Takeovers panel coffers swell to match powers

Friday 2nd March 2001

JOHN KING: Comfortable with the budget

By Rob Hosking

The litigation budget of the newly activated Takeovers Panel is to be significantly increased, the panel chairman, John King, said yesterday.

The panel, which has lain dormant due to the lack of a code, is set to awaken after the activation of the code from July this year.

The size of the litigation budget had yet to be confirmed by the government, Mr King told The National Business Review.

"We don't know how much it is yet but ministers have been quite supportive of the panel," he said.

Earlier in the week, at a media briefing on the new code, Mr King said the budget would be "reasonably robust."

"And the political climate is supportive of this process. It will be very important that from day one we establish that we have some teeth, and that we want to see people abide by the laws. I'm pretty comfortable with the litigation budget."

Mr King strongly emphasised the wide powers the panel would possess under the new law - comments which could heighten any rush, which he conceded is possible, by some firms to initiate takeover bids before the code comes into force.

He also said that companies or individuals trying to find ways around the code would be running a considerable risk. The broad nature of the takeover rules meant the panel had considerable powers and anyone looking for loopholes was likely to be disappointed.

"The code hasn't been written as black-letter law, like a tax statute, where there is a neat little hole. We have carefully used words and concepts that mean the definitions of illegal activity are pretty broad."

This approach had been criticised from some quarters, he noted, but this meant the panel had sufficient powers to enforce the intent of the laws.

"And not only will people find it quite difficult to find loopholes but they also run a severe risk because the penalties are quite considerable - for an individual it is up to $500,000 and for a corporate it is up to $5 million. And the court has huge powers to wind back transactions and require people to forfeit shares."

The code has also been written to restrict opportunity for what he called "market stirrers" to frustrate takeovers. Once the panel has given a ruling, other parties are not able to take the matter to court. "People who wish to challenge a takeover have limited rights to do so if the panel has approved a takeover. It doesn't chop them out totally but the only avenue available to them is judicial review."

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