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Parliamentary Joint Committee on Corporations and Financial Services
16/02/2018
Oversight of the Australian Securities and Investments Commission and the Takeovers Panel

BULMAN, Mr Allan, Director, Takeovers Panel

DYER, Mr Bruce, Counsel, Takeovers Panel

Committee met at 09:02

CHAIR ( Mr Irons ): Welcome. Today the committee is taking evidence as part of its ongoing oversight of ASIC, the Takeovers Panel and the Corporations Legislation. This is a public hearing, and a Hansard transcript of the proceedings is being made. The hearing is also being broadcast via the Australian Parliament House website. The committee generally prefers evidence to be given in public but, under the Senate's resolutions, witnesses have the right to request to be heard in private session. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to the committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee.

If a witness objects to answering a question, the witness should state the grounds of the objection, and the committee will determine whether it will insist on an answer. The Senate has resolved that an officer of a department of the Commonwealth or of a state should not be asked to give opinions on matters of policy and should be given reasonable opportunity to refer questions to a superior officer or to a minister. This resolution prohibits only questions seeking opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted.

I particularly draw the attention of the witnesses to an order of the Senate of 13 May 2009 specifying the process by which a claim of public interest immunity should be raised. The witnesses are reminded that a statement that information in a document is confidential or consists of advice to government is not a statement that meets the requirements of the 2009 order. Instead, witnesses are required to provide some specific indication of the harms to the public interest that could result from the disclosure of the information or the document. I now invite you to make a short opening statement, and at the conclusion of your remarks I will invite members of the committee to put questions to you.

Mr Bulman : Thanks to the committee for inviting us today. The Takeovers Panel was revitalised in March 2000. Prior to that, only ASIC could refer matters to the panel. The intention of the revitalisation of the panel was for takeover disputes to be resolved as quickly, informally and efficiently as possible by a specialist commercial body drawn from law, business and finance, as opposed to the delays associated with tactical litigation. From March 2000 to the end of last year, 2017, the panel considered 497 applications, and we have six applications under consideration at the moment. So, we will very shortly have decided our 500th matter.

On average, it takes a little over two weeks—to be precise, 15.9 calendar days—for the panel to make a decision on an application. The panel has on issue 18 guidance notes that provide policy guidance to the market on what may amount to unacceptable circumstances in controlled transactions. This past year the panel had 43 members who make the decisions on applications. The president of the panel is Vickki McFadden, who is also a panel member. When an application is made the president appoints three members—a sitting panel—usually including a lawyer, an investment banker and a company director or a market professional.

The executive of the panel is based in Melbourne and currently comprises five Treasury employees—myself as director, Bruce as counsel, a deputy counsel and two support staff—and from time to time secondees from law firms, and at the moment we have one, from King and Wood Mallesons. The executive's role is to assist the panel to make consistent and timely decisions. I particularly would like to introduce our counsel, Bruce Dyer, who succeeded Alan Shaw in the role of counsel in September 2016. Bruce was previously partner at Ashurst, a leading commercial law firm. He has also been a professor in practice in law at Monash University. In my view, the panel is a well-respected organisation. We conducted a comprehensive stakeholder survey in 2015 which found that 89 per cent of respondents were satisfied with the panel, and we'd welcome any questions you may have.

Mr VAN MANEN: You mentioned in your annual report that last year you dealt with 23 matters, I think it was.

Mr Bulman : Last financial year, yes.

Mr VAN MANEN: Without going into the matters individually—and I'd probably suggest that a lot of people don't really know what the Takeovers Panel is and what you do—I'd be interested to get a bit more of a flavour of what you do. And with those 23 matters and the other 400-odd that you've dealt with since 2000, is there a common theme that you see running through those matters? And do you do that analysis which then provides a feedback loop to us as legislators or through Treasury to improve corporations law so that those matters don't occur on as regular a basis?

