MRP mighty river power limited (ns)

Ann: WAV/RULE: MRP: Mighty River Power - Waivers

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    • Release Date: 10/05/13 13:01
    • Summary: WAV/RULE: MRP: Mighty River Power - Waivers from NZSX Listing Rules
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    MRP
    10/05/2013 11:01
    WAV/RULE
    
    REL: 1101 HRS Mighty River Power Limited (NS)
    
    WAV/RULE: MRP: Mighty River Power - Waivers from NZSX Listing Rules
    
    3 April 2013
    
    NZX Regulation Decision
    Mighty River Power Limited
     Application for Waivers, Rulings and Approvals from NZSX Listing Rules
    7.9.1, 11.1.5 and 11.1.6
    
    Background
    
    1. Mighty River Power Limited ("MRP") is a New Zealand incorporated mixed
    ownership model ("MOM") company within the meaning of section 45P of the
    Public Finance Act 1989 ("PFA").
    
    2. The Crown is proposing to make an offer to the public of fully paid
    ordinary shares in MRP and MRP has applied for the Listing and Quotation of
    its ordinary shares on the NZX Main Board (together the "Offer").
    
    3. The Offer is comprised of Retail, Institutional and Participating Iwi
    offers and will be the first in the New Zealand Government's MOM programme,
    in which the Crown intends to offer to the public up to 49% of the shares in
    certain companies which are currently 100% state-owned ("MOM Programme").
    
    4. At the time of Listing MRP will be a MOM company within the meaning of the
    PFA. Accordingly, the MRP ordinary shares are subject to various restrictions
    under Part 5A of the PFA. These restrictions include:
    
    a) Under section 45R of the PFA, the Crown must hold at least 51% of MRP's
    ordinary shares and will be prohibited from reducing its holding below that
    level. The Crown must also hold at least 51% of any other class of shares
    (voting or non-voting) and any other class of securities in MRP that confer
    voting rights (together the "51% Holding Restriction"); and
    
    b) Under section 45S of the PFA, no person, other than the Crown, may have a
    relevant interest in more than 10% of any class of shares in MRP (including
    the MRP ordinary shares), or of any other class of securities in MRP that
    confer voting rights (the "10% Limit").
    
    (together the "Ownership Restrictions")
    
    5. If a person has a relevant interest in MRP ordinary shares in breach of
    the 10% Limit, under sections 45T(1)(c) and 45T(2) of the PFA that person
    will lose the right to be paid a dividend or other distribution in respect of
    the MRP ordinary shares held in excess of the 10% Limit (the "Excess Shares")
    and must not exercise or control the exercise of the voting rights attaching
    to the Excess Shares.
    
    6. In addition, section 45T(5) of the PFA allows MRP's Constitution to
    provide for the 10% Limit and the consequences of a person exceeding it, and
    to provide for the implementation of those consequences and to add to the
    consequences set out in s45T.
    
    7. MRP proposes to include the following provisions in its constitution that
    restrict the issue, acquisition or transfer of MRP ordinary shares:
    
    a) Clause 13, which provides that any further issues of MRP ordinary shares
    must be made in accordance with Part 5A of the PFA;
    
    b) Clause 18, which requires the MRP Board to refuse to register a transfer
    of MRP ordinary shares where it has actual knowledge, or believes, that the
    transfer of those MRP ordinary shares would, or would be likely to,
    contravene Part 5A of the PFA;
    
    c) Clause 4 of the Fourth Schedule, which restricts MRP from issuing,
    acquiring or redeeming any MRP ordinary shares where the issue, acquisition
    or redemption would result in a breach of the 51% Holding Restriction or the
    Company has knowledge that the issue, acquisition or redemption would result
    in a breach of the 10% Limit; and
    
    d) Clause 10 of the Fourth Schedule, which permits the MRP Board to refuse to
    register a transfer of MRP ordinary shares where:
    
    i. The holder has not provided any, or satisfactory, documentary evidence
    where required; or
    
    ii. The MRP Board has actual knowledge, or believes, that the transfer of
    those MRP ordinary shares will result in a contravention of the 10% Limit.
    
