Mergers & Acquisitions
8. Takeover Rules - 20% Rule
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 22 Aug 2015
- Generally speaking a person or company can't acquire a 'relevant interest' in issued voting securities if the acquisition would result in a person's 'voting power' exceeding 20%.
- The rationale behind this rule is that it prevents a person holding more than a 20% interest in any applicable Australian company unless a specific exemption applies.
- The concept of 'relevant interest' can be confusing. It is a wide concept and can include almost any circumstances when a person has obtained control over voting.
- The term 'voting power' refers to the combined total of a person's 'relevant interests' in voting shares. This number includes the interests of any of a person's associates. It is expressed as a percentage of all voting interests.
- There are also exceptions to the 20% rule that mean it won't apply in every case. One of the exceptions is when relevant interests are acquired under an on or off-market takeover bid, scheme of arrangement, creeping acquisition, security holder approval, downstream acquisition or when exercising a security interest.
- The exemption to the 20% rule exists specifically to allow mergers and acquisitions to take place.
View more Information on Business & Company