The Takeover Panel has published a response statement RS 2023/1 setting out changes to the rule on frustrating action in the Takeover Code. It has also published a revised Practice Statement No 5 on invoking conditions to an offer.

Response Statement 2023/1

The Response Statement, which followed PCP 2023/1 published in May this year, mainly focuses on Rule 21 on frustrating action, but also contains some other miscellaneous changes including to the rules on the sharing of information under Rules 21.3 and 21.4.

The amendments will take effect on Monday, 11 December 2023 and will apply to all companies and transactions, including on-going transactions, from that date. The key changes are:

  • Rule 21.1 on frustrating action – Rule 21.1 restricts the board of a target company from taking any action which may result in an offer or bona fide possible offer being frustrated, unless the company obtains shareholder approval or the consent of the Panel. The rule changes are intended to provide increased flexibility for targets and greater clarity as to the actions that are and are not restricted. In particular, a target board will not be restricted from taking action that either is not material or is in the ordinary course of business. A target must still consult the Panel about any proposed action that may be restricted by the Rule.
  • Rule 21.3 (equality of information to competing offerors) and Rule 21.4 (information to independent directors in buy-outs) – The Panel has made a number of amendments to Rules 21.3 and 21.4 to ensure that an offeror or bona fide potential offeror is not denied access to the target company’s information on a technicality and to reduce the administrative burden on the parties to an offer where information is requested.

Updated Practice Statement No 5

The Takeover Panel has updated its Practice Statement No 5 on invoking conditions to an offer to reflect the Panel Executive’s approach in practice. It has also published an explanation of the changes it has made to the Practice Statement.

Under Rule 13.5(a), a bidder may only invoke a condition to an offer with the Panel’s consent, and consent will normally only be given if the circumstances which give rise to the right to invoke the condition are of material significance to the offeror in the context of the offer.

The Practice Statement discusses the factors the Panel will take into account in considering whether the material significance requirement has been satisfied. The changes to the Practice Statement do not signify a change in the Panel’s approach, but discuss in more detail what the Panel will look at in practice. It also discusses the Panel’s approach to conditions relating to there being no “Phase 2” reference by the Competition and Markets Authority or other equivalent regulators.

 

Gavin Davies
Gavin Davies
+44 20 7466 2170

Antonia Kirkby
Antonia Kirkby
+44 20 7466 2700

Stephen Wilkinson
Stephen Wilkinson
+44 20 7466 2038