Panel Releases Final Guidance on Lock-Up Devices

Release number


The Takeovers Panel advises that it has today released its final policy on Lock-Up devices. The final version follows public consultation on a draft which the Panel released on 2 August. Lock-up devices include Break Fees, No-Shop and No-Talk Agreements, and Asset Lock-up Agreements.

The Director of the Panel, Mr. Nigel Morris, said that the Panel was pleased to have received very positive market response to the draft, and the underlying policy has changed little, although the text has been reworked in some areas to make it more useable, in response to feedback received.

The final policy remains primarily based on:

  • fair and effective competition for control of companies;
  • the interests of shareholders; and
  • the Panel's role as a market regulator.

The principles that the final document affirms include:

  • The Panel accepts the use of break fees in Australia, subject to the Panel's primary concerns about competition for control of companies.
  • The Panel has said that, in general, it won't declare break fees and other lock-up devices unacceptable where they are, in the circumstances of the bid, reasonable, in line with the Eggleston Principles, and will not impede competition for the target company.
  • Proper and timely disclosure is an important part of the protections for shareholders in the Panel's policy.
  • The Panel's role is not to consider the legality or enforceability of break fees, but it will not intentionally facilitate a lock-up device that appears clearly invalid.
  • The general limit on break fees of 1% of the bid value. 1% may be too high in the case of large bids and too low for some small bids.

The elements that have changed include:

  • The Panel has placed somewhat less emphasis on the composition of break fees within the 1% cap.
  • The Panel has narrowed the scope of the policy in the area of pre-emptive rights. It has limited this guidance to lock-up arrangements concerning assets where those lock-ups are entered into in the context of a bid. Other pre-emptive rights may be addressed in the guidance on frustrating action on which the Panel is currently working.
  • The guidance note now also addresses break fee agreements between bidders and major shareholders in a target company.
  • The emphasis on timing of No-Shop and No-Talk agreements has been removed. The period of restraint must be limited and reasonable, but may extend into the bid period where this is justifiable.

The Panel is very appreciative of the work that its subcommittee on the break fees policy has put into this project (Peter Cameron, Simon McKeon, Simon Mordant, Ian Ramsay and Trevor Rowe).

The final Guidance Note takes into account submissions on the draft which were received from: the Australian Institute of Company Directors; the Corporations Committee of the Law Council of Australia; the Securities Institute of Australia; Macquarie Bank Limited; and the Companies and Securities Urgent Issues Group of the Investment Banks and Securities Association.

The document is available on the Panel's website at:


Nigel Morris
Director, Takeovers Panel
Level 47 Nauru House, 80 Collins Street, Melbourne VIC 3000
Ph: +61 3 9655 3501