On 30 April 2024, the Takeover Panel Executive published a revised Practice Statement 31 (Formal sale processes, private sale processes, strategic reviews and public searches for potential offerors). In addition, the Panel also recently published a consultation paper proposing to narrow the scope of the companies subject to the Code, as well as an announcement of the publication of a revised version of the Code.
Each of these developments is summarised below:
- Amendment to Practice Statement 31 (Formal sale processes, private sale processes, strategic reviews and public searches for potential offerors)
Broadly this widens the scope of the dispensations from the strict application of the Code (of Rules 2.4 (a) and (b)) to private sale processes.
As described in Panel Statement 2024/12, the amended practice statement:
- sets out that where a company is genuinely initiating a private sale process, "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" and "how the Executive will normally grant dispensations from Rule 2.4(a) and (b) to that effect";
- describes in more detail the Executive's approach to the different types of sale processes.
Section 4 includes new guidance in respect of private sale processes.
Details of the amendments are set out on the Panel's website, which can be accessed here.
- Proposed narrowing of the scope of the companies subject to the Code
The Panel published its latest consultation paper, PCP 2024/1, on 24 April 2024.
In broad terms, if the proposals are adopted, then a company registered in the UK, the Channel Islands or the Isle of Man would only be subject to the Code if it is "UK-listed" (i.e. any of the company's securities are admitted to trading on a UK regulated market, a UK multilateral trading facility or a stock exchange in the Channel Islands or the Isle of Man) or was UK-listed during the previous three years of the relevant date (the date on which an announcement is made of a proposed or possible offer for the company or the date on which some other event occurs in relation to the company which has significance under the Code).
The proposals if adopted would result in a number of companies falling outside the Code, subject to transitional arrangements and to the company not having been "UK-listed" in the previous three-year period. These would include:
- companies whose shares are traded solely using certain crowdfunding platforms, on a matched bargain facility or using the proposed Private Intermittent Securities and Capital Exchange System
- any unlisted public companies
- companies whose shares are traded solely on an overseas market
- private companies that have filed a prospectus in the last ten years
The proposals would remove the residency test (requiring certain companies to have their place of central management and control in the UK, the Channel Islands or the Isle of Man (i.e. to be UK-resident)) in order for certain companies to be subject to the Code, although the test would continue to apply to certain companies in the three-year transitional period.
Whilst the proposals would reduce the number of companies which are subject to the Code, the PCP notes that in "one limited respect, the proposed amendments would result in a widening of the scope of the companies to which the Code applies. This is because a UK-registered company which was UK-listed at any time during the three years prior to the relevant date will in the future be a Code company regardless of whether it satisfies the residency test, whereas the Code will only apply to such a company today if it is UK-resident. The Code Committee considers that it is appropriate and proportionate for such a company to remain subject to the Code for a limited period of three years after delisting, even if it does not satisfy the residency test."
Transitional Arrangements
These are set out in Section 3 of the PCP and include a three-year period during which companies which are currently within the scope of the Code (or potentially within in it (because of the current rules)) will have time to consider alternative arrangements. The transition period is shorter than the run-off periods of ten years which can currently apply.
Timing
Comments on the proposals should be sent to the Code Committee by 31 July 2024 and the Response Statement is anticipated in Autumn 2024 with implementation approximately one month after the publication of the Response Statement.
Immediate impact
Companies which are currently looking at delisting will need to consider the impact of the proposals on any announcement concerning the application of the Code following delisting.
- Revised version of the Code
A revised version of the Code was published on 30 April 2024 incorporating the amendments described in Panel Statement 2024/13. These amendments reflect recent Instruments, include minor typographical amendments and the replacement of text deleted in error in the fourteenth edition of the Code issued on 11 December 2023. Amended pages of the Code will be sent to subscribers in due course.
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