In July last year, the Code Committee of the Takeover Panel (Panel) issued a consultation paper dealing with pension scheme trustee issues. The Panel has now published its response to the consultation, together with the detailed rule changes. Broadly, the provisions relating to the employee representatives introduced to the Takeover Code in September 2011 will be extended to the trustees of the target’s pension scheme(s). Other new provisions are also being introduced, including in relation to future funding agreements. The intention behind the consultation is to help ensure the effects of an offer on a pension scheme can be discussed by the relevant parties at an early stage, so that any issues which might arise as a consequence of the potential change of control can be considered by the target shareholders and others. Most of those who responded to the consultation were in favour of the proposed changes – with the main objectors being members of the legal profession and private equity industry. The objections raised included the fact that pension scheme trustees have already been given specific protections by law, and some have questioned the justification for giving pension scheme trustees different rights under a Takeover Code transaction as compared to a private acquisition. This table considers how some of the proposed rule changes differ from those initially put forward in July 2012.

Click here to view table.

The rule changes will take effect on Monday 20 May 2013, although the right for the pension scheme trustee to have their opinion appended to the target circular will apply from 20 May 2013, even if the offer document to which the opinion relates is published before 20 May 2013.

A few useful reminders:  

  • parties to the offer will be expected to stand by any public statement made during the offer period relating to any course of action they intend to take (or not take) after the end of the offer period. Where no time period is specified, the statement will normally be expected to hold true for at least 12 months from the end of the offer period;  
  • the trustees will have a right to circulate their opinion on the effects of the offer on the pension scheme, in the same way that the employee representatives have a right to circulate their opinion on the effects of the offer on employment. This is a right, not an obligation (and the Panel has revised the wording of the rules so as to remove any uncertainty on this point); and  
  • target directors may be trustees of the target’s pension scheme. Questions as to whether they have a conflict of interest and if so, how that conflict might be managed, are matters for the directors concerned and will not normally be matters for the Panel to resolve.

The Panel issued a further two consultations in July 2012, relating to (i) companies subject to the Takeover Code; and (ii) profit forecasts, quantified financial benefits statements and material changes in information. Responses to these consultations have yet to be published.