No-shop, no-talk and break-up fee agreements in merger and takeover transactions: the case for a fresh regulatory approach

Mayanja, James (2002) No-shop, no-talk and break-up fee agreements in merger and takeover transactions: the case for a fresh regulatory approach. Australian Journal of Corporate Law, 14 (1). pp. 1-25. ISSN 1037-4124


Download (235Kb)


Merger and takeover transactions have a profound impact of on the interests of shareholders and society in general. For this reason, it is essential that the legal system provide a reliable mechanism for determining the validity of practices that have the potential either to facilitate or inhibit such transactions. This article seeks to demonstrate that the rules currently governing the exercise of directors' powers are ineffective to protect the interests of shareholders and society in general in circumstances involving the use of exclusivity and break-up fee agreements, practices that are fairly new, but which are becoming increasingly common in Australia. The equitable doctrines of fiduciary law against which the validity of these arrangements is determined do not provide clear guidance as to when it is acceptable for directors of target companies to enter into such agreements. There is thus need for reform, so as to promote clarity and predictability of the law in this area. This will enable all interested parties to proceed on reasonable expectations in organizing their affairs whenever these arrangements are involved. In undertaking this reform, policy makers would serve investors and society generally better if they adopted shareholder welfare enhancement as the criterion for adopting the applicable rules in this area. Exclusivity and break-up fee agreements should be permitted where they are designed to maximise shareholder wealth but not otherwise. The article explores ways in which the law could be reformed to achieve this objective.

Statistics for USQ ePrint 2297
Statistics for this ePrint Item
Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Deposited with permission of publisher.
Faculty / Department / School: Historic - Faculty of Business - Department of Law
Date Deposited: 11 Oct 2007 01:02
Last Modified: 04 Oct 2013 04:40
Uncontrolled Keywords: directors' duties; mergers; takeovers; corporate control transactions; lock-ups; no-shop; no-talk; exclusivity agreements; break-up fees
Fields of Research : 18 Law and Legal Studies > 1801 Law > 180109 Corporations and Associations Law
22 Philosophy and Religious Studies > 2201 Applied Ethics > 220102 Business Ethics
15 Commerce, Management, Tourism and Services > 1503 Business and Management > 150311 Organisational Behaviour
Socio-Economic Objective: C Society > 94 Law, Politics and Community Services > 9404 Justice and the Law > 940405 Law Reform

Actions (login required)

View Item Archive Repository Staff Only