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The Australian Takeovers Panel: an Effective Forum for Dispute Resolution?

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The Australian Takeovers Panel: an Effective Forum for Dispute Resolution? The Australian Takeovers Panel: An Effective Forum for Dispute Resolution? Emma Jane Armson ORCID identifier: 0000-0001-8335-6202 Submission for the award of a PhD June 2017 Faculty of Law, University of Melbourne The thesis is being submitted in total fulfilment of the degree The degree is not being completed under a jointly awarded degree 1 Abstract The Australian Takeovers Panel (‘the Panel’) has been the primary forum for resolving takeover disputes since reforms to Australian corporate law on 13 March 2000. This thesis makes a sustained scholarly contribution to the evaluation of takeover regulation under Australian corporate law by analysing the extent to which the Panel has been an effective forum for dispute resolution. The thesis addresses two overarching research questions, namely to determine the criteria that should be used to measure the effectiveness of the Panel in resolving takeover disputes and the extent to which the Panel has satisfied these criteria. The work in the thesis is original and is based on a detailed evaluation of the Panel’s decisions from 13 March 2000 to 30 June 2016. It is the first major academic study of the Panel since it became the primary forum for resolving takeover disputes. Chapter 1 provides an explanation of the key concepts relevant to the analysis in the thesis, explains the research questions and methodology used to answer them, and sets out the structure of the thesis. Chapter 2 informs the assessment of the effectiveness of the Panel in the thesis by analysing the policy goals underlying the historical development of Australian takeover regulation and the establishment of the Panel and its predecessors. Chapter 3 examines the historical development of the Panel on Takeovers and Mergers (‘UK Panel’), which is the key comparator for the Australian Panel for the purposes of establishing the criteria to be applied to determine the effectiveness of the Panel. It concludes that the three objectives for the UK Panel, namely speed, flexibility and certainty, can be used as the criteria to be applied to the Australian Panel to determine its effectiveness. Chapter 4 assesses the speed of Panel decision-making based on an empirical analysis of the timing of the announcement of Panel decisions and publication of the reasons. It concludes that the Panel has achieved a strong form of speed overall. Chapter 5 assesses flexibility of Panel decision-making based on procedural and substantive flexibility. It concludes that the Panel has achieved a strong form of flexibility overall. Chapter 6 assesses the certainty of Panel decision-making based on consistency and finality of decision-making. It concludes that the Panel has achieved a medium to strong form of 2 certainty overall. Given this, Chapter 7 concludes that the Panel has provided an effective forum for dispute resolution in light of the aims of the CLERP reforms. 3 Declarations This thesis comprises only my original work towards the PhD. Due acknowledgement has been made in the text to all other material used. The thesis is fewer than the maximum word limit in length, exclusive of tables, maps, bibliographies and appendices. Emma Jane Armson 4 Preface The following Chapters (together with parts of the introductory material in Part I of Chapter 1) have been published in the following refereed journals, with the benefit of reviewer comments and editorial assistance by journal editors: • Chapter 2 – ‘Evolution of Australian Takeover Legislation’ (2013) 39 Monash University Law Review 654 • Chapter 3 – ‘Lessons for the Australian Takeovers Panel from the United Kingdom’ (2014) 29 Australian Journal of Corporate Law 295 • Chapter 5 – ‘Flexibility in Decision-Making: An Assessment of the Australian Takeovers Panel’ (2017) 40 University of New South Wales Law Journal 460 • Chapter 6 – ‘Certainty in Decision-Making: An Assessment of the Australian Takeovers Panel’ (2016) 38 Sydney Law Review 369. Chapter 3 has also received the benefit of comments from the book editors for a chapter entitled ‘Assessing the Performance of Takeover Panels: A Comparative Study’ in a book on Comparative Takeover Regulation to be published by Cambridge University Press. Chapter 4 has been accepted for publication as an article entitled ‘Speed in Decision-Making: An Assessment of the Australian Takeovers Panel’ in the Company and Securities Law Journal, and has benefited from detailed reviewer comments. 