The Takeover Panel and City Code

1
The Takeover Panel and City Code
2
Introduction

• The Panel and the Code
• Statutory status
• Structure of the Panel
• Structure of the Code
• Powers of the Panel
• To whom does the Code apply?
• Rules
• Code Timetable

3
The Panel and the Code

• Panel administers and enforces City Code on
  Takeovers and Mergers
• Aims Code is not concerned with financial or
  commercial advantages or disadvantages
• History Code introduced in 1968
• The Code provides
• Fair and equal treatment for shareholders
• An orderly framework for the conduct of takeovers

4
Statutory Status

• Pre-20 May 2006 Panel was non-statutory body
• 20 May 2006 06 April 2007 Panel and Code had
  statutory status for some offers
• Since 06 April 2007 Panel and Code have
  statutory status for all offers subject to the
  Code (under Part 28 Companies Act 2006)
• Co-operation with other bodies and access to
  information
• Support of the courts
• Enforcement

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Structure of the Panel

• The Panel overall responsibility for policy,
  financing and administration
• The Executive day to day work and general
  administration of the Code
• The Hearings Committee first tier of appeals
  process
• The Takeover Appeal Board second tier of appeal
  process (limited cases)
• The Code Committee rule-making functions

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Structure of the Code

• 6 General Principles (good standards of
  commercial behaviour)
• 38 Rules
• Purposive interpretation their spirit must be
  observed, as well as their letter

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Powers of the Panel

• Historically, high degree of support with
  compliance strong
• Panel can
• Require documents and information
• Require a party to restrain from acting
• Require payment of compensation
• Enforce breach of Code through Court
• Require a party to take specified further action
• Hearings Committee can
• Private statement of censure
• Public statement of censure
• Suspend or withdraw exemption/approval/special
  status
• Report conduct
• Cold shouldering

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To whom does the Code apply?

• Nature of the offeree (target) company
• Applies to a company
• Which has its registered office in the UK, the
  Channel Islands or the Isle of Man and has its
  securities admitted to trading on a regulated
  market in the UK (ie the Official List and virt-X
  but not on AIM) or on a stock exchange in the
  Channel Islands or the Isle of Man
• (i) Which has its registered office in the UK but
  its securities are admitted to trading on a
  regulated market in another Member State or (ii)
  which has its registered office in another Member
  State and its securities admitted to trading only
  on a regulated market in the UK or on a regulated
  market in one or more Member States, including
  the UK. But, in these cases, the Panel will
  share jurisdiction with the relevant regulator in
  another Member State
• Which does not fall into the two paragraphs above
  and which satisfies the residency text (ie it is
  incorporated in, and has its central place of
  management and control in, the UK, the Channel
  Islands or the Isle of Man)
• Private companies included in limited
  circumstances
• Control an interest or interests in shares
  carrying 30 of more of the voting rights of the
  company

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Who is effected?

• All those involved in an offer governed by the
  Code
• Concert parties ensure all potential concert
  parties are identified

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Key propositions of the Code Rules

• Equal treatment for all shareholders
• Adequate and timely advice and information
• No false markets
• No unapproved frustrating actions

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Equal treatment for all shareholders

• General Principle 1 equivalent treatment
• Rule 16 no special deals/management
  incentivisation
• Rules 6 and 11 quantum and type of
  consideration
• Rule 9 mandatory offer

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Adequate and timely advice and information

• Rule 3 independent advice
• Accuracy of documents
• Disclosure of information
• Rules 24/25 contents of documents
• Rules 28/29 forecasts and valuations
• Rules 30/24 - timetable

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No false markets/unauthorised frustrating action

• No false markets
• General Principle 4 no creation of false
  markets
• Rule 2 timing and contents of announcements
• Rule 8 disclosure of dealings and positions
• Rule 20 equality of information
• Rule 21 Restrictions on frustrating action

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Code Timetable

• Offerees should not be put under siege for an
  unlimited amount of time
• Final Day Rule