The Takeover Panel (the “Panel”) recently published its latest consultation paper (2016/1) setting out various proposed changes to the Takeover Code (the “Code”) in relation to the communication and distribution of information during an offer. The consultation closed on 15 April 2016.
Paul Arathoon, Senior Associate, led the response of The Quoted Companies Alliance (“QCA”) Legal Expert Group to the paper. The QCA is an independent membership organisation that champions the interests of small to mid-size quoted companies. Charles Russell Speechlys is an active member of the QCA and our partners and associates sit on a number of the QCA’s Expert Groups, including the Legal and Secondary Markets Expert Groups. In addition, Tom Shaw, head of Business Services, is on the board of directors of the QCA.
The areas which are discussed in the paper and where the Panel is proposing certain rule changes include:
- equality of information to shareholders
- meetings and telephone calls with shareholders and other parties
- the use of videos, social media and websites, given their increased use in transactions
In general, the QCA supports the proposed amendments to the proposals given that the changes apply balance and largely reflect general market practice. It is expected that, subject to the outcome of the consultation, the new and amended rules will come into force later this year unless the Panel decides a further consultation is required.
EQUALITY OF INFORMATION
The Panel proposes changes to Rule 20.1 to ensure that any presentation or document used in a meeting, as well as material new information relating to an offer disclosed in such meetings, should be made available on a website or via a regulatory information service.
The QCA’s view is that, whilst in principle the change is sensible, it could lead to an overload of information being released into the market that may be of little use to investors.
There is also a proposal that if a presentation or other document is updated then the updated version should be made available on the website as well. Although the new rule requires only that the latest version would fall to be published, this is only provided that it does not omit any relevant information or opinion which was included in a previous version. The QCA response asks whether there should be a requirement to explain any material changes and why they were made or whether to comply with the rule it would be acceptable simply to put both presentations on the website noting the latest one is e.g. 20 March 2016 and the previous one is e.g. 28 February 2016? There also remains a general concern that there will be a further administrative burden to supervising the application of this rule.
The paper further proposes that documents, announcements and other information must be published on a website “promptly” – so replacing the current 12 noon on the next business day requirement currently in place – and that this should be regarded as a requirement to publish as soon as practicable, taking into account what is reasonable in all the circumstances. The QCA’s view is that publishing relevant documents on a website by 12 noon on the business day after an announcement remains a reasonable deadline and that there may be logistical reasons why ‘promptly’ may cause issues, such as if parties outside the UK are in different time zones or where third parties maintain websites.
The paper notes that the current regime of requiring meetings of both the offeree and offeror (and their advisers) with shareholders, analysts, brokers and other interested parties (termed “Relevant Third Parties”) to be attended by an appropriate representative of the financial adviser to the offeror or the offeree company is both costly and can be impractical to police.
Certain changes are therefore proposed to allow derogations or dispensations from the requirement where the Panel considers that the interests of shareholders, and the market generally, will not be adversely affected. In particular this will apply to meetings or calls after announcement of a recommended firm offer in which case senior representatives of the target and bidder who attended will now be able to give the required confirmation to the Panel that no new information was discussed or new significant opinion given.
The Panel is also extending the rules to explicitly cover video meetings and other meetings held electronically.
The QCA’s view is that generally the proposed changes are acceptable and should also lessen the burden on companies and their advisers.
VIDEOS, SOCIAL MEDIA AND WEBSITES
Given the increased use of social media and websites by corporates when communicating with shareholders, customers and other stakeholders, the Panel is proposing that information and opinions in connection with an offer can be disseminated in this way. However, the Panel also wishes to restrict the use of such media so that they can only be used to carry the full text of an announcement already published by regulatory information service or a document published on a website in accordance with the Code or a notification of a link on a website containing such an announcement or document.
In relation to videos, the Panel is proposing that its consent must be given prior to publication of any videos by a party to an offer that include any information or opinions. The use of videos generally will be restricted so that they can only feature a director or other senior executive reading from a script or being interviewed in a pre-scripted interview.
The QCA agrees with these proposals.
The Panel is proposing to expand the current prohibition on advertisements so that it is clear that the general prohibition applies to all and any advertisement made in the course of an offer unless it falls into a specific exemption. There are also some changes made to the exemptions themselves, including the deletion of the exemption to which the Panel has granted specific consent.
Whilst the QCA agrees with the changes proposed, its favour the retention of the existing exemption allowing advertisements with the Panel's consent as having this expressly set out underlines the possibility of a derogation being given.