Jurisdiction - Australia
Australia – No Association From Scheme Approval.

10 December, 2012


In brief


  • Court finds that shareholders voting for a scrip merger scheme did not become associates.
  • Court accepted that the definition of associates should not be read too widely.


The width of the associates definition sometimes makes it difficult to rule out the possibility of “technical” breaches of the takeovers threshold or substantial holder notice requirements. However, that may now be a little easier following the decision of the New South Wales Supreme Court in Perpetual Custodians Ltd v IOOF Investment Management Ltd.


The Court was required to determine whether, for the purposes of a share sale agreement, a scheme of arrangement by Australian Wealth Management Limited (AWM) which effected a scrip merger with IOOF Holdings Limited had resulted in a change of control of IOOF. This turned on whether AWM and the AWM shareholders who voted in favour of the scheme (Voting Shareholders) were “associates”, as defined in the Corporations Act. (AWM shareholders acquired 70% of the merged entity under the scheme.)


AWM and the Voting Shareholders would have been associates if:


  • the scheme was a “relevant agreement” for the purpose of controlling or influencing the composition of IOOF’s board or the conduct of IOOF’s affairs; or
  • they acted in concert in relation to the affairs of IOOF or the acquisition of their shares in IOOF.


The Court held that AWM and the Voting Shareholders were not associates. Although the scheme was a “relevant agreement”, its purpose was not to control or influence the composition of the IOOF board or its affairs. Rather, the Voting Shareholders’ purpose was merely to act in accordance with the recommendation they received and become shareholders in the merged entity. Similarly, they were not “acting in concert” but rather were separately pursuing their own interests, which coincided.


In reaching this conclusion, the Court referred with approval to decisions of the Takeovers Panel suggesting that the concept of a company’s affairs should not be read too widely in this context. This judicial endorsement of the Panel’s purposive and pragmatic approach should be welcomed by those required to advise on these issues.


For further information, please contact:


Bruce Dyer, Partner, Ashurst

[email protected]


Eliza Blandford, Ashurst

[email protected]


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