Following a short consultation period, the Australian Takeovers Panel (Panel) has now released Guidance Note 23: Shareholder intention statements (GN23) on 11 December 2015.
In this alert, Partner Michele Muscillo and Associate Luke Dawson examine the underlying requirements of a Shareholder Intention Statement in the context of GN23 and the differences between the final GN23 and the draft guidance note published by the Panel in its initial Consultation Paper in July 2015 (Consultation Paper).
A “Shareholder Intention Statement” is a statement regarding the intention of a shareholder (which must have been made or authorised by that shareholder), in the context of a takeover bid, scheme of arrangement or a shareholder vote for the purposes of Item 7 of Section 611 of the Corporations Act 2001 (Cth) (Corporations Act).
Shareholder Intention Statements are often used in the context of a takeover bid or scheme either in support of the proposal or against the proposal and can often influence the decisions of other shareholders.
Common Shareholder Intention Statements include:
- Shareholder, a holder of # Shares (X% of the Company’s Shares), intends to accept the Offer by Y in the absence of a superior proposal; or
- Shareholder, a holder of # Shares (X% of the Company’s Shares), does not presently intend to accept the Offer by Y (however reserves the right to do so in the case of an increase in Offer Price).
Because of their potential influence, the Panel is vigilant to ensure that such statements do not inhibit:
- the acquisition of control over voting shares taking place in an efficient, competitive and informed market; and
- shareholders and directors being given enough information to enable them to assess the merits of a proposal.
Requirements for a Shareholder Intention Statement
The Panel has provided in GN23 the following guidance in respect of Shareholder Intention Statements:
- Shareholder Intention Statements must be clear in their meaning
For example, an intention expressed as a “present” intention without a clear additional statement that the shareholder reserves the right to change its mind (with an appropriate qualification) may be insufficient to counterbalance the effect of the “last and final statement” on a shareholder. That is, any departure from the statement by the shareholder may risk a declaration of unacceptable circumstances.
The Takeovers Panel have also stated in Bullabulling Gold Limited  ATP 8, that where statements are intended to reflect a shareholder’s intentions at a point in time, in the absence of express words to this effect, the Panel does not consider that (whatever the intentions of the shareholder) a [present intention] statement will convey this message. This reflects the guidance given by the UK Panel which treats present intention language as being firm rather than qualified.
- If Shareholder Intention Statements are qualified, they must not be ambiguous
Shareholder Intention Statements are able to be qualified (and we would recommend that in most circumstances they should be to preserve flexibility to some degree), but if they are qualified, that qualification must not be ambiguous.
For example, if the relevant Shareholder Intention Statement was:
Shareholder, a holder of # Shares (X% of the Company’s Shares), does not presently intend to accept the Offer by Y (however reserves the right to do so should no superior proposal emerge),
and the Shareholder then accepted the offer without waiting a reasonable amount of time for a superior proposal to emerge, it would likely constitute unacceptable circumstances.
The Panel has noted that while the amount of time required in each situation will depend on the specific circumstances, the Panel has noted that generally a reasonable amount of time will be 21 days after the offer has opened.
- Shareholder Intention Statements must be published with detailed information regarding the holding(s) to which the statement relates
The identity of the shareholder providing their consent to the publication of the Shareholder Intention Statement needs to be disclosed, along with details of their shareholding in terms of number and percentage.
If a bidder/target wishes to aggregate a number of shareholdings, they should ensure that:
- all of the statements they have received contain the same qualifications (that is, they are not given on different terms which would preclude aggregation); and
- all of the shareholders whose shareholdings are to be aggregated have consented to their shareholding being aggregated with other shareholdings (although they are still required to be separately identified in the statement).
Changes between the draft GN23 and the issued GN23
On 11 December 2015, the Panel also issued “GN 23 Shareholder Intention Statements Public Consultation Response Statement” (Response Statement).
The Response Statement notes, that in response to submissions received on the draft GN23:
- the Panel has removed the statement “The Panel does not encourage or discourage shareholder intention statements”and instead included in GN23 a statement that Shareholder Intention Statements may give rise to concerns (depending on how they are obtained and used);
- where a shareholder intention statement is qualified by reference to a “superior proposal”, a period of time is expected to elapse prior to acting in respect of that intention (the Panel would generally expect this time frame to be 21 days from the opening of the relevant offer);
- irrespective of the number or percentage of Shares held, the details of a holding related to a Shareholder Intention Statement must be disclosed (that is, there is no materiality threshold prior to the disclosure obligation arising);
- consent for the making of a Shareholder Intention Statement is required (if consent is not provided with a Shareholder Intention Statement that is made outside of a bidder's statement or target's statement, then the Panel has noted that they may look more closely at the statement);
- the Panel does not believe that any further guidance is required for smaller companies; and
- the Panel does not believe that further guidance is required on whether shareholder intention statements give rise to relevant interests or associations.
Shareholder Intention Statements are a useful tool in the context of control transactions. Ensuring that Shareholder Intention Statements are appropriately crafted and qualified can be essential to the success (or otherwise) of a transaction.