Recent decisions of the Takeovers Panel demonstrate a welcome trend by the Panel to exercise its power to declare circumstances to be unacceptable in that context, which is consistent with the policy considerations underlying the Panel's raison d'être, notwithstanding that there is no finding of a breach of the law.
Background to the Takeovers Panel
The Takeovers Panel is the primary forum for resolving disputes in relation to a takeover bid while the takeover bid remains on foot. The Panel has readily extended its jurisdiction to many aspects of control transactions implemented by schemes of arrangement.
Prior to the Panel being reconstituted in 1999, its ability to intervene in control transactions would only arise if one or more of a list of specified conditions was satisfied. Thereafter, the Panel may intervene, by making a declaration of unacceptable circumstances, after considering the circumstances of the particular case in the context of specified tests (see below), as well as any other policy considerations the Panel considers relevant.
The Panel is a peer review body established as a "specialist body largely comprised of takeover experts." [1] As was stated by Justice Kirby in Attorney-General (Cth) v Alinta Limited (2008) 233 CLR 542:
"…the nature of takeovers disputes was such that they required, ordinarily, prompt resolution by decision-makers who enjoyed substantial commercial experience and could look not only at the letter of the Corporations Act but also at its spirit, and reach outcomes according to considerations of practicality, policy, economic impact, commercial and market factors and the public interest."
The Panel, in making a declaration of unacceptable circumstances, is not exercising judicial power by regulating existing rights and obligations. Rather, the Panel is making orders to prevent the consequences of to what have been found to be unacceptable, and is therefore creating new rights and obligations as between the parties.
The Panel's Mandate
Where the Panel declares circumstances unacceptable, it may make orders to correct the unacceptable circumstances, which can be wide ranging. The law empowers the Panel to make a declaration of unacceptable circumstances in the following two scenarios:
- Having regard to the effect of the circumstances on the control, or potential control, of the company (or another company); or the acquisition, or proposed acquisition, by person of a substantial interest in the company (or another company); or
- The circumstances constitute, or give rise to, a contravention of a provision of Chapter 6, 6A, 6B or 6C of the Corporations Act.
In making such a declaration, or declining to make a declaration, the Panel must consider whether doing so is not against the public interest after taking into account any policy considerations that the Panel considers relevant.
The Panel must also consider the purposes of Chapter 6, other provisions of Chapter 6, rules specified in the regulations or any other matters it considers relevant.
The Panel hits its stride
The Panel is hitting its stride by demonstrating a willingness to declare circumstances unacceptable, notwithstanding that there may not be any discernible breach of the law. In particular, it is doing this in relation to matters where there is a question whether parties are associates in relation to a control transaction, which is a breach of the law or is otherwise unacceptable.
This trend has its genesis in Mount Gibson Iron Limited [2008] ATP 4 9, where the Panel held that, although the parties to the transaction were associates, the entering into the transaction of itself gave rise to unacceptable circumstances, even if the parties were not found to be associates.
For some years this was the sole example but the trend began to develop in 2016 with the hallmark example in Ainsworth Game Technology Limited 01 & 02 [2016] ATP 9. In Ainsworth, the Panel made the following comment:
"98. So, while the legislation should be given full weight, overlaying it is the Panel’s power to declare unacceptable circumstances, exercisable even in the absence of a contravention. Even accepting that item 7 [which specifies who can vote on a shareholder resolution to approve an acquisition] is limited to an acquirer, disposer or an associate (as defined in s12), we think that s657A enables us to make a declaration of unacceptable circumstances in the absence of a finding of association, if (at the risk of paraphrasing):
(a) there is a control effect and the circumstances appear to us to be unacceptable or
(b) there are otherwise circumstances that appear to us to be unacceptable having regard to the s602 principles.
99. That is not to say the Panel can operate at large. Section s657A must operate according to a set of principles. Key principles are set out in s657A itself. Thus the Panel must:
(a) consider the public interest and
(b) have regard to the purposes of Chapter 6 set out in s602, the other provisions of the Act and any rules or regulations (s657A(3)).
100. The Panel may also consider any other matters it thinks are relevant." [references omitted]
Ainsworth was initially followed in Molopo Energy Limited 01 & 02 [2017] ATP 10, as the Panel regarded the relationship between the related parties, whilst not rising to the level of an association, as nevertheless giving rise to unacceptable circumstances. Despite a review Panel finding evidence of an actual association (Molopo Energy Limited 03R, 04R & 05R [2017] ATP 12), the review Panel acknowledged that they would have similarly made a declaration of unacceptable circumstances if an association was not proven.
Finally, in Strategic Minerals Corporation NL [2018] ATP 2, the Panel made a declaration of unacceptable circumstances despite not finding any sufficient material to suggest an association, which was affirmed on review in Strategic Minerals Corporation NL 02R, 03R, 04R and 05R [2018] ATP 5.
While Rod Halstead is a present member of the Takeovers Panel, he was not a sitting member of any of the decisions referred to in this article.
___________________________________________________________________________________________________________________________________________________
[1] Paragraph [7.16] of the Explanatory Memorandum for the Corporate Law Economic Reform Program Bill 1998 (Cth).Back to article