Our readers may have already read our "Doing Business in Australia" series of articles posted before. Recently quite a few relevant facts and policies have been updated. Hence we have produced a new version. You will be able to receive the updated articles about "Doing Business in Australia" in the coming weeks.
Public Takeovers
The Corporations Act regulates takeovers of voting shares and other securities of listed entities and unlisted Australian companies with more than 50 members.
Subject to certain exceptions, a person is prohibited from acquiring a “relevant interest” in more than 20% of the issued voting shares of such companies, or acquiring further shares from a starting point that is above 20% and below 90%. The exceptions include making an on-market or off-market takeover bid (with off-market bids being the most common as they can be conditional unlike market bids which need to be unconditional), a court approved scheme of arrangement, rights issues (although these are closely monitored by ASIC), selective reductions of capital and “creep acquisitions” (being acquisitions of 3% or less over a 6 month period).
The concept of a “relevant interest” is extremely broad and covers direct and indirect interests so that a person can reach the relevant threshold without becoming a registered holder of shares.
If a person acquires a minimum of a 90% relevant interest in the voting shares of a company under a takeover offer, there are compulsory acquisition procedures which may be used in order to acquire the balance of the shares if certain criteria are met.
The regulatory bodies involved in a takeover will be:
ASIC, which regulates compliance with the Corporations Act
ASX, which regulates the conduct of entities listed on the ASX and compliance with the Listing Rules
the Takeovers Panel, which is responsible for reviewing conduct during a takeover, both in terms of strict compliance with the applicable legislation and also whether conduct constitutes “unacceptable circumstances” (the takeovers panel is the body which has the power to make a broad range of orders to remedy any breaches).
As an alternative to structuring an acquisition by way of a takeover, the Corporations Act also permits similar transactions to be effected by way of a scheme of arrangement. Schemes of arrangement allow for greater flexibility and also enables a bidder to have certainty that, if the scheme is approved, the bidder will acquire a 100% interest in the target. However, schemes of arrangement require shareholder approval (including, approval by at least 75% of all shareholders in the target who are not connected to the bidder) and court approval. As such, schemes of arrangement can only be implemented in friendly transactions, unlike takeover bid which can be either friendly or hostile.
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To view our previous news for Chinese investors and various articles in relation with the topic ‘Doing business in Australia’, please click the button on the upper-right hand corner on our WeChat platform, and choose ‘view history’. The contents include:
Business set up in Australia, business structures,company administration, etc.
Background information of Australia, including Australian government, legal system, and business structures, etc.
Laws and regulations in various common areas, including protection of technology and intellectual property, anti-trust and consumer law, contract law, business migration, real property, public takeovers, and electronic commerce etc.
