Proposed changes to deal protection and insider participation in control transactions are likely to be implemented in May, said Allan Bulman, chief executive of Australia’s Takeovers Panel who will be a panelist at Mergermarket’s annual M&A Forum in Sydney on Thursday (16 March).

In December the Takeovers Panel released consultation papers seeking public comment on proposed revisions on lock‑up devices (to be referred to as “deal protection” under the proposal) and insider participation in transactions.

Bulman said comments received as of the end of February indicated a consensus in favour of the general direction of the proposed guidelines. “There is no controversial feedback,” he said.

The Panel is now working on technical details for the new guidelines and will likely approve and publish them in May.

The deal protection changes are substantial and include clarifying the scope to both binding and non-binding proposals, and formulating general principles and factors the Panel will consider in determining whether deal protection arrangements give rise to unacceptable circumstances (deal protection devices are not unacceptable as such but target boards must balance relevant circumstances and reject deal protection devices that reducing meaningful competition for control).

Additional deal changes are as follows:

• Clarifying what the Panel considers to be an effective ‘fiduciary out’ (a provision allowing the directors of a target to be relieved of an obligation in an exclusivity arrangement if it is likely their fiduciary duties require them to do so).
• Guidance on the Panel’s approach to ‘hard’ exclusivity arrangements (i.e., exclusivity arrangements without an effective ‘fiduciary out’ in respect of non-binding proposals).
• Guidance on when deal protection arrangements should be disclosed, including requiring disclosure in the non-binding phase if any deal protection involves a notification obligation.

Changes to the insider participation provisions include broadening the definition of insider to capture a shareholder with material non-public information obtained through its nominee on the target board, as well as expanding the definition of participating insider to include an insider who is a bidder or potential bidder or who has a relationship with a bidder or potential bidder. The proposed changes also call for clarifying the Panel’s expectations as to when an insider should disclose to the board or relevant sub-committee any approach that might lead to a control proposal, as well as providing a non-exhaustive list of factors that the Panel will consider when determining whether unacceptable circumstances exist based on recent Panel decisions.

Bulman said the Panel is likely to issue two further consultation papers later this year on shareholder intention statements and a process to address disruptive behaviour from parties. He added there is no current momentum to introduce a ‘put up or shut up’ clause (whereby a bidder is required to formalise an offer within a set period of time or be barred from making a bid for a longer period) or to require target boards to provide the same due diligence materials to all prospective bidders.