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Clune, Scott --- "Amalgamations, schemes of arrangement and takeovers regulation: concerns of the takeovers panel and the need for reform" [2007] CanterLawRw 4; (2007) 13 Canterbury Law Review 91


Scott Clune

I. Introduction

In the early months of 2006, two high value company transactions involving widely held public companies listed on the NZX were announced to the market. On 20 February 2006, Contact Energy Limited announced its intention to merge with Australian based Origin Energy Limited by way of a scheme of arrangement under Part XV of the Companies Act 1993.[1] A month later on 27 March 2006, Waste Management NZ Limited announced a merger with another Australian company, Transpacific Industries Group Limited, to be effected by way of an amalgamation under Part XIII of the Companies Act 1993.[2] These transactions attracted the attention of the media and the Takeovers Panel — the Takeovers Panel adopting the stance that the transactions were changes of control designed to avoid the protections offered by the Takeovers Code. The Panel commented that '[c]ompanies are dodging the Takeovers Code by taking advantage of merger rules instead of launching a takeover bid'.[3] Over the course of 2006 the Panel produced a number of documents articulating the reasons for its concern and moved for legislative reform to close the perceived 'loopholes'.

This paper examines and evaluates the concerns expressed by the Panel over the use of Parts XIII and XV of the Companies Act 1993 to perform transactions tantamount to takeovers. First, a brief overview of takeovers regulation in New Zealand is given, followed by an examination of the amalgamation and schemes of arrangement provisions of the Companies Act 1993 and a discussion of how these may be used to effect a takeover. The concerns of the Takeovers Panel with regard to the use of the Companies Act provisions in this way are then reviewed. In light of this, the Takeovers Panel's position is critically evaluated. The evaluation draws on a discussion of alternative rules in other jurisdictions, the results of the Panel's attempt to deal with the problem in the Business Law Reform Bill 2006 and judicial comment on the matter.

II. Takeovers Regulation in New Zealand

A takeover can be defined as the acquisition of a controlling interest in a target company by another person through the acquisition of a sufficient proportion of the target company's shares.[4] In the context of a widely held or publicly traded company, there are concerns over the economic efficiency and rights of shareholders in the face of a change in the ownership or 'control' of a company. It is these concerns that have prompted the regulation of takeovers.

Genesis of Current New Zealand Takeovers Law

Prior to the Takeovers Act 1993, takeovers in New Zealand were governed by the Companies Amendment Act 1963. This Act amended the Companies Act 1955 and created a set of requirements that had to be complied with when making a 'take-over offer'. 'Take-over offer' was originally defined in that Act as being an offer for the acquisition of any shares in a company which would result in the offeror gaining control of one half of the voting rights at any meeting of the target company.[5] In 1978 this definition was amended to extend to any offer that would result in the offeror gaining one fifth of the voting rights in the target company. The requirements set out in this Act dealt mainly with notice requirements and the penalties for failing to comply. However the Act only applied to offers made in writing and did not apply to acquisitions made through the stock exchange.[6] There was no specific supervisory body and, although the rules purported to apply to any takeover offer made to more than six members of a company,[7] the shortcomings of the rules were such that compliance was labelled 'optional' by one commentator.[8] In September of 1987 the Minister of Justice requested a report on takeovers law from the Securities Commission. In the following month the stock market crashed and company law and securities regulation became subject to increased public scrutiny and criticism.

The Securities Commission's report found that the present system of takeovers regulation in New Zealand was inadequate in that it was inefficient in encouraging competition for control of companies and so led to undesirable distributions of the wealth generated by equity investment.[9] The report recommended a series of reforms. First was a mandatory bid rule whereby an offer had to be made to all shareholders if a person acquired over a 30 per cent shareholding in the relevant company.[10] Second, an equal price obligation whereby the offeror was required to pay to all offerees the higher of the highest price paid by it for shares in the relevant company in the last 12 months or the market price immediately before the offer.[11] Third, offers in the share market to acquire shares available for purchase, called 'stands in the market', would be allowed, but not 'creeping' or incremental acquisitions whereby a holding was increased over a specified period by small amounts.[12] The Commission also recommended the establishment of an administrative enforcement authority.[13] The Commission noted the relative lack of takeovers regulation in New Zealand when compared with other jurisdictions such as Australia and the United Kingdom and criticised the treatment of minorities in the context of a change of control. The Commission held up the 'pari passu principle' (that all shareholders have a simultaneous and pro rata entitlement in respect of distributions and any residual assets of the company) as the fundamental basis of the corporate contract, and recommended that this contract would be better served in a takeover situation by instituting a combined mandatory bid and equal price regime.[14]

The Minister accepted the Commission's proposals and asked it to produce draft legislation. However in 1990 there was a change of government and the new Minister of Justice set about takeovers reform in a different way. In late 1991 the then Minister announced that a panel would be established by statute to consider the type of takeovers regulation for public issuers that the New Zealand market should have.[15] Late in that year the Takeovers Bill establishing such a panel was introduced to Parliament. The Bill established the Takeovers Panel, the function of which would be to make recommendations to the Minister about the contents of a takeovers code. The Bill underwent significant changes during the parliamentary process.[16] As originally drafted, the Bill contemplated private enforcement of the Code by way of extraneous regulation but this was later altered and the Panel given express enforcement powers.[17] The Bill, as amended, was passed as the Takeovers Act 1993.

The Takeovers Act 1993

The Takeovers Act 1993 consists of three major parts. The first establishes the Panel, sets out its composition, and deals with matters of conduct. The second part empowers the Governor-General, by order in council and on the recommendation of the Minister, to make regulations setting out the rules applying to takeovers of specified companies (a takeovers code).[18] This part also sets out the objects of a takeovers code and mandatory considerations to which the Minister must have regard in making recommendations. The third part deals with investigation and enforcement of a takeovers code. For the purposes of this discussion, the most important part is the second dealing with the purposes of a takeovers code as it is these purposes which are arguably defeated when changes of control are carried out using mechanisms contained within the Companies Act 1993.

The objects of a takeovers code are set out in s 20(1) of the Takeovers Act 1993. Section 20(1) provides that in formulating recommendations for a code the Minister shall consider the following to be the objects of the code:

• encouraging the efficient allocation of resources;[19]
• encouraging competition for control of specified companies;[20]
• assisting in ensuring that the holders of securities in a takeover are treated fairly;[21]
• promoting the international competitiveness of New Zealand's capital markets;[22]
• recognising that the holders of securities must ultimately decide for themselves the merits of a takeover offer;[23] and,
• maintaining a proper relation between the costs of compliance with the code and the benefits resulting from it.[24]

Takeovers Code 2001

There was a considerable hiatus between the passing of the Takeovers Act in 1993 and the implementation of the Takeovers Code in 2001. This was contemplated when the Act was passed as, during the Committee of the House stage, a provision was added noting that the Minister of Justice might decide to take up the recommendation of the Takeovers Panel and put in place a code or might defer that decision indefinitely[25] This power was included on the basis that if the Bill was left in its previous form, the administrative law argument that the Minister would be required to put in place a code within a reasonable time might be raised. It was stated that the shareholder protections in the Companies Act 1993, the Financial Reporting Act 1993 and the New Zealand Stock Exchange Listing Requirements (as they then were) should be given an opportunity to work before there would be an assessment of whether those protections would obviate the need for takeovers regulation.[26]

The Panel submitted a report to the Minister in 1995 containing a draft code that was unaltered from a draft that had been released in late 1993- The Minister recommended the code be adopted but the government of the day elected to defer the decision on whether or not to adopt the code. The code languished for some four years until, following the change of government at the 1999 general election, the incoming Minister of Commerce reversed the deferral.[27] The Takeovers Code 2001 was introduced by the Takeovers Code Approval Order 2000 and took effect from 1 July 2001. Contemporaneously, amendments were made to the Takeovers Act 1993 to allow for supervision and enforcement of the Code and the Companies Amendment Act 1963, which had governed takeovers until the coming into force of the Code, was repealed.[28]

The Takeovers Code 2001 applies to 'voting securities' in 'code companies'. A voting security is an equity security that confers a currently exercisable right to vote at a meeting of shareholders. It does not include debt or other non voting securities even if they are convertible to voting securities.[29] A code company is a company incorporated in New Zealand under the Companies Act 1993[30] that is, or was in the last 12 months, listed on the New Zealand Stock Exchange or has more than 50 shareholders.[31] The Code regulates takeovers by crafting a general rule and then formulating exceptions to that rule. This general rule is referred to as the 'fundamental rule' and is articulated at r 6. This rule states that no person may acquire a holding of greater than 20 percent of the voting rights of a code company or, if greater than 20 percent is already held, increase his or her holding.

