Takeovers Act amendments give Panel jurisdiction to consider expense claims
On 30 March 2017, the Regulatory Systems (Commercial Matters) Amendment Act 2017 came into force. This amends the Takeovers Act and Takeovers Code as they relate to takeover expenses incurred in connection with an offer or takeover notice and affects all takeovers where a takeover notice was received by the target company on or after 31 March 2017.
The new sections of the Takeovers Act adopt the previous position set out in the Code, in which the directors of a target company are entitled to be reimbursed by the target company for expenses properly incurred in relation to an offer or takeover notice, and a target company is entitled to recover its properly incurred expenses from the offeror.
The Act now provides that either party may apply to the Takeovers Panel for a determination of the amount to be reimbursed. This is a change from the current law, which requires a target company to file Court proceedings in circumstances where the proper amount recoverable by the target company cannot be agreed. Under the amendments, a target company will be entitled to appeal the Panel’s determination to the District Court (in circumstances where the amount to be reimbursed is no more than $350,000) or the High Court (in circumstances where the amount exceeds $350,000).
By giving the Panel jurisdiction, in the first instance, to consider reimbursement disputes, the intention of this amendment is to ensure that efficient and cost-effective decisions can be reached in disputes relating to takeover expenses. That being said, it is a number of years since the approach to determining takeover expenses has been considered by the High Court (we understand that the Kathmandu/Briscoes matter is still outstanding).
It remains to be seen what approach the Panel will take regarding the types of expenses that a target company is entitled to recover from an offeror. The Takeovers Panel’s guidance note on the recovery of takeover expenses differs markedly from the current case law. It will be interesting to see if the Panel revises this or not. If they do not and a party (most likely the offeror) appeals the Panel’s decision, it will be of interest to see if a Court will adopt the Panel’s guidance note or continues to adopt existing case law – or some middle ground between the two.
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