Consultation on the companies to which the Takeover Code should apply and updated Practice Statement on private sale processes

The Takeover Panel has published a consultation paper (PCP 2024/1) which would narrow the scope of companies to which the Code applies. Separately, it has updated Practice Statement 31 to set out its approach to the naming of potential offerors on a private sale process.

Panel consultation on companies to which the Takeover Code applies

The Takeover Panel is proposing to narrow the types of companies to which the Takeover Code applies, to focus on companies which are registered and listed, or were in the last three years listed, in the UK. The Code currently applies, broadly speaking, to:

• any public company incorporated in the UK, Channel Islands or Isle of Man which has its shares listed on a UK regulated market (e.g. the Main Market of the London Stock Exchange) or a multilateral trading facility (MTF) in the UK (including AIM) or admitted to trading on any stock exchange in the Channel Islands or the Isle of Man;
• any other public company incorporated in the UK, Channel Islands or the Isle of Man which has its place of central management and control in one of those jurisdictions (known as the residency test); and
• certain private companies, such as those whose shares have been traded on a UK regulated market or a MTF, or who have published a prospectus, in the past 10 years – again if they meet the residency test.

The Takeover Panel is proposing the following:

• Companies in scope – The Code will apply to a company if it has its registered office in the UK, the Channel Islands or the Isle of Man and either: (a) its securities are admitted to trading on a UK regulated market, a UK MTF, or a stock exchange in the Channel Islands or the Isle of Man (collectively the Panel is referring to these companies as being “UK-listed”); or (b) the company was UK-listed at any time during the three years prior to the relevant date (being the date of the announcement of an offer or possible offer, or other event which has significance under the Code).
• Companies no longer in scope – The Code will no longer apply to a company which was UK-listed more than three years prior to the relevant date; a company whose securities are, or were previously, traded solely on an overseas market; a company whose securities are, or were previously, traded using a “matched bargain facility”; any other unlisted public company; or a private company which filed a prospectus at any time during the 10 years prior to the relevant date.
• Disclosure on delisting – When a company delists, it will have to make appropriate disclosure to its shareholders about the fact that the Code will cease to apply after three years.
• Transitional arrangements – There will be transitional arrangements for companies that will cease to be subject to the Code as a result of these changes. The Panel is proposing that the Code will continue to apply to those companies for three years from the implementation date of these rule changes. This is to allow these companies to put in place alternative arrangements such as making appropriate amendments to their articles of association or enabling shareholders to exit their investment if they do not wish to be shareholders in the company without the protections afforded by the Code.

The consultation closes on 31 July 2024. The Panel says that it intends to publish a response statement in autumn 2024 and the implementation date will be approximately one month later.

We discuss the Takeover Panel’s proposals in the latest episode of our public M&A podcast series, which you can listen to here.

Practice Statement 31 on private sales processes

Practice Statement 31 sets out the Takeover Panel's approach to formal sale processes, strategic reviews, etc and when, for example, potential offerors have to be named in those situations. It has been updated, as described in Panel Statement 2024/12, to set out the Panel's approach to private sale processes (that is where a company initiates discussions on a private basis with more than one potential offeror and chooses not to announce those discussions).

If a company makes an announcement in respect of what was, until that point, a private sale process (whether voluntarily or in response to rumour or speculation or share price movement), that will commence an offer period in relation to the company, and trigger the requirement to identify any potential offeror with which the company is in talks, or from which an approach has been received (under Rule 2.4(a)). The Panel has updated the Practice Statement to say that where a company is genuinely initiating a private sale process, the requirement to identify any potential offeror may not be appropriate and it may be acceptable for the company to be required to identify a potential offeror only if it has been specifically identified in any relevant rumour or speculation.

The Panel has also issued an updated version of the Takeover Code. The changes, which are only minor, are described in Panel Statement 2024/13.