7 November 2007 Media Statement
New Bill protects minor shareholders
Minor shareholders who have unsuccessfully opposed a fundamental change in a company's structure will have the power to
require the company to purchase their shares at fair price under a Bill introduced into Parliament today by Commerce
Minister Lianne Dalziel.
The provisions of the Companies Act 1993 currently require that the company offer a "fair and reasonable price" to the
shareholder for their shares, but provide no guidance as to how a fair and reasonable price is calculated.
The Bill reforms those provisions by establishing a transparent process for calculating the price of shares in a
minority buy-out situation. The amendments proposed by the Bill follow the recommendations of a Law Commission report
which arose out of a court decision (Natural Gas Corporation Holdings Ltd v. Infratil 1998 Ltd). In that case, Justice
Doogue concluded that the provisions required further clarity to make the minority buy-out rights more beneficial and
workable.
Amendments to the minority buy-out provisions include:
providing that the price of the shares in a minority buy-out be calculated from the date that the company gives
the shareholder notice agreeing to buy back the shares, but that the valuation be adjusted to disregard any change
attributable to the event triggering the buy-out (except when a shareholder is being bought out against the
shareholder's will); and
clarifying and expanding the powers of the arbitrator to determine the share price in a minority buy-out.
"This Bill will provide an effective and cost-efficient process for minority buy-outs, and by doing so will better
protect the interests of minority shareholders," said Lianne Dalziel.
The minority buy-out provisions of the Companies Act apply to special resolutions that:
alter the company's constitution in a way that imposes or removes a restriction on the company's activities; or
approve a major transaction; or
approve an amalgamation proposal.
ends