• UK Takeover Panel which oversees corporate takeovers under a City Code on Takeovers and Mergers (the Code), confirmed new changes which will reduce the companies affected.
• Follows UK TO Panel April 2024 issued consultation on code applicability.

Changes Overview

• The main change is the introduction of a more focused jurisdictional framework to then determine whether the Code applies to particular company, rather than previous rules.
• Traditionally, the Takeover Code applied to public companies incorporated in the UK, Channel Islands, or Isle of Man, irrespective of whether their own securities were traded there.
• The new rules reflect a clearer connection to the UK’s economic and legal landscape.
• Under the new framework, the Takeover will only apply to those companies with registered office in the UK, Channel Islands, or Isle of Man and with securities that are admitted to trading on a UK-regulated market, or exchanges in Channel Islands, or Isle of Man.
• Also, the requirement for companies to have their central management and control or residency based in the UK, in the Channel Islands, or Isle of Man has been removed.
• Various companies will no longer fall within the jurisdiction like a public or private firm whose securities are or were previously traded via using matched bargain facilities, as well as firms whose securities are or were previously, traded only on overseas market.

Rationale

• The revised Takeover Code better aligns with the Takeover Panel’s focus of regulating all UK-listed firms.
• Under the current rules, the Code applies to companies listed on markets like NYSE or NASDAQ if their registered office is in the UK, Channel Islands, or Isle of Man and their central management/control is in one of these jurisdictions, which is outside of scope.
• Restricting the Panel’s jurisdiction to companies registered and traded on public trading venue in UK, Channel Islands, or Isle of Man removes unlisted public companies and private firms traded on private trading platforms and any firms traded solely overseas.
• In narrowing its scope, the Panel intends to ensure regulatory clarity so firms have a better understanding of when the Code will apply, and reduce the regulatory burden.
• UK FB’s Corporate Finance Committee, which consists of senior investment bankers who lead the M&A advisory practices at our members’ investment banks, welcomes the changes and consider that they enhance clarity and efficiency in the takeover process.

Next Steps

• The new regime will come into force on 3 February 2025, with two-year transition period.
• Transition period broadly reflects UK FB’s advocacy for a shorter transition period and aims to provide sufficient time for companies to adapt without prolonging uncertainty.