The Takeovers Code creates a number of exceptions to the fundamental rule permitting an acquisition of voting securities:

• under a prescribed 'full' or 'partial offer' in respect of a code company;[32]
• under an acquisition or allotment approved by an ordinary resolution of the code company in accordance with the procedure set out in the Code;[33]
• under a creeping acquisition where a shareholder who already holds between 50 and 90 percent of a code company can acquire up to an additional five percent in a 12 month period;[34] or,
• by means of a compulsory acquisition if the shareholder holds 90 percent or more of the code company.[35]

Moreover, in order for an offer, or acquisition or allotment of shares, which would otherwise breach the fundamental rule to proceed, the proposal must have a specified level of shareholder support. A full takeover offer must be conditional on the offeror achieving control of more than 50 percent of the voting rights in the company. Similarly, an acquisition or allotment must be approved by 50 percent of shareholders entitled to vote and voting at a meeting. Importantly, the parties involved in the acquisition or allotment cannot participate in the vote.[36]

For an acquisition or allotment under the Code, the code company's directors must provide a written statement as to whether they recommend acceptance or rejection of the proposal together with their reasons for so doing.[37] In the case of a code offer, the board of the target company must produce a target company statement. The board must, within that statement, either recommend acceptance or rejection of the offer or refrain from making a recommendation. Again, reasons for the board's stance must also be set out in the statement.[38] Importantly, under a code offer, acquisition, or allotment, shareholders are entitled to receive a report on the merits of the proposal from an independent adviser.[39]

This overview of takeovers regulation in New Zealand illustrates the purposes of regulation and the regime in place to give effect to those purposes. Against this backdrop, Parts XIII and XV of the Companies Act 1993 can now be examined with a view to understanding their appropriateness for executing transactions which amount to takeovers.

III. Amalgamations: Part XIII of the Companies Act 1993

An amalgamation under the Companies Act 1993 is a form of reorganisation where two companies merge and continue as a single company (the amalgamated company). The amalgamated company may either be a new company or be one of the amalgamating companies.[40] Shareholders in the amalgamating companies either take shares in the amalgamated company or receive other consideration in exchange for their shares although, in some cases, shares may be cancelled without compensation.[41] All the property, rights and obligations of the amalgamating companies are transferred to the amalgamated company by operation of law.[42]

The amalgamation provisions in Part XIII of the Companies Act 1993 have no direct predecessors in the Companies Act 1995. Under the 1955 Act, a reorganisation having similar effect to an amalgamation conducted under Part XIII of the 1993 Act would have been an 'arrangement'.[43] As will be seen when schemes of arrangement are discussed, this would have required approval by special resolution of each class of shareholders and creditors and the approval of the High Court. In investigating reform of the Companies Act 1955, the Law Commission viewed the need for court intervention in all cases of reorganisation to be inefficient and undesirable. The Commission therefore recommended the adoption of a specific amalgamation mechanism based on North American law.[44] This recommendation was accepted and two processes for amalgamating companies, short form and standard amalgamations, were enacted as Part XIII of the Companies Act 1993.

The short form amalgamation process is set out in s 222 of the Companies Act and allows for the amalgamation of wholly owned subsidiaries with their parent or other subsidiary companies in the group byway of board resolution. This being so, the mechanism is inapt to affect a change of control. This is in contrast to a standard amalgamation.

A standard amalgamation involves a number of steps.[45] First, an amalgamation proposal is prepared by the amalgamating companies.[46] This proposal must contain the terms of the amalgamation and s 220 lists certain pieces of information that must be included in an amalgamation proposal. Second, pursuant to s 221, the board of each amalgamating company must approve the amalgamation proposal and pass resolutions stating (1) that in its opinion, the proposal is in the best interests of the company and (2) that it is satisfied that immediately after the amalgamation the amalgamated company will satisfy the solvency test. The directors who vote in favour of the proposal must sign certificates to the same effect as the resolutions.[47] Copies of the amalgamation proposal and certificates given by directors must then be distributed by the board of each amalgamating company to all the shareholders of their company. It should be noted that an independent appraisal of the proposal is not required under Part XIII but for companies listed on the New Zealand Stock Exchange it may be required under the Listing Rules.[48] Third, the shareholders of each amalgamating company must approve the amalgamation proposal by special resolution and in some cases interest group approval may also be required.[49] Finally, the approved amalgamation proposal must be delivered to the Registrar of Companies.[50] The proposal becomes effective on registration.[51] Shareholders who vote against the amalgamation proposal at the requisite meeting have the right to request the company to purchase their shares at a fair and reasonable price.[52]

In addition to the amalgamation procedures outlined in Part XIII, companies may also amalgamate using the schemes of arrangement provisions contained in Part XV of the Companies Act. Although Part XV is very general, it expressly provides for High Court approval of an amalgamation even though the amalgamation could be effected under Part XIII.[53] Hence New Zealand operates two parallel procedures for amalgamations.

IV. Schemes of Arrangement: Part XV of the Companies Act 1993

Part XV of the Companies Act 1993 provides a mechanism for the execution of amalgamations, compromises and arrangements by way of High Court approval. There are procedures for the implementation of both amalgamations and compromises without court sanction set out in Parts XIII and XIV of the Act respectively. However it is expressly stated that these provisions do not restrict the ability of the Court to approve this type of transaction under Part XV[54] In addition to amalgamations and compromises, the Court may approve any 'arrangement' under Part XV.[55] The term 'arrangement' has been held to have a very broad meaning. In Suspended Ceilings (Wellington) Ltd v CIR,[56] the Court of Appeal cited English authority which contended that

there is no ground for limiting the meaning in a section empowering the Court to approve an arrangement, and any risk is sufficiently guarded against by the fact that the sanction of the Court must be obtained.[57]

The meaning of arrangement has also been articulated as 'any scheme that can in the ordinary use of language be regarded as an arrangement between a company and its members'.[58] Such wide definitions of'arrangement' illustrate that the range of transactions which the Court may approve under Part XV is very broad indeed. The necessity for this broad provision operating in parallel with more specific procedures contained in the same Act may seem unclear and the confusion is only compounded when the genesis of the provision is examined.

The scheme of arrangement has its roots in English law where, in the late nineteenth century, the courts were granted power to approve a scheme of arrangement between a company in liquidation and its creditors.[59] New Zealand law embraced the scheme of arrangement and developments largely followed those in England. Under the Companies Act 1955, schemes of arrangement were provided for at ss 205-207. Under that Act, schemes could be made between a company and its members (shareholders) or creditors irrespective of solvency. The scheme provisions were the only method available for carrying out an amalgamation or compromise. The provisions set out that upon application for an arrangement, the Court was empowered to call a meeting of shareholders.[60] The arrangement could then only proceed if it was approved by a 75 percent majority of shareholders voting at that meeting[61] and it received the sanction of the Court.

This regime included several procedural protections for minority shareholders. Shareholders were entitled to receive a statement explaining the anticipated effect of the arrangement on the company and its shareholders and which disclosed any material interest on the part of the company's directors. Furthermore, even if the arrangement was approved by a 75 percent majority at the Court ordered meeting, the Court still had to sanction the proposal. In deciding whether or not to approve the scheme, the Court was required to take into account a number of matters including whether the scheme was such that an intelligent person of business might reasonably approve and whether the scheme was fair and reasonable to all affected parties.[62]

Dissenting shareholders who were opposed to an arrangement had very few options after the scheme was approved. Under s 209 of the 1955 Act, a shareholder could ask the Court to order that the company purchase his or her shares in the company. However such a request would only be granted if the company's conduct was 'oppressive, unfairly discriminatory or unfairly prejudicial' to the shareholder concerned and the Court considered it just and equitable to grant relief. It should be noted that this remedy was not specifically connected to schemes of arrangement but was available in any situation where the company's conduct was 'oppressive, unfairly discriminatory or unfairly prejudicial.' In light of this, it is difficult to imagine a situation where the Court might approve a scheme as being reasonable to all affected parties and then subsequently find that it was 'oppressive, unfairly discriminatory or unfairly prejudicial.'

As stated above, the Law Commission saw the need for court intervention in all cases of compromise or reorganisation to be a disadvantage. This being so it recommended that, for the purposes of amalgamations and compromises with creditors, the old s 205 regime would be broken up into two different approaches.[63] There would be a prescriptive approach whereby a 75 percent vote at a meeting of shareholders could bring about an amalgamation without court sanction (for a compromise with creditors a vote of 75 percent by value and 50 percent by number would be required), and a broad backup provision allowing the High Court to sanction an amalgamation or compromise without a vote where the prescriptive approach was not practical. The Companies Bill drafted by the Commission reflected this approach. It contained specific codes that companies were required to follow in effecting amalgamations and compromises and an alternative method whereby the High Court could sanction such a transaction where it was not practicable to follow the other procedures. Clause 195 of the Commission's draft Companies Bill stated:

Notwithstanding any provision in this Act or in the constitution of any company, where it is not practicable to effect a reconstruction or amalgamation in respect of one or more companies in accordance with the procedures set out in this Act or the constitution of those companies, those companies may apply to the Court for approval of a reconstruction or amalgamation and a Court may approve any such proposal on such terms and subject to such conditions as it thinks fit.

However during the parliamentary process the court-sanctioned scheme of arrangement provision was transformed from a backup into an alternative with no requirement that the transaction be impractical under the specific compromise or amalgamation provisions. The end result is that the Court is left with a vast discretion under Part XV.[64] The extent to which meetings are required, the majorities required at such meetings, the information required to be disclosed and the consequences of a negative vote are all left to the Court to decide with no guidance from the legislation. In light of this new provision, the Court was also faced with the question of whether the old intelligent business person test for approval of a scheme would continue to apply. In a second hearing of the Suspended Ceilings case,[65] a majority in the Court of Appeal found that since the new Part XV discretion was not dependent on creditor or shareholder approval, the enquiry by the Court might require additional considerations not appropriate under the old Act. Based on this, a more stringent test was formulated which stated that a scheme should only be approved where it would be unreasonable not to approve it. This test has, however, been rejected in the later Court of Appeal decision of Weatherson v Altus Property Investments Limited[66] where the Court favoured the intelligent business person and fair and equitable test. The Court stated that the unreasonableness test 'may not be pertinent beyond its particular context'.[67]

Consequently contemporary New Zealand company law encompasses two completely different mechanisms that perform similar tasks. Part XIII provides rules for amalgamation of companies independent of the Court or other regulatory supervision and Part XV confers a broad discretion on the Court to approve almost any reorganisation on any terms it deems appropriate. The Takeovers Panel believes that both these sets of provisions are being used to carry out changes of control in code companies in a manner which defeats the objects of the Takeovers Code.

