Introduction
This paper is part of the Corporate Law Economic Reform Program (CLERP) which is examining the Corporations Law with a view to promoting business and economic development. The Program brings an economic focus to corporate law reform, and aims to ensure that the Corporations Law facilitates investment, while maintaining confidence in the business environment and protecting investors.
This paper sets out proposals for reform of takeover regulation under the Corporations Law. The reforms aim to remove regulatory impediments to an efficient market for corporate control subject to ensuring a sound investor protection regime.
The proposals have been developed in consultation with the helpful assistance of a broad range of individuals, companies and associations in the business and professional community and the Government’s Business Regulation Advisory Group (see Appendix A).
Takeover regulation is one of the key areas identified for review and reform in view of its central importance to business activity. The proposed reforms are designed to:
- provide business with appropriate arrangements for the regulation of changes of corporate control; and
- achieve an appropriate balance between facilitating efficient management and control of organisations while ensuring a sound investor protection regime.
Takeover regulation under the Corporations Law aims to regulate how changes of corporate control take place, rather than whether certain takeovers should take place. As a result, the broader issue of mergers in the context of competition policy is outside the scope of this paper. Similarly, the examination of the specific rules designed to achieve foreign investment policy objectives or for industries such as the media, banking and insurance is also outside the scope of this paper.
This paper deals with a recommendation from the Financial System Inquiry (FSI), namely that takeover provisions should apply to public unit trusts.
The paper on the rules governing fundraising by corporations released as part of CLERP proposed that section 52 of the Trade Practices Act 1974 no longer apply to dealings in securities. In particular, that paper proposed that the defences contained in the Corporations Law regarding takeover documents should have full effect notwithstanding the Trade Practices Act. The liability regime for takeover activity will be generally consistent with the liability regime adopted for fundraising activity.
It is intended that the previous work and consultations undertaken on takeovers as part of the Corporations Law Simplification Program will be taken into account in the drafting of the takeover provisions, to the extent that the previous work is consistent with CLERP initiatives. This includes consideration of the recommendations of the Legal Committee of the Companies and Securities Advisory Committee (CASAC) in their reports Anomalies in the Takeover Provisions of the Corporations Law (March 1994) and Compulsory Acquisitions (January 1996).
The issue of collective action taken by institutional investors will also be considered during the drafting stage. As a matter of policy, the takeover rules should not inappropriately affect the ability of institutional investors to make decisions relating to corporate governance issues. It has been argued that the current law inhibits institutional investors from participating fully in corporate governance issues, as an agreement to act collectively in relation to voting at a company meeting could trigger the takeover provisions.
Enquiries concerning this paper and its implementation can be made to:
Sue Vroombout
Financial Markets Division
The Treasury
Telephone: (02) 6263 3048