UK Takeover Panel confirms refocusing of the scope of City Code

The Takeover Panel has published its amendments to the jurisdictional framework of the UK's City Code on Takeovers and Mergers. These changes, which will come into force on 3 February 2025, aim to provide clarity and fairness while ensuring an appropriate regulatory framework for UK-listed and non-UK-listed companies.

The Takeover Panel's response statement summarises the feedback received from its consultation on companies to which the Takeover Code applies, which was published on 24 April and outlined the proposed changes.

The changes have been made by the Takeover Panel under Instrument 2024/3 and relate to jurisdictional scope, removal of the residency test, the exclusion of certain other companies, transitional provisions and timing.

Streamlining of jurisdictional scope

The Takeover Code will apply to UK, Channel Islands or Isle of Man-registered companies with securities admitted to trading on a UK regulated market (such as the London Stock Exchange's Main Market), UK multilateral trading facility (such as the AIM Market operated by the London Stock Exchange) or stock exchanges in the Channel Islands or the Isle of Man (such as the International Stock Exchange) (all referred to as UK-listed).

Companies previously UK-listed within the last two years (shortened from the initially proposed three years) will also fall under its purview.

Companies with their registered offices outside the UK, the Channel Islands, or the Isle of Man will remain exempt.

Residency test

The requirement for companies to have their central management and control in the UK, the Channel Islands, or the Isle of Man will be abolished.

Other excluded companies

Public or private companies whose securities are, or were previously, traded using matched bargain facilities and platforms like the Private Intermittent Securities and Capital Exchange System (or PISCES), TISE Private Markets, and crowdfunding secondary markets will be excluded from the Takeover Code.

Public or private companies whose securities are, or were previously, traded solely on an overseas market (such as NYSE or NASDAQ) will not fall within its jurisdiction.

Private companies that filed a prospectus at any time during the 10 years prior to the relevant date will be exempt unless they were UK-listed within the previous two years (shortened from the initially proposed three years).

Transitional arrangements

Companies currently subject to the Takeover Code but falling outside the new regime will be subject to a two-year transitional period. This is shorter than the initially proposed three-year period and significantly shorter than the existing 10-year period.

During this period, such "transition companies" can explore alternative arrangements, such as amending their articles of association or allowing shareholders to exit their investments.

Timing

The amendments will take effect on 3 February 2025.

The transitional arrangements will cease on 3 February 2027, after which the Takeover Code will only apply to companies that are UK quoted or were UK quoted within the preceding two years.

Osborne Clarke comment

We welcome the Takeover Panel's efforts to streamline the Takeover Code's applicability to strike a balance between regulatory oversight and the needs of companies and market participants.

As we previously commented in April, we expect these amendments will come as a welcome change for many prospective purchasers of unlisted public companies, who have historically been forced to run expensive and onerous Takeover Code-governed acquisition processes for a target that may have been operated as private company despite the code's application.

By approaching these acquisitions without the application of the Takeover Code, parties will have the flexibility, for example, to deal with founding and majority shareholders, multiple share classes and "special deals" without needing to appoint a financial adviser (Rule 3 (independent) adviser), comply with rules 15 and 16 nor obtain a fair and reasonable opinion.

If you would like to discuss your response to the consultation, please get in touch with your usual Osborne Clarke contact, or one of our experts listed below.