NEW ZEALAND Law and Practice Contributed by: Ian Beaumont, Tom Gillespie and Sam Kember, Russell McVeagh
6.7 Types of Deal Security Measures In a scheme of arrangement, deal protections typically sought by prospective buyers include the following: • Exclusivity arrangements: No-shop, no-talk and no-due-diligence provisions, typically with “fiduci - ary out” exceptions allowing the target board to engage with superior competing proposals. • Break fees: Compensation arrangements, in a generally accepted, though not legally prescribed, amount of 1% of the target’s equity value. • Matching rights: A right for the buyer to be informed of, and match, any superior proposal. • Target warranties and conduct covenants: Under- takings regarding the operation of the business in the ordinary course between signing and comple - tion. • Voting agreements: Commitments from major shareholders to support the transaction in the absence of a superior proposal. These types of protections are unusual in a pre-bid context and are not a feature of Takeovers Code offers (other than “lock up” agreements requiring substantial shareholders to accept the offer (in the absence of a superior proposal)). Recent changes to the overseas investment regime have resulted in typically shorter timelines for obtain - ing OIO approval than previously. 6.8 Additional Governance Rights In a private M&A context, a buyer has the ability to impose a wide range of additional governance rights, typically via the constitution. These can include board representation, information rights, prescribed reserve matter consent requirements, and restrictions on the transfer or issue of shares. In a public M&A transaction, the scope to prescribe additional governance rights or protections is more limited. The constitution can permit a significant shareholder board appointment rights in line with its shareholding, although this has implications for how the shareholder can vote on other board appointees.
6.9 Voting by Proxy In New Zealand shareholders can vote by appoint - ing a proxy to attend a shareholders’ meeting and vote on their behalf. The right to appoint a proxy is conferred by the Companies Act, which provides that a shareholder of a company who is entitled to attend and vote at a meeting of shareholders may appoint another person as the shareholder’s proxy to attend and vote on the shareholder’s behalf. A proxy does not need to be a fellow shareholder. The notice of meeting must inform shareholders of their right to appoint a proxy and the form in which the proxy appointment is to be made. The company’s constitution may impose additional requirements or conditions on the exercise of the right to appoint a proxy, provided that these are not inconsistent with the Companies Act. 6.10 Squeeze-Out Mechanisms Where the bidder becomes a “dominant owner” by holding or controlling 90% or more of the voting rights in a code company, it may compulsorily acquire all outstanding voting securities of that class. The bidder must serve an acquisition notice within 20 working days after becoming dominant owner or, where the 90% threshold is reached via a takeover offer, within 20 working days after the offer closes. The Takeovers Code also confers a reciprocal “sell‑out” right ena - bling outstanding shareholders to require the domi - nant owner to acquire their securities on Code terms. 6.11 Irrevocable Commitments It is common in New Zealand public M&A transac - tions for the offeror to seek commitments from key target shareholders to accept the offer (in the case of a takeover offer) or vote in favour of the scheme (in the case of a scheme of arrangement). These com - mitments are typically sought during the negotiation phase and entered into prior to the public announce - ment of the transaction (given they will need to be dis - closed), and are intended to provide the offeror with a degree of certainty as to the likely level of acceptance or shareholder support for the transaction from the outset. In New Zealand, commitments from key shareholders typically take the form of either:
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