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Transcripts from the Prime Ministers of Australia

Transcript 2701

SPEECH BY THE RT HON W MCMAHON CH MP PRIME MINISTER ON COMPANIES (FOREIGH TAKE-OVERS) BILL 1972 SECOND READING

Photo of McMahon, William

McMahon, William

Period of Service: 10/03/1971 to 05/12/1972

More information about McMahon, William on The National Archive website.

Release Date: 24/10/1972

Release Type: Statement in Parliament

Transcript ID: 2701

COMMONWEALTH OF AUSTRALIA
SPEECH BY
The Rt Hon. W. McMAHON, M. P.
Prime Minister
ON
Companies ( Foreign Take-overs) Bill 1972
Second Reading
[ From the ' Parliamentary Debates', 24 October 1972]
Mr MMAHON ( Lowe-P. rime Minister)
( 8.55)-This Bill makes provision for
the control of foreign takeovers of companies.
The House will recall that in the
statement I made on 26th September last
concerning overseas investment in Australia
I announced the Government's intention
to legislate for the control of those
foreign takeovers it considers would be
against the national interest. In outlining
the measures that would operate under the
legislation I indicated that decisions on
whether particular takeovers would be
against the national interest would be
taken by the Government. I added that in
making its decisions the Government
would be assisted by an independent
authority established under the legislation.
This authority would analyse and report to
the Government on takeover proposals
which the Government judged warranted
further investigation as to whether they
would be against the national interest. I
indicated that the proposed measures for
the control of foreign take-overs would
apply from 27th September 1972 and that
they would embrace takeover proposals
then current.
Pending the establishment of the proposed
independent authority I said that
there would be an interim arrangement
under which departmental machinery
would be used for consideration of particular
takeovers on the basis of the
announced criteria. This departmental
machinery has been established and is functioning. A special group of officers has
been appointed specificially for the purpose
of examining the national interest aspects
of particular takeover proposals. This
group is located in my Department but it
comprises officers from several other
departments and is under the direction of
a very senior officer who has been
seconded from the Department of Trade
and Industry. The reports of the group are
considered by . very senior representatives
of several departments before being
referred to the Government for decision.
The administrative arrangements for the
examination of particular foreign takeovers
are an important step in the implementation
of the Government's policy which I
announced on 26th September. That policy
recognises that we are not as dependent on
others as formerly and that Australians
have rights at stake in foreign takeovers in
the ownership and control of Australian
industry. But we also recognise that the
interests of the Australian investors should
not be prejudiced, except when the overriding
interest of the nation requires it.
The administrative machinery alone is not
sufficient. If it is to be fully effective that
machinery must have the backing of the
law. A decision that a particular foreign
takeover should not proceed must be one
that, if necessary, is enforceable in a court.
On the other hand, the parties to foreign
takeover proposals are entitled to know
with certainty where they stand. The law
should make their position clear too.

The Bill will give immediate legal backing
to the proposals I announced on 26th
September insofar as those proposals relate
to foreign takeovers of companies. The Bill
will ensure the effectiveness of the Government's
control of the takeovers. It will also
provide clear and precise procedures for
the business world. Parties involved in or
contemplating takeover proposals will
know just what steps they should take to
remove uncertainties. The Bill does not at
this stage establish the proposed independent
authority. That will be provided for
in a further Bill, which will be introduced
next year and will necessarily take some
time. In the meantime it is desirable that
the effectiveness of the control being exercised
under the departmental machinery
should be ensured. The present Bill will do
this. The powers under the Bill to prevent
foreign takeovers that are against the
national interest will be exercisable by the
Government, acting through the Minister
administering the Act. This is in accord
with the proposals announced on 26th September.
In exercising these powers, however,
the Government will in practice act
on advice from the departmental officials 1
have mentioned. The present Bill applies to
foreign takeovers of companies, and these
comprise most of the takeovers within the
proposals of 26th September 1972. Certain
other types of takeovers are not covered
by the Bill. These takeovers will continue
to be controlled administratively under the
departmental machinery. They will be
provided for in the Bill to be introduced
next year. I assure the House that the
Government will not hesitate to use its
powers to the full to ensure compliance
with the controls. The Bill will apply to
proposals for foreign takeovers of trading
or financial corporations formed within the
Commonwealth and also of bodies incorporated
in a Territory of the Commonwealth
other than Papua New Guinea.
Holding companies of such bodies are also
covered. The Bill is not confined to companies of
any particular size. But the Government
does not propose, except in special circumstances,
to apply the legislation to takeovers
of companies unless their assets
exceed $ Im. Two main powers are provided in the Bill. One will enable the
Minister to make an order prohibiting a
particular foreign takeover proposal, whatever
its form, from being implemented if
the Minister is satisfied that it would be
contrary to the national interest. The other
main power will enable the Minister to
limit the beneficial interests that a particular
foreign ifiterest or associated group of
interests may have in a specified company.
This power will be available to ensure that
the prohibition of one particular takeover
proposal is not avoided by resort to some
alternative proposal which would achieve
the same ultimate effect. It will also be
available if foreign control of an Australian
company has been achieved since
26th September 1972 without prior
notification of the proposal to the Government.
The question whether a takeover proposal
will result in control of a company passing
from Australian to foreign hands will
be a matter for separate consideration in
the circumstances of each case. The question
in each case will be whether there is a
passing of effective control. In general such
control will be treated as passing if, as a
result of the takeover, 15 per cent or more
of the voting power would be controlled
by a single foreign interest or associated
group of interests. A similar position will
apply if in the aggregate 40 per cent or
more of the voting power is controlled by
foreign interests. These percentages will
not be a conclusive indication of foreign
control. ; If the Minister is satisfied that having
regard to all the circumstances an acquisition
would not give a significant degree of
foreign control over the conduct of the
company in question, the powers of the
Bill will not apply. The question whether a
particular takeover would be against the
national interest will be a matter for decision
by the Government. That is where the
responsibility should rest. In discharging
this responsibility the Government will
apply the criteria that I outlined in my
statement on 26th September 1972. In t:-at
statement I mentioned that a takeover may
be treated as against the national interest if
the company concerned is considered by
the Government to be an economically
strategic industry leader, or to be so large