Mr Bulman : Thanks for that question. I might start with a bit of a discussion about the takeovers provisions generally and a little bit of history. Back in the late sixties there was a bit of a concern that large shareholders were selling their shareholdings to a bidder and the minority shareholders getting less as a result. That led to the government of the time having a committee called the Eggleston Committee. They formulated what were called the Eggleston principles, and they are effectively that every shareholder gets treated equally, that shareholders know the identity of the person acquiring a substantial interest in the company and that the shareholders have sufficient information to make a decision in relation to a bid. Those principles were in state legislation, because at the time all corporations law was state based. It was higgledy-piggledy in state legislation for a while. And then in about 1980 the provisions around takeovers that are very similar to what we have today were legislated in the Companies (Acquisition of Shares) Code, which was then adopted by all the states. That then had a set of takeovers provisions around the 20 per cent threshold, basically saying that a shareholder of a listed company can't go over 20 per cent unless it goes through on exception, such as making a bid, a scheme of arrangement or going to a shareholder meeting or something like that.

Around that time, there was also quite a lot of debate around the black letter of those provisions, so the legislature again decided to have two sides to a coin, in a sense: they gave the then corporate regulator the power to exempt or modify from those conditions, and at the same time they also gave the corporate regulator the power to make declarations of unacceptable conduct. I think the idea was that, if somebody tried to get around the black letter of the law, the NCSC could still make a declaration of unacceptable conduct.

Fast-forward another 10 years. There were a lot of complaints that the NCSC was acting as judge, jury and executioner; I think that was the expression that was often used. So it was decided to take that power away from the corporate regulator and give it to a panel, where the corporate regulator could then refer matters to that panel. So that was ASIC, and previously the Australian Securities Commission. During the following decade, it was often threatened by the corporate regulator but rarely used. There were four referrals to the panel in the next decade.

As the 1990s continued, there was concern at the degree of tactical litigation happening in the marketplace for corporate control. Quite often, targets would take bidders to court to stop the release of a bidder's statement, and the courts would often enjoin those bidders from doing so. So there was a desire to actually see the panel revitalise so any party could come to the panel, rather than just ASIC. At the same time, the courts were, to some extent, excluded from the dispute resolution process during the period of a bid.

In terms of what I think it was first envisaged that the panel would be dealing with, they thought they would be dealing quite a lot with disclosure issues in takeover bids, because those were the matters that were mostly before the courts prior to the year 2000. There was also a sense that there might be quite a lot of reviews of ASIC decisions, so one of the powers the panel got in 2000 was to review the ASIC exemption and modification provisions in bids. We have done that on a couple of occasions but not very many, as it turned out.

We also have considered quite a lot of issues around bidder statement content. Out of the matters we've done, 80 have involved some issue around bidder statement content. But we have also done a lot of other issues in relation to our disputes. In terms of the breach of the 20 per cent threshold, we've considered 55 matters of that nature.

Mr VAN MANEN: Can I just jump in on that: how does that come to your attention? Is that a referral by ASIC to you, or is that something you pick up in a market disclosure or a public statement by a listed company?

Mr Bulman : The people who can apply to the panel are anybody interested in the matter—so that could be a shareholder, a bidder or a target. ASIC also has the power to do so, and ASIC does refer matters to us. Predominantly, they have, in our history, been bidders, targets and increasingly shareholders. We get quite a lot of applications from shareholders, and we have had a number of applications from ASIC. In particular, we had one major one last year.

The other matter where we've had quite a lot of applications—and these are mentioned in our annual report—is in relation to associations. We've got this 20 per cent threshold, and this has been the case in other jurisdictions as well. A possible way for parties to avoid that—and this is a very colloquial expression—is to, with your mates, go over to the shelter sheds and have an arrangement that the market isn't aware of. A lot of allegations put to the panel, both by ASIC and by shareholders, and sometimes by targets, is that various parties are associating or acting in concert as a way of getting around the 20 per cent threshold. We've had 74 of those matters, and those matters are actually some of our most time intensive and quite intense applications.

CHAIR: Can I just interrupt again.

Mr Bulman : Of course.

CHAIR: I hope you don't mind if we interrupt as you're going.

Mr Bulman : Keep interrupting, because I'll just keep talking.

CHAIR: What sorts of penalties are handed out to those people?

Mr Bulman : We are not here to punish, as such; we're here to remedy. Our process is that, when the panel hears submissions and gets rebuttal submissions, it decides whether to make a declaration of unacceptable circumstances. Once it makes that declaration, it then has the power to make orders, but those orders are entirely remedial. So, to the extent that there are breaches of chapter 6 which may have criminal consequences, they're matters for ASIC to pursue.

CHAIR: Have they pursued any of those? Have you referred them?