V. Use of Amalgamations and Schemes of Arrangement to Effect Takeovers

Before the ways in which Parts XIII and XV can be used to effect a takeover can be examined, what precisely is meant by the term 'takeover' must be clarified. The earlier given definition of 'takeover', extracted from a business law dictionary,[68] stated that a takeover is the acquisition of a controlling interest in a target company by another person through the acquisition of a sufficient proportion of the target company's shares. This seems relatively straightforward but for the purposes of this discussion it is largely inadequate. This is due to the provisions of the Takeovers Code 2001. The fundamental rule of the Takeovers Code states that no person may 'hold or control' more than 20 percent of the voting rights of a code company except in accordance with the Code provisions. The Code thus purports to regulate more than the mere acquisition of control through the purchase of securities. The Code will apply to a situation where control increases by any means. In some cases, such as a cancellation of securities, a reorganisation of voting rights attaching to shares, or, a share buy-back transaction, an increase in control triggering the Code could occur involuntarily on the part of the controller. Hence, the Code is outcome focussed and, by implication, defines 'takeover' as a change in control effected by any means whatsoever.

Prior to the adoption of the Takeovers Code, it was recognised in New Zealand that a scheme of arrangement was an appropriate method of carrying out a takeover. For example, in Re Canterbury Timber Products[69] the High Court was asked to sanction a scheme of arrangement under the Companies Act 1955 which, in reality, was merely a takeover offer that did not comply with the takeovers provisions set out in s 208 of that Act. Despite this, the Court was prepared to sanction the transaction. It would still be possible to use a scheme of arrangement to carry out a direct takeover bid under the current regulatory scheme but to do so would almost certainly require compliance with the Code or a Code exemption from the Takeovers Panel. This is because there are no exceptions in the Code for Parts XIII and XV of the Companies Act so where the use of one of these provisions results in a change in control of a code company above the prescribed threshold, the Code will apply. The Panel has previously indicated it will only be willing to grant exemptions where there are 'clear and compelling' reasons why the transaction should not be treated as a takeover, although it later expressed an intention to alter this policy focussing on a more general assessment of the instant transaction and how it relates to the Code.[70]

However it is possible to structure transactions under these provisions so that the Code is not triggered and neither compliance nor exemption is required. Such transactions almost always involve the incorporation of a new company, the cancellation of all voting rights in the code company in return for monetary consideration or securities in the new company, and the merger of the code company into the new company. A transaction executed in this manner involves no accrual of voting rights in the code company as it ceases to exist while its business is absorbed into the new company. In this context, it is worth examining some of the transactions that have caused the Takeovers Panel concern.

The transaction which first prompted the Takeovers Panel to consider the relationship between the Code and the Companies Act provisions[71] was the merger of Sky Network Television Limited (Sky) and Independent Newspapers Limited (INL). Both of these companies were code companies. The two companies executed a scheme of arrangement whereby a new company was formed (MergeCo) and this company acquired all the shares in Sky and INL. Immediately before the acquisition by MergeCo all the voting rights attaching to Sky and INL securities were cancelled. Accordingly, despite the fact MergeCo had acquired all the shares in two code companies, no person became the holder or controller of voting rights in an existing code company as a result of the scheme and the Takeovers Code was not triggered. After this process was complete, Sky, INL and MergeCo were amalgamated with MergeCo remaining as the surviving company. MergeCo was then renamed Sky Network Television Limited and listed on the New Zealand Stock Exchange.[72] The Takeovers Panel was concerned that the deal was structured in this way specifically to avoid the operation of the Takeovers Code.[73]

Another use of the scheme of arrangement provisions which caused the Panel some apprehension was the proposed merger of Contact Energy Limited (Contact) with Origin Energy Limited (Origin). Contact was a code company while Origin was a company incorporated in Australia and listed on the Australian Stock Exchange. The structure of the transaction was modelled on the successful mergers of two Australian energy companies that resulted in the BHP Billiton and Rio Tinto groups. The transaction was proposed by way of a 'dual listed company' described as a 'merger achieved by way of contract'.[74] Under this dual listed structure, the two companies would retain their separate corporate identities and listings on their respective stock exchanges. However the two companies would have a common board and unified management, a single credit pool, a combined dividend policy, and would publish combined accounts. No shareholders would be required to sell their shares in the existing companies and each share in Contact and Origin would carry one vote in the combined group. Again, this structure involved no change in control of a code company so the Code did not apply. Despite this, the Panel considered that because Origin already held over 50 percent of Contact shares and so Origin shareholders would hold over 75 percent of the economic interests of the new group, the transaction amounted to an increase in control over a New Zealand code company. It is worth noting that in June 2006 the deal broke down and the merger was never completed. There had been strong speculation that the terms of the merger did not adequately reflect the value of Contact relative to Origin and key institutional shareholders of Contact expressed an intention to vote against the merger. Thus, even though Origin held over 50 percent of the voting rights in Contact, it became apparent that the deal would not receive the required 75 percent shareholder support.[75]

These two transactions have both involved mergers effected by way of scheme of arrangement. This means that the proposals were subject to High Court sanction. However, an amalgamation under Part XIII of the Companies Act operates without Court supervision and this procedure has also been used to carry out transactions that have concerned the Takeovers Panel. The recent amalgamation of Transpacific Industries Group Limited (Transpacific) and Waste Management NZ Limited (Waste Management) is one such example. Under that transaction Transpacific, a company incorporated in Australia, incorporated a wholly owned subsidiary in New Zealand (MergeCo). An amalgamation under Part XIII was carried out between Waste Management and MergeCo. The terms of that amalgamation set out that MergeCo would be the continuing entity and Waste Management would cease to exist. Shareholders of Waste Management would be paid cash in consideration for their shares. After the transaction was completed, MergeCo changed its name to Transpacific Industries Group Limited and listed on the New Zealand Stock Exchange.[76] As with the scheme of arrangement transactions, this deal did not result in Transpacific becoming the holder or controller of any Waste Management voting rights and so the code did not apply. The Chair of the Takeovers Panel, John King, described the transaction as 'simply a takeover done by an amalgamation'.[77]

These transactions illustrate that the schemes of arrangement and amalgamation provisions of the Companies Act can be used to acquire all the business, assets and liabilities of a code company without actually acquiring voting rights in the company itself and thus avoiding compliance with the Takeovers Code or the necessity for an exemption. This facility has caused the Takeovers Panel much concern. The reasons for this concern will now be examined.

VI. Takeovers Panel's Concerns

Over the course of 2006, the Panel expressed its concern at the way in which Parts XIII and XV of the Companies Act were being used via comment in the media and the issue of a number of documents. In April 2006 the Panel released its consultation document on a proposed new policy for exemptions for schemes of arrangement.[78] The Panel included in that paper a call for submissions on the relationship between the Code and the schemes of arrangement provisions of the Companies Act. It stated:

The Panel views the recent use of schemes of arrangement as avoidance mechanisms as unsatisfactory. There can be good and proper reasons to utilise the scheme of arrangement procedure but it is not appropriate for it to be used as a device to avoid key requirements of the Companies Act and the Code.[79]

Interestingly, the Panel considered the possibility of Part XIII amalgamations being used in a similar fashion but noted that under these provisions dissenting shareholders had minority buyout rights. It then stated that schemes of arrangement could be used to avoid these rights as well as the protections of the Code.[80] Thus the Panel appeared at this stage to have viewed Part XIII as relatively innocuous compared to Part XV. Though the Waste Management deal had been announced some ten days prior to the release of the consultation paper, the proposal was not mentioned in the paper. The Panel would later cite that transaction as one of the reasons reform of Part XIII was required.[81]

The brief consultation document issued in April went no further than expressing a concern that schemes of arrangement were being used to avoid the Code. Media and market attention continued to focus on this issue but with the announcement of the Waste Management merger the spotlight was also turned on Part XIII. In May, after responses from the consultation paper were considered, the Panel announced two measures via which it hoped to curtail the use of schemes of arrangement in the manner it considered undesirable.[82] First, it would seek to be heard by the High Court when it considered proposed schemes of arrangement involving code companies and, second, it revoked the class exemption for initial public offers that had been relied upon in respect of some schemes which involved the creation of a new company.[83] The announcement of these measures was well received, the New Zealand Herald reporting them under the headline 'Takeovers Panel sharpens its claws'.[84] However the Panel was far from convinced that these steps were sufficient to solve the issues they addressed. It would later state:

These measures are the only course of action available to the Panel under the current legislative framework of the Code and the reconstruction provisions of the Companies Act. Clearly these measures would not be a sufficient solution to the problems which some market participants urged the Panel to address.[85]

Believing that legislative action was required to remedy abuses of the Companies Act provisions, the Panel released a more detailed discussion paper on 19 June 2006.[86] This paper articulated in greater detail the nature of the Panel's concerns and contained proposed legislative changes for comment. The concerns were summarised in the introduction to the discussion paper:

The Panel, like many market participants, is concerned that the rights of shareholders of code companies, particularly minority shareholders, in respect of mergers and acquisitions are dependent upon the choice of mechanism used by parties to effect such a transaction. The Panel considers that there should be consistency as to the rights and protections for code company shareholders regardless of the form of the mechanism used to effect a merger with or acquisition of a code company.[87]

