The four main proposals are:
A person who controls more than 50% of the shares in a company should be free to acquire further shares without having to make a bid or satisfy another exemption. The law should focus only on transactions resulting in a change of control. Regulating acquisitions by a person already in control just introduces red tape and unnecessary cost. Shareholders would know this rule when considering whether to accept the bid and would act accordingly if they were concerned about being locked into a minority position.
All bids should be subject to a mandatory 50% minimum acceptance condition so control of the target company only passes at a price acceptable to the majority of shareholders. This would bring our laws into line with the rules in many other jurisdictions. It would ensure that effective control could not pass quickly unless the bid was strongly supported. This rule would mean that other rules would require amendment (such as the 3% creep rule) so that a shareholder could not end up with more than 20% and less than 50% to negate the operation of the rule.
Where a bid has been recommended by target directors, the bidder should be able to compulsorily acquire all the shares in the company if it achieves acceptances for 75% of outstanding shares. We consider that the dual test of target director support and 75% acceptance provides sufficient protection. Lowering the threshold from 90% to 75% would bring the rule more into line with the rule applying in scheme of arrangement, reductions of capital and alterations to company constitutions. Minority shareholders would still have the protection of being able to resist compulsory acquisition of their shares if fair value was not offered by the bidder.
A bidder should be free to obtain commitments to accept the bid from shareholders with more than 20% of the shares on issue, subject to the commitment lapsing if a higher bid is made. This is the ordinary effect of our rules now with bidders frequently securing public commitments under the ‘truth in takeover’ rule anyway. Introducing a specific rule would at least clarify the legal position.