From 30 September 2013, the Takeover Code (Code) will apply to more companies than it does at present. In last July's public consultation paper (PCP 2012/3), the Code Committee of the Takeover Panel proposed extending the scope of the Code. Presently, the Code does not apply a residency test to companies which:

  • have their registered offices in the UK, Channel Islands or Isle of Man, and
  • have any securities admitted to trading on a UK regulated market (eg the main market of the LSE or the ISDX main board, but not AIM) or any stock exchange in the Channel Islands or the Isle of Man.

Any other company with its registered office in the UK, Channel Islands or Isle of Man is only subject to the Code if it is deemed by the Takeover Panel to have its place of central management and control in the UK, the Channel Islands or the Isle of Man (the so-called residency test). So, for example, a UK company with its shares admitted to trading on AIM whose place of central management and control is in Bermuda is currently not subject to the Code.

The proposals

The proposals in PCP 2012/3, broadly, sought to remove the residency test completely so that the Code would apply to all companies with their registered offices in the UK, the Channel Islands or the Isle of Man, regardless of where their place of central management or control is.

On 15 May 2013, the Code Committee published its response to PCP 2012/3 together with the final amendments that will be made to the Code. The Code Committee has taken into account the objections to the withdrawal of the residency test in relation to companies with no listing in the UK or other members of the EEA and has, therefore, modified its original proposals.

The new regime

The revised Code (effective from 30 September 2013) will now apply to all companies with their registered office in the UK, the Channel Islands or the Isle of Man whose shares are admitted to trading on:

  • a regulated market in the UK (eg, the LSE main market or the ISDX main board),
  • a multilateral trading facility (MTF) in the UK (eg, AIM or the ISDX growth market), or
  • any stock exchange in the Channel Islands or the Isle of Man.

However, the residency test will continue to apply to a company which has its registered office in the UK, the Channel Islands or the Isle of Man whose securities are:

  • admitted to trading solely on a public market which is not a regulated market (either in the UK or in another EEA member state), an MTF in the UK or a stock exchange in the Channel Islands or the Isle of Man; or
  • not traded on any public market.

In other words, it will continue to be the case that the Code will apply to an offer for such a company only if it is considered by the Panel to have its place of central management and control in the UK, the Channel Islands or the Isle of Man.

Private companies

Private companies with their registered offices in the UK, the Channel Islands or the Isle of Man are subject to the Code in limited situations. PCP 2012/3 also proposed certain changes to these rules which have been only slightly modified in the response. Key changes from the current regime to note are that the rules will, from 30 September 2013, apply to such a company:

  • whose securities have previously been admitted to trading not only to a UK regulated market, but also to a UK MTF or any stock exchange in the Channel lslands or the Isle of Man, or  
  • which has filed a prospectus, rather than simply having been subject to an obligation to file such a document.

Such companies are, and will remain, subject to the residency test as well as other tests which are unchanged.

Shared jurisdiction companies

Except for very minor, clarificatory modifications, the rules that apply to shared jurisdiction companies are unchanged.

Comment

The new rules extend the application of the Code to companies not previously covered by it. In particular, AIM companies will now be subject to the Code irrespective of their place of management and control. The new rules sensibly exclude a UK, Channel Islands or Isle of Man company with securities admitted to trading solely on an overseas market, given that their shareholders are, in practice, unlikely to expect to be afforded the protections of the Code.

The amendments take effect from 30 September 2013. By that date, companies which are not currently subject to the Code but which include similar takeover protections in their articles of association will need to consider whether those articles are inconsistent with the Code and need to be amended. Significant shareholders in companies that will become subject to the Code who are planning to increase their stakes in such companies to between 30% and 50% may also wish to do so before the Code's restrictions apply.