CAMAC's key recommendations are considered below.

Headcount test

CAMAC has recommended the removal of the 'headcount' test, which requires a majority in the number of shareholders voting to approve a Scheme in addition to 75% of votes being cast in favour of the Scheme. The test is viewed by many as out of line with other shareholder approval processes and unnecessary, particularly in light of the development of statutory shareholder oppression remedies. Further, it can have the effect of giving disproportionate weight to minority shareholders in the Scheme approval process. By removing the headcount requirement, minority shareholders would be unable to increase their influence through share splitting in order to block Schemes.

Despite protests from certain quarters, who argue that the headcount test is required to protect minority shareholders, CAMAC considers that there are already adequate protections in place, such as the courts' discretion to block unfair Schemes, the requirement for an independent expert's report and the duty of directors to act in the shareholders' best interests.

Anti-avoidance of takeover provisions

Section 411(17)(a) of the Act currently provides that a Scheme cannot be approved if it is proposed for the purpose of avoiding the takeover provisions in Chapter 6 of the Act. However, CAMAC has indicated that it considers that Schemes present a flexible and practical procedure which can be used to effect a number of forms of corporate reorganisation and noted that it has no preference between a Scheme and a bid as a means to change corporate control where both are available, acknowledging that certain circumstances are better suited to Schemes. Accordingly, CAMAC considers that section 411(17)(a) serves no real purpose and has recommended its repeal.

This recommendation has received strong support by industry practitioners as the provision has frequently been used by objectors attempting to block Schemes in the past.

Scheme booklet disclosure

CAMAC has recommended the introduction of a 'clear, concise and effective' requirement for scheme booklets which is the same test as currently applies to prospectuses. CAMAC emphasised the importance of focussing on key information in the scheme booklet to promote readability and recommended that information of secondary or marginal importance should be able to be incorporated by reference.

It has also recommended that the specific disclosure requirements in the Corporations Regulations be repealed subject to:

  • Dissenting directors being given the right to have their views included in the Scheme booklet.
  • Retention of the requirement for the provision of an independent expert's report (which CAMAC suggests should be inserted into the Act).

Court powers

Some of the submissions to CAMAC's report suggested that the court should be given the power to make binding determinations on class composition at the first hearing as this would provide certainty and reduce the likelihood of shareholders arguing that the Scheme should be disallowed at the second hearing on the basis that the classes were wrongly constituted. Rejecting these submissions, CAMAC has recommended instead giving the court express curative powers at the second court hearing to approve a Scheme notwithstanding that the classes may have been improperly constituted or if there are other extrinsic factors that may otherwise result in the court overturning a Scheme vote.

Directors' liability

Currently, the due diligence defence is available to directors who issue disclosure documents in IPOs and bid documents in takeovers; however, there is no equivalent for Scheme documentation. Having regard to the similar function of these documents, CAMAC has recommended a review as to whether they should continue to receive different treatment.

Extension of scheme provisions

Acknowledging that managed investment schemes, such as property and infrastructure trusts, constitute a significant proportion of the securities market, CAMAC recommended that the Scheme procedure be extended to apply to managed investment schemes (and stapled groups that include a managed investment scheme).

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