[co-author: Maria Tolentino]
In the recent decision in Re Dropsuite Limited [2025] ATP 10, the Takeovers Panel concluded that a voting intention statement given by a substantial shareholder in the usual form was ‘ambiguous’ as to whether that shareholder had implied that it would not dispose of any of its target shares before the scheme meeting. The Panel indicated that such ambiguity may have been clarified if the voting intention statement was clearer about the possibility that the substantial holder’s voting power might change before the scheme meeting.
In this article, we consider the potential implications of this conclusion for substantial shareholders and also target directors who may consider making voting intention statements in the future.
In brief
- The market has generally proceeded on the assumption that, unless a voting intention statement expressly states that the substantial shareholder in question will not sell any of their shares, the substantial shareholder is not restricted from selling shares in the target. The same applies for director voting intention statements.
- In a recent decision, the Takeovers Panel has cast doubt on this assumption, concluding that a voting intention statement given by a substantial shareholder in the usual form was ‘ambiguous’ as to whether that shareholder had implied that it would not dispose of any of its shares in the target before the scheme meeting.
- This decision may cause many future voting exclusion statements to contain qualifications relating to all manner of theoretically possible actions that the maker of the statement could conceivably wish to take in the future.
Voting intention statements
In schemes of arrangement that are being used to effect changes of control of ASX listed companies, it is not unusual for substantial shareholders to make a public statement setting out how they intend to vote (such statements are referred to as “voting intention statements”). Under ASIC’s ‘truth in takeovers’ policy (which the Takeovers Panel has endorsed), substantial shareholders risk regulatory action, or a declaration of unacceptable circumstances, if they depart from a voting intention statement.
Conventional formulation and market practice
A common form of a voting intention statement is to the following effect:
By way of example, the ASX announcement in 2024 relating to the scheme of arrangement involving the acquisition of Base Resources Limited included the following voting intention statement:
Does this prevent the shareholder from selling their shares?
Many people in the market have assumed that, unless the substantial shareholder that gives a voting intention statement expressly states that they will not sell any of their shares (outside of the scheme of arrangement), or that they will vote a specified number of shares, that shareholder:
- is not prevented from selling any of the shares that are referred to in their voting intention statement; and
- will only be required to vote the number of shares actually held by it at the time of the vote.
In this context, it is also important to remember that it is customary for target directors to make a voting intention statement which is substantially similar to the conventional form of voting intention statements given by substantial shareholders. Target directors would not normally expressly reserve the right to sell any of their shares (outside of the scheme of arrangement).
Consistent with this, after the voting intention statement was published in the Base Resources scheme and before the first court hearing, Sustainable Capital sold down its interest from 24.8% to 20.63%, without issue or challenge.
A new approach?
On 28 January 2025, Dropsuite Limited announced a scheme of arrangement under which NinjaOne Australia Pty Ltd would acquire all the shares in Dropsuite. The announcement included the following voting intention statement from Dropsuite’s largest shareholder:
Between 28 January 2025 and 6 February 2025, Topline disposed of some of its shares on-market, decreasing its interest from 21,639,316 shares (31.0%) to 13,829,409 shares (19.7%).
A shareholder in Dropsuite applied to the Takeovers Panel for a declaration of unacceptable circumstances. The applicant submitted (among other things) that Topline’s voting intention statement above did not indicate that Topline had reserved the right to sell Dropsuite shares before voting in favour of the scheme and, therefore, a reasonable investor would have concluded that Topline intended to maintain its 31% interest and vote that 31% interest in favour of the scheme. The applicant also submitted that, as a result of Topline failing to lodge a substantial holder notice within the time required by section 671B of the Corporations Act, it created a false market in Dropsuite’s shares.
The Takeovers Panel made a declaration of unacceptable circumstances in response to these submissions. The Panel concluded that the Topline voting intention statement referred to above was ‘ambiguous’ as to whether Topline had implied it would not dispose of any Dropsuite shares before the scheme meeting. The Panel went on to say that such statements are not inherently unacceptable, particularly where the shareholder does not dispose of any shares or if it does, “the resulting decrease in voting power is small and disclosed within the time required by section 671B”.1 No guidance was given by the Panel on what would be considered a “small” decrease in voting power.
Commentary
The Panel’s decision may lead to a revision to any assumption that, unless the substantial shareholder that gives a voting intention statement expressly specifies that they will not sell any of their shares (outside of the scheme of arrangement), that they are not prevented from doing so under the ‘truth in takeovers’ policy.
It is noted that in Re Vimy Resources Ltd2, the Court did not disagree with Counsel's argument that a voting intention statement given in the usual form did not prevent the holder from selling its shares before the scheme meeting.
A comparison of the voting intention statements in the Dropsuite scheme and the Vimy Resources scheme (set out side by side below) indicates striking resemblance between the two statements.
The Panel, agreeing with ASIC, concluded that where a shareholder intention statement is provided at announcement of a scheme, the shareholder will generally not dispose of its shares and shareholders may have interpreted the intention statement on that basis. Further, “market participants might also have placed weight on Topline’s significant 31% voting power to conclude disposal was neither intended nor likely”.5 The Panel concluded that, accordingly, the intention statement could have been clearer about the possibility that Topline’s voting power might change and that ambiguity could have been clarified if Topline had lodged its substantial holder notice in time as required by section 671B of the Corporations Act. The Panel also took into account the timing of when the selling down began (on the date of the intention statement) indicating that it was aware its voting power might change before the scheme meeting.
Voting intention statements provide valuable information to other target shareholders, and the market more generally, ahead of a scheme vote. One potential impact of the Panel’s Dropsuite decision could be to discourage certain substantial shareholders from being willing to make voting intention statements. In the authors’ view, that would not be a welcome development in Australian public M&A transactions.
Another possibility is that, as a result of the Panel’s decision, we start to see voting intention statements contain qualifications relating to all manner of theoretically possible actions that the maker of a voting intention statement could conceivably wish to take in the future (e.g. disposing of shares, granting security interests in shares etc). Again, while that would provide greater clarity in the market, it would introduce additional complexity in Australian public M&A transactions.
Endnotes
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