Revised Guidance Note 7: Lock-Up Devices - Panel Releases Consultation Draft

Release number


As previously announced, the Takeovers Panel advises that it has conducted a review of its existing Guidance Note 7 on Lock-up Devices (GN7).

To assist in its review, the Panel invited interested parties to provide feedback in relation to their observations of GN7’s operations and application so far and what aspects (if any) should be modified.

The Panel received submissions regarding GN7 from Allens Arthur Robinson, the Australian Securities & Investments Commission, Blake Dawson Waldron, the International Banks & Securities Association of Australia, the Law Council’s Business Law Section, Macquarie Bank Limited and the Securities Institute. The Panel wishes to thank these organisations for their very helpful submissions.

After considering those submissions, as well as the Panel’s own experience in proceedings dealing with lock-up devices, the Panel sought to address the following issues in preparing the revised version of GN7:

  • The Panel has affirmed its view that lock-up devices are not prima facie unacceptable.
  • The “1% guideline” in relation to break fees has been retained, with additional guidance as to how concerns regarding competitive neutrality or non-coercion may override the application of the guideline.
  • There is new focus on the two underlying principles, competitive neutrality and non-coercion, that the Panel applies in considering whether a lock-up device prevents a control transaction from taking place in an efficient, competitive and informed market.
  • The Panel’s view that the payment of a break fee is not, of itself, unacceptable in circumstances where, for example, shareholders reject the takeover bid or other relevant transaction is re-stated.
  • There is less focus on costs incurred by parties as a determinative factor in assessing whether a lock-up device is unacceptable – although costs may still be taken into account (for example, when deciding whether it is appropriate to apply the 1% guideline).
  • A distinction is made between the Panel’s approach to no-talk agreements on the one hand and no-shop agreements on the other.
  • The guidance provided in relation to the disclosure obligations of parties to a lock-up device has been revised.

The Panel’s review has been conducted in large part by a sub-committee, and the Panel wishes to thank the sub-committee members: Panel members Simon McKeon, Simon Mordant, Peter Cameron, Peter Scott and Professor Ian Ramsay. The Panel is also grateful for the input and assistance received from external sub-committee member, David Williamson (Blake Dawson Waldron, Melbourne).

The Panel now seeks input on the revised version of GN7 from interested practitioners and market participants. A copy of the revised version of GN7 is available on the Panel’s website under Consultation.

Comments on the revised version of GN7 are to be provided on or before Wednesday, 1 December 2004.

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