- New regime: The Takeovers Code will represent a new takeovers regime for NZSE listed companies, and unlisted companies with 50 or more shareholders and $20 million or more in assets. Parties cannot contract out of the Code.

- Enforcement: The Takeovers Panel and High Court are given broad enforcement powers, including the power to order payment of penalties of up to $5 million. These penalties can apply to directors, employees, and advisers.

- Fundamental rule: A shareholding of greater than 20 percent cannot be acquired, and a person already having such a shareholding cannot increase that shareholding, except under an offer made in accordance with the Takeovers Code, or as permitted in other limited circumstances set out in the Code. This rule covers the acquisition of indirect shareholdings, and transactions involving transfers, and issues, of shares.

- Compliance options: A person may become the holder or controller of an increased percentage of the voting rights in a Code company:
(a) Under:
(i) Offers for all of the shares of a Code company; and
(ii) Offers for less than all of the shares of a Code company,
But if the bidder does not already hold or control more than a 50 percent shareholding, the offer must be conditional on acceptance as to a sufficient number of shares to take the bidder across that threshold (or a lesser threshold approved by shareholders of the target company);
(b) Where shareholder approval is obtained;
(c) where a person with more than a 50 percent, and less than a 90 percent, shareholding acquires less than 5 percent in any 12 month period; or
(d) If the person already holds or controls a 90 percent shareholding.

- No differential offers: The same terms must be offered for shares of the same class.

- Reports: Independent advisers approved by the Takeovers Panel must provide reports on the "merits" of each offer to the directors of the target company. If different classes of shares are to be acquired, reports will also be needed as to the offer being fair and reasonable between classes.

- Duration: Offers must be open for acceptance for between 30 and 90 days.

- Conditions: No conditions can be included which depend on the bidder's, or any of its associate's, judgment (such as a due diligence condition) or the fulfilment of which lies in the bidder's or any of its associate's hands (which may capture a finance condition).

- Deemed escalation clause: Offers can be varied to lift the consideration - but the consideration must be provided to all accepting shareholders, even those who have accepted before the variation is made.

- Procedures: The general procedures to be followed (service by bidder of a takeover notice, statement by target company directors, delivery of takeover offer to shareholders) broadly mirror those of the existing regime under the Companies Amendment Act 1963, but more extensive information must be disclosed.

- Defensive tactics: Tactics that frustrate an offer are generally prohibited.

- Dealings: The ability of a bidder to deal in shares outside of an offer is restricted.

- Compulsory acquisition provisions: Provisions, similar to those currently in the NZSE Listing Rules, for compulsory acquisitions upon reaching a 90 percent shareholding are included.

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