Corporate Matters – November 2017
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Statements of Intention – proposals for changes to the Takeover Code
The Code Committee of the Takeover Panel has proposed several changes to the rules relating […]
The Code Committee of the Takeover Panel has proposed several changes to the rules relating to the content and timing of statements of intention and also the publication of hostile offer documents.
The main proposals are as follows:
Additional content in statements of intention. In addition to those statements already required under the Takeover Code, an offeror would need to make specific intention statements regarding:
- the target company’s R&D functions;
- any material change in the balance of the skills and functions of the target’s employees and management; and
- the likelihood of any consequences on the target’s headquarters and headquarter functions of the offeror’s strategic plans post takeover.
New timing requirements for intention statements. An offeror would be required to make intention statements earlier than is currently the case. Under the proposals, the intention statement would have to be set out in the Rule 2.7 announcement as well as in the offer documents. It is thought that this would allow a more informed debate between stakeholders on the merits of the offer. It would also give employee representatives and pension trustees the opportunity to express an opinion in time for it to be included in the offer documentation.
New timing requirements for offer documents. The Takeover Panel proposes to prevent an offeror from publishing offer documents for 14 days from its firm offer (Rule 2.7) announcement unless it has first obtained the consent of the target company’s board. The rationale for this is that it enables the target board to have a minimum of twenty eight days to prepare its initial response circular, in turn pushing out the dates for Rule 31.1 and any Day 39 circular.
Reports on post-offer undertakings and intention statements. Both the offeror and the target company would be required to publish reports on post-offer undertakings rather than publication being at their discretion which is the current situation. Any post-offer intention statements would also have to be published rather than be given in private to the Takeover Panel.
The consultation period for the proposals ended on 31 October and it is thought that they will be adopted without any material amendments.
WM comment
The proposals are yet another development to the Takeover Code seemingly originating from the Kraft Foods take over of Cadburys in 2010. To a large part the proposals appear to be politically motivated with the Takeover Panel stating that they are responding to commentary in the public arena and suggestions made by various parties including the Government. In practice, the most significant change will be the prohibition on publishing offer documents within 14 days of a Rule 2.7 announcement. On the face of it this will make a takeover more difficult for a hostile bidder as it reduces pressure on the target’s board. We will keep you updated with any news on the adoption of the proposals.

Legal Entity Identifier Codes – have you got yours yet?
On 13 October 2017 the London Stock Exchange issued AIM Notice 47 which requires all […]
On 13 October 2017 the London Stock Exchange issued AIM Notice 47 which requires all AIM companies with securities admitted to trading on AIM to have a Legal Entity Identifier (LEI) code.
This is to ensure compliance with the Markets in Financial Instrument Directive and the Market Abuse Regulation which require operators such as the London Stock Exchange to collate LEI codes for each issuer admitted to trading.
The LEI is a unique 20-digit alpha-numeric code based on the ISO 17442 standard which connects to key reference information of the issuer that enables clear and unique identification of legal entities participating in financial transactions. All main market companies have had to comply with the requirement to register for an LEI since 2013 and so should already have one.
AIM companies can obtain an LEI from the London Stock Exchange by following a link on their website Legal Entity Identifier (LEI) | London Stock Exchange Group. If an existing AIM company has not registered for an LEI it must do so by 30 November 2017.
In addition, the AIM application form for admission of new securities to trading to AIM has been amended to require an LEI. The amended form should be used by all AIM companies and prospective applicants seeking admission to trading on AIM.

Corporate Governance Reform – strengthening the voice of stakeholders
In our September edition of Corporate Matters, we reported on the formal response published by […]
In our September edition of Corporate Matters, we reported on the formal response published by the Department for Business, Energy and Industrial Strategy (BEIS) to the Government’s green paper on proposed reforms to corporate governance.
One of the key areas that we highlighted were proposals for greater employee and other stakeholder input at board level. Within the report, BEIS announced that secondary legislation would be introduced to require all companies of a significant size (probably more than 1,000 employees), both private and public, to explain how their directors comply with the requirement to consider the wider stakeholders when promoting the success of the company under section 172 of the Companies Act 2006.
The report also stated that the Government’s aim was to encourage industry-led solutions, one of which was to ask ICSA: The Governance Institute and the Investment Association to complete their joint guidance on practical ways in which companies can engage with their employees and other stakeholders at board level.
This new guidance has now been published and is available on the ICSA: the Governance Institute website. It contains ten key principles to guide the way boards approach stakeholder representation in the boardroom and includes information on how company boards can best attend to:
- identifying key stakeholders;
- the composition of the board and development of directors;
- the way in which boards receive and process information;
- designing appropriate engagement mechanisms;
- reporting and feedback to shareholders and stakeholders.
At the launch Business Minister Margot James said “A crucial part of the [corporate governance] reforms is making sure companies listen to their workers and customers. This new industry-led guidance will help companies to choose how best to ensure those voices are heard in boardrooms up and down the country. This is an important piece of work and I would urge companies to draw on this guidance to help ensure their long-term success.”
Chris Cummings, CEO, Investment Association, commented “Investors want companies to take decisions which will generate the best long-term value to their shareholders. To make such decisions, boards need to hear and take account of the views of their stakeholders. Failure to do so, could impact on the future success of the company. The guidance launched today, provides practical steps for UK companies to consider how they ensure their stakeholder voice is represented in the boardroom. It also outlines how companies report on their stakeholder engagement activities and the impact engagement has had on the board’s decision making.”
WM comment
Companies to which the new corporate governance reforms apply, will need to consider this guidance for accounting periods starting from 1 June 2018. We will continue to monitor how this guidance from the Governance Institute and Investment Association is put into practical effect and report again in the new year with any developments of best practice.

New Prospectus Regulation – the PEG Statement of Principles will remain the same
The Pre-Emption Group has confirmed that the pre-emption thresholds in its Statement of Principles laid […]
The Pre-Emption Group has confirmed that the pre-emption thresholds in its Statement of Principles laid down in 2015 will remain the same despite the introduction of the new Prospectus Regulation on 20 July 2017.
The 2015 Statement of Principles allows for the general disapplication of pre-emption rights in respect of up to 5 per cent. of the issued share capital on an unrestricted basis and a further 5 per cent. of the issued share capital provided the funds are used in connection with an acquisition or specified capital investment.
As discussed in a previous publication, the new Prospectus Regulation allows an issuer, which already has securities admitted to trading on a regulated market, to admit further securities without the need for a prospectus as long as the securities represent less than 20 per cent. of the same class of security. Despite this relaxation of the requirement for a prospectus, the Pre-Emption Group has confirmed that the thresholds in its guidance will remain the same.

Corporate legislation tracker – November 2017
Our corporate legislation tracker highlights key corporate developments coming up and on the horizon. To […]
Our corporate legislation tracker highlights key corporate developments coming up and on the horizon.
To find out more, please click here.