CAMACs Position in Relation to the Use of Schemes of Arrangement for Takeovers - Coursework Example

Members’ schemes have as well evolved in recent years as a means of realizing transformations in corporate management. They are generally utilized for this function, in non-hostile situations, in preference to a takeover bid under Chapter 6 of the Corporations Act. In the period from January 1, 2008, to July 1, 2009, there were 78 takeover bids about listed entities (73 off-market and 5 on-market bids), compared with 58 members’ schemes. The use of schemes to alter corporate management has received judicial as well as regulatory recognition.

The Advisory Committee was asked by the former Government, in the context of a wider reference, to offer advice on a specific facet of members’ schemes, namely the ‘headcount’ test for shareholder approval. The Committee did put into consideration that it would be helpful to reflect on this matter in the context of a wider review of whether the members’ scheme requirements function effectually and suitably, as well as with suitable safeguards, to enable corporate restructuring.

The Committee had in mind the increasing and changing use of members’ schemes, together with their use as a means to attain change of corporate management, along with the fact that the relevant requirements of the Corporations Act have mainly remained unaltered for several years. CAMAC published a discussion paper in June 2008 and invited comments from interested parties.

Change of ControlI does agree with the CAMAC’s position since schemes might be utilized for a variety of functions, including effecting a change of control within a company or a corporate group. If utilized to this end, a scheme can be compared with a variety of control through a bid or a reduction of share capital. The major general characteristic of schemes, bids, and reductions of capital is that, once approved (schemes or reductions of capital) or successful (where a bidder achieves the required acquisition threshold), they bind all shareholders, including non-participating or dissident shareholders. Relying on their terms, they can be utilized to realize majority or complete control. These statutory arrangements are not subject to the restrictions on share expropriation under the Gambotto principles.

Schemes have been increasingly utilized to attain changes of control, notwithstanding moves over the last decade to overcome hardships in realizing complete control via a bid. According to ASIC, since the beginning of the year 2007, almost as many schemes have been employed for this function with listed bodies as have takeover bids.