    8. MRP proposes to include the following provisions in its constitution which
    provide consequences if a person has a relevant interest of MRP ordinary
    shares in excess of the 10% Limit:
    
    a) Clause 7 of the Fourth Schedule, which provides for the automatic
    suspension of voting rights and the entitlement to dividends or other
    distributions in respect of Excess Shares (being MRP ordinary shares in which
    a Relevant Interest is held in excess of the 10% Limit); and
    
    b) Clauses 12 to 21 of the Fourth Schedule, which provide for a registered
    holder of Excess Shares to have no voting rights and no entitlement to
    dividends or other distributions:
    
    i. If a breach of the 10% Limit is determined by the board to be inadvertent,
    in respect of those Excess Shares (clauses 14(a) and (b)); and
    
    ii. If a breach of the 10% Limit is determined by the board to be not
    inadvertent or there is insufficient information to determine if the breach
    was inadvertent, in respect of all MRP ordinary shares held by that
    registered holder (clauses 15(a) and (b));
    
    and also provide for the sale of shares so as to ensure that there is no
    longer a breach of the 10% Limit.
    
    9. There is a requirement for the Board to give notice before making such a
    determination and to explain the consequence of being in breach of the 10%
    Limit. The Board then has the power to require the sale of Excess Shares if
    the registered holder does not remedy the breach within the period specified
    in section 45T(1)(b) of the PFA and the proceeds of the sale (less any costs
    of sale) will be paid to the registered holder. An exception applies if the
    registered holder is an "Approved Nominee" for the purposes of section 45U of
    Part 5A of the Public Finance Act, in which case clauses 15(a) and (b) only
    apply in respect of those MRP ordinary shares held by the Approved Nominee on
    behalf of a person who has a relevant interest in MRP ordinary shares in
    contravention of the 10% Limit.
    
    10. MRP has approached NZX Regulation ("NZXR") seeking approval to permit the
    inclusion of provisions in MRP's constitution that restrict the issue,
    acquisition and transfer of MRP ordinary shares and which enable the MRP
    Board to suspend any benefit or right attached to MRP ordinary shares due to
    a contravention of the 10% Limit. MRP has also sought waivers in respect of
    the requirement for MRP to enter into a security agreement with the Crown.
    
    Application 1 - Rule 7.9.1
    
    11. MRP has applied to NZXR for a Ruling that Rule 7.9.1 does not apply in
    respect of the Crown's shareholding, so that the Crown and MRP are not
    required to enter into a security agreement in respect of the Crown's 51%
    shareholding.
    
    12. In support of its application for a ruling, MRP makes the following
    submissions:
    
    a) Rule 7.9.1 is only intended to capture contractual restrictions on
    dealings in shares and it should not apply to restrictions imposed by law;
    
    b) The purpose of a security agreement is to enable NZX to enforce, on behalf
    of persons who subscribe for shares, restrictions on the ability of a major
    shareholder to deal with its shares. This form of shareholder protection is
    unnecessary where any breach of the 51% Holding Restriction would constitute
    a breach of law;
    
    c) The protections afforded to shareholders by Rule 7.9.1 are unnecessary as
    the ownership restrictions that apply to the MRP ordinary shares are also
    contained in the Constitution and are therefore enforceable by any
    shareholder of MRP under the Companies Act 1993, which provides mechanisms
    for shareholders to require MRP to comply with its Constitution.
    Specifically:
    
    i. Clause 4(a) of the fourth schedule of the MRP Constitution prohibits MRP
    from issuing, acquiring or redeeming any shares if it would result in the
    Crown breaching the 51% Holding Restriction; and
    
    ii. Clause 18 of the Constitution requires the board to refuse to register a
    transfer of MRP ordinary shares where it has actual knowledge, or believes,
    that the transfer of those MRP ordinary shares would, or would be likely to,
    contravene Part 5A of the PFA;
    
    d) The 51% Holding Restriction will be clearly disclosed in the Offering
    Document;
    
    e) Under Part 5A of the PFA, no person (other than the Crown) may have a
    Relevant Interest in more than 10% of the MRP ordinary shares. Any party to a
    security agreement may have a relevant interest in the Crown's 51%
    shareholding on the basis that they have the power to control the acquisition
    or disposition of shares subject to the security agreement. This could place
    that party in breach of the PFA by granting a relevant interest in more than
    10% of the MRP ordinary shares; and
    
    f) NZXR has previously granted a similar waiver to Chorus Limited (August
    2011).
    