Thus the Takeovers Panel considered it undesirable that the rights and protections which shareholders of code companies have in relation to a change of control are dependent on the form of transaction employed by those wishing to change control of a company.[88] The Panel saw this as defeating the purposes of the Takeovers Code:

the use of amalgamations and schemes to avoid the Code is not consistent with the intention of the Code. It is the intention of the Takeovers Code to provide protections to all code company shareholders in respect of transactions involving changes of control. The Panel believes that at the time of the enactment of the Companies Act and the Takeovers Act it was not intended that the Companies Act should provide mechanisms to allow parties to avoid the shareholder protections provided by the Takeovers Code.[89]

However, the Panel's view as to the intention of the Code is arguable. The purposes of the Code set out in s 20 of the Takeovers Act make no reference to ensuring consistency of rights and protections no matter how a change of control is effected. The objects of the Code do include 'assisting in ensuring that the holders of securities in a takeover are treated fairly' and it is certainly arguable that rights and protections being dependent on the method used to effect a change of control is unfair. However perhaps it is better to ask instead whether the rights and protections available under the Companies Act provisions are fair in absolute terms rather than focussing on the dissimilarity. The quest for consistency is venerable and certainly a virtue to which law reform in general should aspire but there is no harm in allowing for different protections in mechanisms yielding similar outcomes when the mechanisms themselves are entirely disparate. Thus the issues raised are threefold. First, whether the rights and protections available to code company shareholders with regard to schemes and amalgamations yielding changes of control are deficient per se. Second, whether it is acceptable that the rights and protections given to shareholders under a scheme or amalgamation are different from those given under a Code transaction. Third, whether the reform proposed to address these issues provides any significant advantages.

The first question should be addressed in the general context of company law. It must be remembered that a great many drastic actions can be taken with regard to a company if one can muster 75 percent support at a shareholders' meeting. A special resolution can adopt, revoke, or alter a company's constitution so as to impose or remove a restriction on the activities of the company. Shareholders can, again by special resolution, approve a major transaction or put the company into liquidation.[90] In the case of a special resolution that alters or removes a restriction on the company's activities, or one that approves a major transaction, a shareholder who votes against such action has a right to require that the company purchase his or her shares at a fair and reasonable price.[91] This right is also available in the event of a standard amalgamation.[92] A standard amalgamation involves two or more boards and every director of each board has a duty to act in the best interests of his or her respective company.[93] It is the board of each company that negotiates a proposal which must be approved by special resolution of the shareholders of each company. It seems then that the combination of directors' duties, notice and information requirements and the minority buyout right yields a significant level of protection for shareholders. There is no obvious characteristic of a code company that dilutes the protection offered by these rights. If there is deficiency in the absolute fairness of this process, it is a deficiency of company law in general unrelated to the specific nature of amalgamations involving code companies. It is worth noting that there has been criticism levelled at the fairness of the procedure for minority buyouts under the Companies Act 1993. In Natural Gas Corporation Holdings Ltd v Infratil 1998 Ltd,[94] Doogue J stated that he regarded this procedure as 'substantially flawed'.[95] This judgement precipitated a report from the Law Commission on the minority buyout procedure which recommended a number of changes.[96] However in the five years since the report was released, no action has been taken on the matter. For the purposes of this discussion, it is submitted that deficiency in the minority buyout procedure is not a valid reason for restricting the scope of the amalgamation mechanism and any unfairness that results from the combination of the two provisions is merely further evidence of the need for reform of the minority buyout procedure.

With regard to the fairness of schemes of arrangement, it is arguable that the lack of statutory rights and protections is wholly ameliorated by court supervision. The words of Lawson J in extolling a wide meaning of the term 'arrangement' are apt:[97] 'any risk is sufficiently guarded against by the fact that the sanction of the Court must be obtained'. This is further evident from the test adopted by the courts in contemplating final approval of a scheme, specifically, that it must be one of which an intelligent person of business might reasonably approve and that it must be fair and equitable to all affected parties.[98] It is highly unlikely that, in the face of such a broad discretion as the High Court has under Part XV of the Companies Act 1993, it would be the overseer of manifest unfairness.

Hence it seems that neither the scheme nor the amalgamation provisions of the Companies Act are intrinsically unfair in relation to code companies. Indeed the collapse of the Contact-Origin deal is an example of how minority holders are able to prevent a merger where there is a belief that the terms of the transaction are unattractive. This being so, the concern must stem largely from the fact the rights and protections are inconsistent. Whether or not this inconsistency is acceptable is dependent on the similarity of the mechanisms and, more specifically, whether the natures of schemes and amalgamations are so different from those of code transactions that disparate rights and protections are tolerable. From an outcome based viewpoint, this is clearly not the case. The Transpacific-Waste Management deal yielded an almost identical outcome to that which would have resulted from a successful code offer. However the ends should never be viewed divorced from the means. In examining the interaction of schemes and amalgamations with takeovers regulation, it is helpful to review the experiences of other common law jurisdictions.

VII. Comparative Law

United Kingdom

At the time of writing, the law regarding arrangements and amalgamations in the United Kingdom was in transition. As outlined above, the scheme of arrangement is a product of English law and the doctrine continues to subsist in that jurisdiction by virtue of Part XIII of the Companies Act 1985 (UK). However in late 2006 a new Companies Act was enacted and will come into effect gradually over 2007.[99] This Act makes significant changes to the arrangement, amalgamation and takeovers provisions. The law as it currently stands under the 1985 Act will first be examined before the changes in the 2006 Act are noted. The provisions of the 1985 Act create a situation similar to that which existed in New Zealand under the Companies Act 1955, whereby the Court is empowered to call a meeting of shareholders or creditors and may approve a scheme if it receives 75 percent approval at that meeting.[100] The use of this provision to carry out a transaction practically the same as a takeover has long been accepted in the United Kingdom. This is illustrated by the case of Re National Bank Ltd[101] in which the Court approved a scheme that involved the cancellation of all the shares in a company and then a reissue of shares to another person. Opponents of the scheme argued that this was an inappropriate use of the scheme provisions as the scheme provisions operated subject to a smaller majority than the takeover provisions (75 as opposed to 90 percent). Plowman J expressly rejected this argument, citing both the supervision of the Court and the fact that the onus of proving the fairness and reasonableness of the scheme falls on its proponents as justifying the lower threshold.[102]

Despite this, takeovers in the United Kingdom are governed by the Panel on Takeovers and Mergers and the extremely detailed City Code which it administers. This Panel was originally an entirely self-regulatory body of market practitioners with de facto power only. However, the Panel now has a legal basis following the implementation of the 13th European Community Directive.[103] The City Code is expressly stated to apply to takeovers and mergers however effected including by way of Court approved schemes of arrangement.[104] However there is an important difference between the United Kingdom Code and the New Zealand Code. Even though the City Code is extremely prescriptive (far more so than the New Zealand Code), regulating announcements, notice requirements, documentation, time limits and defensive tactics, it makes no reference to a compulsory acquisition threshold. The Code contains significantly more stringent conduct and disclosure requirements than the scheme provisions of the Companies Act 1985, but so long as these are complied with, there is no evasion of the Code by allowing the transaction to proceed based on a 75 percent majority. English law does encompass a compulsory acquisition threshold of 90 percent but this is provided for in the Companies Act, not the City Code.[105]

The City Code only applies to companies whose securities are traded on a regulated market in the United Kingdom. The Companies Act does however mandate additional disclosure requirements for public companies[106] in undertaking a Court approved reorganisation or amalgamation.[107] The requirements must be fulfilled before the Court is permitted to sanction the scheme. Significantly, these include the commissioning of independent expert reports which consider the merits of the amalgamation.[108] It is worth noting that under the 1985 Act, United Kingdom company law does not provide a mechanism for the amalgamation of companies without court sanction.

However much of this will change with the introduction of the Companies Act 2006 (UK). Under this Act the United Kingdom has adopted a framework similar to that which exists in New Zealand. The new Act contains a mechanism for unsupervised mergers (amalgamations).[109] The requirements of the mechanism are almost identical to those contained in the New Zealand law but, notably, an independent appraisal of the merger proposal is required.[110] The new Act also retains a general court approved arrangement mechanism.[111] However, in contrast to the New Zealand provision which operates in parallel with the amalgamation and compromise provisions, the scheme of arrangement provisions in the new United Kingdom Act are expressly stated to have 'effect subject to Part 27' (the amalgamation provisions).

The new Act also contains provisions relating to takeovers.[112] These provisions establish the Panel on Takeovers and Mergers. Importantly, the Panel is empowered to make rules governing mergers as well as takeovers.[113] It is worth noting that both the 75 percent approval for a merger and 90 percent threshold for compulsory acquisition are codified within the Act itself[114] so there is seemingly little the Panel could do to alter this disparity that has caused so much concern to the New Zealand Takeovers Panel. Despite this, on the face of the provisions it appears the Panel would be able to make merger proposals subject to Panel approval.[115] The practical effect of these new provisions remains to be seen. However it appears that the United Kingdom is moving towards an amalgamation and arrangement system similar to our own.


