OVERVIEW OF THE PROPOSED TAKEOVER BY-LAWS

The Trinidad and Tobago Securities and Exchange Commission has prepared Take-over By-laws to regulate attempts by one entity (the offeror) to acquire control over an offeree company (the target). Although these By-laws have not yet been enacted into law, they represent best practice. The Commission therefore expects that all parties involved in take-over bids will comply with the requirements of the proposed Take-over By-laws.

The objectives of the Take-over By-laws are to ensure that:

1.  all security holders have access to the same information and sufficient time to analyse the information which is necessary for making an informed decision as to whether to accept or reject an offer to acquire their securities; and
2. a fair market is maintained during the take-over bid so that all security holders enjoy equitable treatment by the offeror.

In order to inform the public as to what is expected with regard to compliance with the proposed Take-over By-laws, the following significant provisions of the By-laws are highlighted below:

Responsibilities of the offeror

1. The offeror must make an offer to all the holders of the class of securities subject to the bid who are in Trinidad and Tobago.
2. All holders of the same class of securities must be offered identical compensation and where the compensation is increased, it must be paid on all securities taken up whether deposited before or after the increase.
3. The take-over bid must be filed with the Commission and sent to the target company.
4. The offeror must send to all security holders a copy of the take-over bid together with a take-over bid circular. The take-over bid circular must include:
• information outlining the terms and conditions of the offer;
• the source of the funds to be used to pay for the securities taken up;
• the offeror’s plans for the target; and
• any material information known to the offeror and not in the public domain.
5. The offer must remain open for 35 days and if there is a variation to the bid, the bid must remain open for a further period of 15 days.
6. Where the compensation is to be paid in cash, the offeror must make adequate arrangements before the bid to ensure that the required funds are available to make full payment for all securities that the offeror has offered to acquire.

Responsibilities of the directors of the target company

1. When the take-over bid has been made, the board of directors of the target company must prepare a directors’ circular and send it to the security holders not later than 21 days after the date of the take-over bid.
2. The directors of the target company must also file the directors’ circular with the Commission and send a copy to the offeror.
3. The directors’ circular must include:
• recommendation and the reasons to accept or reject a take-over bid or a statement that they are unable to make or are not making a recommendation and the reasons for not making a recommendation
• any relationship or arrangement between the offeror and target or their respective directors and officers
• any information regarding a material change in the affairs of the target, since the last published financial statements
• any response by the target to the take-over bid such as an extraordinary transaction, e.g. a merger or reorganization; a sale of a material amount of the assets; a bid by the target to buy back its own shares; a material change in capitalization or dividend policy

 

Defensive tactics

The target company must not take any action which may result in a bid being frustrated, or in security holders being denied an opportunity to decide on the merits of the bid, unless the security holders have approved the action by resolution in a general meeting.

Restriction on acquisition during bid period

Securities deposited cannot be acquired by the offeror for a period up to 35 days.

Take up of securities

1. Securities deposited must be taken up by the offeror within ten days after the expiry of the bid if all the terms and conditions of the bid have been complied with or waived.
2. Securities are to be paid for not more than three days after they are taken up.

Withdrawal rights

1. Securities deposited may be withdrawn by security holders during the 35 day bid period.
2. Securities deposited and not taken up and paid for by the offeror may be withdrawn after the expiry of 45 days from the date of the take-over bid.

 

Monica Clement
General Manager
Trinidad and Tobago Securities and Exchange Commission

May 1, 2002

 

Members of the public can view the proposed Take-Over
By-laws on the Commission’s website: www.ttsec.org.tt

or contact the Commission by telephone 624-2991 for clarification