Citation(2019) 31 SAcLJ 285
Published date01 December 2019
Publication year2019
Date01 December 2019
I. Introduction

1 In the UK, public takeovers are primarily regulated by the City Code on Takeovers and Mergers1 (“UK Code”) and the Panel on Takeovers and Mergers (“UK Panel”). The UK Code represents the collective opinion of those professionally involved in takeovers as to how takeovers should be regulated. The UK Panel, which is a specialist independent body comprising representatives from the financial and investment community, enforces the UK Code. Other common law jurisdictions in the Asia Pacific have closely followed the UK approach to takeover regulation with some minor variations, including Hong Kong2 and Singapore.3

2 However, while the takeover panel is the main forum for resolving disputes in these takeover code jurisdictions, it is not the only forum. Aggrieved parties may wish to challenge the decision of the panel. Further, takeover disputes often involve substantive legal rights of the market participants, which are ordinarily resolved in the courts. The question that often arises is the role of courts vis-à-vis the takeover panels in the jurisdictions that adopt the takeover code. Existing scholarship4 and established case law5 have considered two situations of potential conflict: where market participants seek to challenge the takeover panel's rulings in judicial review proceedings, or where the target (or its board) seeks to pre-empt the takeover panel through tactical litigation in an attempt to enjoin a hostile takeover bid.6 In the case of the former, it is clear that the courts can review decisions of takeover panels, albeit the scope of the review is somewhat limited. In the case of the latter, it is well established that the prohibition on the frustration of bona fide bids in the takeover codes can limit the ability of target boards to fulfil their fiduciary duties.

3 Outside of judicial review and tactical litigation, the traditional resolution to the issue of potential overlap in jurisdictions is that the court only adjudicates on the substantive legal rights of the participants. The takeover panel determines whether the participants have complied with the takeover code and, in appropriate cases, makes remedial orders to rectify such non-compliance.7 However, takeovers occur against the backdrop of legal relationships among the shareholders, directors, the bidder and the target,8 and the line drawn between adjudication on

compliance of the takeover code and substantive legal obligations is rarely well defined.

4 Drawing from more recent examples of takeover disputes in the UK, Hong Kong and Singapore, this article argues that that the potential for conflicting outcomes, due to the overlap in jurisdictions, has assumed much more importance. This potential for conflict has intensified, largely in part due to the fact that takeover panels place far more emphasis on market certainty and facilitating orderliness in the markets since the market turmoil after the 2001 terrorist attacks and 2008 global financial crisis. Additionally, given that some of these matters are effectively disposed at proceedings before the takeover panel (and are thus moot issues by the time that they are litigated), they raise the question of whether the takeover panel is intended to be the main (or even only) forum for disputes during the bidding process. In other words, is it desirable to effectively foreclose the right of the market participants to bring an action, ex post the takeover?

5 This article argues that there is insufficient basis to foreclose the right of the market participants to bring substantive legal actions in the courts. Yet, at the same time, moving to a system where takeover regulation is largely decided by the courts will undermine most of the advantages of speed and certainty that are currently found in the takeover code jurisdictions. One possible solution to address this problem is to have a clearer delineation of the powers of the courts and the takeover panels. It considers the suitability of importing the partial solution in Australia in the form of s 659B-C of the Corporations Act 2001, which makes the Australian Takeovers Panel (“Australian Panel”) the only forum for solving disputes when the bid is under way. While there are important differences between the Australian Panel and the takeover panels in the takeover code jurisdictions,9 the functions of the Australian Panel parallel that of the panels in the takeover code jurisdictions as they seek to settle disputes in takeovers and make their decisions on similar aims and principles.

6 The article is organised as follows. Part II10 sets out the respective roles of the courts and the takeover panels in takeover code jurisdictions. Part III11 deals with the circumstances in which the takeover panels resolve disputes to give effect to certainty and market orderliness, even though the principles-based approach in the takeover codes may conflict or be inconsistent with the conclusion reached under private law. Part III then discusses the following: first, where there is a conflict, will the court give primacy to the decisions of the takeover panel? Second, as a matter of process, is a party precluded from bringing litigation in the courts to seek redress arising from the decision of the takeover panel on the grounds of such inconsistency?

