Lawyers call for takeover law reform

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Reforms to Australia’s takeover laws to reduce red tape and simply rules, would drive greater efficiency for the benefit of the economy, argue Herbert Smith Freehills partners Rodd Levy and Baden Furphy, who are calling for reforms.

Levy, who is a member of the Australian Takeovers Panel, told Australasian Lawyer that the laws are outdated and that Australia is lagging behind other countries.

“Practice has moved on and so should the rules,” said Levy.

“Current elements of the regulatory framework are overly complex and in some cases unnecessary,” Furphy added.

“Our suggested reforms are intended to reflect the current principles in legislation of providing fairness for shareholders, and to promote greater takeover activity for the benefit of the Australian economy.”

Under the proposal, some regulation would be removed, such as restrictions on a controller acquiring more shares, along with other rules being relaxed in favour of bidders.  A mandatory 50% minimum acceptance condition on all bids would be required to protect shareholders.

“The changes are intended to change some rules, but most of the existing rules would be retained,” Levy said.

“There would still be full disclosure to shareholders via bidder’s statements and target’s statements, equal treatment of shareholders and adequate time provided for directors and shareholders to consider a takeover proposal.”

The proposed changes would simplify takeover bids and encourage more takeover proposals, likely to not only benefit shareholders but to encourage better allocation of resources in the economy, Levy said.

“It has long been accepted that takeovers and the threat of takeovers, provides incentives for directors to use the company’s assets more efficiently or face replacement by others who will do that and who are prepared to pay for that position,” he said.
 
Click through for the four main proposals.

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