On 24 April 2024, the Takeover Panel released a consultation paper (PCP 2024/1) proposing a significant narrowing of the companies to which the Takeover Code applies.
The proposals would limit the application of the Takeover Code to companies with their registered office in the UK, Channel Islands or Isle of Man (UK registered) which either (i) have securities admitted to trading on a UK regulated market, UK MTF (i.e. AIM and the Aquis Growth Market) or a stock exchange in the Channel Islands or Isle of Man (UK listed), or (ii) were UK listed at any time during the previous three years.
The residency test is also being removed from the Takeover Code. This test applies the Takeover Code to unlisted public companies and certain private companies with their central management and control in the UK, Channel Islands and Isle of Man. The Takeover Panel has generally interpreted this test to be satisfied if the majority of a company’s directors are resident in the UK, Channel Islands or Isle of Man.
If adopted, these proposals will mean that the Takeover Code will no longer apply to a range of UK companies that would previously have been caught by it, including:
- unlisted public companies;
- public or private companies which were UK listed over three years ago;
- public or private companies whose securities are, or were, traded on an overseas market or a matched bargain facility (e.g. JP Jenkins or Asset Match); or
- private companies who have filed a prospectus,
in each case as long as they have not been UK listed in the last three years. This three year run-off period represents a significant reduction from the current 10 year run-off period.
The Takeover Panel’s proposals are intended to provide market participants, shareholders and companies with greater clarity and certainty as to the companies that fall within its jurisdiction. It has not always been clear (e.g. to public companies that have never been UK listed or previously UK listed companies that do not satisfy the residency test) that they are subject to the Takeover Code. The proposals also refocus the Takeover Panel on its primary remit – the regulation of takeovers and mergers of UK listed companies. In this respect, the proposals are to be welcomed.
A transitional period of three years is proposed for companies that would have been subject to the Takeover Code immediately prior to the implementation date but fall outside of the new scope. The residency test will also continue to apply for the transitional period.
The consultation closes on 31 July 2024 with a response statement expected in Autumn 2024 and implementation approximately one month later.
If you have any questions or would like to discuss this article further, please contact Tessa Trevelyan Thomas or David Robinson from our Capital Markets team.
