Takeover Code: Narrowing the scope of the companies subject to the Code

On 24 April 2024, the Takeover Panel released a consultation paper which proposes a new jurisdictional framework which would narrow the scope of the companies to which the Takeover Code ("the Code") applies, refocusing the application of the Code on companies which are registered or listed (or were recently listed) in the UK.

Proposal

It is proposed that the Code will only apply to a company if, on or after the date on which the amendments are implemented, the company has its registered office in the UK, the Channel Islands or the Isle of Man and any of the company's securities are (or were during the three years prior to the relevant date) admitted to trading on:-

(a) a UK regulated market (i.e. the LSE and Aquis Stock Exchange),

(b) a UK multilateral trading facility (i.e. AIM and Aquis Growth Market), or

(c) a stock exchange in the Channel Islands or the Isle of Man (i.e. TISE). 

(Referred to as "UK-listed".)

The Code continues to not apply to companies with registered offices outside of the UK, the Channel Islands or the Isle of Man.

Narrowing the scope – who the Code will cease to apply to.

The proposed amendments would abolish the "residency test" and the Code would not apply to:-

(a) a public or private company which was UK-listed more than three years prior to the relevant date;

(b) a public or private company whose securities are, or were previously, traded solely on an overseas market;

(c) a public or private company whose securities are, or were previously, traded using a “matched bargain facility”;

(d) any other “unlisted” public company; and

(e) a private company which filed a prospectus at any time during the 10 years prior to the relevant date, save if it had been UK-listed at any time during the three years prior.  

It will also be made clear that the Code does not apply to non-UK-listed company whose securities or other interests are traded solely using other platforms, for example: a PISCES, TISE Private Markets, Seedrs or Crowdcube.

Delisting

Currently the Code continues to apply to a UK-registered, UK-listed company following a delisting either indefinitely if it remains a public company or, if it re-registers as a private company, for ten years, provided that it continues satisfies the residency test.  Under the new provisions the Code would continue to apply for three years following its delisting regardless of the residency test being satisfied, and then would cease to apply.  For example, if a UK company moves its listing to the US it would remain subject to the Code for three years from delisting even if central management and control also moves to the US.

Sole beneficial owner

The Code Committee will also codify, its long-established practice, that the Code will not apply to companies with a sole beneficial owner.

Waive the application of the Code

The Code will also introduce an ability for the Panel to grant a waiver from the application of some or all of the provisions of the Code in respect of a Company which is not UK-listed and which is in the three year run-off period.

Transitional Arrangements

There will be transitional arrangements for a period of up to three years in relation to companies to which the Code applies immediately prior to the implementation date and which fall outside of the scope of the new regime. 

During this period an impacted company will have an opportunity to put in place alternative arrangements such as, for example, appropriate amendments to its articles of association or enabling shareholders to exit their investment if they do not wish to be shareholders in companies without the protections afforded by the Code. At the end of the three years, the Code will no longer apply to these impacted companies.

The consultation closes on 31 July 2024 and the Code Committee intends to publish a Response Statement setting out the final amendments to the Code in Autumn 2024.  Implementation will be approximately one month after the publication of the Response Statement.

If you have any questions about the proposals and how they may affect you, please get in touch with Melanie Talbot.