Bird & Bird

The Takeover Code: important proposed amendments

The Code Committee of the Takeover Panel (the "Panel") has recently undertaken a public consultation in relation to potentially significant amendments to the Takeover Code (the "Code"). The results of this consultation were published on 21 October 2010. Whilst some of the more draconian changes that had been under consideration will not be implemented (on the basis that they concern matters of company law and therefore can only be addressed properly by government), the consultation is likely to lead to significant changes to the Code which may fundamentally affect the way in which takeovers are undertaken in the UK.

The Panel sees its role very much as policing what should be a proper and reasonable balance between the conflicting interests of a bidder and a target in takeover bids. The recent public consultation resulted from a general feeling that, in recent times, the balance had shifted unfairly in favour of bidders. The Panel has concluded that this has indeed been the case. The Code Committee has therefore brought forward a number of proposals to amend the Code with a view to redressing the balance in favour of target companies. Other changes have also been proposed to the Code to improve the offer process and to take more account of the position of persons who are affected by takeovers in addition to target company shareholders.

The Code Committee's principal proposals are as follows (please click on each for further information, including a Bird & Bird commentary on the same):

The Code Committee has decided not to adopt proposals to increase the minimum acceptance condition requirement under the Code for an offer to be successful (currently '50% plus one') or to disenfranchise shares acquired during the offer period, citing the incompatibility of such changes with company law. It remains to be seen whether the Government will intervene in this area.

The detailed terms of the proposed revisions to the Code will be subject to the Code Committee's usual public consultation procedures and are therefore unlikely to come into effect until early 2011. However, the day to day approach adopted by the Panel in these areas in the intervening period is likely to move towards the practice expected to be introduced.

The content of this update is of general interest and is not intended to apply to specific circumstances. The content should not, therefore, be regarded as constituting legal advice and should not be relied on as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. Further, the law may have changed since first publication and the reader is cautioned accordingly.

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