Impact of the United Kingdom's withdrawal from the European Union on the Takeover Code

By Nicholas Heap


The Code Committee of the Takeover Panel published a consultation paper on 5 November 2018 (PCP 2018/2) containing some proposed amendments to the Takeover Code in order to address the potential impending withdrawal of the United Kingdom from the European Union. The consultation closed on 17 December 2018.

In the event that the UK leaves the EU without a deal then, as things stand, the proposed amendments will come into effect at 11.00 p.m. on 29 March 2019.  The Code Committee published the final amendments that would need to be made to the Code in a response statement released on 6 March 2019. The final changes were in line with the proposals contained in the consultation paper (save for one minor additional change). If a transition period is agreed for the UK’s withdrawal from the EU, the proposed changes will occur at the end of the transition period.

In overview, the proposed changes to the Takeover Code are not material, other than those relating to the removal of the shared jurisdiction regime, which currently applies under the EU Takeover Directive.

At present, the shared jurisdiction rules are designed to deal with the situation where the jurisdiction for supervision of a takeover bid is shared between more than multiple supervisory authorities located in different EEA member states. This situation results from a company having its shares listed on a regulated market in one EEA state which is different to that in which its registered office is located. In such circumstances, certain elements of a takeover are governed by the Takeover Code and others by the takeover rules of the other EEA state.

Following the implementation of the changes to the shared jurisdiction regime, the provisions of the Takeover Code would no longer apply to offers for the following companies:

  • A target company whose registered office is located in the UK and where its securities are admitted to trading on an EEA regulated market other than the UK and provided that the company's place of central control and management is located outside the UK; and
  • A target company whose registered office is located in an EEA state other than the UK and where its securities are admitted to trading solely on a UK regulated market (or, in certain cases, to multiple EEA regulated markets other than in the country of its registration).
  • However, the provisions of the Code will apply in full under the proposals to any offer made for a company which has its registered office in the UK and whose securities are admitted to trading on a regulated market in an EEA member state where the company satisfies the residency test under the Code. The residency test is determined primarily according to whether the company has its place of central management and control in the UK.

The Code Committee envisages that, at present, 36 companies will be affected by these changes.

The Code Committee recognises that the companies in question, and their shareholders, might prefer the Code to continue to apply to them after the UK has exited the EU. However, it believes that the deletion of the shared jurisdiction rules is a natural consequence of the UK’s decision to exit the EU and does not believe that there is a compelling argument for the Code to be amended so as to ensure that an offer for such a company should continue to be regulated by the Panel post-exit.