Mr Bulman : We do from time to time make referrals to ASIC, and ASIC has taken civil penalty proceedings and criminal proceedings, from time to time, in relation to takeovers.

CHAIR: Let's go back to the 74, where you were.

Mr Bulman : In relation to those matters, part of the nature of the way we've been set up is that there are very strict time limits in which the panel has to decide applications. Effectively, the panel only has three months from when the circumstances occurred, or one month from the date of the application, to make a decision. Often, in association cases, that, in effect, means that we only have one month to make a decision on association, and that then involves doing almost a forensic audit within a month. That tends to be one of our most intense matters, and you'll see that our president mentions some association matters in our annual report.

CHAIR: How would you go if you got two in the same month?

Mr Bulman : We have had two; we may have had three in the same month. We just work harder, I guess.

CHAIR: Do you have the resources to—

Mr Bulman : We sometimes can bring in people on contract to assist us if necessary.

Ms BUTLER: You had one consultant in 2016-17?

Mr Bulman : We did, yes.

Ms BUTLER: What was that in relation to?

Mr Bulman : That was actually in relation to helping in relation to an association case.

CHAIR: When you said you did your satisfaction survey back in—was it 2015?

Mr Bulman : It was 2015.

CHAIR: You said 89 per cent were satisfied with your operation, and 11 per cent obviously weren't. What sorts of numbers were they?

Mr Bulman : From memory—I have the survey here—

CHAIR: It is at least 10.

Mr Bulman : I think we had a survey response of 124; 656 were approached and 124 responded.

CHAIR: Most of us, as MPs, would be happy with a 20 per cent response. What were the issues for the 11 per cent? What types of issues did they have with you?

Mr Bulman : They were varied. They included sitting panel members' M&A experience—some people focused on that as an issue. Some focused on the issue of the handling of novel issues. The other was in relation to the panel's dealing with association applications. One of the main remedies that the panel can undertake in an association application if there has been a breach of that 20 per cent threshold is to vest the shares in breach with ASIC for on-sale. I think there is a perception in some quarters of the marketplace that it would be nice for a more stringent remedy to be put there. But, as I've said before, the panel's main role is to remedy the unacceptable circumstances. We're not here to punish. But there's a section in the community that would like there to be punishment, or greater punishment, I guess.

CHAIR: Shareholders, usually.

Mr Bulman : In many cases, yes. In one case, for example, we vested shares in ASIC when we failed an association. The party actually sought a judicial review and sought a stay of that vesting and then, basically, at the end of that process, at a time of its choosing, effectively decided to end the matter and then, once the shares were vested and sold, they made a profit on the sale. So I think that may have led some people to feel a little bit aggrieved by that process.

CHAIR: What sort of interaction do you have with FIRB? If it's an overseas takeover, do you work with them?

Mr Bulman : FIRB and ASIC are both independent organisations; I think that is an important aspect to mention. Both FIRB and the executive are Treasury employees. So we do see them from time to time. From time to time, as well, we talk to FIRB—particularly, the Treasury employees to FIRB—about how the takeover provisions in chapter 6 operate to assist them in their work. But we have to be careful about when they have a particular application in some matters before us that there are appropriate information barriers to ensure that the public keep a fair degree of confidence that we're both separate organisations.

CHAIR: I'm not overly familiar with the takeovers regulations but, in a situation where you've got a takeover starting to commence, does it have to be signalled to the market? Do the other shareholders, who own shares in those businesses, need to know if there's a potential takeover—can you explain what the process is?

Mr Bulman : That's quite a multifaceted question. There is a provision in the act that says that, when you make a public proposal to make a bid, you have to follow through with that in two months. That is probably one of the most serious provisions in the act. From memory, it's one where ASIC has actually prosecuted someone in relation to the failure to make a bid. It really affects the market, needless to say, to announce a bid and then not follow through.

There are a whole range of issues around when a bidder approaches the target in relation to a bid and when that bid is announced. ASIC guidance notes deal with that particular issue, because it's an issue around market integrity. For example, if there is a discussion between a bidder and a target, and there is some sort of leak—or it seems to be a leak, because there's a run on the shares—that can be a major issue. ASX and ASIC are quite interested in that topic. Chris, do you have anything to add in relation to that?

Mr Dyer : We're giving you a lot of detail, and you should feel free to tell us if it's too much detail. If you want a higher level—

CHAIR: You can never get too much detail! You're doing very well.