    Application 1 - Rules
    
    13. Rule 7.8.1 provides:
    
    "If:
    
    (a) at the time of the initial Quotation of a Class of Equity Securities a
    person holds more than 20% of the Securities of that Class; or
    
    (b) at the time of the initial Quotation of a Class of Equity Securities a
    person is entitled, pursuant to a binding arrangement, to subscribe for more
    than 20% of the Securities of that Class (other than pursuant to a bona fide
    underwriting agreement),
    
    Rule 7.8.2 shall apply in respect of the Equity Securities held or to be
    subscribed by that person (in this Rule 7.8 the "Specified Securities")."
    
    14. Rule 7.8.2 provides:
    
    "The Offering Document in respect of Securities referred to in Rule 7.8.1
    shall state with reasonable prominence either:
    
    (a) the restrictions which are to be imposed upon the disposal of the
    effective ownership and control of all or any of the Specified Securities by
    the holders of those Specified Securities (and if the holders are not to be
    the beneficial owners of the Specified Securities, by the beneficial owners);
    or
    
    (b) that there are no restrictions of the nature referred to in (a)."
    
    15. Rule 7.9.1 provides:
    
    "If an Offering Document states, pursuant to Rule 7.7 or 7.8, that
    restrictions are to be imposed upon disposal of the effective ownership or
    control of any Securities then:
    
    (a) the Issuer shall enter into an agreement (a "Security Agreement") with
    the persons to whom those Securities are to be issued, and if those persons
    are not the beneficial owners of those Securities, those beneficial owners,
    and with such other persons (if any) as NZX may consider necessary in order
    to ensure that the restrictions on disposal of effective ownership or control
    of those Securities can be effectively enforced; and
    
    (b) that agreement shall be in such form as NZX may require, and shall
    prohibit the parties to it from taking steps which would cause the effective
    ownership or control of those Securities to be disposed of otherwise than in
    accordance with the restrictions specified in the Offering Document; and
    
    (c) where that agreement provides a discretion for lifting the imposed
    restrictions prior to the expiry of an agreed restriction period, the
    agreement shall stipulate that the exercise of this discretion requires the
    consent of non- interested Directors of the Issuer in addition to any other
    requirements. For this purpose, the term "interested" bears the meaning
    assigned to that term in section 139 of the Companies Act 1993, on the basis
    that if an Issuer is not a company registered under that Act, the reference
    to the "company" in that section shall be read as a reference to the Issuer."
    
    Application 1 - Decision
    
    16. On the basis that the information provided to NZXR is full and accurate
    in all material respects, NZXR declines to grant the ruling sought from Rule
    7.9.1. Instead, NZXR grants MRP a waiver from the requirement in Rule 7.9.1
    to enter into a security agreement with the Crown in respect of the Crown's
    holding in MRP ordinary shares.
    
    Application 1 - Reasons
    
    17. In coming to this decision, NZXR has considered that:
    
    a) The Crown's ability to sell MRP ordinary shares is restricted by the PFA.
    It is unnecessary therefore, to require a further restriction by way of a
    security agreement;
    
    b) The Ownership Restrictions will be disclosed in the Offering Document; and
    
    c) MRP will bear a non-standard designation which will alert potential
    investors to the Ownership Restrictions.
    
    Application 2 - Approval and Waiver from Rules 11.1.5 and 11.1.6
    
    18. MRP has applied to NZXR for approval under Rule 11.1.5 in respect of
    provisions in its constitution, as outlined above in paragraph 7, that
    restrict the transferability (issue, acquisition or transfer) of MRP ordinary
    shares.
    
    19. MRP has applied to NZXR for a waiver from Rule 11.1.6 to permit the
    inclusion in its constitution of the provisions, as outlined above in
    paragraph 8, which allow for the suspension of benefits or rights attaching
    to MRP ordinary shares by reason of transfer.
    
