The Panel has today published its reasons for its decision not to make a declaration or orders in relation to the Vanteck and Int-A-Grid Transactions entered into by Pinnacle VRB Limited after Reliable Power Inc. had announced its bid for Pinnacle and before the bid closed. Under the Transactions, Pinnacle granted licences to Vanteck (VRB) Technology Corp and Int-A-Grid (UK) Ltd to market, sell, manufacture and utilise Pinnacle's Vanadium Redox Battery technology within the Americas and in Europe, Russia and the Middle East.
The application was made by Reliable on 2 April 2001. Reliable asserted that unacceptable circumstances arose from the Vanteck Transaction because:
- Pinnacle's directors did not act consistently with their director's duties when entering into the Transaction; and
- the Transaction amounted to the disposal of a substantial part of Pinnacle's business or property therefore triggering a defeating condition in Reliable's bid as well as a prescribed occurrence under section 652C of the Law.
The Panel announced its decision on 24 May 2001. The Panel's decision also related to the Int-A-Grid Transaction which was announced on 11 April 2001.
The Panel decided that because the Transactions were entered into after the announcement of Reliable's Bid and may trigger a defeating condition in the Bid, they may have the effect of depriving Pinnacle shareholders of access to benefits which they might have received under Reliable's Bid. The Panel took the view that, during Reliable's Bid, the rights of Pinnacle's shareholders to determine the outcome of the Bid should prevail over the rights and duties of Pinnacle's directors to manage this aspect of Pinnacle's business. For this reason, the Panel decided that the Transactions should be subject to approval by Pinnacle's shareholders.
The Panel based its decision on the policy of paragraph 602(c) of the Corporations Law which says that shareholders must have reasonable and equal opportunities to share in any benefits accruing to them under a takeover bid. This policy is quite distinct from the directors' fiduciary duties to act in the best interests of the company, from the restrictions placed on their powers by the general law and from the existing statutory and Listing Rules requirements concerning approval of related party and other transactions.
The Panel made this decision in response to the facts of this matter. The policy underlying this decision will need to be refined to make its application clear in other instances. In making this decision, the Panel has, however, has been careful to recognise that a company should not be paralysed simply due to the existence of a takeover bid.
The Panel decided to make no declaration or orders because:
- Pinnacle decided to convene a general meeting to seek shareholder ratification of the Vanteck and Int-A-Grid Transactions; and
- The sitting Panel in this matter preferred not to make a declaration over Pinnacle's failure to comply with a principle that had not been explicit at the time that Pinnacle's directors decided to enter into the Transactions.
The reasons are available on the Panel's website at www.takeovers.gov.au .
On 23 May 2001, the Panel received an application for the review of this decision. The review Panel is currently considering this application.
Director, Corporations and Securities Panel
Level 47 Nauru House, 80 Collins Street, Melbourne VIC 3000
Ph: +61 3 9655 3501