Interest proposal to an addition to the comp. constitution:
7. Proportional takeover approval provisions
As part of the proposal to adopt a new constitution in Item 4 in the accompanying notice of meeting, it is intended to insert
rule 6 which contains proportional takeover approval provisions.
The Corporations Act 2001 (Cth) sets out the terms of the relevant provisions to be included in the constitution. The
Corporations Act 2001 (Cth) also requires that we provide you with sufficient information to make an informed decision on
whether to support or oppose the resolution.
Why do we need the proportional takeover approval provisions?
In a proportional takeover bid, the bidder offers to buy a proportion only of each shareholder’s shares in the target company.
This means that control of the company may pass without shareholders having the chance to sell all their shares to the
bidder. The bidder may take control of the company without paying an adequate amount for gaining control.
To deal with this possibility, a company may provide in its constitution that if a proportional takeover bid is made for shares
in the company, shareholders must vote on whether to accept or reject the offer and that decision will be binding on all the
shareholders.
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The benefit of the provision is that shareholders are able to decide collectively whether the proportional offer is acceptable
in principle and it may ensure that any partial offer is appropriately priced.
What is the effect of the proportional takeover approval provisions?
If a proportional takeover bid is made, the directors must ensure that shareholders vote on a resolution to approve the bid
more than 14 days before the bid period closes.
The vote is decided on a simple majority.
Each person who, as at the end of the day on which the first offer under the bid was made, held bid class securities is
entitled to vote, but the bidder and its associates are not allowed to vote.
If the resolution is not passed, transfers which would have resulted from the acceptance of a bid will not be registered and
the bid will be taken to have been withdrawn.
If the bid is approved (or taken to have been approved), the transfers must be registered if they comply with the
Corporations Act 2001 (Cth) and the company’s constitution.
The directors will breach the Corporations Act 2001 (Cth) if they fail to ensure the approving resolution is voted on.
However, if the resolution is not voted on, the bid will be taken to have been approved.
The proportional takeover approval provisions do not apply to full takeover bids and only apply for 3 years after the date of
adoption of the constitution. The provisions may be renewed, but only by a special resolution.
No person to acquire or increase its substantial interest
At the date this statement was prepared, no director is aware of a proposal by a person to acquire, or to increase, a
substantial interest in the shares of the company.
Potential advantages and disadvantages
The directors consider that the proportional takeover approval provisions have no potential advantages or disadvantages for
them. They remain free to make a recommendation on whether an offer under a proportional takeover bid should be
accepted.
The potential advantages of the proportional takeover approval provisions for shareholders of the company are:
• you will have the right to decide by majority vote whether an offer under a proportional takeover bid should
proceed;
• the provisions may help shareholders avoid being locked in as a minority;
• increase in the bargaining power of shareholders which may ensure that any partial offer is adequately priced;
and
• knowing the view of the majority of shareholders may help each individual shareholder assess the likely outcome
of the proportional takeover bid and to decide whether to accept or reject that offer.
The potential disadvantages for shareholders of the company include:
• proportional takeover bids for shares in the company may be discouraged;
• shareholders may lose an opportunity of selling some of their shares at a premium; and
• the chance of a proportional takeover bid being successful may be reduced.
The board of directors considers that the potential advantages for shareholders of the proportional takeover approval
provisions outweigh the potential disadvantages. In particular, shareholders as a whole are able to decide whether or not a
proportional takeover bid is successful.
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