Schemes of Arrangement: To Takeover Takeovers?

In a recent book, Schemes, Takeovers and Himalayan Peaks , Tony Damian and Andrew Rich of Freehills argue that schemes of arrangement are an effective method of achieving change of control in Australian corporations, and reject the view that ‘conventional’ takeovers, regulated by Chapter 6 of the Corporations Act 2001 (Cth) (the Act), should operate to the exclusion of schemes. The authors propose that the Act should be amended to fully recognise schemes of arrangement as a valid method of acquiring listed companies.

This research project goes further than Damian and Rich in exploring the potential of schemes of arrangement to effect change of control transactions. Rather than adopting the conventional approach of considering whether and how schemes of arrangement are used as an alternative to Chapter 6 takeovers, and whether schemes of arrangement provide sufficient protections to shareholders, the primary purpose of this project is to explore whether schemes have replaced ‘conventional’ takeovers as the predominant method of effecting changes of control in Australia, and consider whether takeover bids- and Chapter 6 of the Act- should be scrapped. Could a overriding ‘fairness’ doctrine, overseen and developed by a specialist division of the judiciary, effectively substitute the plethora of principles and rules (including the doctrine of unacceptable circumstances) which form an increasingly sophisticated takeovers law? Are there overriding commercial (including tax, strategic) reasons which necessitate a transaction proceeding by way of ‘conventional’ takeover? Is the fact that ‘conventional’ takeovers are characteristically ‘hostile’ a conceptual barrier preventing more widespread use of schemes?

In considering this novel and important issue, the research project will include comparative analysis of laws and practices in other jurisdictions (particularly the United States and the European Union), empirical research of the use of schemes and takeovers in Australia in recent times, an exploration of arguments and commentary on schemes of arrangement (including a detailed analysis of the contentions and proposals of Damian and Rich in their book), as well as consideration of the actual and potential impact of schemes of arrangement on shareholder rights (including the emerging governance rights of participation and representation)

This project is being financially supported by Deakin University Law School, with academic members of the project all staff members of Deakin Law School: Professor Jean J Du Plessis (Professor), Mr James McConvill (Lecturer), Mr John Bingham (Research Assistant) and Ms Elizabeth Klein (Research Assistant).

A monograph entitled, Schemes of Arrangement: To Takeover Takeovers?, incorporating the analysis, findings and recommendations derived from the research project, will be published in late 2005.

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