceptable circumstances, the Panel is guided by the following:

Time before acceptance

  1. If the statement is qualified by reference to a time before which it will not be acted on, it is likely to give rise to unacceptable circumstances if the shareholder acts before that time has passed.

Aggregation with bidder’s shareholding

  1. If a statement is given without the qualification that it is subject to no superior offer emerging (or words to that effect), it is likely to give rise to unacceptable circumstances if given before the offer period is open and the shares the subject of the statement would, if aggregated with the bidder’s shareholding and any other shares the subject of similar statements, increase the bidder’s shareholding beyond the 20% threshold.11

Superior proposal

  1. If a statement is qualified by reference to a superior proposal, it is likely to be give rise to unacceptable circumstances if the shareholder accepts before allowing a reasonable time to pass for a superior proposal to emerge. The Panel considers that this is implied by the statement. The amount of time required will depend on the circumstances, but generally the Panel will consider a reasonable time to be 21 days after the offer has opened.12
  2. Whether a competing proposal is superior is primarily for the shareholder to determine, but it may give rise to unacceptable circumstances if a shareholder acts contrary to a demonstrably superior competing proposal without good reason.
  3. If a superior proposal has been made, the shareholder is not obliged to accept it merely because it has made a statement regarding an earlier proposal. There may be good reasons why the shareholder does not. However, if the shareholder accepts the original bid, the Panel may be interested in whether that supports an inference that there was some form of agreement, arrangement or understanding between the shareholder and the original bidder.
  1. In considering whether the manner in which a shareholder intention statement is disclosed gives rise to unacceptable circumstances, the Panel is guided by the following:

Details provided

  1. The identity of the shareholder to whom the statement is attributed should be disclosed.
  2. If the shareholder's holding is material, dDetails of the holding, in number and percentage terms, should be disclosed.13

    Example: X Ltd, which holds at the date of this statement 100,000 shares (19.9%), intends to accept the offer.

  3. Shareholder intention statements must only be published in a bidder’s statement or target’s statement if the shareholder has consented and the document so states.14 The Panel expects that shareholder intention statements made outside a bidder’s statement or target’s statement will only be made with the consent of the shareholder.15 If consent is not provided, the Panel will look more closely at the statement.
  4. If the statement aggregates holdings and the aggregate holding is material, the Panel expects that all the shareholders whose holdings are aggregated have consented,16 and will consider whether they and their individual holdings have been separately identified in the statement.

Remedies

  1. The Panel has wide powers to make orders.17 It may, for example:
    1. require the maker of a shareholder intention statement to comply with the statement
    2. require the statement to be retracted18
    3. release the maker of the statement from any obligation to comply19 or
    4. unwind an action or transaction based on a statement.20

Publication History

    First Issue xx

Related material

GN 7 Lock-up devices

GN 18 Takeover documents


1 Section 611, item 7 “Approval by resolution of target”. References are to the Corporations Act 2001 (Cth) unless otherwise indicated

2 Section 602(a)

3 Section 602(b)(iii)

4 A statement that a shareholder intends not to accept (reject) a bid. See Bullabulling Gold Limited [2014] ATP 8

5 For example in Summit Resources Limited [2007] ATP 9, a bidder made a statement regarding voting in favour on a resolution approving a transaction between the target and a third party

6 Guidance Note 7 Lock-up devices at [33]-[34]. See also Alpha Healthcare Limited [2001] ATP 13

7 ASIC RG 25: Takeovers False and Misleading Statements at [RG25.29]-[RG25.34]. See also BreakFree Limited 03 and 04 [2003] ATP 38 and 39 at [111]

8 For example in Ambassador Oil and Gas Ltd 01 [2014] ATP 14, a stated intention to accept ‘within 14 days’ gave rise to unacceptable circumstances when the shareholder did not wait for the 14 days to elapse

9 For example, MYOB Limited [2008] ATP 27

10 For example, Ambassador Oil and Gas Limited 01 [2014] ATP 14

11 MYOB Limited [2008] ATP 27

12 If a shareholder intention statement is made after offers have opened, a reasonable time might be less than 21 days because the shareholder could otherwise have accepted. If there is a variation of the bid after offers have opened, such as a price increase, and thereafter a shareholder intention statement is made, a reasonable time might be calculated from the date of the variation and be less than 21 days from that date

13 Custodial institutions’ holdings can change on the instruction of the beneficial owner, so a statement by a custodial institution might identify the holding at a particular date when the statement is made

14 See sections 636(3) and 638(5). See also ASIC RG 55: Statements in disclosure documents and PDSs: Consent to quote at [55.68]–[55.70]. For the reason why consent is important, see BreakFree Limited 03 and 04 [2003] ATP 38 and 39 at [129]-[131], affirmed in BreakFree Limited 04(R) [2003] ATP 42 at [67]

15 Guidance Note 18 Takeover Documents at [41]

16 Bullabulling Gold Limited [2014] ATP 8 at [38]

17 Section 657D

18 Bullabulling Gold Limited [2014] ATP 8

19 MYOB Limited [2008] ATP 27

20 Ambassador Oil and Gas Limited 01 [2014] ATP 14