Both Australian company law and Chinese company law have been dramatically changed in the last decade and are still being changed. The CLERP Act 1999, which came into force on 13th March 2000, made significant changes to the Corporations Law (CL). While the Securities Law of China, which commenced on 1st July 1999, is a milestone in the development of Chinese company law. Both the CLERP Act of Australia and the Securities Law of China changed the takeover provisions in respective jurisdictions. This short essay is to outline these changes and their impacts and interactions.
CLERP Act 1999: takeover law reform and its impacts in Australia
The takeover legislation in Australia can be traced back to the takeovers code introduced by the Uniform Companies Code in 1961. This legislation was significantly revised in 1971 with the introduction of the Eggleston Principles. The Eggleston Principles was subsequently carried forward into the Companies (Acquisition of Shares) Act 1980, and the provisions of this legislation were largely re-enacted in CL.
Before the CLERP Act was enacted, CL had been changed more than a dozen of times, but takeover provisions were almost the same although the Simplification Task Force had planned to reform them relating to relevant interests, associate relationships and entitlements.(1) After the CLERP replaced the Corporate Law Simplification Program, the endeavour to reform the takeover provisions continued, and the emphasis was moved to facilitate a more efficient market for corporate control because the objective of the CLERP was "to ensure that business regulation is consistent with promoting a strong and vibrant economy and provides a framework which assists business in adapting to change".(2) The CLERP brings an economic focus to corporate law reform. As a part of the CLERP, takeover law reforms accordingly were designed to achieve an appropriate balance between facilitating efficient corporate control while ensuring a sound investor protection regime, particularly for minority investors.
The CLERP Act has repealed the whole of Chapter 6 of CL, and inserted new Chapter 6 together with Chapters 6A, 6B, 6C and 6D, of which Chapter 6 deals with the acquisition of shares and takeovers, Chapter 6A deals with compulsory acquisitions and buy-outs. Chapter 6 begins with the purposes of the takeover rules with Eggleston Principles incorporated. It also extends takeover regulation to listed managed investment schemes and listed bodies. The main reforms are summarised as follows.
The CLERP Act makes the Corporations and Securities Panel the primary forum for the resolution of takeover disputes during the bid period. All interested parties may bring matters before the Panel, not just the ASC. Any aggrieved party has a right of appeal from a Panel decision to an appeal division of the Panel. The Panel is empowered to make a declaration of unacceptable circumstances having regard to the public interest, and to review ASIC's administrative decisions.
Before the reform, the courts were the principal forums for resolving takeover disputes. Targets in hostile takeover bids often resorted to litigation that can result in bids being delayed, sometimes for tactical reasons. And the court proceedings arguably were used as a method of creating financial disincentives for takeovers to proceed. The advantages of an effective panel for dispute resolution are obvious. A Panel comprised of experts in the field will make decisions quickly and efficiently. The removal of the capacity of the court to grant injunctions other than on the application of the ASC will remove the major source of current tactical litigation. And the Panel applying a single standard instead of the different approaches taken by different judges also can minimise tactical litigation.
Before the reform, a compulsory acquisition is available only when 75% by number of the outstanding shareholders sell their shares during the bid. If the takeover relates to a particular class of shares then it is only the remainder of that class that may be acquired. Now, compulsory acquisitions can be made for all class of securities. The 75% rules are changed to be based on the value of shares subject to acquisition under the takeover, rather than numbers of shareholders. This overcomes the problem of a single shareholding being distributed among several people to deliberately increase the number of shareholders to oppose the bid.
In addition, a person who has relevant interests in at least 90% by number of the securities in that class is able to achieve 100% control of that class. This helps companies overcome any limitations on acquisitions flowing from the Gambotto(3) decision. If 10% by value of the minority holders of any class dissented, the acquisition of that class would only be able to proceed with court approval of the fairness of the price.
This reform is designed to make takeover easier and prevent greenmail, and will result in better and more efficient management of company groups and reducing the administrative and reporting requirements of associated companies. Where a parent company has compulsorily acquired outstanding minorities, there is more flexibility in distribution of funds between subsidiaries, the confidential information is better protected and conflicts of interest in dealings between group companies are avoid. However, it is also criticised as both unfair and unnecessary for hurting minority shareholders.
The CLERP Act also makes significant reforms on the disclosure requirements for takeover offers. The disclosure rules are consistent with the fundraising disclosure rules and have regard to the extent to which reliable information is available and useful. A bidder has liability to make supplementary disclosures. The procedure rules relating to off-market bids and market bids are brought into line. Part A and Part C statements are merged into a bidder's statement and a target's statement replaces Part B and Part D statements.
