The Law Commission has issued a report recommending a reworking of the sections governing minority buyouts in response to the High Court decision in Infratil 1998 Ltd v Natural Gas Corporation Holdings Ltd [2000] 3 NZLR 727. In Infratil, Doogue J was critical of the lack of detail in the minority buy-out provisions and was of the view that the provisions be urgently reconsidered. Sections 110-115 of the Companies Act 1995 confers the right on a minority shareholder to compel a company to buy out the shares of the minority shareholder when they have unsuccessfully opposed a special resolution.
Some of the notable Law Commission recommendations are as follows:
Notice should be given of the availability of buy-out rights along with the notice of the special resolution sought to be
passed. The company should give full details of the basis on which its offer has been calculate when it nominates its price.The valuation of the minority shareholders' shares should be valued as at the date the company gives notice of the intention to buy the shares. Except where the minority shareholder is being squeezed out on an amalgamation, the valuation should be adjusted to exclude any value attributable to the event, or the expectation of the event authorised by the special resolution.
In the case of an amalgamation where the shares are not to be converted into shares in the amalgamated company, thevaluation should take into account any benefit of the amalgamation; The basis of the valuation should be a pro rata share of the value of the shares of that particular class without minority discount or strategic uplift; The arbitrator should have wider powers to award compensation for costs (for example, solicitor-client and expert witness costs) and delay and to make ancillary enforcement orders (for example, an order for specific performance).The contents of this document are for information purposes only and should not be acted upon without specific legal advice. KPMG Legal does not accept any liability other than to its clients and only then in relation to specific requests for advice.KPMG Legal is an independent law firm.
For more information please contact our Mergers & Aquisitions team.
Please contact:
Rob Noakes at rnoakes@kpmg.co.nz,
Martin Dalgleish at mdalgleish@kpmg.co.nz
Ross O'Neill at rsoneill@kpmg.co.nz.
Web site:
KPMG Legal: Corporate Advisory / M &A