Changes to the Takeover Code (the Code) will take effect on 12 September 2016. Requirements relating to the communication and distribution of information will be updated and clarified. In particular, changes will be introduced to reflect the developments in electronic communications, including social media, which have taken place over recent years.
The rules governing the communication and distribution of information are an essential part of the orderly framework for the conduct of takeovers and underpin the following general principles:
- Target company shareholders must have sufficient time and information to enable them to reach a properly informed decision on a bid.
- Target company shareholders (of the same class) must be treated equally.
There will be significant amendments to a number of Code provisions; we look at some of the key changes below.
Social media, videos and webcasts
New rules will be introduced to regulate the use of social media, videos and similar forms of communication by the parties to an offer.
New Rule 20.3 will regulate the use of videos, webcasts and audio-only communications as a means of communicating information or opinions relating to an offer or the financial performance of the parties to an offer. A video, webcast or audio communication:
- must contain only a director or senior executive reading from a script or participating in a scripted interview (failing which it is likely to be regarded as an advertisement)
- may only be published with the prior consent of the Panel
- must be published on a website, and an announcement about the publication must be made at the same time via a regulatory information service (an RIS).
The use of social media (including Twitter and Facebook) will be allowed but in more restricted circumstances. New Rule 20.4 will prohibit the use of social media to publish information except:
- the full text of an announcement which has already been published via an RIS
- the full text of a document which has already been published on a website in accordance with the Code
- a notification of a link to the website on which such announcement or document has been published.
Equality of information
Rule 20.1, which requires equality of information to shareholders, will be substantially enhanced and clarified.
Reflecting the approach already taken in practice, changes will make it clear that the rule applies to information and opinions relating to the offer or the parties to the offer (not just information about the parties).
When the parties publish material new information or significant new opinions relating to an offer or the parties (or provide it to target shareholders, other relevant persons or the media) it will have to be announced via an RIS at the same time. This change supports the requirement for information and opinions to be made equally available to all target shareholders.
Irrespective of whether or not it contains any material new information or significant new opinion, there will be a requirement for the prompt publication on a website of:
- any presentation or other document relating to an offer or a party to an offer provided to, or used in any meeting (including a telephone call or video conference) with, any target shareholder or other relevant person
- any article, letter or other written communication relating to an offer or the financial performance of a party to an offer provided to the media.
Meetings with shareholders and others
A new Rule 20.2 will be introduced (replacing a note to Rule 20.1) putting further emphasis on the monitoring of meetings and telephone calls with shareholders, analysts and others. The rule requiring supervision by a corporate broker or financial adviser will apply not just to meetings at which the participants are physically present but also to telephone calls, video conferences and meetings held by other electronic means.
A dispensation may be granted for meetings which take place after the announcement of a recommended firm offer where there is no competitive situation. If granted, the meeting could go ahead without the presence of a corporate broker/financial adviser in circumstances where a senior representative (or adviser) of the target company or bidder, who has been appropriately briefed, takes on the supervisory role.
Other changes or clarifications include:
- unscheduled meetings will not be excluded from the scope of new Rule 20.2 (currently, there is a carve out for relevant meetings which "take place by chance"). A dispensation may be available for unscheduled incoming telephone calls to an investor relations officer where basic information is relayed in accordance with a pre-approved script.
- new Rule 20.2 will not apply to ordinary course meetings that take place prior to the offer period (unless the meeting relates to a possible offer or if it would not be taking place but for the possible offer), to telephone campaigns conducted in accordance with the requirements of the Code or to meetings which relate solely to administrative matters.
The revised Code will take effect on 12 September 2016. The new rules will not have retrospective effect but will apply to ongoing offers from that date.