One of the main objectives of the Takeovers Panel (Panel) is to determine takeover and other corporate control disputes in a speedy manner. Consistent with this emphasis on efficiency and speed, it is important for parties who are intending to make an application to the Panel to bear in mind the need to act without delay. This is because an application to the Panel must be made within two months after the relevant circumstances which are complained of have occurred.1  Although the Panel may grant an extension of this two-month period2, this discretion is not exercised lightly and the Panel will require credible allegations of clear, serious and ongoing unacceptable circumstances to warrant the Panel agreeing to extend the period.3 

The timeliness of Panel applications has arisen as an issue in a number of proceedings relating to allegations of non-compliance with substantial holder provisions and associations.4 Delays often arise because the company (or another interested party) may not become aware of a defect in a substantial holder notice until a new event or development in relation to the company (such as a proposal to spill the board) causes the company to scrutinise a previously issued substantial holder notice more closely. In relation to allegations of undisclosed associations, it is often difficult and time consuming to collect sufficient evidence to support the allegation.

A delay may result in the Panel declining to conduct proceedings

A delay in making an application to the Panel could contribute to the Panel deciding not to conduct proceedings, as was the case in Dragon Mining Limited [2014] ATP 5 (Dragon Mining Limited).5

In this case, the applicant, Dragon Mining, alleged that, amongst other things, substantial holder notices lodged between January 2013 and May 2013 in relation to acquisitions of Dragon Mining shares made by a custodian on behalf of a beneficiary were deficient. The parent company of the beneficiary was not disclosed in the substantial holder notices.

The application to the Panel was only made on 2 February 2014 and against the backdrop of shareholders having requisitioned a meeting of Dragon Mining to replace certain directors, which was scheduled to be held on 7 February 2014.

The Panel noted that although the relevant circumstances forming the basis of the application (that is, the custodian’s acquisition of shares on behalf of the beneficiary) occurred almost one year before the application to the Panel was made, on one view, it could be argued that the application was nevertheless still within time because the circumstances were continuing or because Dragon Mining only became aware of the non-disclosure upon receiving a response to its tracing notice on 23 December 2013.

However, the Panel said that it appeared that Dragon Mining only inquired about the ownership of the beneficiary after the board spill meeting was requisitioned, despite the fact that there were four substantial holder notices lodged between January 2013 and May 2013, each disclosing an increase in relevant interest. The Panel was of the view that had Dragon Mining made even informal enquiries, the relationship between the beneficiary and its parent company would have been discovered relatively easily. In light of this, the Panel did not consider the application to be timely and declined to conduct proceedings.

The delay may not be fatal if the circumstances are ongoing

As indicated by the Panel in Dragon Mining Limited, there may be situations where the circumstances being complained of may be construed as ongoing (and therefore, the application still within time). This was the case in Northern Iron Limited [2014] ATP 11. In this case, the application to the Panel (which also concerned non-compliance with the substantial holder notice provisions) was made on 23 May 2014. The concerns about disclosure were known to the applicant, Northern Iron, about a year before and attempts had been made by it to get additional information.

The parties whose actions were subject of the application (Dalnor Parties) argued that Northern Iron unreasonably delayed in making its application and only made it for the tactical reason of affecting voting at the upcoming AGM of Northern Iron (scheduled to be held on 29 May 2014). However, in contrast to the decision in Dragon Mining Limited, the Panel here preferred the view that the application was brought on by developments, being a request made by Dalnor for a board seat, rather than for tactical reasons.

The factors the Panel took into account in arriving at that view were that there was an increase in Dalnor’s holding approaching 20% and an attempted exercise of the voting rights quite recently. In addition, just before the proxies closed for the AGM, a revised substantial holder notice had been lodged. The Panel therefore considered that the circumstances were ongoing. For the avoidance of doubt, the Panel also exercised its discretion to extend the application period.

Key lesson

Although there have been instances where the Panel has either characterised circumstances as ongoing or continuing, or exercised its discretion to extend the application period, parties considering making an application to the Panel should not assume that this occurs frequently.

As mentioned above, the Panel does not exercise its discretion to extend the application period lightly as it takes the view that the time limit was set by legislature to provide certainty to market participants in the context of takeovers that actions could not be challenged indefinitely.6 

Whether or not a set of circumstances can be characterised as ongoing will depend on the particular facts of those circumstances. Where a complainant waits for “more serious” or “more unacceptable” circumstances to arise before bringing the application, it runs the risk of the delay leading to a Panel deciding not to conduct proceedings.7

Therefore, if a company becomes aware of any deficiency in a substantial holder notice or possible association between persons which may give rise to unacceptable circumstances, the company should take prompt steps to investigate the circumstances (such as, by issuing a tracing notice under section 672A of the Corporations Act) and, if the evidence gathered is sufficiently persuasive and it is thought appropriate to make an application to the Panel, the company should not delay in doing so.