Panel proposes changes to the Takeover Code

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On 5 July, the Code Committee (Committee) published three consultation papers proposing changes to the Takeover Code (Code) concerning:

  • Companies subject to the Code (PCP 2012/3);
  • Profit forecasts, quantified financial benefits statements, material changes in information and other amendments (PCP 2012/1); and 
  • Pension scheme trustee issues (PCP 2012/2).

Companies subject to the Code - removal of the “residency test”

The “residency test” will be removed such that the application of the Code to public and certain private companies with registered offices in the UK, the Channel Islands or the Isle of Man will no longer depend on whether the Panel considers them to have their place of central management and control in the UK, the Channel Islands or the Isle of Man. Consequently the Code will apply to all such companies wherever they are managed and controlled.

The removal of the “residency test” was long overdue and will remove both the uncertainty as to when the Code applied in such circumstances and the practice of companies manipulating residency to opt in and out of the Code.

Proportionate requirements to certain profit forecasts

Rule 28 will be revised to incorporate more proportionate requirements to certain profit forecasts, most notably to profit forecasts published before the making of an approach for a possible offer. The Panel could dispense from the requirements of Rule 28 in certain circumstances, including in relation to “ordinary course profit forecast” and forecasts relating to historical or future financial periods.

Other changes include; (i) incorporating the requirements of Note 9 on Rule 19.1 on “merger benefits statements” (to be re-named “quantified financial benefits statements”) in Rule 28 and extending their application to statements made by the offeree concerning cost saving measures or other financial benefits that it proposes to implement if the offer is unsuccessful (in addition to statements concerning the financial benefits expected to arise if the offer is successful); and (ii) amending Rule 27 to require the disclosure of material changes (in information published in an offer document or an offeree board circular) promptly after their occurrence, as opposed to if and when a subsequent document is published.

Pension scheme trustee issues

All the Code provisions that currently apply for the benefit of employee representatives will be extended to the trustees of the offeree company’s pension scheme(s).

Comments on these consultations are invited by 28 September 2012.

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