AUSTRALIA: Panel Publishes Consultation on Proposed Amendments to Frustrating Actions

Wednesday September 14 2016

On 14 September 2016, the Takeovers Panel released a Consultation Paper seeking public comment in relation to a draft rewrite of Guidance Note 12 on Frustrating Action.

The draft rewrite seeks to provide clearer guidance about the Panel`s approach to frustrating action, including the circumstances in which a frustrating action is unlikely to be unacceptable.

The Panel seeks comments from interested persons on the draft Guidance Note by 24 October 2016. Comments should be emailed to takeovers@takeovers.gov.au.

The Consultation Paper and draft Guidance Note are available on the Panel`s website (www.takeovers.gov.au) on the consultation page.

The Panel is required to take into account the actions of directors when considering the purposes of the acquisition of a substantial interest under Chapter 61, Corporations Act 2001. This includes actions that caused or contributed to the acquisition not proceeding, i.e. frustrating actions.

Guidance Note 12 sets out the Panel’s policy on frustrating action. The Panel has acknowledges the importance of ensuring a balance between defensive manoeuvring and the proper conduct of the target’s business.

The Panel have noted a number of market participants’ concerns that Guidance Note 12 does not adequately explain the risk attached to the various considerations making a frustrating action unacceptable, and consequently has the potential effect of unduly restricting a target from carrying on business during a bid period.

They have additionally outlined the concerns of target directors, which is reported to have become more difficult recently due to the trend for bidders to include a long, complex and restrictive list of bid conditions, including those that seek to restrict the target’s business operations or require the target to take actions to assist the bidder.

Consequentially, the Panel proposes to revise Guidance Note 12 to provide clearer guidance about the Panel’s approach to frustrating action, including the circumstances in which a frustrating action is unlikely to be unacceptable.

Please click the link at the top of the page for the consultation paper (Guidance Note 12 Frustrating Action).