ABSTRACT
What are the duties of directors when they find themselves the subject of an unwanted advance? Is the Australian Takeovers Panel standard different to the standard in the United States and elsewhere? In Australia neither the courts nor the Takeovers Panel have gone so far as to suggest that target directors ought to actively seek an auction once a company is ‘in play’. Is the difference between the United States and Australian provisions more than a different view of the role of shareholder primacy?
It is unlikely that an Australian court will consider the ‘duty to auction’ in an Australian takeover. Instead, the Takeovers Panel will most likely determine the issue on the basis of what is ‘unacceptable’. The Takeovers Panel has consistently refused to consider the duties of directors in control transactions. Nonetheless, duties analogous to an obligation to auction can be discerned from the Takeovers Panel material. The Takeovers Panel is strongly focused on the transfer of control taking place in an efficient, competitive and informed market, but when does an efficient market demand an auction?
Like the United States model, are these duties only enlivened when control is likely to pass? While not as strict an obligation as the shareholder wealth duty imposed by the Delaware courts, the Takeovers Panel will impose a wide set of requirements on directors to preserve the market for control. In the contest for corporate control there needs to be an adequate opportunity for shareholders to maximise payment for what will effectively be their final chance to benefit from their shareholding.
What this means is that there is practically no difference between the processes the Takeovers Panel would require of a target board and those a court might require before it would agree to exercise its discretion to convene a meeting of shareholders to approve a scheme. In the end, the jurisdictional differences are much more at the margin than one might otherwise expect.
Lumsden, Andrew J and Fridman, Saul, The Duty to Auction: Real or Imagined? (February 12, 2012), Companies and Securities Law Journal.
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