    20. MRP makes the following submissions in respect of those applications:
    
    a) The restrictions on issue, acquisition or transfer contained in the
    constitution are consistent with the PFA. In particular, section 45R(2) of
    the PFA provides that MRP must not issue, acquire or redeem shares or other
    voting securities if it would result in a breach of the 51% Holding
    Restriction and section 45R(3) of the PFA provides that an issue, acquisition
    or redemption is invalid and of no effect to the extent that it breaches
    section 45R(2);
    
    b) The footnote to Rule 11.1.5 states that:
    
    "NZX recognises that there are situations in which a restriction on the
    ownership of the Equity Securities of an Issuer may be appropriate... NZX
    will generally exercise its discretion to permit a restriction to be
    introduced where:...
    (b) the restriction is desirable, expedient or necessary in connection with
    giving effect to a statutory requirement;
    (c) there are other reasons which NZX considers justify the inclusion of a
    restriction.
    
    NZX will as a general rule only exercise its discretion under Rule 11.1.5
    before the time of the initial Listing of an Issuer or, in respect of a Class
    of Securities of an Issuer, before the time of the initial Quotation of that
    Class. NZX's view is that any restriction on the ownership of Equity
    Securities of an Issuer should be clear at the time of Listing or Quotation,
    so that investors can make an informed investment decision before they
    acquire Equity Securities of the Issuer through NZX."
    
    c) The restrictions on issue, acquisition or transfer are desirable to ensure
    the restrictions in the PFA can be given effect to by MRP. The PFA does not
    expressly restrict the ability of MRP to register a transfer that would
    result in a breach of the 10% Limit or the 51% Holding or to issue MRP
    ordinary shares or other securities that would result in a breach of the 10%
    Limit. MRP considers it desirable to include restrictions on the issue,
    acquisition or transfer of securities in its Constitution to enable it to
    give effect to the PFA;
    
    d) MRP will clearly disclose the restrictions on the issue, acquisition or
    transfer of MRP ordinary shares in:
    
    i. The Offering Document (which will require NZX approval under Rule
    6.1.2(e));
    
    ii. Statements provided to shareholders pursuant to Rule 11.2.1; and
    
    iii. New investor communications provided to persons who acquire MRP ordinary
    shares following the Offer; and
    
    e) There is precedent for granting approval under Rule 11.1.5. Each of Chorus
    Limited (CNU) and Air New Zealand Limited (AIR) have previously been granted
    approval under this Rule for the inclusion of restrictions in its
    constitution in similar situations where there are restrictions on ownership
    imposed by statute.
    
    f) The proposed provisions, in paragraph 8 (above) are consistent with, and
    supported by:
    
    i. Section 45T(1)(c) of Part 5A of the PFA, which provides that a person who
    contravenes section 45S of the PFA may not exercise or control the exercise
    of any voting rights attaching to Excess Shares;
    
    ii. Section 45T(2) of Part 5A of the PFA, which provides that a person has no
    right to be paid a dividend or other distribution in respect of Excess
    Shares; and
    
    iii. In respect of clauses 15(a) and (b), section 45T(5) of the PFA which
    gives MRP power to include in its Constitution consequences for exceeding the
    10% Limit that are additional to those set out in section 45T;
    
    g) The 10% Limit and the consequences of exceeding it will be disclosed in
    the Offering Document;
    
    h) In respect of the Board's powers to declare MRP ordinary shares to be
    Excess Shares, these operate in clearly defined circumstances and are set out
    in the constitution (see clauses 12 to 21 of the Fourth Schedule to the
    constitution); and
    
    i) The constitution provides certain protections for holders of Excess
    Shares:
    
    (i) MRP must give written notice to affected shareholders (including notice
    of the consequences of the Board determining that there is a breach of the
    10% Limit) and give them the opportunity to make representations to MRP
    before MRP makes a determination as to whether there is a breach of the 10%
    Limit (clause 12 of the Fourth Schedule to the Constitution);
    
    (ii) An affected shareholder has 14 days to respond to the notice (clause 13
    of the Fourth Schedule to the Constitution);
    
    (iii) MRP must make its determination within 14 days of receipt of
    representations in writing and must promptly give notice to the relevant
    shareholders of its final determination once made (clause 13 of the Fourth
    Schedule to the Constitution); and
    
    (iv) Clause 18 of the Fourth Schedule to the Constitution requires the board,
    in deciding which MRP ordinary shares are to be identified as Excess Shares
    and in making its determination, to have regard to any criteria, as it may in
    its discretion, consider appropriate and equitable.
    
