Rules that govern takeover bids for many UK businesses are to be narrowed in scope in a move experts said will better align with the expectation of shareholders. The changes to the Takeover Code take effect from 3 February 2025.
The changes, confirmed by the Takeover Panel’s Code Committee (34-page / 517KB PDF) following a consultation exercise it held earlier this year, mean the Code’s application to corporate transactions involving unquoted companies in the UK will be much more limited in future.
Under the new regime, the Code will apply to companies that fall into two separate categories: companies registered in the UK, the Channel Islands, or the Isle of Man where those companies’ shares are publicly traded on a UK regulated market, a UK multilateral trading facility such as AIM, or a stock exchange in the Channel Islands or the Isle of Man; and private companies that were UK-quoted sometime within the previous two years.
However, transitional arrangements have also been provided for by the Code Committee, meaning that companies that are under the jurisdiction of the Code at the cut-over date but will not be so in future – including companies that have offered securities or filed a prospectus in the 10 years prior to 3 February 2025 – will continue to be subject to the Code for up to two years – one year less than the Takeover Panel’s Code Committee originally proposed.
For companies falling into this category, the precise end date at which they will stop being subject to the Code will depend on what comes first – the end of the transition period on 2 February 2027 or the end of their own ‘run-off’ period, that being the date on which their exposure to the current rules of the Code ends.
“The changes that the Code Committee is making to the Code are welcome and align the functioning of the Code more closely with what shareholders in unquoted companies typically expect,” said Alasdair Weir of Pinsent Masons.
“Often unquoted companies and their shareholders and directors are not aware that they are subject to the Code. When they become aware, usually in the heat of a transaction, they then typically seek to disapply the Code to that transaction, which is possible in certain cases but not always. The Code isn’t really designed to regulate the takeover of smaller unquoted companies, and these changes draw a clearer line between which companies are, and are not, regulated by the Code,” he said.
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