It is worth noting that the most striking and radical of the CLERP's proposals for takeover law reform was to introduce a mandatory bid rule. Acquisitions that would exceed the statutory threshold 20% would be allowed as long as that the acquisition was immediately followed by the announcement of a full takeover bid. The bid would be unconditional and for cash of an amount at least equivalent to the highest price paid by the bidder in the last four months.
The CLERP believed that there were potentially significant benefits associated with introducing a mandatory bid.(4) It would promote certainty in the takeover process, cut down the bid costs for removal of an auction and smooth the bid process for minimisation of directors' defensive behaviour. It was expected that more bids would take place as a result of greater certainty of outcome, providing greater incentives for efficient management under the increased prospect of a takeover.
However, it was inconsistent with the first three Eggleston Principles, and the removal of an auction would result in some reduction of market transparency. It would also harm the target shareholders because they would be forced to accept the same price that was offered in private negotiation. At last, the mandatory bid proposal was deleted from the CLERP Bill when it was opposed in the Senate.
The reforms are potentially very important to the shape of takeover law and company law generally. As takeover is much easier and more efficient than before, the reforms also will promote efficient management and confident market, which will ultimately lead to greater wealth creation and better competitive capacity in globe market.
Securities Law: takeover law reform and its impacts in China
As a securities lawyer identified by China Securities Regulatory Commission (CSRC) and Ministry of Justice, I am more interested in what has happened in China and what should China adopt the Australian experience for her own securities markets related to takeovers.
After the socialization in later 1950s, shares were disappeared in Mainland China.(5) But under the "open-door" policy, shares were re-emerged in China in 1983.(6) Before Shanghai Stock Exchange was established in December 1990, securities were traded on counter in major cities under government supervision.(7) After the foundation of Shanghai Stock Exchange and Shenzhen Stock Exchange,(8) securities trading on counter was no longer legal and all securities should be traded in stock exchanges. There was no nationwide securities regulation until Interim Provisions on the Management of the Issuing and Trading of Stocks (Interim Provisions) was issued by the State Council on 22 April 1993. Chapter 4 of the Interim Provisions focused on listed company takeovers. In the same year, the Company Law was finally promulgated by the National People's Congress.(9) The Company Law includes some provisions on shares transfer and company merger that is related to takeover. Actually, before the Interim Provisions was issued, the Draft Securities Law had been under debate. After several years of debate, the Securities Law at last was enacted at the end of December 1998 and came into force on 1 July 1999.
As I have mentioned above, the Interim Provisions and the Securities Law only cover listed company takeovers, while the Company Law applies to other company takeovers. Due to the word limit, this short essay will mainly focus on listed company takeovers.
Chapter 4 of the Securities Law deals with takeovers, which retains basic takeover provisions in the Interim Provisions; it also makes some changes to make takeover a little easier and more efficient. I would like to summarise as follows the main takeover provisions of the Securities Law as well as the changes it has made. Meanwhile, I would like to compare them with the counterparts in CL, especially in the CLERP Act.
In Interim Provisions, a natural person was not allowed to hold 5 per thousand shares in a listed company, so only a legal person can be a takeover bidder. This limitation no longer exists in the Securities Law. This is a very important reform to the socialist China.
According to Article 78, a listed company may be taken over by bid or by agreement. The latter was not allowed in the Interim Provisions. Only Article 89 is especially about takeover by agreement, that a purchaser can conclude shares transfer agreements with the shareholders of a listed company. After the agreements are made, the purchaser should report to CSRC and the stock exchange and make a public disclosure within 3 days. The agreements shall not be carried out before the disclosure. This provision makes takeover much easier. But it is criticised for little transparency, and unfair to minority shareholders. In practice, if a person wants to take over a listed company by agreement, the person has to negotiate with the controlling shareholders; it is almost impossible to negotiate with thousands of minority shareholders.
The takeover threshold in China is 30%,(10) but it does not mean that a person can trade shares freely before he possesses 30% shares of a listed company. Under Article 79, if a person possesses 5% shares of a listed company on market, he should report to CSRC, the stock exchange and the company, and should make a public disclosure within 3 days. He is prohibited from trading the company's shares in the prescribed period. The rule also applies whenever the person increases or decreases his share possession by 5% point of the total shares in the company. When the person possesses 30% shares of the company, he should make a takeover bid if he wants to make more purchase on market, except that it is exempted by CSRC.(11) A proportional bid is allowed under Article 82.
This provision is similar to the substantial holding provision in section 671B CL. The limitation is loosened greatly compared to the Interim Provisions. In the Interim Provisions, if a person possesses 5% shares of a listed company, he should stop trading within 3 days to report and disclose whenever his possession is increased or decreased by 2% of the total shares in the company.
