Penny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share this | Hansard source

On behalf of the Labor Party, I rise to speak on the Corporations Amendment (Takeovers) Bill 2007. The Takeovers Panel was established in 1999 as a replacement for the Corporations and Securities Panel as part of the Corporations Law Economic Reform Program, known as CLERP 9. Labor welcomed the introduction of the Takeovers Panel and its role as the main forum for resolving disputes in a takeover bid period when this occurred in March 2000. The panel has largely been an effective forum for resolving takeover disputes by reducing litigation in the bid period, which, if not otherwise reduced, would have the effect of increasing the cost and time involved in corporate takeovers. However, the role of the panel should not restrict companies that are involved in takeover disputes from the right to a judicial review of its decisions.

The amendments in this bill, which are to the Corporations Act 2001, primarily arise out of two Federal Court decisions: Glencore International v Takeovers Panel (2005) and (2006), which are known as the Glencore cases. These matters construed the jurisdiction of the Takeovers Panel more narrowly than had previously been anticipated, and, as we understand it, the bill seeks to amend the Corporations Act to ensure that the panel will continue its role in resolving disputes during a takeover bid period.

The panel has the power to make declarations in circumstances relating to a takeover or to the control of an Australian company it finds to be unacceptable in a bid period. In determining whether activities by companies involved in takeover bids are unacceptable, the panel has relied on the definition of ‘substantial interest’. In the Glencore cases, the panel decided that equity swap arrangements to indirectly purchase shares through two investment banks were a ‘substantial interest’, which gave it jurisdiction over the bid. However, in the Glencore cases, the Federal Court found that the equity swap did not increase Glencore’s substantial interest and therefore precluded the panel from making any declarations with regard to the bid.

The disclosure of equity derivatives, although an issue arising in the Glencore cases, is not dealt with by this bill and Labor supports the view of the Parliamentary Joint Committee on Corporations and Financial Services that there should be consultation with stakeholders in relation to possible amendments to chapter 6C of the Corporations Act on the issue of disclosure of equity derivatives.

The bill before the chamber seeks to do the following things. First, it seeks to clarify the definition of ‘substantial interest’ in section 602 by introducing a new section 602A, which gives a so-called indirect definition so that the panel’s role should not be limited only to the issues described in the section. Second, it amends section 657A so that the panel’s jurisdiction, when making a declaration of unacceptable circumstances, is not restricted to looking only at current circumstances but may also consider past, present and future effects of circumstances on the control of the company. This amendment effectively expands the jurisdiction of the panel by allowing it to consider future effects of the circumstances in relation to its review function. Third, the bill seeks to repeal the requirement to give each person to whom the panel’s order relates an opportunity to make a submission on the matters in section 657D(1)(a) and substitute a new section which contains a requirement to receive submissions only from persons to whom the proposed order is directed. Finally, it seeks to create a time limit for concluding reviews of panel decisions.

Currently there is no clear definition of ‘substantial interest’ in the act and Labor support the introduction of the section 602A definition of ‘substantial interest’. However, we do note that there have been a number of concerns raised with the approach taken in this bill to defining this term. This ostensibly indirect definition of ‘substantial interest’ has been said to have the potential to be misinterpreted, to increase uncertainty and to raise the possibility of the panel essentially determining its own jurisdiction. This was the view put by the Australian Institute of Company Directors. The explanatory memorandum to the bill states that there are limits to the definition of ‘substantial interest’ and that the amendment is not intended to include, for example, employees, suppliers and customers who are involved with a company.

As I indicated, the bill also seeks to expand the jurisdiction of the panel so that it can consider future likely effects of current circumstances. There were concerns raised that the amendment to the relevant sections would allow the panel to consider effects of the circumstances in the past, present and future. There were concerns raised that this would expand the jurisdiction of the panel in a way that might be unforeseen. Paragraph 657A(2)(b) qualifies the jurisdiction of the panel by using the words ‘having regard to the purposes of this chapter set out in section 602’. Submissions to the parliamentary joint committee have suggested that this provision may not adequately address the concerns regarding the panel’s jurisdiction, which arguably is included in the bill.

During the inquiry undertaken into this bill the Law Council proposed that the words ‘having regard to’ in paragraph 657A(2)(b) be replaced with ‘because they are inconsistent with or contrary to’ the purposes as set out in section 602. This is essentially a circumscribing provision which enables the limits and the parameters of the panel’s jurisdiction to be identified with greater certainty. In Labor’s view such an approach would soon create more certainty about the scope of the panel’s jurisdiction.

We support the Law Council’s amendment to paragraph 657A(2)(b). We accept the Law Council’s submission that this is likely to give more clarity to the jurisdiction of the panel, and we note that this is, I believe, a cross-party, but certainly a bipartisan, recommendation of the parliamentary joint committee.