The Takeovers Panel (Panel) has recently released a Consultation Paper for the Guidance Note (GN) on Shareholder Intention Statements. Shareholder Intention Statements can, if not carefully made, contravene the misleading statement provisions, cause a person to unlawfully acquire a relevant interest in excess of the 20% takeover threshold, and give rise to a declarations by the Panel of ‘unacceptable circumstances’.
The draft GN has been prepared in an attempt to seek to address ambiguities that can cause shareholder intention statements to result in such issues.
In this Alert, Partner Nicole Radice, and Senior Associates Emily Ackland and Katherine Hammond, outline six key points from the draft GN which those involved in the preparation of takeover documents and persons making shareholder intention statements should be aware of, and also describe the consultation process.
Draft GN – 6 key points
- The Panel does not encourage or discourage shareholder intention statements.
- A “Shareholder Intention Statement” is any statement regarding the intention of a shareholder which has been made or authorised by the shareholder, in the context of a bid, scheme or shareholder vote for the purposes of item 7 of section 611.Shareholder Intention Statements include (but are not limited to) ‘acceptance’ or ‘rejection’ statements.
- There is a risk that a Shareholder Intention Statement will be misleading (or at least confusing) if:
- if expressed in terms that are unclear in meaning (e.g. an intention expressed as a ‘present’ intention);
- if a qualification is made and that qualification is ambiguous; or
- if published without detailed information regarding the holding where material.
- Shareholder Intention Statements could potentially create a ‘relevant interest’ in the shares the subject of the statement or support an inference of association which might contravene the Corporations Act and also result in unacceptable circumstances.
- A Shareholder Intention Statement may give rise to unacceptable circumstances if:
- The statement is qualified by a reference to a time before it will not be acted on, if the shareholder acts before that time has passed;
- If a statement is given (e.g. that a shareholder intends to accept the bid) without the qualification that it is subject to no superior offer emerging, if given before the offer period is open and the shares the subject of the statement would if aggregated with the bidder’s shareholding an any other shares of the subject of similar statements, increase the bidder’s shareholding beyond the 20% threshold; or
- If a statement is subject to a superior proposal and the shareholder does not wait a reasonable time for a superior proposal before acting.
- Shareholder Intention Statement must only be made with the express consent of a shareholder and disclosure of the following details should be provided:
- The identity of the shareholder;
- The shareholder’s holding; and
- That the shareholder has consented to the statement;
Where the Shareholder Intention Statement aggregates a number of shareholders, each should consent and the above details should be provided in respect of each constituent shareholder.
At this stage the above is draft guidance only and the Consultation Paper is seeking submissions on the draft GN and whether it’s helpful or requires further changes for better guidance. A copy of the Draft GN can be found here.
In particular, the Takeovers Panel is asking for feedback with respect to whether:
- the statement in the draft GN that “The Panel does not encourage or discourage shareholder intention statements” is helpful;
- a time frame should be specified before acting on a stated intention (for example, if a substantial shareholder who has made a statement of intention should not act on that stated intention until 21 days after an offer opened has lapsed);
- in disclosing details of the holding, it is necessary for the shareholder’s holding to be material before it is disclosed and if further guidance as to what ‘material’ means is required;
- the identity and holding of shareholders is required in circumstances where aggregate holdings are disclosed;
- consents to the making of a statement should always be required or in what circumstances the consent wouldn’t be needed;
- the guidance is useful for small companies or what further guidance is needed; and
- guidance is required with respect to whether shareholder intention statements give rise to relevant interests or associations.
Numerous cases have been brought before the Panel with respect to the ability to rely on third party statements in target or bidder’s statements. The Panel has noted that in 2014, 45% of takeovers and 86% of schemes were announced together with a statement of shareholder intention in response to the proposal. It is not uncommon for smaller investors to look for guidance from the substantial shareholders in making a decision as to whether or not to accept a proposal. Accordingly, the framework around what must be disclosed, restrictions to be placed on shareholder statements and reliability have been reviewed.