Proposals
The consultation paper proposes that the Code will only apply to a company who has a registered office in the UK, the Channel Islands or Isle of Man if (i) it is UK-listed or (ii) has been UK-listed within the preceding three years.
For this purpose, the term 'UK-listed' relates to shares being admitted to trading on:
- UK regulated market (e.g., the Main Market of the London Stock Exchange);
- UK multilateral trading facility (e.g., AIM); or
- stock exchange in the Channel Islands or the Isle of Man (e.g., The International Stock Exchange).
As such, the Code would no longer apply to any unlisted plcs and private companies (unless they have been UK-listed within the previous three years).
It is also proposed that the 'Residency Test' be abolished so that any companies listed in an overseas market (such as NYSE or NASDAQ) but which have their place of central management and control in the UK, the Channel Islands or Isle of Man will no longer be subject to the Code.
The consultation also confirms that the Code does not apply to companies who shares are only traded using platforms such as a Private Intermittent Securities and Capital Exchange System, private markets (i.e. TISE Private Markets) or secondary/crowdfunding platforms (i.e. Seedrs, Crowdfunder).
Transitional Arrangements
If the proposals are adopted, transitional arrangements will apply for a period of three years in relation to companies to which the Code applies immediately before the implementation date. After this date, the Code will cease to apply to any such 'transition companies'.
During the three year transition period, transition companies should consider whether it and its shareholders want to continue benefiting from Code protections by including minority shareholder protections in its articles of association, or by otherwise making itself subject to the jurisdiction of the Takeover Panel (or an alternative takeovers regulator). Similarly, during this period, shareholders should have sufficient time to exit their investment before the Code ceases to apply.
The consultation closes on 31 July 2024 and the Takeover Panel anticipates publishing a response statement in Autumn 2024, with the changes coming into effect approximately one month after publication of the response statement.
We expect that the response to this consultation will be universally positive and look forward to these proposals being implemented later in the year.
Our Equity Capital Markets team can provide you with advice from experienced lawyers who are in the unique position of having been through both the listing and take-private process.
Known for our track record of successfully delivering ECM transactions, including as a regular advisor to investment banks, our ability to anticipate key issues sets us apart from other advisors.
Please reach out to the authors if you have any queries or questions regarding the scaling back of the scope of the Takeover Code.
