More ‘Substantially Flawed’ Law From Mr Swain?

Tuesday 11th Jul 2000
Stephen Franks
Media Release -- Economy

The High Court’s declaration that a section of the Companies Act is ‘substantially flawed’ should be a warning to Commerce Minister Paul Swain against ill-considered change, said Act Commerce spokesman Stephen Franks.

Justice Doogue stated minority buy out rights need urgent reconsideration if they are to be beneficial to small shareholders. Minority buyout rights allow small shareholders to force a majority shareholder(s) to buy, or find a buyer for, shares they feel are compromised by a majority decision.

“This is a timely warning to Paul Swain of the risks of forcing ‘one size fits all’ changes in business areas where voluntary agreement should be the norm.

“Mr Swain wants to ram through a take-over code that is primitive and will inflict own goals on small shareholders. This is the second illustration within a week of the costs of well meaning but badly drawn law.

“When I developed the Stock Exchange listing rules for take-over provisions I was aware of the gaps in New Zealand company law. Justice Doogue’s findings highlight the risks of legislating without understanding how markets work.

“Whereas the minority buyout rights in the listing take-over provisions have proved workable and robust in more than five years in application.

“Mr Swain wants to supplant workable rules with feel-good rules that will only enrich lawyers,” said Stephen Franks.

For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at act@parliament.govt.nz.

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