5 Acknowledgments I am indebted to my supervisors, Professor Ian Ramsay and Associate Professor Paul Ali, for the high quality of their supervision in relation to the thesis. Their insightful comments, attention to detail, timely responses and support for my work have been particularly appreciated. I would also like to thank the referees and editors for their comments and editorial assistance in relation to the parts of the thesis that have been published or accepted for publication. In particular, I appreciated the invitation by Associate Professors Umakanth Varottil and Wan Wai Yee from the National University of Singapore and Singapore Management University respectively to participate in their conference and book project on Comparative Takeover Regulation. This allowed me to receive valuable input at the conference that they hosted in Singapore in 2015. In addition, I would like to thank members of the Panel Executive, particularly Allan Bulman, in making statistical information available to me for the purposes of the thesis. Many thanks are also due to Bruce Dyer and Karolina Ksiezak for their comments in relation to Chapter 4. Finally, I wish to thank George Williams for his insights and support over so many years. I could not have done the thesis without this and the forbearance of my family and friends. 6 Table of Contents Chapter 1 – Introduction 8 Chapter 2 – Development of Australian Takeover Regulation 30 Chapter 3 – Criteria for Effectiveness of Takeover Panels 100 Chapter 4 – Speed 147 Chapter 5 – Flexibility 175 Chapter 6 – Certainty 222 Chapter 7 – Conclusion 266 Bibliography 272 Appendix 1 – Panel Decisions on Frustrating Action Policy 289 Appendix 2 – Panel Decisions on ‘Truth in Takeovers’ Policy 291 Appendix 3 – Judicial Review of Panel Decisions 293 7 Chapter 1 – Introduction This thesis makes a sustained scholarly contribution to the evaluation of takeover regulation under Australian corporate law. It achieves this by analysing the extent to which the Australian Takeovers Panel (‘the Panel’) has been an effective forum for dispute resolution since it became the primary forum for resolving takeover disputes during a takeover bid on 13 March 2000. The thesis addresses two overarching research questions, namely to determine the criteria that should be used to measure the effectiveness of the Panel in resolving takeover disputes and the extent to which the Panel has satisfied these criteria. The work in the thesis is original and is based on a detailed evaluation of the Panel’s decisions from 13 March 2000 to 30 June 2016. It is the first major academic study of the Panel since it became the primary forum for resolving takeover disputes. There are three parts to this introductory chapter. Part I sets out the regulatory context, particularly focusing on takeovers, the relevant legislative provisions and the role of the Panel. This introductory material provides an explanation of the key concepts relevant to the analysis in the thesis. The research questions are discussed in detail in Part II of this Chapter. Part III explains the methodology used to answer these research questions and sets out the structure of the thesis. I REGULATORY CONTEXT There are three sections in this Part. The first section sets out the players involved in a takeover and the key conflicts of interest arising in the takeover context. In the second section, there is an overview of how the conduct of parties involved in a takeover is currently regulated under the takeover provisions in the Corporations Act 2001 (Cth) (‘Corporations Act’). The takeover provisions in the Corporations Act regulate how a takeover is conducted, rather than deciding whether the takeover should proceed on 8 competition, foreign investment or other policy grounds relating to specific industries.1 Finally, the third section provides an overview of the role of the Panel. A Takeovers A takeover is one of the key ways in which the control of a company can change.2 It involves the purchaser (‘bidder’) acquiring the shares in the company (‘target’) directly from its shareholders (‘target shareholders’). Whether the bidder succeeds in obtaining control of the target will depend on whether sufficient numbers of target shareholders accept the bidder’s takeover offer, which is made to them individually. Takeovers play a critical role in corporate governance. This is because the threat of a takeover resulting in replacement of the company’s existing management provides a strong incentive for the directors to ensure that the company is operating efficiently.3 It has been observed that the stock (or capital) market provides an ‘objective standard of managerial efficiency’.4 Accordingly, if a company’s shares are performing poorly on the stock market, this is commonly considered to be an indication of poor management and makes the company an attractive target for a takeover.5 This assumes that the capital market is operating 1 See, eg, Commonwealth Treasury, Corporate Law Economic Reform, Proposals for Reform, No 4, Takeovers – Corporate Control: A Better Environment for Productive Investment (Canberra, 1997),
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