7 Part IV12 argues that while the takeover panel is not necessarily concerned with the legal position of the participants in the takeover, the remedial order or failure to grant relief in respect of contravention of the takeover code will often affect the participant's remedies at private law.

8 Part V13 sets out the observations and analyses the implications of the findings on recent developments. In particular, it discusses whether the reluctance of the courts to intervene in decisions made by specialist takeover panels, which are driven by concerns of market certainty and predictability rather than giving effect to substantive legal rights, continues to be justifiable in light of the increasing impact on private law. It also argues for the desirability of a clearer delineation between the takeover panel and the courts and assesses the viability of the Australian example. Part VI14 concludes.

II. Background and the problem of overlapping jurisdictions

9 There are significant similarities between the takeover regulations in the UK (post-2006) and its former colonies (such as Singapore and Hong Kong), which have transplanted the UK-style of takeover regulation. Prior to the implementation of the European Union (“EU”) Takeover Directive (“Takeover Directive”) in 2006,15 the UK Panel was an entirely self-regulatory body and did not have statutory enforcement powers.16 Post-2006, while the UK Panel now possesses a

statutory function, the essential characteristic of the UK Panel as a regulator of takeovers remains unchanged.17 Decisions of the UK Panel are made by the Takeover Executive, and rulings can be reviewed by the Hearings Committee18 with a right to appeal to the Takeover Appeal Board.19 Panel members are drawn from finance and investment communities.20 The UK Panel can order compensation for breaches of specified provisions of the UK Code,21 and its rulings can now be enforced by the courts.22

10 Similarly, in Singapore and Hong Kong, takeover regulation is primarily regulated under the Singapore Code on Takeovers and Mergers23 (“Singapore Code”) and the Codes on Takeovers and Mergers and Share Buybacks24 (“HK Code”) respectively, both of which are based on the UK Code. In Singapore, the Singapore Code is administered by the Securities Industry Council of Singapore (“SIC”), established under the Securities and Futures Act.25 Unlike in the UK, however, SIC members not only are drawn from the private sector but also include government representatives, though the majority are from the private sector.26 While day-to-day decisions are generally made by the secretariat of the SIC, the SIC may convene hearing committees in certain significant cases.27 Unlike in the UK and Hong Kong, the Singapore Code does not provide for a right of further appeal against SIC decisions. In Hong Kong, the HK Code is administered by the Takeovers and Mergers Panel (“HK Panel”).28 Rulings at first instance

are made by the Executive of the HK Panel, and it is possible to appeal the decisions to the HK Panel and to further appeal to the Takeover Appeal Committee. The HK Panel, established under the Securities and Futures Commission of Hong Kong, comprises members from the financial and investment community.29

11 All three takeover code jurisdictions provide for the takeover panel the power to order compensation for breaches of the takeover code, though there are some variations on the scope of compensation. For example, the Singapore Code, unlike the UK and HK codes,30 does not exhaustively define the types of breaches which compensation may be awarded for.31

12 Existing scholarship and jurisprudence deal with two areas of overlap between the takeover panels and the courts where there may be conflicting decisions reached by both bodies. The first relates to judicial review proceedings and the second to litigation by target boards to enjoin bona fide bids. There is a third area of potential conflict: pursuant to s 955 of the UK Companies Act 2006,32 if the UK Panel applies to the court to enforce compliance with the UK Code. However, as this provision is found in neither the Singapore nor HK code, and is unlikely to prove contentious in UK practice in light of The Panel of Takeovers and Mergers v David King,33 it has been excluded from discussion in this article.

A. Judicial review

13 In the UK, before the UK Panel was put on a statutory footing,34 the English Court of Appeal in R v Panel on Takeovers and Mergers plc, ex parte Datafin plc35

(“ex parte Datafin”) held that decisions of the UK Panel were subject to judicial review, on the application of either the “nature” test36 or the...

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