Reforming Australia's takeover defence laws: what role for target directors? A reply and extension

The thrust of this article is that the objective of preventing directors from frustrating hostile takeover offers cannot be fully realised under the proposed reform. By allowing directors freedom to continue 'conducting the ordinary business of the company', in the face of an unsolicited takeover attempt, the proposed reform confers wide discretion on the directors to block any takeover bid unacceptable to them. There is no means of identifying intransigent resistance from honest efforts by the directors to manage the business of the company. In order to protect the hostile takeover process more effectively, the proposed reform needs to be refined to spell out with more certainty the proper role of directors in contests for corporate control. The governing rule should explicitly require the directors of a company that is, or is likely to be, the target of a hostile takeover bid to desist from taking any action which may have the foreseeable effect of blocking the offer without the prior consent of the offeree shareholders. Drawing on the experience of several overseas jurisdictions, this article explores ways in which the law could be reformed to attain this objective