Following public consultations earlier this year on the class exemption for share buybacks and the inflexibility of notice of meeting requirements for allotments of shares under rule 16(b) of the Takeovers Code, the Takeovers Panel has granted new class exemptions under the Takeovers Code (Class Exemptions-Buybacks and Rule 16(b)) Amendment Notice 2010.
Rule 16(b) class exemption
Rule 16(b) provides that a notice of meeting which contains a proposed resolution to enable persons to become the holder or controller of an increased percentage of voting rights in a Code company by way of an allotment that has been approved by an ordinary resolution of the company (under rule 7(d)), must include the particulars of the voting securities to be allotted. However, the characteristics of some transactions which are subject to rule 16(b) mean that it is impossible for the Code company to specify the exact numbers and percentages required to be disclosed. In particular, the information is often dependent on a number of factors outside of the company's control. Consequently, prior to granting the new class exemption, the Panel had granted about 40 individual exemptions in respect of such transactions.
The Rule 16(b) class exemption applies to the following kinds of transactions:
- a rights issue;
- an underwriting arrangement (where the Takeovers Code (Professional Underwriters) Exemption Notice 2004 is not relied on); and
- the conversion of options and other convertible securities.
The class exemption is subject to conditions which effectively modify the disclosure requirements in rule 16(b) so that, rather than expressing the exact numbers and/or percentages that may be held or controlled by the allottee, the notice of meeting must state the potential maximum numbers and/or percentages. The class exemption is also subject to further conditions which ensure that the shareholders of the Code company have the necessary information to make a fully informed decision when deciding whether to approve any increases in voting control.
For allotments that will occur over a period of more than 12 months, on-going disclosures about the control position of the exempted allottee must be made in the company's annual report and on its website (if it operates a website).
Replacement of the share buyback class exemption
The notice also amends the Takeovers Code (Class Exemptions) Notice (No 2) 2001 by replacing the existing class exemption relating to buybacks approved by shareholders. The new exemption imposes similar disclosure conditions for share buybacks as those that apply for the Rule 16(b) exemption noted above.