Takeover Code Changes to Extend Disclosure Regime

The disclosure regime contained in the Takeover Code will be extended from 19 April 2010 to a “positions-based” regime, rather than a dealings-based regime. The amendments are designed to improve the transparency of the positions of and dealings by persons involved in takeover offers.

The principal changes are as follows:

Disclosure of opening position disclosure at start of offer period

There will be a requirement to make a public disclosure of opening positions, containing details of any interests or short positions in, or rights to subscribe for, any relevant securities of the target and a non-cash bidder (or competing non-cash bidder) whose identity has been publicly announced following the commencement of an offer period and following an announcement that first identifies a bidder. This requirement applies regardless of whether or not any dealings in relevant securities have taken place.

Opening position disclosures should be made by:

• The target and bidders (including those held by any associates)
• Any person who is interested in 1% or more of any class of relevant securities in the target or bidder.
• Exempt principal traders who do not benefit from recognised intermediary status and are currently therefore subject to disclosure requirements under the Code.

Disclosure should be made within 10 business days of the commencement of the offer period and, in the case of a securities exchange offer where the bidder is not identified at the start of the offer period, the opening position disclosure in respect of bidder securities must be made within 10 business days after the announcement that first identifies the bidder.

Extending the “composite” disclosure regime

Persons who have a long position of 1% or more in any class of relevant securities will be required to disclose any dealings in securities (and details of interests and short positions) not only of that party (which is currently the case), but also any other party (other than a cash bidder) to the offer.

Obligation to assist the Panel in identifying 1% shareholders

Rule 22 is to be amended to require the target’s board (or the board of a non-cash bidder, as the case may be) to take all reasonable steps to determine the identity of persons who are interested in 1% or more of any class of relevant securities of the relevant party and to provide the Panel with details of all persons whom it reasonably considers to be interested.

The target and non-cash bidders (if applicable) should also send an explanation of their disclosure obligations under Rule 8 to disclose details of any dealings in relevant securities during an offer period, by way of a reminder. The target can meet this requirement by including the notification when it sends shareholders a copy of an announcement or circular in accordance with Rule 2.6 of the Code).

Definition of “associate”

The definition of associate will be deleted from the Code. Instead the definition of “concert party” will be used for rules which currently use the definition of associate.

Persons who are associates of, but not acting in concert with, a bidder or target will no longer be required to disclose details of their interests in 1% or more of a class of relevant securities, unless the person cannot rebut the presumption that it is acting in concert and in which case the Panel may require disclosure of this fact to be made to it.  

There is a significant degree of overlap between the definitions of "associate" and "concert party" and this amendment is not expected to have a significant impact.

For further information, please contact Anthony Brockbank or Dominic Gurney-Champion.