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Proposed changes to Guidance Note 12 – Frustrating Action

This is a submission by the Corporations Committee of the Business Law Section of the Law Council of Australia (the Committee) in response to the Consultation Paper issued by the Takeovers Panel (the Panel) on 14 September 2016 in relation to the revision of Guidance Note 12 on Frustrating Action. 

The Committee's responses are as follows: 

1. Is there any need to amend the existing guidance? 

The reason given in the Consultation Paper for the changes is that a number of market participants have expressed the view that the GN in its current form does not adequately explain the risk attached to the various considerations making frustrating action unacceptable, and that the position of target directors is said to have become more difficult of late because of the trend for bidders to include a long, complex and restrictive list of bid conditions. 

While we agree that the existing guidance could benefit from some amendment to remove considerations which do not advance the frustrating action policy, the Committee did not think that bid conditions are any more long, complex and restrictive now than 10-15 years ago, when it was more common to have conditions such as those requiring the target to give due diligence confirmations or take actions assisting the bidder. 

That said, we are in favour of clarifying the Guidance Note in a number of respects described below. 

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