On 5 July 2012, the Code Committee of the UK Takeover Panel (the Panel) launched three separate consultations regarding proposed amendments to various aspects of the Takeover Code in the UK (the Code). The amendments relate to profit forecasts, merger benefits statements, material information changes during an offer period, pension scheme trustee issues and the scope and jurisdiction of the Code in terms of the companies to which it applies.
The first consultation - PCP 2012/1 - relates to profit forecasts, merger benefits statements, material changes in information previously published during an offer period and other matters. This follows a prior consultation (PCP 2010/1) in March 2010 in the same area.
The proposed amendments include:
- Revising Rule 28 in relation to profit forecasts, in order to adopt what the Code Committee regard as more proportionate requirements, a more logical framework and more consistency with other regulatory provisions, than currently in place in relation to profit forecasts. In particular for example, Rule 28 should no longer require reports to be obtained from reporting accountants and financial advisers where a profit forecast was published before an approach with regard to a possible offer was made. In addition, Rule 28 should provide the Panel with the explicit ability to grant a dispensation from its requirements in certain circumstances, such as where the profit forecast relates to a period ending more than 15 months from the date on which it is first published or where the offer could not result in the issue of securities representing 10% or more of the enlarged equity share capital of the offeror.
- Renaming merger benefits statements as “quantified financial benefits statements”, incorporating into Rule 28 the requirements of Note 9 on Rule 19.1 on merger benefits statements, and extending the application of those provisions so that they apply to statements made by the offeree regarding cost saving measures or other financial benefits that it proposes to implement even where the offer does not succeed.
- The amendment of Rule 27 to require the offeror and offeree to disclose any material changes in information published in an offer document or an offeree board circular promptly after their occurrence, and not only in the event that a subsequent document is published.
Pensions Scheme Trustee Issues
The second consultation - PCP 2012/2 - relates to pension scheme trustee issues. The Code Committee had indicated in a previous consultation that it intended to run a separate consultation on this area.
The key point proposed in this consultation is that the provisions of the Code which relate to the employee representatives of the offeree should be extended so as to apply also to the trustees of the offeree’s pension schemes. This would require for example that the offeror state in the offer document its intentions with regard to the offeree’s pension schemes and the likely repercussions of its strategic plans on such schemes and that the offeror and offeree make available to the trustees of such pension schemes all the documents that they are required to make available to the offeree’s employee representatives, such as the announcement commencing the offer period, the announcement of a firm intention to make an offer, the offer document, the offeree board circular etc.
Scope of the Code and the Companies to which it Applies
The third consultation - PCP 2012/3 - relates to the scope of the jurisdiction of the Code and the companies which are subject to it.
Currently, an offer for a company which has its registered office in theUK, the Channel Islands or the Isle of Man, and whose securities are not admitted to trading on a regulated market in theUK, will not necessarily be subject to the Code. This may depend on whether the company is considered by the Panel to have its place of central management and control in theUK, the Channel Islands or theIsle of Man- the “residency test”. The Code Committee are proposing to remove the residency test in relation to certain public and private companies with registered offices in the UK, the Channel Islands or the Isle of Man, so that whether such a company is subject to the Code will no longer depend on whether the company 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.
(It is worth mentioning that the position in theUKon this point is in contrast to the position inIreland, where the concept of central management and control does not feature. Instead the Irish Takeover Rules apply to “relevant companies” which are defined in the Irish Takeover Panel Act 1997 (as amended) as including public limited companies or other bodies corporate incorporated in Ireland whose securities are currently being traded, or (if the subject of a takeover or other relevant proposal) were traded within the previous five years, on any of the Irish Stock Exchange (including the ESM), the London Stock Exchange (including AIM), the New York Stock Exchange and Nasdaq.)
This third consultation also proposes a number of other changes, for example regarding the clarification of the 10-year rule whereby the Code applies to private companies whose securities have been traded at any time in the previous 10 years.
The deadline for submissions on all three consultations is 28 September 2012.
For more information on the consultations, please click here.