Mr Dyer : Would it be helpful to have a higher explanation of the kind of regulation we're dealing with and what it's trying to achieve as opposed to, say, FIRB?

Ms BUTLER: That would be good.

Mr Dyer : Essentially, the regulation we're dealing with is a part of the Corporations Act that regulates the acquisition of control of what you might call widely held companies—that's almost always listed companies—but we do have some other disputes that come before us that concern unlisted companies that have lots of members. The vast majority are listed companies, and they're subject, obviously, to ASX listing rules, disclosure requirements and so forth.

When you have widely held companies, it's possible for shareholders to try and acquire enough of the shares to be able to control the company and take it in a different direction. As Allan was saying previously, back in the sixties in Australia, the UK and the US, the same kinds of problems occurred in relation to that: people would just go into the market, buy up shares, not tell anyone anything and treat people differently. There were a whole series of problems that arose as to the way in which people acquired shares, and that's what our takeovers regulation tries to deal with.

At the same time, in the UK, the US and Australia, this kind of takeover regulation developed. This kind of regulation is concerned about regulating the way in which control is acquired. The regulation is neutral as to whether or not control is acquired, and that's different from FIRB, which is looking at whether, when there's a foreign acquisition, that's in the national interest. So they will stop acquisitions altogether, because it seems to be not in the national interest.

It's the same with the ACCC: if the acquisition will result in a substantial lessening of competition, then the ACC may say, 'It can't happen.' But, as far as the panel's concerned, we're trying to regulate how it happens. The real concerns are things like equal treatment of shareholders and fairness in that they have enough information to make a decision as to whether they want to sell their shares to the person who's making a bid and have enough time to decide. They're the kinds of things that the regulation is dealing with and the things that we focus on. But, as Allan was saying, we're a dispute resolution body; we're not a regulator like ASIC that can go out and say, 'We don't like what's happening here.' We can only deal with something when someone makes an application, and it usually is—as Allan said, that's a shareholder, a target company, a bidder company or something like that.

Ms BUTLER: Why were there so many resources firms making applications in 2016-17? From the list in your annual report, they do seem to be quite overrepresented.

Mr Dyer : That may partly reflect activity in the market, because you can have activity in certain sectors, depending on the share price. So, when commodity prices go up or down, that may affect the level of takeover activity and that may mean we get more applications. But that's the only—

Ms BUTLER: So you think it may reflect volatility in relation to shares in the resources sector?

Mr Dyer : I think it would be partly to do at least with, in effect, commodity prices, which tend to feed into the decisions of bidders to make a bid. If price goes down, it becomes more attractive, obviously.

Mr Bulman : Also, from a statistical point of view, we're talking about small numbers, and sometimes the market in mergers and acquisitions can be quite, for want of a better word, hot, and we're not actually all that busy, but then at other times, for whatever reason, there's not a lot of mergers and acquisitions activity, but applications are coming to us—because, while our jurisdiction is limited to chapter 6, it can be quite multifaceted, as I mentioned before. We can deal with not just bids but also control issues, rights issues, association. Because it's more numbers, it's hard to necessarily correlate. You can guess that, yes, if there is lots of mergers and acquisitions activity the panel might be more busy, but it's not always the case.

Ms BUTLER: You don't always have that level of disputation in mergers and acquisitions; sometimes it's more disputations and sometimes it's less.

Mr Bulman : Sometimes money solves everything, so there are no disputes. But, say, in 2008 money wasn't resolving everything, so we were actually quite busy.

Ms BUTLER: In your list of applications that you received in 2016-17, a number of them say 'declined to conduct proceedings'. Does that mean the panel declined to conduct the proceedings?

Mr Bulman : Correct, yes. Would it help if I gave a little map of the process?

Ms BUTLER: Yes.

Mr Bulman : When an application arrives at the panel, the president, after receiving some advice from us, chooses three panel members to consider the matter and then there is a power that the panel has to either conduct proceedings or not conduct proceedings. So the sorts of issues a sitting panel can sit on as to whether to conduct proceedings are issues such as whether the panel has jurisdiction, the strength of the evidence, the likelihood of making remedies or, if you want a layperson's way of putting it: 'Is there anything in this application?' Sometimes the panel thinks, 'There is nothing in this application,' so they decide to decline to conduct.