As was the situation prior to the recent reform in the United Kingdom, Australia does not have a specific mechanism for amalgamations independent of the courts. Any such transaction will be subject to court sanction as a scheme of arrangement. The schemes of arrangement provisions are found in Chapter 5, Part 5.1 of the Corporations Act 2001 (Aust). As is the case in England and was the case under the 1955 Act in New Zealand, the Court is asked to sanction the scheme after it receives 75 percent approval at a meeting of shareholders (or creditors in the case of a compromise).[116] Unlike New Zealand and the United Kingdom however, Australia does not operate a stand alone Takeovers Code. Takeovers in Australia are regulated by the Corporations Act, the relevant provisions being contained in Chapter 6 of that Act. Australia does have a Takeovers Panel which administers takeovers regulation in conjunction with the Australian Securities and Investments Commission (ASIC). The takeovers regulations are, on the whole, very similar to those in the Takeovers Code 2001 and at first it would appear that Australia is in the same position as New Zealand with regard to the use of schemes of arrangement as alternatives to takeovers. However, the schemes of arrangement provisions in the Corporations Act include an important provision, s 411(17), which provides:

(17) The Court must not approve a compromise or arrangement under this section unless:
(a) it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or
(b) there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement;
but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b).

The existence of this provision raises a question as to what the relationship is between the schemes provisions of Chapter 5 and the takeovers regulations in Chapter 6. In the case of Re ACM Gold Ltd,[117] two companies which were both part of a large group sought to become wholly owned subsidiaries of a third company (Poseidon). The scheme envisioned the transfer of a small portion of the two companies' shares to Poseidon and the cancellation of the rest in exchange for shares in Poseidon and a payment of 10c per share by way of reduction of capital. The Australian Securities Commission (now ASIC) opposed the application on the ground that Poseidon sought to avoid Chapter 6. O'Loughlin J granted the application stating that Chapter 6 did not take automatic precedence over Chapter 5 and that s 411(17) was to be given a liberal and practical interpretation in view of the elements of the relevant transaction.[118] His Honour rejected a wider interpretation of the provision to the effect that because the deal could have been structured to accord with Chapter 6, the use of a scheme to carry it out was prohibited. This reasoning has been followed in a number of subsequent cases.[119] This demonstrates that although it is still possible to carry out a takeover under the schemes of arrangement provisions in Australia,[120] there is a significant safeguard against abuse which also assists in clarifying the relationship between reorganisation and takeovers regulation.


Canada, like New Zealand, possesses both a court supervised scheme of arrangement regime and amalgamation and compromise processes that can operate independently of the courts. Moreover, Canadian law was the basis for much of the Companies Act 1993 so a consideration of the Canadian rules is particularly relevant in the New Zealand context. The rules relating to schemes of arrangement are set out in s 192 of the Canadian Business Corporations Act 1985 (Can). The provision was first enacted in Canada in the Business Corporations Act 1978 (Can) and was intended to provide an avenue for particularly complex transactions that were not feasible under the specific reorganisation provisions.[121] This provision was the model for the Law Commission's draft Companies Bill in its 1989 report and it expressly states that an application for court sanction of an arrangement may be made where 'it is not practicable' for the transaction to be carried out 'under any other provision' of the Act.[122] This clarifies the relationship between arrangements and amalgamations in Canada. However far more important for the purposes of the present discussion was the definition of 'arrangement' contained in that Act. The definition in s 192(1) embraced a wide range of transactions. Notably, s 192(1)(f) provided that

an exchange of securities of a corporation for property, money or other securities of the corporation or property, money or securities of another body corporate is not a takeover bid as defined in s 194.

'Takeover bid' was further defined at length to the effect that it meant any offer made to the shareholders of a company that would result in the offeror gaining more than ten percent of any class of issued shares.[123] Under this regime the legal community was forced to attempt to draw a line between takeovers and arrangements. Canadian lawyers referred to this task as a 'thorny problem'.[124] Commentators advocated a practical approach where the Court would examine the proposal carefully to ensure that it had not been artificially structured to fall within the definition of arrangement and to approve it only if it could not realistically be achieved under the other provisions of the Business Corporations Act.[125] However a Bill passed in 2001 removed all takeovers regulation at the Federal level. Amendments to the Canada Business Corporations Act removed all takeovers related material from the Act including s 194 and the final phrase of s 192(1)(f). The regulation of takeovers was instead left to the Provinces. Accordingly, the Provinces adopted laws separating takeovers from arrangements. For example, Ontario amended its Business Corporations Act[126] to state that an arrangement did not include a takeover bid as defined in its Securities Act,[127] while Alberta retained an equivalent to s 192(1)(f) and s 194 in its Business Corporations Act[128] Thus the United Kingdom, Australia and Canada all maintain mechanisms for ensuring that schemes of arrangement are not used as a tool for avoiding takeovers regulation. It seems that such a mechanism would be desirable in New Zealand.

North America was also the model for the Part XIII amalgamation provisions of the Companies Act 1993, the use ofwhichhas caused the Takeovers Panel concern. Indeed the unsupervised amalgamation mechanism was part of Canadian law before the scheme of arrangement, the latter only being adopted in response to difficulties in fitting some beneficial transactions into the amalgamation rules. Perhaps surprisingly then, there appears to have been very little difficulties along the lines of those articulated by the Panel. There are no exclusions or restrictions in Canadian corporations law for use of amalgamations involving public or listed companies. The reason for this may be the theoretical basis on which the amalgamation provisions were designed. This is evident when the situation in the United States of America is examined.

United States of America

The United States is the origin of the unsupervised amalgamation mechanism. The law relating to company mergers and acquisitions in the United States proceeds on a different basis from that of other common law jurisdictions. Takeovers regulation in America appears to be concerned exclusively with hostile takeovers, where one company is attempting to acquire the equity securities of another without the cooperation of the target company's management.[129] Acquisitions of one company by another with the collaboration of the target company's board are properly carried out by way of merger or consolidation (amalgamation).[130] Thus there is an interesting theoretical divergence between New Zealand and the United States where the definition of takeover is concerned. Whereas New Zealand defines takeovers with reference to outcomes, the United States defines it with reference to methods.

In the event of a merger or consolidation, American shareholders ostensibly have rights similar to those present under New Zealand law in the event of an amalgamation. The board of the merging or consolidating companies must negotiate a 'plan of merger' which is then distributed along with various certificates to all shareholders of both companies. The plan is then approved by a vote at a meeting of shareholders of each company although, contrary to the special resolution provisions in New Zealand, most United States jurisdictions require approval by a majority of shares entitled to vote.[131] Dissenting shareholders have a right to 'statutory appraisal', a right equivalent to minority buyout, requiring the company to purchase their shares for fair value. The statutory appraisal right is described as 'the most prevalent mechanism to protect those who oppose the acquisition,'[132] and a great deal of emphasis is placed on this device as a method for protecting shareholders. Rules, such as the doctrine of defacto merger, have been developed in many jurisdictions to prevent creative deal structures that seek to prevent the availability of this right.[133] Moreover the United States has refrained from embracing the English doctrine of court approved schemes of arrangement in its company law. Hence there is no scope for transactions which cannot be carried out within the prescriptive legislative framework.

This raises some interesting issues with regard to takeovers regulation in New Zealand. Presumably in the United States the protections afforded to shareholders by way of directors' duties and the statutory appraisal remedy are seen to be sufficient in a merger or consolidation and the added protection of takeovers regulation is only warranted where the transaction is proceeding without the cooperation of the target company's board. Hence it appears an amalgamation is viewed as fundamentally different in nature from a takeover. This, given that Part XIII of the Companies Act 1993 is almost a carbon copy of North American corporations law, begs the question as to whether the utilisation of the amalgamation provisions in a manner similar to the Waste Management deal is anything more than a proper and intended use.

The Takeovers Panel does not take this view. It sees the Takeovers Code as being relevant to a change of control in a code company effected by any means whatsoever and the ability to gain similar outcomes under mechanisms offering different rights and protections as an anomaly. This being so the Panel, after receiving submissions from its consultation papers, made recommendations to the Minister of Commerce advising changes to both the Takeovers Code and the Companies Act 1993.[134] Amendments were recommended to the effect that schemes and amalgamations be carved out of the Code completely and the principles of the Code be introduced in the amalgamation and schemes of arrangement provisions of the Companies Act.[135] The substance of the proposed amendments and consequent action is outlined in more detail below.

VIII. Panel Suggestions for Reform

Schemes of Arrangement

The Panel recommended that the Code be altered so that it expressly no longer applies to changes of control resulting from a scheme of arrangement. Part XV of the Companies Act would then be amended to require that the Court take into account the principles of the Code when deciding the requirements for approval of a scheme, including the level of shareholder approval required and the information to be provided to shareholders. Furthermore, the Panel suggested that before approving a scheme of arrangement, the Court receive and take into account recommendations from the Panel as to the requirements that should be imposed for the scheme to be approved.[136] The Panel's recommendations would be such that the information provided to shareholders should be consistent with the information that would be required in respect of a code transaction, including an independent appraisal, and, that the level of shareholder approval for the scheme should be based on whether the transaction is in the nature of a merger of shareholder interests or is akin to a compulsory acquisition involving the squeezing out of existing shareholders. In the latter situation, the Panel would likely recommend an approval threshold of 90 percent of total voting rights consistent with the Takeovers Code. In the former situation, the Panel would likely recommend that scheme require the approval of 75 percent of the votes cast at a meeting of shareholders being not less 50 percent of the total voting rights in the company, and, at least 75 percent of the votes cast at the meeting of independent shareholders.[137]

It was accepted by the Panel that its role in respect of schemes involving code companies might increase were the legislation amended in this way and it suggested that the parties proposing a scheme of arrangement should meet the costs of the Panel's involvement.[138]


