Dateline: March 9, 2011

Introduction

Much of our attention in recent weeks has been on matters outside Parliament, as a result the first reading last month of a Bill containing a package of measures designed to improve regulation in a range of sectors has (almost) passed unnoticed. The package of reforms is contained in an omnibus Bill, the Regulatory Reform Bill 2010 which was announced in a fanfare in the week before Christmas by Minister for Regulatory Reform Rodney Hide.

The Bill contains amendments to 13 pieces of legislation, three of which are discussed in this bulletin.

Companies Act 1993

Amongst the changes to the Companies Act proposed by the Bill are:

• enabling companies to introduce electronic voting and hold meetings in which shareholders can participate via the internet to enable increased shareholder participation, cost savings and bring these processes into line with other commercial communications;
• removal of the requirement for a listed company to send a notice to shareholders advising that it has undertaken an on-market share buyback – which is redundant as it is already required by the NZX Listing Rules;
• administrative and process changes affecting certain off-market share buybacks and the termination of voluntary administration; and
• an exemption from the voidable provisions for a receiver’s liability for rent and payments under leases entered into prior to receivership.

Takeovers Act 1993

The Bill amends the Takeovers Act (and thereby the Takeovers Code) to bring much-needed clarity to the application of the Code to (unlisted) companies with 50 or more shareholders by making it clear that, when determining whether the threshold has been exceeded:

•  only the holders of voting securities are counted; and
•  as well as having 50 or more shareholders – the company must have 50 or more share parcels.

This amendment will overcome the problem that became apparent when the Takeovers Panel issued a guidance note in December 2007 stating that, where a parcel of shares was held by two or more shareholders, the Panel took the view that each joint holder should be counted separately. The Panel’s view was greeted with widespread concern, particularly as it brought a large number of family and other closely-held SMEs under the Code in circumstances where there were (often) far less than 50 share parcels but the number of joint holdings tipped the company over the threshold.

The view adopted by the Panel also raises a number of concerns about imposing further barriers for SMEs seeking to raise capital from existing or new shareholders – which the Capital Market Development Taskforce highlighted as a critical issue during the recession.

The Bill also makes it clear that a transaction that starts out under the Takeovers Code, must be completed under the Code regardless of whether the company has ceased to be a Code company in the interim.

Also receiving attention is a provision in the Bill to enable the Takeovers Panel to consider "international comity" between New Zealand and an overseas country when considering exemption applications. Designed as safety valve for the Panel when dealing with the knock-on implications of an upstream (overseas) takeover that results or may result in an indirect change of control of a code company, this proposed amendment has drawn the attention of those opposed to allowing SOEs to obtain capital from the private sector as signalling privatisation by stealth.

Unit Trusts Act 1960

The Bill modernises the means of conveying information to unit holders under the Unit Trusts Act by enabling financial statements to be distributed electronically to unit holders.

Further Information

For further information please contact any member of Hesketh Henry’s Corporate & Commercial team.