UK Takeover code for M&A

Businesses merging and acquiring firms in the UK must adhere to the UK Takeover code. Here is our take on it.

The UK Takeover Code, formally known as the City Code on Takeovers and Mergers, is a critical framework governing public company takeovers in the United Kingdom. Administered by the Panel on Takeovers and Mergers, it ensures (A) fairness, (B) transparency, and (C) an orderly process during M&A transactions.

Below is a concise overview of its key aspects, drawn from official sources.

• Purpose and Scope:

  • Ensures fair treatment for all shareholders during takeovers, protecting their rights to decide on the merits of an offer.

  • Applies to UK-registered companies listed on regulated markets (e.g., London Stock Exchange’s Main Market) or multilateral trading facilities, and certain private companies.

  • Effective from February 3, 2025, the Code’s scope narrows to focus on UK-quoted companies, excluding unlisted public companies and those traded solely on overseas markets.

    
    

• Regulatory Body:

  • The Panel on Takeovers and Mergers, established in 1968, is an independent body responsible for issuing and enforcing the Code.

  • Operates under statutory authority from the Companies Act 2006, with powers to impose sanctions for non-compliance.

    
    

• Core Principles:

  • Comprises six General Principles emphasizing equal treatment, adequate information, and an orderly takeover process.

  • Includes 38 detailed rules and nine appendices, covering offer terms, timetables, and disclosures.

    
    

• Key Requirements:

  • Mandatory Offers: If an investor (or concert parties) acquires 30% or more of voting rights, a cash offer for all equity shares is required at the highest price paid in the prior 12 months.

  • Secrecy: Confidential information, especially price-sensitive details, must remain secret until an offer is announced to prevent market abuse.

  • Stake building: Share acquisitions before or during an offer must comply with Code rules to avoid triggering mandatory bids or disclosure obligations.
    

• Offer Mechanisms:

  • Takeovers can proceed via a contractual offer (a binding agreement with shareholders) or a scheme of arrangement (court-approved process).

  • Conditions (e.g., material adverse change) cannot be invoked unless deemed significant by the Panel.
    

• Compliance and Liability:

  • Non-compliance may lead to sanctions by the Panel or the Financial Conduct Authority (FCA).

  • Criminal liability can arise under the Companies Act 2006, Fraud Act 2006, or for insider dealing under the Criminal Justice Act 1993.

  • Civil liabilities include negligent misstatement or breach of contract in offer documents.
    

• Recent Updates:

  • From February 3, 2025, the Code will no longer apply to companies not quoted in the UK for over two years, with a transition period until February 2, 2027.

  • Removes residency requirements for central management, focusing on UK registration and trading status.
    

The UK Takeover Code is a robust framework ensuring equitable and efficient M&A processes. For detailed guidance, consult the official Takeover Panel website (www.thetakeoverpanel.org.uk) or the Code itself.