Article 87 provides that if a bidder has held more than 90% shares in a company when the bid period is expired,(12) other shareholders who did not accept the offer are entitled to sell their shares to the bidder with the same conditions stated in the bid. It is similar to the compulsory buy-out provisions in sections 662C CL, but there is no compulsory acquisition in the Securities Law. In practice, it is almost impossible that a person holds 90%, because according to Article 86, if a bidder holds more than 75% shares of the total, the listed company shall stop listing. In order to keep the company listed, a bidder will not hold more than 75% shares.
In China, there was a committee under CSRC to deal with disputes arising from the securities market. But it was criticised because only judges and arbitrators have the right make a judgement over civil disputes. So the committee was dissolved and the power was returned to the courts.
Conclusion
Legal changes are always accompanied with the growth in the size of markets and the increase in corporate activity. Compared to the securities markets in Australia and other developed countries, the securities market is very young in China, and compared to the complex CL, the Securities Law is also very simple.(13) The Company Law and the Securities Law of China is just like summaries of CL. On one hand, because the market is not mature, it is necessary that the Securities Law leave more space to CSRC to develop the market rules to adapt to the changing circumstances. On the other hand, too simple rules cause more uncertainty that will impede the market development.
In the past few years, there was a new worldwide takeover trend covered almost all industries. Both Australia and China should try to keep up with it. Since takeover legislations and takeover strategies are used in similar ways in different countries, it is easy to China to adopt some Australian experience. China should improve the efficiency of the market while encouraging better management and enhancing investor protection, and achieve an appropriate balance between them. The mandatory bid proposal is quite good to make an easier and more efficient takeover, the provisions that a listed company may be taken over by agreement make takeover much easier than the mandatory bid, but it is also more opaque and more unfair. In my opinion, if it is supplemented with some useful rules from the mandatory bid rule, it will be better. The Panel contributes more to the efficiency, and sufficient disclosure is crucial to equability and market confidence, hence, they should be adopted with some amendment to improve securities laws and regulations of China. In addition, the simple Securities Law should be refined or supplemented by more detailed provisions to make it more certainty. It should be taken into account to adopt some other Australia experience as well as the new reforms.
Footnotes
1.The Simplification Task Force, "Takeovers", 23 January 1996
2.CLERP, Policy Framework
3.(1995)182 CLR 432
4.CLERP Proposals for Reform: Paper No. 4, Takeovers, Corporate control: a better environment for productive investment
5.China is consisted of four parts: the mainland, Hongkong, Macau and Taiwan. This essay only refers to Mainland China(China).
6.The Joint Investment Company in Baoan County, Shenzhen issued the first public share certificates in 1983.
7.The trading-on-counter markets were called "Trading Centres" in China.
8.They are the only two stock exchanges in China, and will be merged in near future.
9.It was passed on 29 December 1993 and came into force on 1 July 1994.
