When public companies – listed or unlisted – become takeover targets, or engage in any activity where voting power becomes concentrated, regulated processes need to be followed. When it comes to these kinds of companies, there’s not just one or a few owners to deal with, but potentially thousands of shareholders. Strict legal and market rules are in place to ensure their interests are not overlooked, and to ensure the market is fully informed.
The takeover rules kick in at just 20 per cent ‘voting power’ – and voting power can exist without direct ownership. This means mergers and acquisitions and the issue of shares and convertible instruments can be caught as ‘control transactions’ – requiring specialist expertise to keep you within the regulatory goal posts.
A takeover or merger usually takes one of two forms – an offer by one company to acquire all or a majority of the shares of another, or by a scheme of arrangement, which is a court driven process, with a two-limb shareholder approvals requirement (a 75 per cent voting majority and a head count test) for a deal to proceed. Both involve prescriptive statutory processes, timetables and rules surrounding the change in ownership of public companies. The consequences for failing to follow these strict rules can attract offences and penalties, orders from the Takeovers Panel, objections from ASIC or the court effectively vetoing your scheme.
The regulated nature of public company takeovers means there’s a significant amount of legal input required. From transaction sequencing, due diligence, drafting scheme implementation documents, arranging independent expert reports, and communications to shareholders, there are a significant number of boxes to tick.
Our lawyers have helped many public companies through the acquisition process – acting for both buyers and targets – and navigated them through the requirements of regulators such as ASIC, the ASX and the Takeovers Panel, as well as the courts. It’s a specialised field that needs experience and knowledge our lawyers can provide.