The Takeovers Panel will decline to hear a matter about a delisting proposal, unless it is coupled with a transaction which may affect control or the acquisition of a substantial interest or is otherwise in breach of Chapter 6 provisions.
In brief
- The Takeover Panel’s jurisdiction is limited to situations that relate to current or proposed control proposals.
- The Panel does not have general oversight role over listed entities.
Delisting
I published an article last year about the rules that apply to delisting a company from ASX after a takeover bid closes and the bidder has not reached 100% ownership. You can read the article here.
The situation was recently considered by the Takeovers Panel in its decision about the delisting proposal concerning Pact Group Holdings Ltd. The company was 88% owned by the bidder after the takeover bid and still had a large number of minority shareholders, including some who were very vocal in their opposition to the delisting proposal.
The ASX, which seeks to balance the interests of the company wishing to delist and the interests of remaining shareholders, agreed to Pact’s delisting proposal, conditional on a 75% shareholder vote. As the bid had closed more than 12 months previously, the bidder was allowed by the usual ASX policy to vote its shares, which would carry the resolution. This had been spelt out in detail throughout the takeover bid process, so shareholders and the market generally were well aware of the risk of delisting in this scenario.
Panel application
After the ASX’s decision but before the shareholder vote, a number of shareholders applied to the Takeovers Panel seeking a declaration of unacceptable circumstances and various orders, including an order that the bidder should not vote on the resolution.
The Takeovers Panel declined to commence proceedings. This was because the circumstances did not attract the Panel’s (limited) jurisdiction. The Panel only has jurisdiction where the circumstances have, or were likely to have, an effect on the control, or potential control, of the company or on the acquisition, or proposed acquisition, by a person of a substantial interest in the company or were otherwise inconsistent with the purposes of section 602 of the Corporations Act. The Panel was not satisfied that these elements were made out. Therefore, the matter fell outside its jurisdiction.
In my view, this is not a surprising decision.
First, the Takeovers Panel was designed to deal with disputes relating to a takeover bid. It does not have a general supervisory role over companies outside the takeover context.
Second, in this situation, the removal of the company from the official list at the ASX did not affect the control of the company. All shareholders would keep their shares, with the only difference being that the company would be unlisted.
Third, the minority shareholders argued that the delisting was a pre-cursor to the bidder eventually acquiring the balance of the shares. However, there was no current or planned offer. The Panel considered that its jurisdiction is not enlivened by hypothetical scenarios.
Earlier decisions
The decision is consistent with two earlier decisions made by the Takeovers Panel.
The first is Flinders Mines Ltd 02 & 03 [2019] ATP 2 where a delisting proposal was coupled with a proposed on-market share buy-back and rights issue. That had the potential to increase the major shareholder’s voting power from 55.56% to 65.3% (which the Panel regarded as a ‘substantial interest’). The possibility of delisting had not been contemplated or flagged when the major shareholder had previously undertaken a takeover bid. The Panel made a declaration of unacceptable circumstances. It considered that shareholders would be coerced into selling their shares by the prospect of the delisting, contrary to the principles of s602 as it would have an impact on control or potential control of the company.
The second decision is Vmoto Ltd [2025] ATP 7 where the company announced a delisting proposal coupled with an off-market equal access share buy-back. The applicant complained that the buy-back was being undertaken when the market was uninformed about the company’s forecast profits and that the buy-back would remove shareholders who were not in favour of the delisting before the vote on it was held. The company submitted that the buy-back would not materially enhance or entrench any person’s control of the company (though the percentage shareholdings of some directors would increase marginally). The Panel declined to conduct proceedings. This was upheld on review: Vmoto Ltd 02R [2025] ATP 9.
Both Flinders Mines and Vmoto and now Pact indicate that delisting itself will not enliven the Panel’s jurisdiction, unless it is coupled with an associated transaction which may impact control or the acquisition of a substantial interest.
Conclusion
The Pact decision is a reminder that the Panel’s jurisdiction is limited. The Panel does not have power to declare circumstances to be ‘unacceptable’ merely because a person considers that a company (or managed investment scheme) has made a decision that is unfair to that person or group of persons. It is essential that there is also an acquisition or proposed acquisition of control or a substantial interest in the company or breach of the relevant parts of the Corporations Act.
For this reason, it is unlikely that the Panel would hear matters which focus on things such as:
- a failure to pay a dividend;
- a delisting of an entity;
- a change in the entity’s primary stock exchange;
- executive remuneration; or
- proceedings of a board of directors or conduct of a shareholders meeting,
unless that had the effect of influencing a current or proposed control transaction or an acquisition of a substantial interest in the entity.
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