The Takeovers Panel has released a number of recommended amendments to the Takeovers Code following its consultation at the end of 2016 (which can be viewed here). The amendments include both substantive changes and technical changes. We have outlined the substantive changes below.
Small code companies
The main substantive change proposed is to provide additional thresholds for when a company is a "Code Company" and therefore subject to the Takeovers Code. The purpose is to exclude from the operation of the Code "small" companies which are caught by virtue of the number of shareholders they have. The additional thresholds for being a Code Company are that a company has:
- total consolidated annual revenue of $15 million or more at the end of the most recently completed accounting period; or
- consolidated assets of $30 million or more at the end of the company's most recently completed accounting period.
This is a welcomed change. We expect it to reduce the disproportionate compliance costs for small companies, while retaining the appropriately balanced settings for larger and listed companies.
"Days" in the Code
The current timing requirements in the Code are expressed as "days" referring to calendar days, rather than working days, unlike the definitions used in the Companies Act 1993 and the Financial Markets Conduct Act 2013. This results in uncertainty when obligations fall over weekends or holiday periods.
To create greater certainty, the Panel is recommending that the Code be amended so that timing obligations are read as "working days", with references within the Code being amended accordingly.
Electronic Access for Shareholders
At present, the default position is that communications by an offeror which the Code requires to be sent to the target's shareholders (such as the offer document) are sent by post. In contrast, certain other obligations (such as sending information to the Takeovers Panel) are required to be sent electronically.
The suggested amendments allow, as a default, for a shareholder who has provided an electronic address to the Code Company for the purposes of electronic receipt of documents, to be sent information electronically. Where a shareholder wishes to receive documents in hard copy they can request this and the Code Company must comply within 1 working day.
The above changes are welcomed and, together with the technical amendments proposed, will remove unnecessary compliance costs and fix unintended drafting errors.
Russell McVeagh provided detailed submissions on the proposed amendments and regularly advises on takeovers. Please contact us if you have any questions or would like more detailed information on the proposed amendments.
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