Gap in regulations of take-over laws

Monica Clement, General Manager of the Trinidad and Tobago Securities and Exchange Commission (TTSEC) said the existing draft of Takeover By-laws do not have the force of law and the TTSEC does not have the legal authority to regulate bids. “There was a regulatory gap and there still is a regulatory gap,” she told a gathering at a recent seminar on the proposed takeover by-laws. In the absence of such regulations, Clement said the TTSEC depended on the co-operation of the two parties involved in a takeover to guide the process as regards takeovers in the market. The statement, “A takeover bid is perhaps the most dramatic occurrence in corporate life” may seem emphatic, but on further review, one can consider it valid in light of the fact that there are far-reaching consequences of such an event. Clement added that the success or failure of many takeovers has incalculable consequences for the entities involved in the take-over, the shareholders of both entities, employees, community, creditors and the industry at large.

She noted that while takeovers on the international market may seem commonplace, this is not the case in the local scenario. “Nevertheless, this does not negate the importance of ensuring adequate legislation to ensure the protection of the security holder and the creation of an orderly and fair market.” She said as the regulator operating within a developing and dynamic local financial services industry, it is incumbent on the Commission to formulate and enforce regulations that will protect the investors and the wider market. To this end, the primary purpose of the legislation is to protect the interests of holders of securities of the offeree. She added that the Commission acknowledges the importance of protecting security holders while at the same time allowing the local institutions to compete in a liberalised and globalised environment. “Hence, the absolute need to have legislation in place to ensure that all are protected.” When the by-laws come into force, the Commission would be in a better position to enforce rules and regulations applicable to takeover bids. “We would create a framework aimed at protecting security holders by ensuring that they have access to information necessary to make reasoned decisions.” Clement said in 2002, the Commission used moral suasion to guide operations as regards take-overs in the market due to the lack of an enforceable takeover code. However, she assured that with the coming into force of this Takeover by-law, companies will be subject to penalties and sanctions for appropriate action in the market.