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Compulsory Acquisitions and Buy-outs

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Corporations and Markets Advisory Committee
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This report was produced by the Corporations and Markets Advisory Committee. View further information about the Committee and it's other publications.

This Advisory Committee Paper responds to the matters raised in the January 1999 submission by the Australian Shareholders’ Association (ASA) to the Parliamentary Joint Committee on Corporations and Securities on Chapter 6A of the Corporate Law Economic Reform Program Bill (the CLERP Bill).

The CLERP Bill proposes to reform the existing provisions for compulsory acquisitions and buy-outs following a successful takeover bid and to introduce new compulsory acquisition and buy-out provisions that would operate without the need for a prior takeover bid. These reforms are based on the Compulsory Acquisitions Report (January 1996) prepared by the Legal Committee of the Advisory Committee.

The ASA submission raises three general objections to the CLERP Bill proposals. It:

  • questions the need for the proposed new compulsory acquisition power (as found in Part 6A.2 of the CLERP Bill)
  • argues that the criteria for assessing the exercise of any compulsory acquisition power should be whether the offer is “fair and reasonable”, rather than being limited to whether the price offered represents fair value, and
  • expresses concern about ensuring the independence of experts in preparing their reports to minority shareholders.

The ASA submission also raises various drafting issues concerning the CLERP Bill provisions.

Part 1 of this Paper deals with the three general matters raised in the ASA submission. Part 2 of the Paper deals with the additional drafting issues raised in the ASA submission.