UK Takeover Panel proposes refocusing the scope of the Takeover Code

The Takeover Panel has published a consultation which proposes significant amendments to the jurisdictional framework of the UK's City Code on Takeovers and Mergers. The objective of the proposals, published on 24 April 2024, is to refine the code's applicability. It specifically targets UK-listed companies in order to provide clarity and fairness while ensuring an appropriate regulatory framework for UK-listed and non-UK-listed companies.

The key proposals from the consultation relate to jurisdictional scope, removal of the residency test, the exclusion of certain other companies, transitional provisions and timing.

Streamlining of jurisdictional scope

The Code will apply to UK, Channel Islands or Isle of Man-registered companies with securities admitted to trading on a UK regulated market (such as the London Stock Exchange's Main Market), UK multilateral trading facility (such as the AIM Market operated by the London Stock Exchange) or stock exchanges in the Channel Islands or the Isle of Man (such as the International Stock Exchange) (all referred to as UK-listed).

Companies previously UK-listed within the last three years will also fall under its purview.

Companies with their registered offices outside the UK, the Channel Islands, or the Isle of Man will remain exempt from the Code.

Removal of residency test

The requirement for companies to have their central management and control in the UK, the Channel Islands, or the Isle of Man to be subject to the Code will be abolished.

Other excluded companies

Public or private companies whose securities are, or were previously, traded using matched bargain facilities and platforms like the Private Intermittent Securities and Capital Exchange System (or PISCES), TISE Private Markets, and crowdfunding secondary markets will be excluded from the Code.

Public or private companies whose securities are, or were previously, traded solely on an overseas market (such as NYSE or NASDAQ) will not fall within its jurisdiction.

Private companies that filed a prospectus at any time during the 10 years prior to the relevant date will be exempt, unless they were UK-listed within the previous three years.

Transitional arrangements

Companies currently subject to the Code but falling outside the new regime will be subject to a three-year transitional period. This is significantly shorter than the existing 10-year period.

During this period, such "transition companies" can explore alternative arrangements, such as amending their articles of association or allowing shareholders to exit their investments.

Timing

These proposed changes are subject to consultation until 31 July 2024 and may be subject to revision before implementation.

A response statement setting out the final set of revisions to the Code is expected in the autumn of 2024. The final changes are expected to take effect one month after publication of the response statement.

Osborne Clarke comment

The proposed amendments to the Code aim to streamline its applicability, focusing on UK-registered and listed companies, and attempt to strike a balance between regulatory oversight and the needs of companies and market participants. 

We expect these amendments will come as a welcome change for many prospective purchasers of unlisted public companies, who have historically been forced to run expensive and onerous Code-governed acquisition processes for a target that may have been operated as private company despite the Code's application.

By approaching these acquisitions without the application of the Code, parties will have the flexibility, for example, to deal with founding and majority shareholders, multiple share classes and "special deals" without needing to appoint a financial adviser/Rule 3 (independent) adviser, comply with Rules 15 and 16 of the Code, nor obtain a fair and reasonable opinion.

Removing some of these obligations would have simplified transactions such as the acquisition of Hambledon Vineyard plc by a consortium made up of Berry Bros. & Rudd and Symington Family Estates (in which Osborne Clarke acted).   

If you would like to discuss your response to the consultation, please get in touch with your usual Osborne Clarke contact, or one of our experts listed below