Public M&A – changes to the companies to which the Takeover Code applies

The Takeover Panel has published a response statement (RS 2024/1) confirming that the scope of companies to which the Takeover Code applies will be narrowed to focus on UK companies which are, or have in the last two years been, quoted in the UK.

The changes, which are broadly in line with the Panel’s proposals in its consultation paper PCP 2024/1, take effect on 3 February 2025. The principal change to the amendments proposed in the consultation paper is that the length of each of the run-off period and the transition period will be two years, rather than the three years originally proposed.

Companies currently in scope

The Takeover Code currently applies 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 incorporated in the UK, Channel Islands or Isle of Man, such as those whose shares have been traded on a UK regulated market or an MTF, or which have published a prospectus, in the past 10 years – again if they meet the residency test.

Companies that will be subject to the Takeover Code under the new rules

Under the new rules, 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:

• 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 referred to as “UK-quoted”); or
• the company has been UK-quoted at any time during the two 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).

The Code will therefore no longer apply to: companies which were UK-quoted more than two years prior to the relevant date; companies whose securities are, or were previously, traded solely on an overseas market; companies whose securities are, or were previously, traded using a “matched bargain facility”; any other unlisted public company; or a private company which has filed a prospectus at any time during the 10 years prior to the relevant date.

Other points to note

• 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 two years.
• Transitional arrangements – For companies that will cease to be subject to the Code as a result of these changes, the Code will continue to apply to those companies for two years from the implementation date of the rule changes, that is until 3 February 2027. 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.

We discussed the proposals as set out in the Takeover Panel’s consultation in this episode of our public M&A podcast series.