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Changes to the Takeover Code – January 2016

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22/01/2016

Three sets of changes to the Takeover Code (the Code) came into effect on 23 November 2015.

Persons acting in concert with each other

Probably of most interest is the change to the persons who are presumed to be acting in concert, with the Panel introducing three additional presumptions. The additional presumptions are:

  • a person, his close relatives and the related trusts of any of them will all be presumed to be acting in concert with each other
  • the close relatives of a “founder” of a company to which the Code applies, their close relatives, and the related trusts of any of them, will all be presumed to be acting in concert with each other – this presumption will mean, for example, that close relatives acquiring equity on the death of a founder will be regarded as being within a concert party (so the equity does not “leave” the concert party in these circumstances)
  • shareholders in a private company who sell their shares in that company in consideration for the issue of news shares in a company to which the Code applies will be presumed to be acting in concert with each other.

“Close relatives” is defined as normally including:

  • spouses, civil partners and cohabitants
  • children, parents, brothers, sisters, grandchildren and grandparents (and their respective spouses, civil partners and cohabitants).

Dividends

In any announcement under Rule 2.5(a)(i) (specifying the price a potential bidder may be prepared to offer), a firm offer announcement under Rule 2.7 and in the offer document itself the bidder will have to include a statement that it will have the right to reduce the offer consideration by the amount of any dividend (or other distribution) which is paid or becomes payable by the target company to its shareholders, unless, and to the extent that, the bidder expressly states that that target company shareholders will be entitled to receive all or part of a specified dividend in addition to the offer consideration.

If the offer consideration is reduced as a result of dividend, offeree shareholders must be entitled to receive and retain that dividend. If a dividend is paid following an offeror making a “no increase” statement, the offeror will normally be required to reduce the offer consideration by the amount of the dividend.

Voting rights and Rule 9

Where a company has shares which are subject to a legal, regulatory or contractual restriction on the exercise of the voting rights attaching to those shares, those shares will nevertheless still count towards the calculation of the total voting rights exercisable at general meetings of the company.

The exception to this requirement will be limited to cases where the Panel has agreed to the restriction or suspension as an alternative to making a Rule 9 (mandatory) offer, where the shares will not count towards the calculation of the total voting rights exercisable at a general meeting. This means that the only restrictions and suspensions which allow shares to be excluded from being shares with voting rights exercisable at a general meeting are those restricted or suspended by agreement with the Panel to avoid a Rule 9 offer.

WM comment

It is worth noting in particular that possible offer announcements – not just firm offer announcements and offer documents – which include a statement relating to the price at which an offer may be made, must include a statement setting out the offeror’s right to reduce the offer consideration by the amount of any dividend (or distribution) which is paid or becomes payable by the offeree.

Companies that have previously issued shares with suspended voting rights which are still in issue should consult with the Takeover Panel to establish how the change regarding shares with suspended voting rights impacts them.

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