In July last year, the Code Committee of the Takeover Panel (the Panel) published a public consultation paper (PCP 2012/2) which set out proposed amendments to the Takeover Code (the Code).  Broadly, the proposals aimed to give trustees of a target company's pension scheme similar rights to those currently given to employee representatives, namely the right to have an opinion on the effect of the offer published as part of the offer documentation/process.

On 22 April 2013, the Panel published its response (RS 2012/2) together with the final form of the amended Rules which come into effect on 20 May 2013. Whilst the Panel states that it has, in most cases, adopted the proposed amendments contained in the consultation, there are some important changes which we set out below.

Only defined benefit schemes affected

Originally, the PCP proposed that the new regime would apply to both defined benefit and defined contribution schemes. However, having considered the matter further, and having taken respondents’ views into account, the Panel believes that the new provisions of the Code should only apply to an occupational pension scheme that:

  • provides pension benefits, some or all of which are on a defined benefit basis,
  • is a funded scheme which is sponsored by the target company (or any of its subsidiaries even if not wholly owned), and
  • has trustees (or, in the case of a non UK scheme, managers).

In addition, the Panel has clarified that the new rules will apply to defined benefit pension schemes on a group-wide basis, wherever they may be, and will not be limited to UK schemes.

Bidders need only comment on benefit impacts . . .

The original consultation envisaged amending the Rules to put the bidder under an obligation to state its intentions with regard to the target company's pension scheme(s) and the likely impact of its strategic plans for the target on the scheme(s) which would have included any impact on covenant and not just benefits/contributions. 

However, on reflection, whilst the Panel considers that it is appropriate for the bidder to comment on its intentions with regard to the impact of its offer on benefits/contributions, it acknowledges that the bidder’s strategic plans for the target company are unlikely to have repercussions for its pension scheme, and it will not, therefore, now require a statement by the bidder in respect of the impact of the offer on covenant.

. . . but trustees may comment on covenant

However, whist the bidder will not be required to state any impact on covenant, the response statement clarifies that, whilst not stipulating that pension scheme trustees should opine on covenant impact, there is nothing to stop them from doing so. Indeed, the Panel states that it considers that the expression of any such opinion would form part of the debate as to the effects of the offer on the pension scheme and does not believe that it would be appropriate for the new rules to limit the trustees to expressing an opinion on only certain types of impact.

No need for target board to comment (though it may do so)

Having taken respondents’ views into account and considered the matter further, the Panel has concluded that it is not necessary to require the board of the target company to state its own views on the effects of the implementation of the offer on the pension scheme or on the likely repercussions of the bidder’s plans for the target company on the pension scheme. However, the response statement makes it clear that there is nothing to stop the target company board from doing so.

Disclosure of agreements between bidder and trustees

The Panel has scaled back its proposals in respect of the extent to which arrangements between a bidder and the trustees of a target pension scheme must be disclosed. Under the revised rules, an agreement between a bidder and target pension trustees will now, broadly, be treated as any other agreement. If the agreement is a material contract of the bidder, it will have to be summarised in the offer document and published on a website. However, unlike other agreements, if it is not material, but it is if referred to in another bidder published document, it will not have to be published on a website (that is, it will only have to be published on a website if it is material).

Whilst the Panel considered that arrangements between a bidder and target pension scheme trustees which relate to future funding of a scheme should not be caught by the prohibition on offer related arrangements in Rule 21.2, it has agreed to clarify the rule to make this clear. Such arrangements will now, therefore, be expressly excluded from the prohibition. As offer related arrangements (whether permitted at the Panel's discretion or expressly excluded from the prohibition) must be summarised in a firm intention announcement and/or offer document, as well as published on a website, in order to dovetail with the change outlined in the paragraph above, a new note on Rule 21.2 specifies that such agreements need only be published on a website if they are material.


The amendments to the Code will take effect on Monday, 20 May 2013. In particular, revised Rule 25.9, which deals with the requirement to publish a pension scheme trustees' opinion, will apply with effect from that date, regardless of whether the offer document was published before 20 May.


Whilst the proposed changes in the consultation were, broadly, non-controversial and in-line with developments in respect of the provision of information to, and the involvement of, employee representatives/employees, the changes make the new rules more proportionate and practical.