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Takeovers costs disputes now within Panel jurisdiction

May 03, 2017


Partners James Hawes, Don Holborow, Andrew Matthews, Michael Pollard
Special Advisors Peter Hinton

M&A and capital markets

Costs disputes in takeovers will now be determined by the Takeovers Panel. This paves the way for a much more efficient disputes resolution process.  


Responding to a takeover bid typically results in substantial costs being incurred by a Target (professional advisors' fees, communications with shareholders, etc). 

When it was introduced in 2001, the Takeovers Code entitled a target company to recover from the bidder any "expenses properly incurred" in connection with a takeover offer.  

Although the Panel claimed jurisdiction over any dispute arising from this provision, the High Court in 2010 ruled that the Panel had no power to order payment of costs. 

This has led to expensive and drawn out costs disputes, as they found their way through the regular court system. The Panel has long recommended (with strong support from market practitioners) that it would be the most efficient forum for any such dispute.

Current situation

From 31 March 2017, the Panel has the power to determine which costs are "properly incurred". Costs determinations by the Panel are now enforceable through the courts as any other civil debt.  

Although this is a significant improvement over the status quo, it is important to note that:

  • there is nothing substantially different in the Panel's guidance as to what costs are recoverable as "properly incurred", as the Panel has largely reaffirmed their 2008 guidance. Determinations will still depend on the facts in each case;   
  • only costs incurred after the bidder submits a takeover notice are potentially recoverable. This means that a company may be left to carry costs resulting from responding to a party that is speculating about making a potential bid but that never crystallises into a formal takeover notice or takeover offer (New Zealand does not have a "put up or shut up" rule);  
  • there is considerable scope to argue whether expenses are "properly incurred" or not. Success fees claimed by the target company's investment bank, in particular, are likely to be contested. The Panel's guidance leaves open the possibility that such fees may be "properly incurred" in some circumstances; and  
  • parties have the right to appeal a costs determination by the Panel. As a result, a protracted court process is still a possibility.      

For advice relating to costs disputes or takeovers generally, feel free to get in touch with one of our experts.