 |
|
 |
August 2006 |
|
|
-
Branded
food/beverages business -
NZ's
third largest ISP -
Equipment hire business -
NZ's second largest solid waste business -
Various
significant forestry estates (at least 3) -
Liquor
business -
NZX listed
shell companies -
Electrical
metering company
|
- Small retail bank
-
Manufacturing/installation business -
Loan book -
Engineering business -
Manufacturing/fabrication business -
Finance
company -
Material
handling equipment business -
Significant stake in an IT consulting company
|
|
Pre-emptive Rights/Implied Good Faith: A
geothermal joint venture, which has spawned a string of
Court cases, recently had the Privy Council affirm High
Court and Court of Appeal decisions that:
-
a “back-up” sale post termination of pre-emptive
rights did not breach the pre-emptive right itself;
and
-
an asserted implied duty of good faith may exist but
it is one thing to require the stated contractual
obligations to be carried out in good faith it is
quite another thing, as requested and refused here,
to seek further and separate duties over and above
the contractual terms.
|
|
|
-
Success Fee:
The Court of Appeal upheld the High Court that had
refused summary judgment for payment of a “success
fee” for the sale of a business. Unfortunately for
the adviser, although the contract was clear, it was arguable
they agreed to a variation of the terms. -
Franchise Business Sale:
Another franchise sale case. The Court of Appeal
had to decide various issues of liability found
against a vendor under the Fair Trading Act. The
Court of Appeal considered the “in conduit” defence
in some detail. -
Joint Venture “Bare Knuckle Fist Fight”:
The Court of Appeal confirmed a finding of deceit by
a joint venturer (the Court stating findings of
commercial dishonesty produce the legal equivalent
of “bare knuckle fist fight”). The Court however
rejected the High Court’s additional findings of
breach of fiduciary duty (flagging that such duty is
especially difficult to establish between commercial
parties, with independent advisers, and equal
management presence). -
Reckless Trading by Directors:
The Court of Appeal stated “the days of sleeping
directors with merely an investment interest are
long gone”. The Court overruled the High Court
stating the test of reckless trading was objective,
with no element of subjectivity.
|
-
M&A Competition Law: Accessory
Charge Against Vendor Upheld:
The High Court agreed with the Commerce Commission
in finding that a proposed acquisition of a 74%
interest in a Wellington bus company, by the holder
of the 26% interest and only other major competitor,
would substantially lessen competition in the
relevant market. The proposed acquisition was the
subject of an application for clearance which was
withdrawn by the applicant towards the end of the
Commission’s investigation. The “sting in the tail”
of the decision was that certain of the vendors of
shares under the proposed transaction were found to
have breached the Commerce Act by waiving a
condition that clearance was granted by the
Commission with the consequence that they “aided and abetted” and
were “party to” a breach of the Act. The ironic
twist is that the decision suggests a Vendor acting
in “ignorance” of the facts would not be an
“accessory” meaning ignorance could well be bliss!
The decision is to be appealed. -
Share Issue/Battle for Control:
The High Court refused a request for an injunction
in circumstances of an alleged invalid share issue. -
Pre-emptive Rights/Change of Control:
The appointment of a receiver for a 25% shareholder
was accepted to be a “change of control” triggering the
pre-emptive rights in the Constitution of the
relevant company. Injunction applications to
challenge these events were rejected including the
finding that acceptance of an offer made under
pre-emptive rights procedures transfer beneficial
ownership and created a constructive trust for the
shares conditional on final payment of the purchase
price on settlement. -
Directors Duties on the Sale of the
Business as a “hive-down”:
Directors with a contingent liability
sold the company's business to the same shareholders. The High
Court held that they had breached their obligation
to act in good faith in selling the old company’s
business to the new company (problems with
incorrectly valuing its goodwill, and disregarding
the interests of contingent creditors).
Management/Shareholders Dispute:
An application by a 66% shareholder to the Court to
convene a shareholders meeting was successful. The
balance shareholder (and one of two directors) had
clearly signalled management had become
“deadlocked”.
|
-
Schemes of Arrangement and Amalgamations:
The Takeovers Panel issued a discussion paper with
their concerns on the application of the Takeovers
Code to schemes of arrangement and amalgamations.
The Panel are proposing to recommend to the
Government various amendments to the law in these
areas to bring them (more or less) within the scope
of the Code.
The Chair of the Panel has stated that the current
relationship between the Code and the Companies Act
can result in a change of control of a code company
under a scheme or amalgamation without shareholders
having the rights and protections they have under
the Code and this is “undesirable”.
-
Non-Permitted Condition?:
The Panel have indicated that it will question
whether an offeror can include in its offer a
condition relating to shareholder approval of the
offeror shareholders. A formal meeting of the Panel
to definitely decide the issue was cancelled after
the offeror waived the condition in question.
|
|
The Commission has recently granted
clearance for an acquisition involving the New Zealand
markets' for the provision of fleet leasing services and
fleet management services, respectively.
|
The New Zealand Government advised it has
launched a review in respect of:
-
The M&A
competition test (concern expressed that it might be
inhibiting New Zealand’s international competitiveness).
-
Directors and officers share disclosure obligations
(concern expressed that it was too hard to comply with
existing regulations).
|
The Commission released its quarterly
newsletter in July. However the biggest news here is
the impending (end of August 2006 maybe) changes to the New
Zealand Securities Law which will have general impact:
- New insider trading test (removing
“insider” requirement).
-
New market manipulation prohibition. -
Criminal sanctions introduced.
|
|
Our employment team's latest newsletter summarises the
Farmers' Holdings case "Information When Selling a
Business". If you would like a copy of the
summary please don't hesitate in contacting the head of
our employment team,
Michael Quigg.
|
|
We are delighted to obtain publication of an
article in the July/August 2006 issue of M&A Lawyer on
"Cross-Border M&A - A Checklist for US Companies
Making Acquisitions in New Zealand". If
you would like a copy of the article or details on
subscribing to the M&A Lawyer please do not hesitate in
contacting
David Quigg.
|
|
Delete from Circulation List
If you receive our regular newsletters but would
like to be deleted from our circulation list please
advise by emailing
theresacains@quiggpartners.com. |
|
