Key Points
- Where a bidder’s statement provides that shares being offered by the bidder are to be quoted on a stock market, the bidder must apply for quotation within seven days after serving its bidder’s statement
- Recently, several bidders have not complied with this and have been forced to apply to the Federal Court to remedy the oversight. In each case, the court has granted orders correcting the errors
- The courts did not appear to consider whether these applications were precluded by the general prohibition against litigation during a bid
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If a bidder’s statement states or implies that the shares being offered by the bidder as consideration are to be quoted on a stock market, the law requires the bidder to apply for quotation within seven days after serving its bidder’s statement. This becomes a condition of the offer.
The rule is derived from the prospectus laws and was included in the takeovers provisions in March 2000 as part of the effort to harmonise prospectus and takeovers rules where appropriate.
Recently, several bidders have run into problems by forgetting to apply for quotation within the seven day requirement. This occurred in GrainCorp’s bid for Ridley Corporation, Macmahon Holdings’ bid for Ausdrill and in Cabcharge’s bid for Newcastle Taxis.
In each situation, the bidder was forced to apply to the Federal Court to remedy the oversight, no doubt causing some embarrassment. In each case, the court granted orders correcting the errors.
Interestingly, in none of the cases did the court consider the application of section 659B, which prohibits all court proceedings in relation to a takeover bid before the end of the offer period, except proceedings by ASIC or another public authority.
The precise scope of that rule is yet to be determined definitively, but the cases decided so far on section 659B do not establish that there is an exception for seeking a court order to correct an error or omission, such as the one the subject of these court applications. Accordingly, it is doubtful whether the bidders had standing to apply to court at all.
The key implication to arise from this is, of course, to make sure that the application for quotation is made within the seven days and avoid the argument altogether.
Freehills did not act for the bidders in any of the takeovers mentioned above.
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