Public M&A – compensation order and cold-shoulder rulings for breaches of Takeover Code

The Takeover Panel and Takeover Appeal Board have issued a ruling pursuant to which:

• 3 individuals have been ordered to pay compensation of up to £32.5 million to former shareholders of MWB Group Holdings;
• 10 individuals (including the 3 ordered to pay compensation) have been cold-shouldered, including two Swiss lawyers and the chair of a French investment advisory firm; and
• another has been publicly censured.

The rulings relate to:

• a breach of Rule 9 in relation to MWB by the individuals who have been ordered to make the compensation payment;
• a breach of the requirement to take all reasonable care not to provide incorrect, incomplete or misleading information to the Panel (Section 9(a) of the Introduction to the Code) by those who have been cold-shouldered; and
• in the case of the public censure, a breach of Section 6(b) of the Introduction to the Code (not consulting the Panel when he was in any doubt as to whether a proposed course of action was in accordance with the Code).

Whilst the compensation order relates to a breach of Rule 9, most of the individuals have been cold-shouldered for misleading the Takeover Panel in the subsequent investigation.

This is the first time a compensation order has been made under the powers given to the Panel under section 954 of the Companies Act, and only the fifth time the Panel has used its cold-shoulder powers. No FCA-regulated firm can act for an individual who has been cold-shouldered on any transaction subject to the Takeover Code for the duration of the Panel sanction (ranging in this case from one year to 5 years).

Ordinarily, the Panel Executive would have required a Rule 9 offer to made by the concert party members to the other MWB shareholders. However, as MWB was liquidated in 2013 and then removed from the Register of Companies on 15 April 2018, the Executive took the view that it was impracticable, if not impossible, to restore MWB to the Register with a view to reconstituting the company and requiring the Rule 9 offer. Accordingly, it sought a compensation order as an alternative.

The full detail is set out the Hearings Committee Ruling (PS 2024/16). A summary of the Panel's sanctions is set out in PS 2024/17.  The Takeover Appeal Board ruling (TAB 2024/1) related only to the compensation order, rather than the facts or other findings.

Court order securing compliance to pay compensation

The Takeover Panel subsequently obtained a court order to secure compliance with the order to pay compensation (The Panel on Takeovers and Mergers v Mr. Richard Gary Balfour-Lynn & ors [2024] EWHC 3044 (Ch)). Under section 955 of the Companies Act 2006, the Panel can apply to court to secure compliance with its rulings – this is only the second time it has sought such an order.