Ms BUTLER: So you say, 'Sort it out yourselves'?

Mr Bulman : That's one way of putting it, yes. Sometimes also a party will immediately offer an undertaking or offer to do something to correct the unacceptable circumstances immediately, so the panel has nothing to do right from the start. We encourage parties to solve things themselves, if at all possible, before coming to us or when a matter is made. We always, particularly in disclosure matters, want to encourage the parties to meet together and try and sort out issues.

Ms BUTLER: You've got one where the outcome was undertaking, and then a couple where you've made a declaration and then the parties have given undertakings—

Mr Bulman : Yes, that's correct.

Ms BUTLER: Then there's a small number where you've made both a declaration and orders.

Mr Bulman : Yes, that's correct.

Ms BUTLER: I assume that latter category is the most controversial category, where one party feels as though they—

Mr Bulman : As though they don't even want to give an undertaking, yes.

Ms BUTLER: are being coerced, basically. There were some proceedings commenced by Molopo, weren't there?

Mr Bulman : Yes. We'd better be careful in talking about Molopo, because it's currently before the courts. But it was an association application by both Molopo and ASIC in relation to association.

Ms BUTLER: And they commenced judicial review proceedings that are ongoing?

Mr Bulman : Correct, yes.

Ms BUTLER: Is that usual, or do you find that mostly once you give orders they are respected and not appealed?

Mr Bulman : They're relatively unusual. We've had about six judicial review applications, more or less, although added to that six might be one or two that were made and withdrawn very soon after.

Mr Dyer : I think it's a very low level of judicial review. Allan mentioned before that, prior to 2000, takeovers was a very different area of practice. It was very litigious and the standard defence of a target company, when they received a bid, if they didn't like it, was to run off to court and try to get an injunction to stop it. The changes in 2000 Allan talked about before were to change that quite significantly. It has changed it radically. It has taken it out of the courts and to this peer review body. I was an academic and I predicted that there would be lots of judicial review that would defeat the new takeovers power, and I was wrong, because in fact there were none for the first five years, which was quite amazing really. There have been more sense then. It is sporadic. In some years you might have more or less, but that will often depend on to what extent it helps the aims of one party or another, because takeovers are often very large, important transactions, so the target, the bidder, the boards of directors of those companies and the CEOs of those companies have a lot at stake. Usually, what matters most is winning the takeover or defeating the takeover. There will sometimes be strategic issues in terms of whether judicial review is going to achieve anything. That can mean it doesn't—

Ms BUTLER: Whether it is going to be a waste of time, because you just get sent to make the decision again than it does actually stop the takeover, for example?

Mr Dyer : It could be, although it does obviously delay. To the extent that you delay things that often will kill a takeover, because they usually need to happen fairly quickly. If they get delayed for too long in most cases they won't happen. That was the problem with the approach prior to 2000: the injunctions would stop the takeover, and often that would be the end of it, so it was never actually decided. It was an interlocutory injunction. The actual complaint was never actually decided.

Ms BUTLER: But it was effectively final relief, because it destroyed the takeover bid anyway.

Mr Dyer : Because it is so time sensitive. If it takes too long—

Ms BUTLER: It falls in a heap?

Mr Dyer : That's right—at least there is a risk of that.

Ms BUTLER: Does the Takeovers Panel have any view about what further law reform might be appropriate, or is this something you don't see as being within your scope because it is a policy issue?

Mr Bulman : It is a policy issue. At the moment we think things are working reasonably well.

Mr Dyer : There have been various reforms suggested by different people over the years. Generally, the Takeovers Panel, as you saw from the stakeholder survey results, has been well-received by the market and those who are most actively involved in this area. As a result, there is a bit of a hesitation about changing what seems to be working very well. You can have lots to reform ideas, but once you start to change something you don't know what the flow-on effects of that might be.

Mr Bulman : There is always a danger when looking at foreign jurisdictions, because sometimes people say there is this great thing in a foreign jurisdiction and we should have it here, but people don't realise that it is part of their regulatory package. Just bringing a little bit of what is in a foreign jurisdiction and plonking it into the Australian context can sometimes not be the best idea.

Ms BUTLER: I see. Going back to that consultant you mentioned before, that was in relation to an association matter?

Mr Bulman : It was in relation to an association matter, yes.

