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31 Mar 2025
Insight
In brief
- Once a Takeovers Panel decision is made, ASIC or a party can apply for a review of the decision, but, where no declaration or orders are made, consent from the President is required.
- In two recent decisions, Invest Blue and Tissue Repair, the President declined to give consent, citing no new evidence or errors in the initial decisions.
- The examples indicate the Panel is tightening its approach to consent to review applications. That will help prevent unnecessary delays and ensure the more efficient use of resources, especially in circumstances where there is a live control transaction.
Background
ASIC or a party to proceedings in the Panel may apply to the Panel for a review of a decision in those proceedings. Review proceedings are a fresh hearing of the matter on its merits, and a review Panel may affirm, vary, set aside, or substitute decisions of an initial Panel. However, if the initial Panel’s decision does not concern a declaration of unacceptable circumstances or the making of interim or final orders, review proceedings need the consent of the President of the Panel. For example, the President’s prior consent is required for review of an initial Panel’s decision to decline to conduct proceedings or not to make any orders.
Various Panel cases and Guidance Note 2: Reviewing Decisions describe the policy behind the consent requirement as follows:
- If no declaration or orders have been made, no new rights or obligations have been created (which militates against the usual expectation in administrative law that a merits review should be available); and
- There should be a prompt conclusion to Panel proceedings because takeovers and other control transactions are often fast-moving.
When considering a consent to review application, in addition to this policy, the President will look at whether there was any potential error in the initial Panel’s decision and other relevant factors, such as the emergence of new evidence, the potential prejudice that might flow from the decision to grant or withhold consent, and the merits of the initial Panel’s decision.
Two recent decisions indicate that the Panel may be taking a harder line.
Invest Blue Pty Ltd (Consent to Review) [2025] ATP 6
This case involved an application by a former shareholder of Invest Blue Pty Ltd, Kanearo Pty Ltd, concerning alleged contraventions of Chapter 6 in connection with the acquisition of Invest Blue by Ironbark Investment Partners Pty Ltd pursuant to a share purchase agreement.
Kanearo argued that, at the time of execution and completion of the share purchase agreement, Invest Blue had more than 50 shareholders and was thus subject to the takeovers rules in Chapter 6. Because Invest Blue and Ironbark failed to adhere to those rules, Kanearo and other shareholders were denied important Chapter 6 protections (for example, being provided with a bidder’s statement, expert’s report etc.). If it was found that Invest Blue did not, in fact, have more than 50 shareholders at the relevant time, Kanearo argued that there was a deliberate plan by Ironbark and Invest Blue to reduce the number of shareholders and evade Chapter 6 by encouraging shareholders to transfer their holdings into a bare trust arrangement.
The Panel disagreed with Kanearo’s characterisation of the situation on both counts. The Panel stated that, based on the evidence available, it was clear that the company had fewer than 50 shareholders when it was sold to Ironbark, and it was unlikely that it would find a deliberate strategy to avoid Chapter 6. The Panel also noted that the orders sought by Kanearo (essentially, unwinding the share purchase transaction) would be unfairly prejudicial, and the application was not timely, as the transaction occurred over a year ago. Accordingly, the Panel concluded that there was no reasonable prospect that it would make a declaration of unacceptable circumstances and declined to conduct proceedings.
Kanearo applied for a review of the decision and, given that no declaration or orders had been made, needed the President’s consent to do so. In an unusual move, Kanearo only sought a partial review regarding the issue of whether the company had more than 50 shareholders and dropped its complaint about a deliberate strategy to avoid Chapter 6.
The President declined to grant consent. In doing so, the President observed that Kanearo’s submissions asked the Panel to draw inferences from various documents about or circumstances in relation to an unambiguous question — that is, how many shareholders did Invest Blue have at the time of the share sale? The answer hinged very simply on how many names were entered into the register of members at that time. The register had been provided, and the Panel concluded that it showed fewer than 50 shareholders.
Some new arguments were advanced by Kanearo but none were compelling. As such, the President was not persuaded that there was any potential error in the initial Panel’s decision or any significant new evidence that would change that conclusion. Although there was no control transaction on foot, the President considered it was still important for the matter to be resolved promptly, so the underlying policy favoured declining consent.
Tissue Repair Ltd (Consent to Review) [2024] ATP 21
The application in this case involved an alleged undisclosed association between certain shareholders of Tissue Repair Ltd concerning a notice to requisition a general meeting of shareholders to restructure the company’s board.
The founders of Tissue Repair, who together controlled approximately 15% of its shares, sought to replace two non-executive directors due to a disagreement about the company’s future direction, including whether the company should delist from the ASX. The founders provided the company with draft notices under sections 249D and 203D of the Corporations Act to requisition a general meeting to remove the two non-executive directors. The draft notices were signed by the founders and other shareholders collectively holding more than 50% of Tissue Repair shares. The founders’ lawyers stated that the notices would be formally served if the non-executive directors did not step down.
Tissue Repair applied to the Panel, arguing that the shareholders who signed the notices were party to a relevant agreement to seek to restructure Tissue Repair’s board (and potentially delist the company) and had failed to disclose their combined voting power, relevant interests or association. Tissue Repair sought orders preventing the notices from being served on the company, requiring the shareholders who signed the notices to lodge substantial shareholder disclosure detailing the nature of their association, and vesting any shares acquired after the association was formed with ASIC for sale.
The Panel had concerns about the nature of the founders’ engagement with the other shareholders who signed the sections 249D and 203D notices. To address this, the Panel requested an undertaking from the founders that the notices not be served on Tissue Repair and that the founders inform the other shareholders that they were free to vote as they wished on any shareholder resolution. The founders agreed to give the undertaking and further submitted to the Panel that at no time did they discuss with the other shareholders any proposal to delist Tissue Repair. In light of the undertaking and submissions, the Panel decided there was no reasonable prospect of making a declaration of unacceptable circumstances and declined to conduct proceedings.
Tissue Repair applied to the President for consent to review the proceedings. In declining to grant consent, the President stated that there did not appear to be any error in the initial Panel’s decision and no new relevant material had been produced by Tissue Repair. It was also significant that the key issue in Tissue Repair’s initial application, the sections 249D and 203D notices, had been addressed by the founders’ undertaking.
The President quoted from Austral Coal Ltd 03R [2005] ATP 15 to underscore the point that consent was not warranted:
“… the existence of the consent requirement was a firm indication that the legislature did not intend that parties would have an automatic right to review a decision by a full Review Panel, where that decision did not involve a declaration of unacceptable circumstances or orders.”
Commentary
The decisions in Invest Blue and Tissue Repair indicate that the Panel is tightening up its approach to consent to review applications (and, more generally, to the exercise of its discretionary powers). This is a positive development.
Cases that have little chance of being decided differently, or where the initial decision is plainly correct, should not be reopened. Doing otherwise does not make the best use of the parties’ (and the Panel’s) time and resources. Additionally, in the context of a live control transaction, it may unnecessarily delay the transaction and create uncertainty for shareholders and other market participants.
As the applicant’s costs in seeking a review are reasonably low (compared to, say, appealing the decision of a court), there is little disincentive for those who fail in their applications to an initial Panel to seek review. But if the Panel is seen as applying the policy underlying the consent requirement relatively strictly, parties may think twice before seeking a review. Hopefully, the Panel will be encouraged to maintain this approach.
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