Chapter 6 of the Corporations Law regulates takeovers in Australia. Some key differences between the Australian Corporations Law and the Takeovers Code are:

- Ambit: Chapter 6 of the Corporations Law is applicable to listed companies, unlisted companies with more than 50 shareholders (with no minimum asset test) and other listed entities (such as unit trusts).

- Fundamental rule and exceptions: The fundamental rule under the Corporations Law is substantively the same as under the Takeovers Code. However, whereas the Code gives very few exceptions to the fundamental rule (with reliance apparently being placed on the powers of the Takeover Panel to grant exemptions), the Corporations Law contains a number of very sensible exceptions. For example:
(a) Acquisitions under rights issues;
(b) Acquisitions under dividend reinvestment schemes; and
(c) Acquisitions under underwriting arrangements.

- Off market and on market bids: The Corporations Law draws a distinction between off market and on market bids, with different rules applicable to each. There is no such distinction under the Takeovers Code.

- Partial bids: Under the Corporations Law, a partial bid must be made as a bid for a specified proportion of each shareholder's shareholding. The Takeovers Code is much more flexible in terms of how a partial bid can be structured.

- Pricing: The Corporations Law provides that the consideration offered under a takeover bid must at least equal the maximum consideration paid by the bidder in the four months preceding the bid. There is no equivalent requirement under the Takeovers Code.

- Creep: The Corporations Law permits acquisitions of up to 3 percent in any 6 months (as compared, under the Takeovers Code, to 5 percent in any 12 months, and then only if a 50 percent shareholding is already held).

- Target company disclosures: Although the general procedures to be followed for takeovers under both the Takeovers Code and the Corporations Law are the same, there is one important difference. This relates to the disclosure requirements on target company directors. Under the Takeovers Code, there is an obligation to disclose all information that could reasonably be expected to be material to offerees. Under the Corporations Law, this obligation is limited to what is known to the directors of the target company, and allowance is expressly made for the time that is available to prepare the director's disclosure statement.

This is a general summary only and should not be taken as a substitute for specific advice.

Russell McVeagh, law firm
Web site: Russell McVeagh

March 2001