Ms BUTLER: Was that a lawyer, a banker—

Mr Bulman : A lawyer.

Ms BUTLER: Was the consultancy rate equivalent to your deputy counsel's rate? I know it is different if you are contracted with an employee.

Mr Bulman : From memory, it was based on the rate that panel members are paid, which I suspect is less than what our deputy counsel is paid.

Ms BUTLER: Probably on the P&L, isn't it? The P&L on page 28 of the annual report says you spent $43,920 on contractors.

Mr Bulman : Yes.

Ms BUTLER: How long a period would that have been for

Mr Bulman : This is guesswork on my part, but it will be about 2 to 3 months.

Ms BUTLER: Feel free to take it on notice.

Mr Bulman : I am happy to take that on notice.

Ms BUTLER: The questions are: how much did you spend, how long was the period of the contract and how does it compare with the deputy counsel?

CHAIR: To go back to your high-level explanations, at what point in a scenario, say where one public company decides it wants to take over another public company, how many triggers are there, and what are those triggers? For instance, in a relationship where do they have to make a public disclosure as what their intention is? Is it after a board decision, is it after accumulating 19 per cent or before they take their bid? What are the commercial sensitivities in regard to that? If they do make that decision, and if they go to Centrepoint to try and quietly acquire up to 19 per cent of the stock, isn't that a blockage to disclosing publicly what their intentions are?

Mr Dyer : There are a lot of questions there. We can give you far too much detail in response to that, but let me try at a high level and I can give you more. As I said before, this is a very complex area of regulation. You have listing rule requirements for listed companies, so they have continuous disclosure requirements. That's not what we're regulating, but they're important in terms of what happens in these kinds of transactions. The fact that someone's going to make a takeover is probably the best example of price sensitive information you can get, because to win in the takeover you need to offer a premium. Generally the takeover will be higher than the market price. The fact that someone's considering a takeover is highly price sensitive.

There's a guidance note the ASX have in relation to when an approach to a target company needs to be announced, but generally it could be confidential discussions. Once there is a definite proposal then there will be continuous disclosure obligations. There are also requirements in chapter 6 about disclosure. If it's going to be a takeover bid, at the point you make a takeover bid there are detailed requirements there about both the timetable and the content of what's called a bidder statement. I can give you more but—

CHAIR: Yes. Keep going.

Mr VAN MANEN: Yes. I would be interested to know, to follow on from the chair's question, what the trigger point is for that to be notified to the market, whether it's 15 per cent shareholding or whether you go to 20 per cent?

Mr Dyer : There are a couple of different triggers. One set of triggers is the requirements in relation to disclosure of substantial shareholdings. There's a part of the act that, in relation to a listed company, requires disclosure by a person who has five per cent or more. That's very low. Part of the reason for that disclosure is to ensure that the market knows when someone is building a stake. Once someone gets five per cent more of the shares they'll have to put in a substantial holder notice. It doesn't necessarily mean they're making a takeover bid, in some cases they're just passive investors, funds or whatever, or they could be banks that are buying on behalf of a number of different people with completely different objectives. If you are a bidder and you're wanting to get a stake before you make a bid then that's a crucial threshold, because at that point you're going to have to announce that you've got that stake. And depending on who you are the market may well guess that in fact you are thinking about a bid, or at least you're accumulating a stake that may be significant in terms of control.

Sometimes a bidder will go in and try to acquire a large stake. What they want to do is to acquire as big a stake as they can. They can't go over 20 per cent because that is part of the takeover laws. Twenty per cent is as far as they can go without making a takeover bid effectively. This is all high level, of course. If they were foreign in the past they had a 15 per cent threshold, which has now gone up to 20 per cent as a result of changes in the Factors Act a few years back. That can be complicated. In some cases there's a lower threshold for FIRB, so there are different issues there for some foreign acquirers. They made need further approval even below 20 per cent.

Mr Bulman : The 20 per cent threshold is such that, if a shareholder goes over that threshold, they have breached the act unless they go through a gateway—one of the exceptions. That's a very important safety barrier.

Mr Dyer : One of those exceptions is to make a takeover bid. When you make a takeover bid, it's the same offer offered to all shareholders. That's the equality principal. Everyone is treated the same. Obviously, when you're buying on the market, people get different prices for their shares.

