Key changes to the Takeover Code and enforcement

Changes to the scope of the Takeover Code

In November 2024, the Takeover Panel published its changes to the Takeover Code to narrow the range of companies within its scope, with the aim of refocussing the application of the Takeover Code on those companies which might expect to be subject to takeover regulation and providing clarity and certainty as to the Takeover Panel’s jurisdiction.

As of 3 February 2025, subject to certain transitional arrangements which will apply for two years, the Takeover Code only applies to companies that:

• have their registered office in the UK, the Channel Islands or the Isle of Man; and
• have, or have in the past two years had, securities admitted to trading on a UK regulated market, a UK multilateral trading facility or stock exchange in the Channel Islands or the Isle of Man.

Therefore, subject to the transitional arrangements, the Takeover Code will no longer apply to other UK-registered companies which have historically been in scope, such as a public company which ceased to be quoted more than two years ago; a private company which filed a prospectus during the 10 years prior to the relevant date (provided it has not been listed/quoted in the past two years); and/or a public or private company whose securities are, or were previously, admitted to trading solely on an overseas market or traded using a matched bargain facility (such as Asset Match or JP Jenkins). The Takeover Code will also not apply to a company solely by virtue of its securities or other interests being traded using another platform, such as a private market (for example, TISE Private Markets), a secondary market of a crowdfunding platform (for example, Seedrs Secondary Market) or the UK Government’s proposed Private Intermittent Securities and Capital Exchange System (“PISCES“).

For further details, please see our client note: Scope refocussed: Panel reduces the range of companies to be subject to the Takeover Code | Travers Smith

Practice Statement no. 31

The Takeover Panel only amended one of its Practice Statements in 2024, namely Practice Statement 31: Formal sale processes, private sale processes, strategic reviews and public searches for potential offerors. The changes, which introduced a new and more formalised regime for private sale processes, were a result of a perceived reluctance by boards of listed companies to commence formal sale processes (which require a public announcement), and a perception that the existing rules regarding the naming of potential bidders may work in an “inappropriate manner” where a public company is considering a private sale.

The guidance provides that where a public company can demonstrate to the Takeover Panel that it is genuinely initiating a private sale process, it will normally grant dispensations from Rule 2.4 of the Takeover Code, such that:

• where that public company makes a voluntary announcement regarding a sales process which was until that point private, the public company will not be required to (although it still can) identify any potential bidder with which it is in talks or from which it has received an approach; and
• where an announcement is required by the Takeover Panel, for example because of rumours or speculation, the public company will be required to identify a potential bidder with which it is in talks or from which it received an approach only if that potential bidder has been specifically identified in such rumour or speculation.

Where dispensations have been granted, and an announcement is made, the announcement should contain details of the dispensations granted, and any potential bidder that is named (voluntarily or if required) will then be subject to the normal 28-day “put up or shut up” regime under the Takeover Code.

In certain circumstances, a public company will be able to convert a private sale process into a formal sale process.

Bulletins: new guidance on intention statements and representative directors

The Takeover Panel also published two new Bulletins, which aim to remind practitioners about the operation of specific provisions of the Takeover Code in response to issues that arise on live transactions.

The first Bulletin on intention statements confirms that, unsurprisingly, the Takeover Panel will not accept arguments that a bidder should be entitled to omit to make certain intention statements required by the Takeover Code, for reason that it has not yet formulated such an intention. Examples of reasons the Takeover Panel has seen include uncertainty about expected synergies in relation to employees, or the location of the offeree’s place of business, or an expectation that a statement is fit for purpose as it is “standard form” or has been used on a similar transaction. This Bulletin serves as a helpful reminder that bidders should avoid using boilerplate intention statements, which have increasingly been demanded by certain stakeholders, and that the Takeover Panel’s expectation is that a bidder will almost always have developed specific intentions in relation to the matters set out in the Takeover Code, which must be stated in both the firm offer announcement and the offer/scheme document. In exceptional cases where a bidder has no intention to make any changes in relation to these matters, it must make the appropriate negative statement. The bidder should work closely with its financial and legal advisers to prepare these statements.

The second Bulletin on representative directors highlights the importance of considering the application of Rule 20.1 of the Takeover Code (equality of information) where a target director has been appointed by a target shareholder, and where that representative director, who has been provided with information by the target company, is providing that information to the appointing target shareholder. The Takeover Panel provides its recommendations in this scenario, including when announcements should be made, and reminds practitioners of the need to proactively consult with the Takeover Panel on such matters.

Largest number of cold-shouldering sanctions so far under the Takeover Code

In July 2024, the Takeover Panel found that the former chief executive, the former finance director and a former executive director of MWB Group Holdings plc (“MWB“), a company whose shares at the relevant time were traded but which has since been liquidated, had breached Rule 9 of the Takeover Code by carrying out transactions which increased their combined shareholding above the 30% threshold and to more than 50%, without making a mandatory offer to the other MWB shareholders.

The Takeover Panel, which had for many years been investigating alleged breaches of the Takeover Code relating to MWB, ordered that they pay compensation to the shareholders of MWB amounting to approximately £33 million (plus interest), less any amounts investors recovered from any subsequent sale of their shares. In addition, the Takeover Panel’s Hearings Committee ruled that each of the Executive Directors be cold-shouldered between four and five years. 

What is interesting is that the Takeover Panel’s Hearings Committee also cold-shouldered other named individuals (seven in total, who were involved in the relevant transaction, including two lawyers) for failures in their dealings with the Takeover Panel in breach of the Introduction to the Takeover Code (i.e. failing to be open, co-operative and assist the Takeover Panel when requested).

This decision is significant: a cold-shouldering sanction is rarely imposed, but 10 arising out of one transaction is quite exceptional. For an individual, the consequences of being cold-shouldering is significant and the press coverage of this case was substantial. Following the decision, the Financial Conduct Authority issued a public statement addressed to regulated firms reminding them that they should not be dealing with any individual who is cold-shouldered on any transaction to which the Takeover Code applies, and that such firms are expected to inform all approved persons within their firms of the same.