Australia: Has Australia's Takeovers Panel turned the ‘tap’ on to more ‘association’ proceedings?

  • The situation: A major shareholder of Tap Oil Limited, a company listed on ASX, gave notice of an intention to spill the board, to remove all but one of the current directors, through a general meeting of shareholders.
  • The development:Tap Oil applied to the Australian Takeovers Panel for a declaration of unacceptable circumstances, alleging that its two major shareholders (who collectively held more than 40 per cent of its shares) were acting in concert in relation to the board spill.
  • The result:The Takeovers Panel decided to conduct proceedings but ultimately declined to make a declaration of unacceptable circumstances. This was a rare circumstance where the Panel conducted proceedings regarding an alleged association but declined to make a declaration.

Tap with running water

Australian's shareholder disclosure rules require that shareholders aggregate their shareholding with their associates' shareholdings for the purpose of determining their ‘voting power’ in Australian listed companies. That voting power, and the identity of their associates, must be disclosed to the market if their voting power exceeds five per cent or changes by more than one per cent if above that threshold.

Where a major shareholder seeks the removal of the current directors via general meeting, it is not uncommon for listed companies to apply to the Takeovers Panel for a declaration of unacceptable circumstances, alleging that the major shareholder is acting in concert with other shareholders without informing the market. To date, the Panel has been minded to intervene and make a declaration if sufficient evidence is presented to it in the application to show an undisclosed association.

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