Senator KETTER: In terms of your annual report, I'm interested in the issues that come up in your applications. You disclosed that association issues are probably the major one and disclosure issues are the next. I'm interested in how last year compared to previous years. Is there a trend developing or is that a fairly typical year?

Mr Bulman : To give you an understanding of the whole of the panel's history, basically issues around disclosure are bidder statement content. We've had 80 matters that were considered bidder statement content; 44 were considered bidder statement announcements; 42 were considered target statement content; and 35 were considered targets, announcements and conduct; while there were 74 association matters. Throughout the panel's history, there were more disclosure matters than association matters. From time to time in recent years, we have had more association matters. It's hard to say whether that's a trend, to be honest, but it certainly appears that we have had more association matters in the last five years, speaking anecdotally.

Senator KETTER: In terms of the association issues, they're very time-intensive and resource-intensive, as far as the panel's concerned?

Mr Bulman : They are—yes.

Senator KETTER: I note that you have some reticence about talking about policy issues, but perhaps you could answer this as best you can. In the UK and in Hong Kong there is a situation where there is a reversal of the onus of proof in relation to associates. To what extent can you comment on that? How does that impact on the effectiveness of the regulation?

Mr Bulman : Again, it's hard to compare jurisdictions. I should say that we do have good relationships with both the Hong Kong and the UK regulators and we talk to them about issues. Their systems are quite different in many respects. Their presumptions are sometimes practiced in different ways as well. From my understanding, in the UK, those presumptions are fairly strong indicators from their perspective, while in Hong Kong it is less so. That's my understanding. I might be slightly wrong. In the Australian context, we have found that, for about a third of the matters that come before us, we can find association and make declaration orders in relation to them. Would some sort of presumption help? It's difficult to say in our context, to be honest, and it is a matter of policy for the government.

Senator KETTER: But would fewer resources be required in a situation where you have that rebuttable presumption situation?

Mr Bulman : Again, I'd be guessing. Maybe slightly less but not significantly.

Senator KETTER: In terms of last financial year and the number of matters you declined to proceed with—out of about 11 that you proceeded with, there were about nine—was that a typical year? You declined more applications than you accepted. How does that compare to previous years?

Mr Bulman : I have a statistic on that. I'm just looking for it. My apologies.

Senator KETTER: You can take that on notice, if you like.

Mr Bulman : No, I don't need to take it on notice. I have it in front of me. I just need to find it, that's all. I've got some calendar-year stats here. For 2017, the panel declined in 50 per cent of matters. In 2016, they declined in 33 per cent of matters. Between 2010 and 2017, the panel declined in 44 per cent of matters—so, that's the last seven years. For the first nine years of the panel's history, the panel declined in 26 per cent of matters. It's fair to say that in the panel's early period it probably erred more on the side of conducting because they were getting used to their jurisdiction. As the panel has matured it has had a little more confidence, I think, to decline to conduct.

The other dynamic in all that is that from time to time the panel might get a run of matters where there is, quite frankly, not much in them. They might get a run of five matters where they've declined to conduct, and people say, 'Oh, does this show some pattern, that the panel is now declining to conduct too much?' But, quite often, it's just the nature of the sorts of applications that are before it. In other years the panel can conduct on almost every matter, again, because of the nature of the matters that are before it.

Mr VAN MANEN: In the history of the panel have you come across any parties that have been involved for a number of times—say, in association matters or, for want of a better word, because they are regular 'recalcitrants' in this particular area?

Mr Bulman : That does happen from time to time, yes.

Senator KETTER: In terms of the mechanics of policy review, I take it that you discuss trends with ASIC?

Mr Bulman : Yes, we do. We meet with ASIC, usually around once a quarter, and we discuss trends and issues.

Senator KETTER: Okay. And then it's ASIC's responsibility to report to government about potential reform?

Mr Bulman : Yes, and sometimes we also report to government about possible reform.

Mr Dyer : There are two types of policy here. One is the policy in terms of reform. We have guidance notes that indicate the approach of the panel within the powers that the panel currently has. So policy is considered at that level by panel members on a regular basis. We get the panel members together twice a year to look at policy issues that they can deal with within the power and discretion that they have. It's a reasonably broad power to declare circumstances unacceptable so that some things can be dealt with.