10.In China, there are no different classes of shares other than ordinary shares.
11.Article 81, Securities Law
12.In China, a takeover bid must last for not less than 30 days and not more than 60 days: Article 83.
13.The Securities Law contains 224 articles, of which only 17 articles regulate takeovers.
Bibliography:
1.Legal Committee of the Company & Securities Advisory Committee, Compulsory Acquisitions Report, January 1996;
2.The Simplification Task Force, "Takeovers", 23 January 1996
3.CLERP, Policy Framework
4.CLERP, Policy Reforms;
5.CLERP Proposals for Reform: Paper No. 4, Takeovers, Corporate control: a better environment for productive investment
6.CLERP, Commentary on Draft Provisions;
7.H Ford, R Austin and I Ramsay, An Introduction to the CLERP Act 1999, Australia's New Company Law, Butterworths, 2000
8.R Levy, Takeovers: Law and Strategy, LBC, 1996
9.P Little, Law of Company Takeovers, LBC, 1997
10.Jennifer Hill; "CLERP: What it Means for Corporate Australia", (2000) 1 Australian Company Secretary 18;
11.R Tomasic, J Jackson and R Woellner, Corporations Law: Principles, Policy and Process, Butterworths, 3rd edition
12.K Santow, CLERPing the Panel, (1999) 10 November paper given at Centre for Corporate Law and Securities Regulation, University of Melbourne
13.S Hirst and L Law, CLERP and Takeover Disclosure Regulation, (1999) 17 CSLJ 307
14.R Tomasic and J Fu, The Securities Law of the People's Republic of China: An Overview, (1999) 10 AJCL 268
15.T L Hong, Corporate Law Reform in the People's Republic of China, (1999) 10 AJCL 238
杨春宝一级律师简介
杨春宝一级律师，大成上海高级合伙人、资本市场部主任、国资基金研究中心主任，大成中国区私募基金专业带头人、科技与文化法律研究中心联合牵头人。执业30余年，长期从事私募基金、投融资、并购重组法律服务，尤其对对赌研究颇深且具有非常丰富的实战经验，并专注于金融机构股权投资业务。2004年起多次入选The Legal 500"私募基金"和"公司与商业"等境内外各类律师榜单，代理的中国法院首例适用外国法律审理外国公司的董事损害小股东权益纠纷案入选上海高院发布的《上海法院域外法查明典型案例》和威科先行"要案头条"。入选上海涉外法律人才库、上海市司法局鼎新法治人才库、上海国有企业改制法律顾问团，具有上市公司独立董事任职资格，系多家知名高校的兼职教授或兼职研究生导师及上海市商务委跨国经营人才培训班讲师。出版《私募股权投资基金风险防控操作实务》等16本投融资法律专著。了解更多常见法律问题
澳大利亚CLERP Act如何改革收购争议解决机制？
在澳大利亚原有制度下，法院是收购争议的主要解决场所，竞价期间目标公司常通过诉讼拖延收购，甚至以法庭程序制造财务障碍。CLERP Act引入公司证券小组作为竞价期间收购争议的主要裁决机构，由专家组成，所有利益相关方均可向小组申诉，小组可就不利情况作出声明，并有权审查监管机构的行政决定。这一机制改变了以往依赖法院的格局。
文章指出，在改革前，敌意收购中的目标公司经常诉诸诉讼，某些情况下纯粹出于战术目的，导致收购延迟，法庭程序实际上被用作对收购继续进行的经济威慑。因为不同法官裁判标准不一，诉讼结果难以预测，也助长了策略性诉讼。引入单一专家小组后，裁判标准统一，决策快速高效，同时法院仅在监管机构申请时才能颁发禁令，这从根源上减少了策略性诉讼的空间。
实务中，收购争议解决效率直接影响交易成败。采用专家小组模式有利于在竞价期间快速定分止争，避免因司法拖延导致收购窗口错失。但也要注意，小组裁决可能对实体权利产生重大影响，当事人应重视在小组阶段的证据与论证准备。此外，法院与行政监管的权限划分需要明确，确保司法审查与专家裁决之间形成有效衔接，防止新的程序滥用。
澳大利亚CLERP Act对强制收购制度做了哪些修改？
强制收购指收购方在取得足够比例股份后，可以强制收购剩余少数股东股份的制度。澳大利亚改革前，强制收购须满足持有75%股东在竞价中出售股份，且按股东人数计算；改革后改为按股份价值计算，同时适用于所有类别的证券。若相关权益达到某一类别证券的90%，即可取得该类别全部控制权；但若按价值计算10%的少数股东反对，则须获得法院批准收购价格公平方可继续。
文章指出，旧规则中75%按股东人数计算存在漏洞，因为单一股份可以分散给多人，从而人为增加股东人数来抵制收购。改为按价值计算后，该漏洞被克服。此外，90%门槛的引入有助于公司规避此前司法判例对收购设置的障碍，使母公司更容易实现对子公司的全面控制。改革还使集团内部资金调度、保密信息保护及关联交易冲突规避更加灵活，但也因可能损害少数股东利益而被批评。
强制收购简化了控制权整合，但必须防范对少数股东的压榨。在实务中，收购方应关注价格公允性，尤其是当少数股东反对时，法院审查可能带来额外成本。对少数股东而言，应充分了解自己的异议权利和退出机制。立法者需要在促进效率与保护少数股东之间保持平衡，现有规则通过价值基准和司法审查程序试图实现这一平衡，但个案中的公平性仍需具体评估。
为什么强制要约规则未在澳大利亚通过？
强制要约规则是一种收购触发机制，即任何收购导致持股超过法定门槛（如20%）时，收购方必须立即对所有股东发出全面无条件收购要约，且要约价格不得低于此前四个月内支付的最高价。该规则旨在提高收购确定性、减少竞价过程中的拍卖成本，并抑制目标公司董事的防御行为，从而促进更多收购活动。
文章指出，CLERP曾认为引入强制要约规则具有潜在重大好处，但因该规则与Eggleston原则中的部分内容相冲突，且取消拍卖式竞价会降低市场透明度，目标公司股东可能被迫接受私下谈判中的较低价格，因此受到反对。最终该提案在澳大利亚参议院遭到否决，未成为法律。这反映了改革在效率与公平之间的艰难取舍，也说明立法机关对可能损害股东利益的激进条款持审慎态度。
该规则被否决提示我们，收购法律改革不能只追求效率，必须兼顾股东平等、市场透明和价格发现机制。在实务中，触发门槛、要约价格和豁免条件的设计直接影响收购成本与股东利益。我国在设计类似制度时，应结合本国市场结构，评估强制要约对控制权市场活跃度的影响，并为少数股东提供充分的价格保护与退出渠道。政策制定者还需预判利益集团的反制力量，准备充分的政策论证。
以上内容仅供参考，不构成法律意见。如需专业法律服务，请联系杨春宝一级律师：chambers.yang@dentons.cn