The recommendations made by the Panel in relation to Part XIII amalgamations were similar to those made with regard to Part XV, the Panel recommending a carve out for Part XIII be inserted into the Code.[139] In addition, the Panel recommended that the Companies Act 1993 be amended to require that parties to a proposed amalgamation must obtain the approval of the Panel to the amalgamation process.[140] In granting approval to any proposed amalgamation the Panel would have regard to the principles of the Code.[141]

Regard to 'the principles of the Code' was a feature of the Panel's reform recommendations. These principles were articulated as being

to ensure that all shareholders of a code company are able to participate in a change of control of a code company in accordance with rules which ensure equal treatment and the provision of information to enable shareholders to make an informed decision.[142]

These principles were said to be reflected in the requirements of the Code with respect to three areas: the information provided to shareholders in respect of a proposed transaction; the level of shareholder approval required for a proposed transaction to proceed including those who are entitled to vote on that resolution; and, the level of control required before compulsory acquisition provisions apply.[143] This being so, the Panel was suggested, particularly with regard to levels of shareholder approval, that it would generally require or recommend a process consistent with the requirements of the Code.[144] However it was noted that

[t]hese may not be appropriate in every situation, particularly as schemes [and amalgamations] involve a meeting procedure and not an offer to each individual shareholder.[145]

Since the release of its recommendations to the Minister of Commerce in August 2006, the Panel has taken two major steps with regard to reform in this area. First, it challenged a scheme of arrangement proposal in Dominion Income Property Fund Ltd v Takeovers Panel.[146] Second, it recommended the reform described above to the Commerce Select Committee considering the Business Law Reform Bill.

Subsequent Action

Dominion Income Property Fund Ltd concerned an amalgamation of three companies. In September 2006, Dominion Income Property Fund Ltd, Property Fund Thirty-One Ltd, and Dominion Newmarket Properties Ltd filed an originating application in the High Court for orders approving an amalgamation under Part XV of the Companies Act. The application proposed that Property Fund Thirty-One Ltd and Dominion Newmarket Properties Ltd would become amalgamated in Dominion Income Property Fund Ltd. Shareholders in the two companies being discontinued would receive shares in Dominion Income Property Fund Ltd. In granting the application, the High Court ordered that the proposal be approved by a special resolution of shareholders in a postal vote. It also stated that there would no quorum requirement for the vote. The Court noted that the applicant did not accept that the Takeovers Panel was required to be notified of the scheme but would do so as a courtesy. Upon being notified, the Panel sought and was granted leave to be heard in relation to the scheme. Subsequent to that hearing, the orders were varied to state that the special resolution must also be passed by votes representing a majority of voting rights in the amalgamating companies. The amalgamating companies appealed.

The judgement of the Court of Appeal, given by Young P, noted the case was the first since a 'change in attitude' was signalled by the Takeovers Panel. The concerns and reform proposals were acknowledged but it was noted that they had not been acted on and may well never be.[147] The Court then looked at the question of whether the amalgamation was a 'takeover'. In this regard, the Court noted that [t]his issue is quite complex and not well suited to being addressed in an oral judgment delivered under time pressure'.[148]

The Court noted that although in this case the Takeovers Code was not engaged, this was 'not, in itself, a controlling consideration'.[149] Counsel for the Panel argued that the effects of the proposal were economically or practically the same as Dominion Income Property Fund Ltd taking over the other two companies and that the control over the merged entity by the shareholders in the other companies would be significantly diluted. The Court accepted these statements but stated that they too were not controlling considerations. The Court then noted the arguments of the appellants that the amalgamation was different in nature to a takeover as it was a mere reorganisation and not a change in control. With regard to this point, the Court stated that '[w]e suspect that [the appellant] is right but we do not see this as being of critical significance in the context of the case as a whole'.[150]

In considering whether to withdraw the requirement that a majority of voting rights approve the scheme, the Court noted the problem of shareholder apathy and the very real possibility that the proposal would receive the support of an extremely high proportion of the votes cast but that these votes would fall slightly short of a majority of the voting rights in the amalgamating companies. The appellants argued that rather than this outcome necessarily defeating the proposal, it should be a matter for consideration in the final hearing on the proposal. The appellants also pointed out that there was never a voting threshold requirement under the more prescriptive scheme provisions of the Companies Act 1955. The Panel responded by arguing that the cumulative effect of no quorum, no voting threshold and no minority buyout was setting the bar too low. In the end the Court found for the appellants stating:

If the proposed amalgamation is approved by the shareholders, it will still be for the Court to decide on the final application whether to approve the proposal. The smaller the number of votes cast in favour of the amalgamation, the greater must be the scrutiny of the Court. Further, if the Court sees the amalgamation as engaging the policy of the Takeovers Act or as an inappropriate vis à vis dissenting shareholders, then this may be relevant to whether the Court, on the application for final orders, should refuse approval or make approval the subject to a buy out of dissenting shareholders.[151]

Given that the appeal was allowed on its merits, the Court declined to rule on whether the Panel was entitled to make application for orders varying a scheme. It was however accepted that the Panel's standing was 'at least well arguable'.[152] Media reaction to the decision was somewhat varied. The New Zealand Herald proclaimed 'Panel gains more power to vet mergers' and stated that the Court of Appeal decision had confirmed that the Panel had 'a right to be heard in court proceedings to approve mergers conducted by shareholder vote'.[153] Conversely an article in the National Business Review was headed 'Court of Appeal rules against Takeovers Panel' and cited the case as 'a setback in its campaign against companies using so-called schemes of arrangement to avoid the tougher requirements under the Takeovers Code'.[154] The Panel issued a statement expressing a continuing intention to be heard in relation to future schemes and reaffirming its calls for legislative reform.[155]

The overall effect then of the Dominion Income Property Fund Ltd case on the rules relating to schemes of arrangement appears to be minimal. It is likely fair to say that this was the wrong case for the Panel to seek to test its power. The scheme involved three closely related companies with no squeeze out of any shareholders and very little prospect of unfairness to minority holders. It is interesting that the Court appeared to give some tacit support to the contention that amalgamations in general were of a different nature to those transactions with which the Code was concerned and placed a great deal of emphasis on practical considerations and the safeguard of the final approval hearing.

In addition to seeking a hearing in Dominion Income Property Fund Ltd, the Panel submitted its reform proposals to the Commerce Select Committee considering the Business Law Reform Bill.[156] The Panel was heard by the Committee but it declined to include the Panel's proposals in the Bill when it was reported back to the House. The Select Committee Report stated that the Panel's proposals were beyond the scope of the Bill but that the Committee 'would support additional measures being brought forward to address the Takeovers Panel's concerns at least in part'.[157]

In speaking to the Bill on second reading, Commerce Committee and Government Member, Maryann Street, addressed the Takeovers Panel's submission:

The Commerce Committee thought the Takeovers Panel had a legitimate point to make, but decided that further work was needed on that issue ... So the Commerce Committee decided to insert the following sentence in the commentary on the bill: 'We would support additional measures being brought forward to address the Takeovers Panel's concerns at least in part.' That is an important consideration, because there may well be things that we will be able to do, in short order, to address some of the concerns of the Takeovers Panel, particularly with regard to amalgamations, and where actions look like amalgamations rather than takeovers.[158]

Despite this statement, the Government later attempted to make some limited changes by way of supplementary order paper to the Bill. This paper, addressing the Panel's recommendations, was reportedly to be presented to Cabinet on Monday 13 November 2006. This was followed by a second report that the paper was not to be presented because it had failed to gain the support of the National Party on the basis that it would have circumvented due process. The consent of all the political parties was necessary because the amendments to the Business Law Reform Bill requested by the Panel were beyond the scope of the Bill.[159] It is unclear precisely what the content of this proposed supplementary order paper would have been but in an article in the New Zealand Herald, Commerce Minister, Lianne Dalziel was reported as saying:

It would have created new regulation-making powers, meaning shareholders could have received additional information about a proposed amalgamation ... It would have also required the court to take into account matters specified in regulations about whether an amalgamation proposal would have unfairly prejudiced a shareholder and whether a proposed scheme of arrangement should be approved.[160]

It seems then that support for the reform proposals of the Takeovers Panel have been met by Parliament with lukewarm support and whether reform will ever be enacted is far from certain. This outcome arguably provides support for the contention that the concerns of the Panel are somewhat overstated and its reform proposals excessive. Indeed in terms of the principles of the Code as articulated by the Panel,[161] it seems that the existing Companies Act mechanisms and associated protections serve the stated ends reasonably well. Moreover it seems the reform proposals could have effects detrimental to the express purposes of the Takeovers Code set out at s 20 of the Takeovers Act 1993.

The Panel itself acknowledged that the reform would increase compliance costs in relation to a scheme and more so in relation to amalgamations. The requirement that the Panel be consulted in respect of any scheme of arrangement involving a code company would be unique amongst the major common law jurisdictions. However the lack of a requirement to have regard to the Takeovers Code in relation to Court approved schemes in current New Zealand law is also anomalous and remedial action in this regard would be desirable. The most advantageous form for this action to take would be to insert a provision into Part XV similar to s 411(17) of the Australian Corporations Act 2001 (Aust). Such a provision should forbid the Court from approving schemes unless it is satisfied that the provisions are not being used as a mechanism to avoid the Code or it has received a statement of no objection from the Panel. Such a provision would be internationally consistent, would promote the competitiveness of New Zealand's capital markets and would prevent imposition of an unnecessary compliance cost for code companies where a scheme is clearly not a takeover in disguise. In addition to this, consistency with Australian law is an express principal of takeovers regulation in New Zealand under s 24 of the Takeovers Act. In this way it would be possible to address perceptions of a loophole and limit the potential for abuse while at the same time increasing international consistency and limiting the involvement of the Panel to scheme proposals which genuinely raise takeovers issues.

