The Takeovers Panel: welcome to adulthood

The Australian Takeovers Panel (the Panel) is a peer review body that regulates corporate transactions and takeovers by resolving live disputes in an efficient and practical manner. It has widely been regarded as an Australian regulatory success story since the model, as a commercial body, was settled in its final form on March 13 2000. Fittingly, today welcomes the Panel to adulthood, as it celebrates its 21st birthday.

History of the Panel

The Panel is the primary domain for settling takeover related disputes, having received almost 600 applications between 2000 and 2020. However, some legal purists criticise the jurisdictional overreach that it enjoys, arguing that it operates above the law and has become a ‘quasi-court’.

The Panel is a creature of statute, and effectively took over from the Administrative Appeals Tribunal, which was subject to difficulties and inefficiencies, proving exceptionally torturous for parties transacting with statutory deadlines. It was modelled on the United Kingdom’s longstanding Panel on Takeovers and Mergers.

A resounding success

The Australian Takeovers Panel endured challenges in its earlier years, with the older model receiving only four applications between 1991 and 2000. The reasons being, it struggled with limited jurisdiction, lack of market recognition and constricting legal framework. However, the Panel has enjoyed a marvellous turnaround since 2000.

Mr Alex Cartel, President of the Panel, commented in the 2020 Annual Report that “the Panel has been a resounding Australian regulatory success story, particularly by substantially increasing efficiency and reducing the costs associated with takeovers dispute resolution”. 

Indeed, it is true that the Panel is highly regarded among the professional community and has a strong influence on market practice. This stature was reinforced by the 2008 landmark decision of the High Court in Attorney-General (Cth) v Alinta Limited [2008] HCA 2 (Alinta), which confirmed the constitutional validity of the Panel.

A key reason for the apparent success of the Panel is its composition of membership, and effective leadership. Panel members are appointed by the Governor-General, and must have practical, commercial experience in areas of business, company administration, financial markets, financial products/services, law, economics or accounting. There is a typically a strong diversity of profession, geography and gender of the member base, and in each sitting panel. Despite non-executive panel members being part-time, this assists with maintaining consistency in decisions, with reasoning embodying the set of governing principles.

Fundamentally also, decisions on application are made in a timely manner. The typical average number of days from application to decision is 16.2 days, according to panel statistics. Importantly, the average number of days from the date of decision to publication of reasons has decreased significantly, currently at 27 (down from 90 in 2006).

However, arguably the most important factor in the Panel’s success is the informal and non-legalistic approach it takes to resolving disputes in takeovers. Its principles-based approach embodies the spirit of its creation, and leans towards proceeding a bid so that target company shareholders have the final say in approving or rejecting the takeover. The Panel in its reasoning refrains from applying technical legal rules in situations where it would be artificial to do so. 

Principles of operation

For example, a key objective of the Panel has been to ensure market integrity, known as ‘truth in takeovers’. This rule requires market participants who make a ‘last and final’ bid statement to be held to this. It formed the basis for an application to the Panel in late 2020, in the matter of Cardinal Resources Limited. The rule has never formed part of any legislation. However, it is regarded as strengthening the fundamental principle of an efficient, competitive and informed market.

The governing purposes of the Panel is to fulfil the Eggleston Principles, which prioritise an efficient, competitive and informed market environment. They also include various shareholder and director protections regarding the bidder’s identity, extent of information provided, time allowed to consider the bid, as well as opportunity to participate.

The Panel will also decide on whether ‘unacceptable circumstances exist’. This will commonly be resolved by either ordering a party to rectify the situation, refraining from making a declaration, or declining to conduct proceedings on the basis of insufficiency.

To ensure transparency, certainty and fairness, each decision along with clear, well-developed guidance is published on the Panel’s website.

Criticism

However, like any independent regulatory body, the Panel may be subject to the risk of becoming a bureaucracy in the event the number of applications continues to increase. The Panel is already stretched at certain times of the year, and accepts secondees from major law firms throughout Australia.

The Panel has also been criticised for its discretion in applying evidentiary principles, and the traditional laws of evidence that the Courts are subject to. Instead, decisions of the Panel often require expert commercial judgment, extensive testing of counterfactual arguments, as well as a fair amount of informed guesswork.

Happy birthday!

Despite these criticisms in the past, the Panel has been a resounding Australian regulatory success story, despite enduring challenges in its early years. It sheds light on the value of effective and timely peer review dispute resolution framework. Happy 21st birthday to the Panel.

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