AUSTRALIA Law and Practice Contributed by: Alberto Colla, Keith Tan, Hugh McDonald and Dean Zinn, MinterEllison
8.4 Independent Outside Advice Depending on the nature, scale and complex - ity of a proposed business combination, direc - tors of a bidder and target will commonly obtain independent external advice from investment bankers, lawyers, financial and tax advisers, public relations firms and proxy solicitation firms. Technical or other specialist advisers are also commonly engaged to undertake due diligence. There is a statutory requirement for a target to commission an independent expert’s report where the bidder’s existing voting power in the target is 30% or more, or a director of the bid - der is also a director of the target. Even outside these two mandatory circumstances, a target will often voluntarily commission an independent expert’s report (eg, in a hostile takeover where target directors consider the offer materially undervalues the target). Where a business combination is structured as a scheme of arrangement, market prac - tice requires the explanatory memorandum to include an independent expert’s report express - ing an opinion on whether the scheme is in the best interest of target shareholders, even if such a report is not required by law. 8.5 Conflicts of Interest Directors of Australian companies have statutory and fiduciary duties to avoid conflicts of interest. Under Australia’s corporations legislation, a director must give notice to the other directors of a material personal interest related to the com - pany’s affairs. Notice can be given at a directors’ meeting or by standing notice. For proprietary companies, if permitted by the constitution, directors may vote on a matter in
The role of an IBC in this context is to apply independent judgment to promote a fair and bal - anced transaction process. This includes: • regulating the provision of due diligence and other information to the prospective acquirer and otherwise managing the conflict of inter - est; • evaluating the fairness and overall merits of the proposed transaction, including by engaging external advisers; • negotiating the price, terms and conditions of the proposed transaction on behalf of the target; • making recommendations to the target board and shareholders on the proposed transac - tion; and • taking responsibility for disclosure documents and other communications provided to target shareholders about the proposed transaction. 8.3 Business Judgement Rule The business judgement rule in Australia pro - vides that a director of a company will be taken to have met the duty of care and diligence in making a business judgement (defined as any decision to take or not take action on a matter relevant to the business operations of the com - pany) if the director: • has made the judgement in good faith for a proper purpose; • did not have a material personal interest in the subject matter of the judgement; • informed themselves about the subject matter of the judgement to the extent they reason - ably believed to be appropriate; and • rationally believed that the judgement was in the company’s best interests.
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