Corporate Law Update
February 2015
Proportional Takeover Provisions – Review Your Constitution
What is a proportional takeover bid?

states whether, as at the day on which the statement is
prepared, any of the directors of the company is aware
of a proposal by a person to acquire, or to increase the
extent of, a substantial interest in the company and, if
so, explains the extent (if any) to which the proposal
has influenced the decision to propose the resolution;

reviews both the advantages, and disadvantages, of
the provisions proposed to be renewed for the directors
and the company's members, during the period during
which the provisions have been in effect; and

discusses both the potential advantages, and the
potential disadvantages, of the provisions proposed to
be renewed for the directors and the company's
members.
A proportional takeover bid is an off-market takeover bid for
a specified proportion of the securities in the bid class. The
proportion specified must be the same for all holders of
securities in the bid class.
Proportional takeover provisions
It is common for the Constitution of a public company to
contain proportional takeover approval provisions which
require shareholders to approve any takeover offer for only a
proportion of each shareholder’s shares.
As a proportional takeover bid involves an offer for only a
proportion of each shareholder’s shares, a bidder may
acquire control of a company:

without shareholders having the chance to sell all their
shares, leaving them as part of a minority interest in the
company; and

without payment of an adequate control premium.
Proportional takeover provisions are designed to assist
shareholders to receive proper value for their shares if a
proportional takeover bid is made for the company. They
lessen the risk of a bidder obtaining control without
adequately compensating shareholders as they allow
shareholders to decide collectively whether a proportional
takeover bid is acceptable and appropriately priced.
Renewal of proportional takeover provisions
In accordance with section 648G of the Corporations Act
2001 (Cth), the proportional takeover provisions expire three
years from their adoption or, if renewed, from the date of
renewal.
A company may renew its proportional takeover provisions
by special resolution. With the notice convening the meeting
at which any such resolution is proposed, the company must
send a statement that:

explains the effect of the provisions proposed to be
renewed;

explains the reasons for proposing the resolution and
sets out the factual matters and principles underlying
those reasons;
Action
While it is common for the Constitutions of public companies
to contain proportional takeover approval provisions, it is not
common for companies to renew those provisions. We
recommend that public companies review their Constitutions
and contact us if it is necessary to renew the proportional
takeover provisions contained in them.
Further details
For further details please contact:
Phillip Roberts
Partner
Email: [email protected]
Simon O’Loughlin
Partner
Email: [email protected]
Larry Opie
Consultant
Email: [email protected]
O’Loughlins Lawyers is pleased to have acted for
Animoca Brands Corporation Limited (previously called
Black Fire Minerals Limited) in relation to its acquisition
of the Animoca Brands mobile applications/games
development and publishing business, and recent relisting on ASX.
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obtain independent legal and other professional advice suitable to their individual circumstances
.
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