In terms of Part XIII amalgamations, it seems the Panel's recommendations are wholly undesirable. The introduction of regulatory oversight completely defeats the purpose of the provisions which were included in the Act specifically because supervision and approval in all cases was seen as a disadvantage. Moreover the requirement for the Panel to approve an amalgamation introduces an element of risk and uncertainty to a procedure that is, by design, wholly certain. It may be that a specific carve out for Part XIII transactions in the Takeovers Code would be beneficial. This would further reduce perceptions that amalgamations exploited a loophole. However a carve out for Part XV schemes could be detrimental as it may abrogate any standing of the Panel to be heard in relation to Court approval of a scheme. A carve out for amalgamations but not schemes may at first seem incongruous but when it is remembered that the purpose of Part XIII was to create an efficient unsupervised amalgamation mechanism, the disparate treatment makes sense. Indeed, creating an explicit exception for amalgamations could encourage a company interested in the acquisition of another to approach the target and negotiate a mutually beneficial merger as opposed to launching a unilateral takeover bid.

A matter of some concern is the Panel's stated intention of only granting approval for changes of control involving a squeeze out where the scheme or amalgamation is approved by 90 percent of the total voting rights. The idea that 90 percent acceptance should be required for a scheme involving a change of control was specifically rejected in the United Kingdom as failing to account for the protection given by the court approval process.[162] In addition to the fact that a 90 percent acceptance threshold for an amalgamation or arrangement would elevate the transactions above and beyond major transactions, constitutional amendments and voluntary liquidations, it would also render the use of both provisions to effect changes of control totally impractical. It was noted in Dominion Finance that the reality of voter apathy in widely held companies was such that requiring the approval of even 50 percent of total voting rights was too onerous.[163] Such practice would also confer disproportionate power on a small number of shareholders who would effectively be able to veto transactions that are supported by the vast majority of shareholders. In this way the proposal is actually contrary to the interests of small shareholders and fosters a tyranny of the minority.

The fact that an independent appraisal is not required as part of an amalgamation proposal is legitimately of concern and there is a strong case to be made that it would be desirable to have a requirement for such an appraisal inserted into Part XIII. However it is accepted by the Panel that in many Part XIII amalgamation cases an independent appraisal is commissioned notwithstanding the absence of legal compulsion.[164] Significantly, an independent appraisal was circulated to shareholders as part of the Waste Management transaction and it may be that such a report is a practical necessity to achieve the required level of shareholder approval. Furthermore, any scheme or amalgamation proposal that involves the issue of securities will be a prospectus for the purposes of the Securities Act 1978 and subject to the extensive disclosure requirements that pertain to such a document.[165]

IX. Conclusion

In early 2006 the execution of several mergers byway of amalgamations and schemes of arrangement raised perceptions of a loophole in New Zealand takeovers law. This understandably caused concern to the Takeovers Panel but, when further articulated, its concern appears to have been misconceived. The original concern was with the use of Part XV of the Companies Act 1993 to avoid Takeovers Code protections but this later shifted to concern that both Parts XV and XIII of the Companies Act 1993 were being used to avoid Takeovers Code protections. The fluid nature of the Panel's concern at the early stages of the debate illustrates the difficulty in discerning exactly what is wrong with the use of the Companies Act provisions in this manner. The Panel's anxiety later focussed on the inconsistency of rights and protections between the various forms of transaction yielding the same net result. However an examination of the origins and purposes of the Companies Act's provisions has shown that they are internationally well established and useful mechanisms for carrying out changes of control in companies raising little concern as to unfairness for minority shareholders.

There is merit to the concern that insufficient regard is had to takeovers regulation in approval of some schemes of arrangement. This is internationally anomalous and the Court possesses extremely wide discretion. In other jurisdictions it is acknowledged that a scheme can be a proper method of executing a takeover and in doing so regard is properly had to takeovers regulation. This being so, the introduction of a provision into Part XV similar to that present in the Australian Corporations Act would be desirable. As outlined above, the benefits of such an amendment would be numerous. Under a regime that refuses approval for schemes apparently designed to avoid the Takeovers Code, it seems likely that a transaction such as the Sky—INL deal which sparked the controversy would not receive Court approval.

Conversely, anxiety over the use of the amalgamation provisions appears to be misguided. Unsupervised amalgamations are a product of North American law expressly adopted in New Zealand in response to a perceived economic inefficiency in requiring court supervision for all cases of reorganisation. The theoretical foundation of the mechanism is that an amalgamation involving the consensual merging of the business of two companies is fundamentally different in nature from the unilateral decision of one company to acquire control of another. This is reflected in the protections available to shareholders under the mechanism. It seems that amendment to Part XIII of the Companies Act 1993 along the lines advocated by the Takeovers Panel would represent a departure from the theoretical basis of that Act and the rules that have developed around it over the past 13 years. The reform proposed would introduce an element of uncertainty into a procedure which is currently entirely certain. The changes would further result in a takeovers regulation system peculiar in the common law world. This would not be closing a loophole, it would be fundamental change and, if change of this nature is seen as desirable, it should only be undertaken after extensive market consultation and investigation into the economic effects of such moves. The pursuit of consistency in the rights of code company shareholders in general is admirable. However, if it is acknowledged that amalgamations and takeovers are totally different transactions regardless of the similar outcomes then concern about inconsistency is assuaged. By incorporating the North American amalgamation mechanism into the Companies Act 1993, New Zealand has implicitly accepted the transactional dichotomy and this must be taken into account if reform leading to uncertainty and incongruousness is to be avoided.

Scott Clune LLB(Hons)/BSc. Scott is currently a law clerk in the corporate team at Chapman Tripp in Wellington.

[1] Contact Energy Ltd, Contact and Origin Agree to Merge Creating Australasia's Largest Integrated Energy Group (Press Release, 20 February 2006): <> .

[2] Transpacific Industries Group, Transpacific and Waste Management NZ Announce Merger Proposal (Press Release, 27 March 2006): <> .

[3] A Bennett, 'Companies disguise takeovers to dodge rules', New Zealand Herald (Auckland), 5 April 2006.

[4] J Ipp (ed), Butterworths Business and Law Dictionary (1997).

[5] Companies Amendment Act 1963, s 2(1).

[6] See Tatra Industries Ltd v Scott Group Ltd (1983) 1 NZCLC 98,648.

[7] Companies Amendment Act 1963, s 3.

[8] J Farrar & M Russell, Company Law and Securities Regulation in New Zealand (1985) 379.

[9] Securities Commission of New Zealand, Company Takeovers: Recommendations to the Minister of Justice (1988).

[10] Ibid 83-84.

[11] Ibid 92.

[12] Ibid 88.

[13] Ibid 84.

[14] Ibid 5.

[15] Minister of Justice, Hon D Graham, 24 September 1991, cited in LexisNexis NZ, Morison's Company and Securities Law [43.3].

[16] Ibid.

[17] Takeovers Bill, as introduced to Parliament, cl 18 cf Takeovers Act 1993, Part 3, Subpart 1.

[18] Takeovers Act 1993, s 19. This section was amended by the Takeovers Amendment Act 2002. The original provision required the Takeovers Panel to make recommendations.

[19] Takeovers Act 1993, s20(1)(a).

[20] Takeovers Act 1993, s20(1)(b).

[21] Takeovers Act 1993, s 20(1)(c).

[22] Takeovers Act 1993, s20(1)(d).

[23] Takeovers Act 1993, s20(1)(e).

[24] Takeovers Act 1993, s 20(1)(f).

[25] Takeovers Act 1993, as originally enacted, s 28(2).

[26] Morison's Company and Securities Law, above n 15, [43.4].

[27] Ibid.

[28] See Takeovers Act 1993, s 41, inserted by the Takeovers Amendment Act 2001, s 12(1).

[29] Takeovers Code 2001, r 3(1).

[30] The term 'company' has the same meaning under the Code as in s 2(1) of the Companies Act 1993.

[31] Takeovers Code 2001, r 3(1). Prior to 28 October 2006 an unlisted company required 50 shareholders and $20,000,000 in assets to be a code company but the asset requirement was removed as of this date by s 27(2) of the Takeovers Amendment Act 2006.

[32] Takeovers Code 2001, r7(a)-(b).

[33] Takeovers Code 2001, r7(c)-(d).

[34] Takeovers Code 2001, r 7(e).

[35] Takeovers Code 2001, r7(f).

[36] Takeovers Code 2001, r17.

[37] Takeovers Code 2001, r19.

[38] Takeovers Code 2001, Schedule 2, r15.

[39] Takeovers Code 2001, rr18, 21.

[40] Companies Act 1993, s 219.

[41] Companies Act 1993, s 220(1)(f),(g), (3).

[42] Companies Act 1993, s 225(d)-(g).

[43] SeeSee Companies Act 1955, s 205(5).

[44] New Zealand Law Commission, Company Law: Reform and Restatement (1989) 45, 146.

[45] Morison's Company and Securities Law, above n 15, [43.3].

[46] Companies Act 1993, s 220.

[47] Companies Act 1993, s 221(2).

[48] Takeovers Panel, Schemes of Arrangement and Amalgamations Involving Code Companies: Recommendations to the Minister of Commerce (2006) [35].

[49] Companies Act 1993, s 221(5).

[50] Companies Act 1993, s223.

