Compulsory Acquisition Case Study

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During a takeover, a shareholder will have a choice as to whether they vote in favour of the takeover and accept the bidder’s offer or to hold onto their shares. By opting for the latter, the shareholder may find that they become a minority interest if the takeover is successful. This may not benefit them and the bidder. The shareholder may be isolated and experience a fall in value of their investment. The Corporations Act provides a mechanism whereby this potential conflict can be avoided.
Chapter 6A of Corporation Act gives a person a right to compulsorily acquire securities under certain circumstances, depending on the level of person’s interest in the relevant class of securities or at the relevant entity overall
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1.Compulsory acquisition following a takeover bid.
2.General compulsory acquisition.

Compulsory Acquisition following a takeover bid
A bidder may compulsorily acquire any remaining securities in the bid class at the end of a takeover bid, if it has met the relevant threshold

• The bidder holds relevant interest in 90% the bid class securities at the end of the bid and
• The bidder has acquired 75% of the securities that the bidder made offers under the bid.
Post bid compulsory acquisition on the basis of threshold test must commence within one month after the end of the offer period.

General Compulsory Acquisition

Under General Compulsory Acquisition, any person can compulsorily acquire all of securities to which that person has full beneficial interest or all of securities in every class of share or securities that is convertible into share if the person
• Has 90% or more voting power in the company; and
• Holds full beneficial interest in 90% or more of the securities in the company.
The rights attaching to compulsory acquisition under s664A expires if the commencement of acquisition process doesn’t take

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