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Business → Corporations law → Corporate control and restructuring
Overview — Corporate control and restructuring
James Dickson, Partner, Jen Tan, Senior Associate and Kieren Shattock, Lawyer, Piper Alderman
There are various ways in which there may be a change of control of widely held entities.
Whilst the concept of control has various meanings in various circumstances, the Corporations Act 2001 (Cth) (CA) prohibits acquisitions that result in an increase in voting power to above 20%, or that further increase voting power that is already above 20% (but below 90%). There are a number of exemptions to this prohibition.
Takeovers
The most common exceptions to effect a change of control are acquisitions through a takeover bid and a cancellation or transfer effected by a scheme of arrangement.
A takeover bid may be an off-market bid or a market bid. A market bid can only be used where the bidder makes an unconditional cash bid for quoted securities. All other bids must be off-market bids.
To undertake a takeover, a bidder must issue a bidder's statement containing a significant amount of information, including the terms of the offer, the consideration payable, the bidder's intentions regarding the target and other material information.
The target responds with a target's statement which contains material information not otherwise provided and a recommendation whether or not to accept the offer.
See Takeovers.
Schemes of arrangements
A scheme of arrangement is a CA procedure between a company and its security holders that, when followed, binds the company and relevant security holders to a course of action.
A scheme may be a cancellation scheme or a transfer scheme.
In addition to using schemes to effect a transfer of control, a scheme is able to effect many other transactions.
To effect a scheme, the CA procedure must be followed precisely. This procedure includes meetings of security holders, an explanatory statement, court hearings and ASIC reviews.
See Schemes of arrangement.
Buy-backs, capital reductions and other minority eliminations
Whilst takeovers and schemes are the most common methods of acquiring control of widely held entities, other methods include buy-backs, capital reductions, shareholder approved placements and compulsory acquisitions.
Each of these methods of altering control of widely held companies can do so in a way that does not result in the bidder holding 100% of the securities on issue.
Where a bidder has less than 100% after a control transaction and wishes to move to 100%, they may do so through another control transaction or, if they are a 90% holder, through compulsory acquisition.
See Buy-backs, capital reductions and other minority eliminations.
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