[51] Companies Act 1993, s 225(1).

[52] See Companies Act 1993, ss 110, 106(1)(c).

[53] Companies Act 1993, s 238(a).

[54] Companies Act 1993, s 238.

[55] Companies Act 1993, s 236.

[56] [1995] 3 NZLR 143.

[57] Re Guardian Assurance Co [1917] 1 Ch 431, 450 (CA) (Lawrence J).

[58] Re Milne & Choyce Ltd [1953] NZLR 724, 746.

[59] Joint Stock Companies Act 1870 (UK). For a history of the scheme of arrangement see S Oudyn, 'Schemes of Arrangement under Part XV of the Companies Act 1993' (2006) 12 New Zealand Business Law Quarterly 50.

[60] Companies Act 1955, s 205(1).

[61] Companies Act 1955, s 205(2). Note that for a compromise with creditors, approval by creditors who represented in excess of 75 percent of the money owed by the company was required.

[62] See Re CM Banks Ltd [1943] NZGazLawRp 110; [1944] NZLR 248, 253.

[63] JHodder, Whither the Companies Act 1993?' [1997] New Zealand Law Journal 97, 100.

[64] See Morison's Company and Securities Law, above n 15, [48.2].

[65] (1997) 8 NZCLC 261,318 (CA).

[66] (2001) 9 NZCLC 262,467 (CA).

[67] Ibid 262,475.

[68] Ipp, above n 4.

[69] above n 59, 50.

[70] Takeovers Panel, Policy on exemptions from the Code for schemes of arrangement effected under the Companies Act 1993 (2006): <> .

[71] See Takeovers Panel, Schemes of Arrangement and Amalgamations Involving Code Companies: Recommendations to the Minister of Commerce, above n 48, [49]. (unreported, HC, Christchurch, M63/82, 23 March 1982, Hardie Boys J), cited in Oudyn,

[72] See Sky Network Television Limited, Company History: <> cf Takeovers Panel, Schemes of Arrangement and Amalgamations Involving Code Companies: Recommendations to the Minister of Commerce, above n 48, [47].

[73] Takeovers Panel, Policy on exemptions from the Code for schemes of arrangement effected under the Companies Act 1993, above n 70.

[74] Contact Energy, Presentation to Shareholders (January 2006): <http://www.contactenergy.> .

[75] Contact Energy, Independent Directors Committee — Message to Shareholders (June 2006): <> .

[76] See Transpacific Industries Group, Transpacific and Waste Management NZ Announce Merger Proposal (Press Release, March 2006): <> .

[77] R Inder, 'Takeovers Law Change "Urgent"', New Zealand Herald, (Auckland), 20 June 2006.

[78] TakeoversPanel,Takeovers Panel, Policy on exemptions from the Code for schemes of arrangement effected under the Companies Act 1993, above n 70.

[79] Ibid [30].

[80] Ibid [27-28]

[81] See Takeovers Panel, See Takeovers Panel, Schemes of Arrangement and Amalgamations Involving Code Companies: Recommendations to the Minister of Commerce, above n 48.

[82] Ibid [91].

[83] See Takeovers Code (Class Exemptions) Notice (No 2) 2001.

[84] S Ward, 'Takeovers Panel Sharpens its Claws', New Zealand Herald (Auckland), 16 May 2006.

[85] See Takeovers Panel, Schemes of Arrangement and Amalgamations Involving Code Companies: Recommendations to the Minister of Commerce, above n 48, [93].

[86] TakeoversPanel,Takeovers Panel, Schemes of Arrangement and Amalgamations Involving Code Companies: A Discussion Paper Issued by the Takeovers Panel (2006).

[87] Ibid 2.

[88] TakeoversPanel,Takeovers Panel, Schemes of Arrangement and Amalgamations Involving Code Companies: Recommendations to the Minister of Commerce, above n 48.

[89] Ibid[69].

[90] Companies Act 1993, s 106(1).

[91] Companies Act 1993, ss 110-115.

[92] Companies Act 1993, s 110(a)(ii).

[93] Companies Act 1993, s 131.

[94] [2000] 3NZLR 727.

[95] Ibid 739.

[96] New Zealand Law Commission, Minority Buy-Outs (2001).

[97] See Re Guardian Assurance Co [1917] 1 Ch 431 (CA).

[98] See Weatherson vAltus Property Investments Limited (2001) 9 NZCLC 262,467 (CA).

[99] See Companies Act 2006 (Commencement No. 1, Transitional Provisions and Savings) Order 2006 (UK).

[100] Companies Act 1985 (UK), s 425.

[101] [1966] 1 All ER 1006.

[102] Ibid 1013 cf Suspended Ceilings (Wellington) Ltd v CIR [1995] 3 NZLR 143.

[103] EC Directive on Takeover Bids (2005/24/EC): see <> .

[104] Panel on Takeovers and Mergers, City Code on Takeovers and Mergers (2006): see para (b) A5.

[105] Companies Act 1985 (UK), s 429.

[106] Companies Act 1985 (UK), s 1(3): a company the memorandum of which states that it is to be a public company.

[107] Companies Act 1985 (UK), s 427A, Schedule 15B.

[108] Companies Act 1985 (UK), Schedule 15B, cl 2-5.

[109] Companies Act 2006 (UK), Part 27.

[110] Companies Act 2006 (UK), s 909.

[111] Companies Act 2006 (UK), Part 26.

[112] Companies Act 2006 (UK), Part 28.

[113] Companies Act 2006 (UK), s 943.

[114] See Companies Act 2006 (UK), ss 907, 979.

[115] See Companies Act 2006 (UK), ss 943-944.

[116] Corporations Act 2001 (Aust), s 411(4).

[117] (1992) 10 ACLC 573.

[118] Ibid 582. This view is supported by the fact that ASIC is able to exempt a scheme when it has been proposed for the purpose of avoiding Chapter 6.

[119] See Re Stockbridge Ltd (1993) 9 ASCR 637; Nicron Resources Ltd v Catto (1992) 10 ACLC 1186.

[120] See generally S Traves, ‘A Scheme of Arrangement can be an Effective Method of Takeover' (1994) 12 Company & Securities Law Journal32.

[121] Ibid 48.

[122] Canada Business Corporations Act R.S. 1985 (Can), s 192(3).

[123] Canada Business Corporations Act R.S. 1985 (Can), s 194 (pre-2001 reform).

[124] Traves, above n 120, 49.

[125] Scott, Buckley & Harrison, 'The Arrangement Procedure under Section 192 of the Canadian Business Corporations Act and the Reorganisation of Dome Petroleum Limited' (1990) 16 Canada Business Law Journal 269, 303.

[126] Business Corporations Act R.S.O. 1990 (Ont), s 182(1)(f).

[127] Securities Act R.S.O 1990 (Ont), s 89.

[128] Business Corporations Act R.S.A. 2000 (Alberta).

[129] See the Securities Exchange Act 1934 (US) (The 'Williams Act') which regulates 'tender offers' (takeover offers). While the Act itself does not define 'tender offer' it is clear that a merger or consolidation is not a tender offer despite the fact that, in the end, it may have substantially the same effect: see also J D Cox & T L Hazen, Cox & Hazen on Corporations (2nd ed, 2003) ch 24.

[130] Ibid 1302-1305.

[131] See, eg, Model Business Corporations Act (1984) (US), s 11.03.

[132] Cox & Hazen, above n 129, 304.

[133] Ibid 1318-1324.

[134] Takeovers Panel, Schemes of Arrangement and Amalgamations Involving Code Companies: Recommendations to the Minister of Commerce, above n 48.

[135] Ibid [77].

[136] Ibid [191].

[137] Ibid [194].

[138] Ibid [195-197].

[139] Ibid [198].

[140] Ibid.

[141] Ibid.

[142] Ibid [169].

[143] Ibid.

[144] Ibid [170], [171].

[145] Ibid [171].

[146] (unreported, CA, CA229/06, 26/10/06).

[147] Ibid [12].

[148] Ibid [24].

[149] Ibid [26].

[150] Ibid [29].

[151] Ibid [44].

[152] Ibid [45-48].

[153] R Inder, 'Panel Gains More Power to Vet Mergers', New Zealand Herald (Auckland), 8 November 2006.

[154] 'Court of Appeal Rules Against Takeovers Panel', National Business Review, 7 November 2006.

[155] Takeovers Panel, Panel in court on scheme of arrangement (7 November 2006): <http://www.takeovers. govt. nz> .

[156] See Takeovers Panel, Submission to the Commerce Committee on the Business Law Reform Bill: Schemes of Arrangement and Amalgamations Involving Code Companies (August 2006): <> .

[157] Commerce Select Committee, Commentary to Business Law Reform Bill (No 64-2) (2006) 7 <> .

[158] New Zealand Parliamentary Debates, Vol 634, 6191-6192.

[159] See A Bennett & C Niesche, 'Officials Try Again to Close Takeovers Code Loophole', New Zealand Herald (Auckland), 13 November 2006.

[160] Ibid.

[161] See Takeovers Panel, Submission to the Commerce Committee on the Business Law Reform Bill: Schemes of Arrangement and Amalgamations Involving Code Companies, above n 156.

[162] Re National Bank Ltd [1966] 1 All ER 1006.

[163] (unreported, CA, CA229/06, 26/10/06) [41].

[164] Takeovers Panel, Schemes of Arrangement and Amalgamations Involving Code Companies: Recommendations to the Minister of Commerce, above n 48, [35].

[165] See Securities Act 1978, s 39, Schedule 1.

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