Going back to your rebuttable presumptions about association: the panel has considered that issue in the past, and there have been views about that internally. But there are limits to how far the panel can go to introduce those presumptions.

Senator KETTER: Wouldn't that require legislative change?

Mr Dyer : It depends, I think, on how they're done. That's probably a difficult question, I think, as to how.

Mr Bulman : Yes, I think we're getting to a difficult area of law. We can issue guidance, which is a guide on certain aspects. I'm not sure you could introduce rebuttal presumptions in that context. We also have a rule-making power, but at this point the panel hasn't actually made any rules as such; it has felt no need to. Whether it could introduce rebuttal presumptions by rules, again, I think, is legally debatable.

Senator KETTER: I presume ASIC is involved in the process for developing the guidance note. Is there Treasury involvement in that process as well?

Mr Bulman : Treasury does get consulted as well.

Mr VAN MANEN: In the event of dealing with these parties who are probably more regular than they should be, what capacity do you have to deal with them? Or is that a matter that you then refer to ASIC or to other regulators to deal with those particular parties' activities?

Mr Bulman : Firstly, I should mention that ASIC is involved in every matter. ASIC sees everything. So ASIC can see, just as we can see, that someone who is regularly before the panel is really before the panel. From our perspective, because we are an administrative body we have to be very careful to treat people with due procedural fairness and that sort of thing—not to be biased. So there are some issues, even around using material from previous matters. There are issues in the Privacy Act which mean that the panel can't just automatically take material from a previous matter and say, 'Well, you said this two years ago and you're saying this now.' For legal reasons that's actually not possible. So to some extent we have to treat every matter as new people coming to us.

Mr VAN MANEN: So it would be a better question for me to ask ASIC a little bit later.

Mr Bulman : Yes. We are different bodies; we have different roles. Because we are a dispute resolution body—an administrative body—there are some things we need to be very, very aware of when dealing with people who might be before us from time to time.

CHAIR: Just while we're on ASIC, can you explain to the committee what changes have been made to the updated memorandum of understanding, 27 March 2017, between ASIC and the Takeovers Panel.

Mr Bulman : Yes. The original memorandum of understanding was signed at a time when the panel was quite new, so quite a lot of the panel's and ASIC's concerns about the relationship didn't actually occur. I think at the time, the panel was very concerned that ASIC would give the panel timely information if there was a review of an ASIC decision, and ASIC was very concerned to ensure that the panel executive wouldn't give advice on applications that were before ASIC. So there were some concerns in the very early period that turned out to be unfounded. The MOU is considerably streamlined compared to the old MOU and really focuses on ensuring that the two organisations meet regularly and share information to the extent they can, and reporting lines if there are issues that need to be sorted out between the two organisations.

CHAIR: Were there any significant changes to the MOU?

Mr Bulman : As I said, the most significant is that there were whole slabs of the MOU that were taken out, from memory.

Mr Dyer : It is not a long document. If you have a look at it, you'll see it is fairly high level, as it has to be, because the panel is a tribunal, in effect, making decisions. In some cases the panel is hearing appeals from ASIC's decisions, so it is a high-level document that indicates that, where it's appropriate, having regard to the powers and the roles of both ASIC and the panel, we will act in a way where we can consult on policy and things like that. It doesn't really go that far.

Mr Bulman : One major change is that the actual MOU is between ASIC and the panel executive. The original one was between ASIC and the panel, but it was felt that because the panel is an administrative body, it was more appropriate for the MOU to be with the executive, and that is, effectively, where all the liaison is—with ASIC and the panel executive.

Mr VAN MANEN: In your annual report, if you have a look at the table on page 21, it shows that about 50 per cent of the issues in front of you for that financial year were for beach of association rules. Is that indicative of your work over the time as a panel—that about half of the matters before you are related to the breach of association rules, or does that vary from year to year?

Mr Bulman : It varies from year to year. I think, as I said before, about 74 matters involve association through our history, so statistically that's somewhere between 10 and 15 per cent of our matters that involve association historically.

Mr VAN MANEN: So that was a particularly busy year?

Mr Bulman : It was a particularly busy year.

CHAIR: We're just about out of time. As we have no further questions from the committee, I will conclude this session of the hearing. If you have taken any questions on notice, could you provide those to the secretariat by 9 March. We thank the Takeovers Panel for appearing and giving evidence to the committee today, and we appreciate your input and your time.