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Chapter 2

Takeovers Panel

2.1        As part of the committee's oversight responsibilities, the committee took evidence for the first time from the Takeovers Panel. Established in 1991 under the Australian Securities Commission Act 1989, the Takeovers Panel is responsible for addressing any issues that arise during a takeover bid. The panel was revitalised in 2001 under section 10 of the ASIC Act. The revitalisation process opened up applications to the panel from any aggrieved party including bidders, target companies and investors.

2.2        The Takeovers Panel is comprised of 52 members drawn from the professionals within the market, including lawyers, investment bankers and directors. Each matter is presided over by a sitting panel of three members.

2.3        In its first examination of the Takeovers Panel, the committee canvassed three main areas:

• the processes and decision-making powers of the Takeovers Panel;
• the consistency between decisions made by different panels; and
• the transparency of the decision-making process.

Processes of the Takeovers Panel

2.4        The committee examined the Takeovers Panel's processes and decision making procedures. The Director of the Panel, Mr Allan Bulman, explained:

For the majority of our matters, the way they work is that once an application is made the panel is appointed by the President, being Kathy. It is usually three panel members: one lawyer, one investment banker and another member, usually a director. The first task of those three members is to decide whether or not to conduct proceedings, which is to consider the matter further. If they decide not to conduct proceedings then that is the end of the matter. If they decide to conduct proceedings they will normally issue a brief which gives the parties an opportunity over a couple of day period to provide written submissions and rebuttals. If there are any issues that they want to raise in relation to procedural fairness, they can raise them at that point. Then, depending on whether there needs to be further inquiries, the panel might ask further questions. If the panel decides that something needs to be done, that is a declaration needs to be made and potentially orders, there is a further process where the parties are asked to provide submissions on that issue as well. Occasionally, not so much in recent years but occasionally, the panel has had conferences where it is a hearing where people are asked questions face-to-face or by telephone.[1]

Diagram 2.1

                       

2.5        Under the Corporations Act, the Takeovers Panel is provided with the power when hearing matters to declare circumstances unacceptable and make orders. Mr Bulman described the Panel's powers in the following terms:

The way two High Court judges referred to it in the Alinta decision was that a declaration of unacceptable circumstances is a declaration that something needs to be done. The orders are the things that need to be done to remedy the situation. The panel does not have a role of punishing behaviour. Its role is remedial. If there is something that needs to happen, the orders correct that. [2]

Consistency of Takeovers Panel decisions

2.6        One of the key issues examined by the committee was the level of consistency between the decisions of different panels on similar matters. The President of the Takeovers Panel, Ms Kathleen Farrell, explained that the Panel attempts to ensure consistency between decisions through a combination of guidance notes and drawing on previous panel decisions:

A prior decision is guidance to another panel. A guidance note is guidance to another panel. We try to promote consistency that way. Having said that, every proposition can be generalised but needs to be tested against the market as it currently stands and the facts of the particular matter. Sometimes that can give rise to an outcome that might surprise some people, but generally we strive to be consistent because there is a value to that. We have to weigh the value of consistency—as a guiding principle or a straitjacket—against the movement in the market and what the market needs to be efficient, competitive and informed, which ultimately has to be our highest guidance.[3]

2.7        Mr Bulman told the committee that the growing number of matters dealt with by the Panel allows panel members to draw on previous decisions to produce consistency between decisions:

Given that we have dealt with 372 matters, some commentators have observed that the panel is developing its own body of jurisprudence. There is now a body of decisions that the panel can refer to, and the executive assists sitting panels by explaining how previous decisions were come to. Most of the solicitors are very, very sophisticated and they will bring up previous matters. At the same time, to assist transparency in the market generally, the panel is currently making an index of all its decisions so that sitting panels, the executive and outside parties can very readily see what previous decisions the panel has made on a particular point. So there is a number of things over time that have assisted in ensuring consistency. At the same time we have made a lot of effort to ensure that our reasons are as readable and as understandable to market participants as possible. I would submit that that would be one of the most useful ways in which we can ensure consistency.[4]

Transparency of Panel decisions

2.8        The committee questioned the Takeovers Panel on the level of transparency in the panel decision-making process. The Panel explained that usually, matters are treated as private and only the parties involved are privy to specific details until a final decision has been made.[5]

2.9        Ms Farrell explained that during a matter, the Panel will usually prohibit parties discussing the matter in the media under their media-canvassing rule:

So we do a press release when a matter starts. We have a policy that prohibits the parties canvassing in the media while the application is being heard. That is important in stopping the market being misinformed by the toings and froings of public argument. It also has the advantage of keeping some of the heat out of it, because they are always emotional things. And it allows for quick decision making. So it is a very important policy to us. So the next time the market generally finds out anything about the application is when we put out the press release saying what the decision was.[6]

2.10      The Panel informed the committee that the media-canvassing rule was regularly reviewed and assessed on a public interest basis:

...on balance, we consider that there is a better public interest to be served by that media-canvassing policy existing, until the point where our reasons are published. Then everyone can see why we did what we did and what we thought. We have a statutory obligation to give reasons, so we are very assiduous to try and make sure that they are as transparent as they can be...

...So we seek to be transparent when an application comes in by putting out a media release about the general nature of the application telling the public about the decision as soon as it is made and then giving readable reasons as soon as we can after that. Where we are dealing with an issue that needs a little more filling out, that is followed by a guidance note. We hope that that satisfies transparency around how we are thinking about things.[7]

2.11      In terms of the use of confidential documents by parties within a matter, as a general rule the Takeovers Panel prefers not to use confidential information to ensure procedural fairness for both parties:

...There are various ways we can deal with that issue. The panel members might see only a redacted version. In extreme circumstances, we have had some cases where the lawyers of the parties consent for some reason, so they effectively waive their rights. But that is very rare and a very difficult issue. Usually we say: 'No, sorry, what's put before the panel members all the parties need to see. If you want to redact something then redact it.'[8]

Committee view

2.12      The committee appreciates the importance of the Takeovers Panel's work and the imperative of ensuring that its decision-making processes are clear, consistent and transparent. At this time, based on the evidence received, the committee is satisfied that the Panel has the right systems in place to ensure that, as far as possible, these objectives are being achieved. It is important that Panel members continue to develop their expertise by working on a wide range of matters and regularly reviewing the effectiveness of their systems and processes. This will not only enhance Panel members' competence, but also promote greater consistency between decisions.

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