What's on the Block

Supreme Court

Court of Appeal

High Court

Takeovers Code

Company Changes Get Closer

Recent M&A Transactions for Quigg Partners

Further Information

• New Zealand leading biscuit and snacks business

• Pulp, paper and packaging assets

• Majority stake in leading distributor of New Zealand horticultural products

•  Substantial shareholding in a leading general insurance company

• Dairy farms (a considerable number and interests in a corporate dairy business)

• Material shareholding in New Zealand’s leading car/general goods auction house

• Forestry Estates

• Branded smallgoods business sold through supermarkets

• Frozen pizza supply business

• Waiheke Island vineyard

• Flat pack furniture capital investment

Bank Mandate:  The Supreme Court unanimously dismissed an appeal holding a bank liable for breach of its mandate.

Commerce Act:  The Supreme Court finally ended the Commerce Commission's battle against Telecom for alleged misuse of its dominant position (re 1999 dial-up internet packages).

Joint Venture Established by Conduct:  The Court of Appeal, overturned the High Court, and held a joint venture (and consequential fiduciary obligations) existed between two parties in respect of an international distribution arrangement (UK, New Zealand and Australian Court decisions relied on).

Casting Vote:  The Court of Appeal affirmed that "casting vote" for company arrangement was limited to being used to break a numerical deadlock and can not be used to make up any shortfall in relation to voting requirements.

All Reasonable Endeavours:  In proceedings involving strike out requests from an arbitrators interim award and ruling the case discussed interesting issues around the arbitrators decision that a party had not used all reasonable endeavours to obtain Overseas Investment Office consent (the actual decision of whether all reasonable endeavours had been taken was an arbitrators interim award).

Securities Act Breach:  The High Court held various directors in breach of the Securities Act in distributing an investment statement / prospectus / advertisement which contained untrue statements.  The directors were given prison sentences.

Gap in D&O Coverage:  The Court ruled that certain directors cannot rely on their D&O insurance policy to pay the defence of criminal actions filed against them by the new Financial Markets Authority.  Overseas readers will be pleased to note the decision relied on the provisions of a 75-year old New Zealand specific statute (the Law Reform Act 1936) and will therefore be of little, if any, relevance off-shore.

Implied Novation:  The Court rejected an argument of implied novation releasing the original contracting party merely when the vendor accepted another party to be the nominee for settlement purposes.

Restraint of Trade:  An injunction application was declined.  The Court held a serious issue to be tried, but "only just", on issue of whether employment with a competitor amounted to engaging in "any business that supplies products or services which are the same as or which compete with" [the business].  However the Court was not satisfied any breach of the restraint had been shown.

Effect of Nomination:  The High Court held (i) a nominee has the ability to complete a contract in place of the nominating party; (ii) that nomination may occur at any time; (iii) the nominee is entitled to the full benefit of the agreement and can do everything that the purchaser was entitled to do under the contract.

Separate Corporate Identity:  The Court dismissed a claim for summary judgment.  It held the claim essentially amounted to an invitation to lift the corporate veil and, in New Zealand, the Courts are traditionally reluctant to lift the corporate veil, as the doctrine of separate legal identity was fundamental to company law.  There were no compelling factors to justify the high threshold required to look beyond the party's corporate identity.

Settlement Agreement:  The High Court upheld the "no sue" clause in a settlement agreement.

Exemption:  A class exemption has been granted in respect of partial takeover offers and where shares are held by a custodian.

Code Word:  The latest Code Word from the Takeovers Panel provided very practical and useful comments on:

• the Marlborough Lines / Horizon Energy case, in particular new developments arising from the case;

• the use and disclosure of specialist advice by directors in target company statements;

• the disclosure obligations re an offeror's intentions;

• various technical amendments to the Code including changes to the definition of "Code Companies".

As previously advised the New Zealand Government is looking to tighten the requirements for registration of New Zealand companies.  The concern is New Zealand companies used in illegal activity (arms trafficking) and shell companies carrying on banking activities outside New Zealand.

The changes proposed (highlighted in a Cabinet Paper released last week) will require:

• New Zealand resident director or local agent.  An exemption is proposed for companies with directors in an approved foreign jurisdiction (e.g. Australia!!).  The local agent would be required to accept service of legal proceedings and ensure the company has met disclosure and record maintenance obligations (won't be easy to get agents for this?).

• Directors to supply date and place of birth information (not publicly available).

• IRD number (various information again required).

The Registrar of Companies would also receive enhanced powers.  The timing for any change is likely to be early 2012.

Quigg Partners has recently had the pleasure of advising on New Zealand law matters relating to:

• Bain Capital's purchase of MYOB for A$1.3b (including OIO approval).

• Various Australian issues to New Zealand shareholders (including scrip takeover, ESOP, SPP, Scheme of Arrangement and entitlement right issues).

• Electronics for Imaging Inc's acquisition of Prism Group.

•  An exemption from the Takeovers Panel.

• A global restructure and New Zealand subsidiary "elimination" project.

• A bribery and corruption compliance audit.

M&A Corporate

David Quigg
John Horner
Melissa Pengelly
Zoë Genet
Asha Stewart
Svetlana Malivuk
Jonathan Pitts

Employment

Michael Quigg
Bronwyn Heenan
Tim Sissons
Simon Martin
Nick Logan

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PO Box 3035, Wellington 6140, New Zealand