that the takeover would significantly affect
the relative balance of Australian ownership
and control of the industry concerned.
-1 mentioned also the criteria that are to
be applied to other foreign takeovers. The
first criterion is whether, against the background
of existing circumstances in the
industry concerned, the takeover would
lead, either directly or indirectly, to net
economic benefits in relation to such matters
as production, prices, quality and
range of products and services and
efficiency and technological change which
would be sufficient to justify the increased
degree of foreign control of the particular
industry that would result from the takeover.
If the proposed takeover is judged to
be not against the national interest on this
basis, the following additional criteria will
also be taken into account: Whether, after
the takeover, the firm concerned could be
expected to follow practices consistent with
Australia's interest in matters such as
exports, imports, local processing of materials
produced, research and development,
and industrial relations, including employee
protection; and whether the takeover
would have adverse effects on the Government's
defence objectives, environmental
protection or regional development.
In making judgments as to whether particular
foreign take overs would be against
the national interest on any of the foregoing
grounds, due weight will be given to 3
other matters. One is the extent of Australian
participation in ownership and management
that would remain after the take
over; another is the interests of ' shareholders
of the company subject to the take
over; the third is the attitude of its board
of directors. The Government's consideration
of take over proposals will normally
be in 2 stages. The first stage will involve
preliminary consideration to see whether a
detailed investigation is warranted. This
preliminary consideration will have to be
completed within one month from the date
that the proposal is notified to the Minister.
The Bill does not formally require all
foreign take overs to be notified. But its
effect will be to cause all take overs within
the ambit of the Act to be notified. This
will be because the Government will have
the right to -make orders to reverse take overs that have proceeded without prior
notification. If a conclusion is reached that
further investigation of particular proposals
is desirable, the Minister will have power
to issue an interim order prohibiting implementation
of the proposal for such period
not exceeding 3 months as is necessary for
the further consideration to be given to it.
If no order is made -in respect of a take
over proposal within a period of one
month from notification, it will be free to
proceed. In addition, the Minister will be
able in appropriate cases to grant clearance
certificates in respect of take over proposals
notified to him. A breach of any of the
orders I have mentioned will be an offence
punishable by a heavy penalty. In addition
a Supreme Court will have power, on
application by the Minister, to make further
orders against a person who commits
such an offence. The Court will be able in
such circumstances to restrain the exercise
of voting rights, direct payments to be
withheld, direct the sale of shares, and
make desirable ancillary orders.
In exercising these powers, however, the
Court will be required to satisfy itself, as
far as it reasonably can do so, that any
order it proposes to make will not unfairly
prejudice any person. The Court's powers
are limited where the breach in question
was due to inadvertence and excusable.
Orders made by the Minister under the
proposed Act will have to be published in
the Gazette. Parliament will also be
informed of the making of the orders as
soon as it is practicable to do so. Some
will come into operation on the date of
their publication. Others will operate as
from a later date specified in the order. if
the provisions. I have outlined are to
operate effectively it goes without saying
that the Government will need to be able
to obtain any relevant information and
documents. In particular, information as to
the persons who have beneficial interests in
shares held by nominees will be needed.
The Bill recognises this need and accordingly
empowers the Minister -to requisition
relevant information and documents by
notices in writing.
This Bill is a major step in the implementation
of the Government's decisions
which I announced on 26th September.
The Bill will ensure the effectiveness ot
our decision to prevent foreign take overs

of Australian companies where they are be introduced. With this in mind the
against the national interest. It will do this operation of the present Bill will cease on
in a way that has due regard to all rele-31st December 1973 or such earlier date
vant interests and, most importantly, keeps as may be proclaimed. In the meantime
uncertainty to a minimum, this Bill will ensure that the interim
In due course a further Bill which will arrangements function both smoothly and
provide amongst other things for the estab-effectively. I commend the Bill to the
lishment of the independent authority will House.
20807/ 72F. D. ATKINsoN, Government Printer, Canberra

Transcript 2701