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The Securities and Futures Commission has submitted its revised takeovers and mergers code to the Government with an amendment to make it easier for listed companies to privatise.

 The amendment to rule 2.10, which concerns privatisation by way of scheme of arrangement, will allow companies that have obtained 90 per cent of shareholder approval to privatise.

 Even if the proposal garners fewer votes, it would still be valid unless those against it account for more than 2.5 per cent of the total voting rights.

 At present, companies wishing to privatise need 90 per cent of the holders of common shares, by value, to agree, regardless of who holds the voting rights.

 Another requirement that a privatisation scheme must 'be fair and reasonable in the opinion of an independent financial adviser', was also scrapped to help reduce 'opinion shopping' by supporters of a scheme, the commission said.

 Removing that requirement would 'improve the likelihood for public shareholders to receive a more accurate independent financial adviser's opinion and to make their own informed decision', it said.

 The commission's decision takes into account the privatisation experience since 1993, in particular that of Kwong Sang Hong International and Tristate Holdings.

 These companies only narrowly failed to achieve the required level of approval.

 A privatisation proposal by Kwong Sang Hong received 87.5 per cent approval from independent shareholders, while a similar proposal by Tristate received 83.3 per cent.

 Both companies failed privatisation bids that would have succeeded had the new rule been in place.

 The commission said it would be sensitive to market reactions and would be prepared to conduct further a 'review should the circumstances require'.

 The revised code will become effective August 1, the commission said.

 All other proposed amendments set out in the consultation paper released last February have been adopted, it said.

 A total of 26 submissions from the public were received during the month-long consultation period, it said.

 The 1975 takeover code has had only one major amendment. In 1993, the rule concerning privatisation by way of scheme of arrangement was introduced.



SFC takeover code amended to ease privatisation rule