    Application 2 - Rules
    
    21. Rule 11.1.5 provides:
    
    "An Issuer may, with the prior approval of NZX, incorporate in its
    Constitution or Trust Deed a provision restricting the issue, acquisition or
    transfer of Relevant Interests in Equity Securities."
    
    22. Rule 11.1.6 provides:
    
    "Except as expressly permitted by the Rules, no benefit or right attaching to
    a Security shall be cancelled or varied by reason only of a transfer of that
    Security."
    
    Application 2 - Decision
    
    23. On the basis that the information provided to NZXR is full and accurate
    in all material respects, NZXR hereby grants MRP approval under Rule 11.1.5
    to allow MRP to include in its constitution the provisions described in
    paragraph 7 of this decision, which restrict transferability.
    
    24. On the basis that the information provided to NZXR is full and accurate
    in all material respects, NZXR hereby grants MRP a waiver from 11.1.6 to
    allow MRP to include the provisions described in paragraph 8 of this decision
    in its constitution, allowing the suspension of dividend and voting rights
    attached to MRP ordinary shares where the 10% Limit is breached.
    
    25. The approval and waiver in paragraphs 23 and 24 are granted on the
    conditions that:
    
    a) MRP bears a non-standard designation; and
    
    b) Details of the provisions in the constitution that restrict the issue,
    acquisition or transfer of MRP ordinary shares and of circumstances in which
    dividend and voting rights may be suspended (as per the provisions in MRP's
    constitution), are:
    
    (i) Appropriately disclosed in the Offering Document and all statements
    provided to shareholders under Rule 11.2.1; and
    
    (ii) Provided to persons who acquire MRP ordinary shares following the Offer.
    
    Application 2 - Reasons
    
    26. In coming to the decision to grant MRP the approval and waiver described
    in paragraphs 23 and 24, NZXR considered the following matters:
    
    a) The provisions described in paragraphs 7 and 8 enable MRP to enforce the
    10% Limit, which is a key aspect of the Ownership Restrictions under the
    Government's MOM Programme;
    
    b) The conditions contained in paragraph 25 will ensure that persons applying
    for MRP ordinary shares in the Offer, and persons trading MRP ordinary shares
    on market have notice of the Ownership Restrictions and the consequences of
    breaching the 10% Limit;
    
    c) The policy underlying Rule 11.1.6 reflects the fundamental principle that
    shareholders are entitled to exercise the rights attaching to securities
    (especially the right to vote and receive dividends) and only in very limited
    circumstances should these rights be removed;
    
    d) The provisions described in paragraph 8 apply in limited circumstances and
    it is desirable that MRP has the ability to ensure the 10% Limit is adhered
    to and that there is an appropriate disincentive to breaching the statutory
    requirements in Part 5A of the PFA. The provisions in paragraph 8 are
    necessary to help achieve the policy objectives in Part 5A of the PFA. The
    PFA expressly anticipates that a company's constitution can add to the
    consequences set out in the PFA;
    
    e) MRP's constitution sets out a process whereby holders of a relevant
    interest in Excess Shares are notified that they may have breached the 10%
    Limit, and of the consequences of this breach, including, in particular,
    where a breach is found not to be inadvertent. Holders of a relevant interest
    in Excess Shares are also able to make representations to MRP in respect of
    an alleged breach. This procedure will give holders of a relevant interest in
    Excess Shares an opportunity to respond to and rectify the breach of the 10%
    Limit prior to MRP suspending the dividend or voting rights attached to the
    MRP ordinary shares in which they have a relevant interest.
    
    Confidentiality
    
    27. MRP has requested that NZX keep this waiver confidential until such time
    as MRP advises NZX that the Offering Document has been registered by the
    Registrar of Financial Service Providers.
    
    28. In accordance with Footnote 1 to Rule 1.11.2, NZXR grants MRP's request.
    
    ENDS.
    End CA:00236076 For:MRP    Type:WAV/RULE   Time:2013-05-10 11:01:42
    				
 
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