In 2008 the Takeovers Panel made recommendations to the Government relating to corporate control-change transactions involving companies subject to the Takeovers Code (code companies), which are effected under Part 13 (amalgamations) or Part 15 (schemes of arrangement) of the Companies Act 1993. These recommendations were incorporated into the Companies and Limited Partnerships Amendment Bill 2011, and were brought into force last week under the Companies Amendment Act 2014.

How the new provisions operate

Under the amendments to the Companies Act:

These restrictions do not apply where the reconstruction of code companies does not involve a change in the relative holding or control of voting rights. For guidance on the process for applying for the no objection letter see the Takeovers Panel’s Guidance Note on Schemes of Arrangement and Amalgamations under Part 15 of the Companies Act 1993 - April 2014.

  • Part 13 long- form amalgamations prohibited: The use of long-form amalgamations under Part 13 of the Act are now prohibited where an amalgamating company is a code company. An amalgamation involving a code company, however, can be achieved under Part 15 of the Act as a scheme. Short-form amalgamations (i.e., for intra-group reorganisations) are still permitted.

  • Court approval of a scheme subject to restrictions: Under Part 15, the High Court cannot approve a scheme that affects the voting rights of a code company unless:

    • it is satisfied that the shareholders of the code company will not be adversely affected by the use of a scheme rather than the Takeovers Code to effect the change of control involving the code company; or

    • a statement in writing by the Takeovers Panel that it has no-objection to the scheme is produced to the court.

  • Two limb voting test (75% approval by each interest class and approval by 50% of the total eligible voting rights): Shareholders may only approve a scheme by:

    • a resolution approved by a majority of 75% of the votes of the shareholders in each interest class entitled to vote and voting on the question; and

    • a resolution approved by a simple majority of the votes of those shareholders entitled to vote (i.e., not just 50% by number of those voting on the resolution but of all shareholders entitled to vote). This second limb applies on an overall basis rather than by each interest class separately.

  • Codification of interest class tests: Legislative guidance (in the form of a new schedule 10 to the Act) has been given for determining interest classes for the purposes of voting on a resolution to approve a scheme of arrangement.

Transitional arrangements in place

The amendments to the Part 13 provisions include transitional arrangements for code companies that were in the process of amalgamating under Part 13 of the Companies Act before the provisions came into effect. That is, if the board of the amalgamating companies have agreed to an amalgamation prior to 3 July 2014, the former law will continue to apply to that amalgamation – as long as the amalgamation takes effect before 29 December 2015.

Changes to other legislation

Consequential amendments have also been made to the Takeovers Act 1993 to provide for the Takeovers Panel's new function of considering whether to provide statements of no objection under the Companies Act and to the Takeovers (Fees) Regulations 2001, which now include the ability for the Takeovers Panel to charge applicants for considering whether or not to provide a no-objection statement.