UK: Code Committee proposes changes to the Takeover Code

The Takeover Panel Code Committee has outlined its conclusions, in a statement available available here (pdf), in respect of the principal issues on which it consulted earlier this year in its review of certain aspects of the takeover process (about which see here, pdf). The Committee has rejected proposals that would have extended the scope of the Code and which would, in its view, require changes in company law, such as disenfranchising certain shareholder and raising the minimum acceptance condition threshold of ‘50% plus one’.

The Committee is, however, proposing changes to the Code, reflecting its view that hostile offerors "have, in recent times, been able to obtain a tactical advantage over the offeree company to the detriment of the offeree company and its shareholders" (para. 2.6). Amongst the changes proposed are the following:

• requiring potential offerors to clarify their position within a short period of time;
• prohibiting deal protection measures and inducement fees other than in certain limited cases;
• clarifying that offeree company boards are not limited in the factors that they may take into account in giving their opinion and recommendation on the offer;
• improving the quality of disclosure by offerors and offeree companies in relation to the offeror’s intentions regarding the offeree company and its employees; and
• improving the ability of employee representatives to make their views known.

Consultation papers regarding these matters will be published in due course.