The UK Takeover Panel (the Panel) has published a response statement (RS 2024/1) following publication of PCP 2024/1 in April 2024 which proposed changes to the scope of the Takeover Code (Code) so that it would apply to fewer companies and make the application of the Code clearer. Please see our briefing on PCP 2024/1 for further explanation.
In summary, the Response Statement confirms the changes set out in the PCP with the only significant change being that the run-off and transition periods will be two years rather than three years as set out in the PCP.
The changes to the Code will take effect on 3 February 2025. This means that from 3 February 2025, the Code will only apply to companies with their registered office in the UK, Channel Islands or the Isle of Man who either have their securities admitted to trading on a UK regulated market or multi-lateral trading facility or a stock exchange in the Channel Islands or the Isle of Man (UK-listed) or the company was UK-listed at any point in the two years before an offer for the company, subject to a transitional period of two years for companies that will no longer be subject to the Code.
When does the Code currently apply?
The Code currently applies to offers for companies with their registered offices in the UK, the Channel Islands and the Isle of Man in the following circumstances:
(a) if any of their securities are admitted to trading on a UK regulated market or multi-lateral trading facility (MTF), or any stock exchange in the Channel Islands or the Isle of Man. This means that, for example, UK companies with shares traded on the Main Market of the London Stock Exchange or on AIM will be subject to the Code
(b) if the company is a public company which is considered by the Panel to have its place of central management and control in the UK, Channel Islands or the Isle of Man (the residency test)
(c) if the company is a private company which is considered by the Panel to have its place of central management and control in the UK, Channel Islands or the Isle of Man and one of four conditions is met, for example, it has its securities admitted to trading on a UK regulated market or MTF or on any stock exchange in the Channel Islands or the Isle of Man in the last ten years or it has had dealings and or prices for dealing published on a regular basis for a continuous period of at least six months in the last ten years.
When will the Code apply once the changes have taken effect?
As set out above, subject to the transitional provisions set out below, the Code will only apply to companies with their registered office in the UK, Channel Islands or the Isle of Man who either have their securities admitted to trading on a UK regulated market or multi-lateral trading facility or a stock exchange in the Channel Islands or the Isle of Man (UK-listed) or the company was UK listed at any point in the two years before an offer for the company (“run-off period”).
This means that, subject to the transitional provisions:
the residency test will be abolished. In practice, the Panel has interpreted the residency test to be satisfied if a majority of the directors of the company are resident in the UK, Channel Islands or Isle of Man which has meant that some companies have deliberately avoided the application of the Code by making sure that the majority of their directors are resident outside those jurisdictions
the Code will no longer apply to UK registered and resident companies whose shares are admitted to trading solely on an overseas market and will not apply to any public company unless it is UK-listed
public or private companies whose shares are currently traded (or have been traded) on matched bargain facilities such as JP Jenkin and Asset Match will not be subject to the Code
companies whose shares will be traded on the new PISCES platforms (an intermittent trading venue) will not be subject to the Code
as is the case now, the Code will not apply to a private company traded on a private market (such as TISE Private Markets) if no information in relation to share dealings or share prices is published
as is the case now, the Code will not apply to a private company whose “shares” are traded using the secondary market of a crowdfunding platform such as Seedrs Secondary Market (as the instruments traded are not shares or securities comprised in the company’s equity share capital nor transferable securities carrying voting rights.
Transitional provisions
Transitional provisions will apply from 3 February 2025 so that a public or private company to which the Code currently applies and which is not UK-listed will have two years to adjust to the new regime. This will allow such companies to put in place alternative arrangements if they wish, such as making appropriate amendments to articles of association. Respondents to the PCP agreed that the length of the run-off period should be consistent with the transitional period and following discussions with a number of respondents to the PCP, the Code Committee concluded that the period should be two years rather than the three years proposed by the PCP.
