Innocent parties will have more protection 6 min read
The Federal Government has introduced a Bill to amend the new mandatory merger notification regime. The changes address two of the regime's most contentious aspects: the automatic voiding of acquisitions not notified to the Australian Competition and Consumer Commission (the ACCC), and the overly broad treatment of 'associates' for the purposes of the control test. These are welcome and necessary amendments that will make the regime more proportionate and consistent with international practice. However, automatic voiding rules continue to apply to notified transactions implemented without valid approvals, creating significant consequences that warrant close attention in integration planning.
Key takeaways
- The Treasury Laws Amendment (strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026 replaces automatic voiding with a court-supervised process in some circumstances. Under a new section 77E, the Federal Court may, on the ACCC's application, declare an acquisition void without regard to the transaction's substantive competition merits.
- Implementing a notifiable acquisition without notifying the ACCC will no longer be deemed void, but will still breach s45AY and may attract pecuniary penalties. However, transactions notified but implemented before ACCC approval, before the appeal period has expired or after approval has become stale remain automatically void, providing more serious consequences for 'gun jumping' than not notifying at all.
- The changes are prospective. Clients with upcoming or in-progress transactions should consider how these changes may affect them.
Voiding acquisitions: what's automatic and what's voidable?
What is changing?
Previously, under s45AZA of the Competition and Consumer Act 2010 (the CCA), a notifiable acquisition implemented without notification, or notified and completed before clearance, was automatically deemed void. Stakeholders expressed concerns that this could produce unintended outcomes, including uncertainty for third parties relying on completed transactions, and that it encouraged overly conservative notification approaches.
The Bill repeals automatic voiding and replaces it with a court-supervised process for non-notified transactions. Under a new s77E, the Federal Court may, on the ACCC's application, declare an acquisition void or make any other appropriate order. The court must not consider the transaction's substantive competition merits, but can consider whether voiding would be undesirable (eg it would cause harm to innocent third parties, or where the vendor has been wound up). Implementing without notification will still attract pecuniary penalties.
However, notifiable transactions notified to the ACCC but implemented before approval, before the appeal period expiring or once a decision is stale remain automatically void. This would apply to inadvertent gun jumping as well.
Key features of the new framework include:
- Time limits: There will be a six-year limit on the ACCC's ability to seek a voiding declaration and on any party's ability to seek orders dealing with the consequences of voiding. For transactions that were notified to the ACCC but implemented before approval, this time limit can be extended with the court's leave. For transactions that were not notified even though they were required to be, this time limit cannot be extended.
- Injunctions: Under a new s77F, the ACCC may seek injunctions from the Federal Court while investigating or pursuing a voiding application, to prevent further steps regarding an acquisition.
- Who can apply: Only the ACCC can apply for a voiding order. Third parties applying for consequential orders must provide a copy to the ACCC, who may intervene. These orders may be made where the court considers them desirable to give effect to a voiding order or to deal with its consequences.
- Commencement: The changes are prospective. They apply only to acquisitions completed after the date the amending legislation receives royal assent.
A key feature of the new voidable regime is that when deciding whether to declare a transaction void, the court cannot consider the transaction's competitive effects or public benefits (s77E). While it can consider whether it would be undesirable to make the voiding declaration, excluding competitive effects is a notable curtailment of judicial discretion. Eg a divestiture or unwinding order may be more appropriate where competitive harm is significant, whereas a voiding order may be disproportionate in cases involving inadvertent, minor or short-lived breaches, particularly by smaller and less sophisticated parties. Some of those factors, however, may be relevant to whether the voiding order would be 'undesirable'.
What this means for you
The shift from automatic to discretionary voiding for non-notified transactions is important in three respects:
- It protects innocent third parties. Lenders, customers, suppliers and counterparties who dealt with a merged entity in good faith are less likely to face automatic legal uncertainty. A court must be satisfied that voiding is appropriate and will likely consider the impact on these parties.
- Limiting the right to apply for a voiding order to the ACCC prevents competitors or dissatisfied shareholders from opportunistically seeking to unwind completed transactions for strategic or vexatious purposes, which is an important safeguard in contested M&A contexts. However, the regulator may still take action against parties who do not notify even if there is no competition issue. Further, even if the ACCC chooses not to apply for a voiding order, it may seek penalties. Overseas precedents indicate that courts and agencies look unfavourably on deliberately not filing, particularly by sophisticated, well-resourced parties and repeat offenders.
- Inadvertent 'gun jumping' remains a penalty risk of up to $100 million per infringement for corporations, 30% of turnover, or three times the benefit value; and up to $2.5 million for individuals. Early implementation of a notified transaction carries even higher consequences, though, as those remain automatically void.
Joint control and associates: convergence with international approaches
What is changing?
The prior adaptation of 'control' in the Act meant that merely entering into a shareholders' agreement could deem shareholders 'associates' with 'joint control', regardless of individual equity interest or actual rights attached to that individual interest. Transactions could therefore be treated as conferring joint control even where the acquirer had no practical ability to influence the target's competitive conduct.
The definition of control is substantively unchanged. A new definition of 'associate' has been introduced into s51ABSB, under which a person is an 'associate' of another in relation to a body corporate if there is a relationship of control between them; they have entered into a relevant agreement for the purpose of determining outcomes about the body's board, or financial and operating policies; or they are acting in concert for that purpose.
However, the key reform is the carve-outs to the definition of 'associate' in s51ABSB(2). A party is now not an associate merely because of a relevant agreement where one or both parties hold rights to dispose of securities, control disposal of securities, protect minority financial interests or receive profit distributions, or because of rights under arm's length financing or standard governance shareholders' agreements (unless excluded by Ministerial determination). A party is also not an associate merely because of giving professional advice, acting as a financial product dealer on client instructions, making a takeover bid, or being appointed as proxy without valuable consideration. The Minister may refine these categories by legislative instrument over time.
This brings the definition of 'joint control' into line with the European Union Merger Regulation concept of joint control and decisive influence, whereby joint control arises where shareholders must reach agreement on major decisions but does not arise from minority shareholder protection rights alone.
What this means for you
- Wide application: The exemption for arm's-length financing, subscription and standard shareholders' agreements about governance processes is practically significant. This change is expected to provide relief from the requirement to notify transactions that resulted in control by virtue of standard shareholders' agreements that do not result in any practical control.
- Good news for minority investors, particularly in the venture capital space: Co-investors holding standard institutional or minority shareholder protection rights will no longer automatically be treated as associates when assessing joint control.
- Bright-line voting power thresholds still apply: Even where the revised definition of joint control avoids a notification obligation, separate bright-line voting power thresholds continue to apply. These include acquisitions that move a holding from 20%, or below, to above 20% in a private unlisted entity, irrespective of control.
Next steps
- Failure to obtain ACCC approvals can expose parties to voiding applications and large penalties. Transactions notified but implemented before approval or once stale remain automatically void.
- Review all transactions for notification requirements and take care in integration planning to avoid inadvertently 'gun jumping', which could render your transaction automatically void.
- See our summary for guidance on the new regime.
The changes still need Senate approval; we will provide an update on commencement.
If you would like to discuss the issues raised in this Insight, please contact any of the people below.