Public M&A Update: Takeover Panel consults on narrowing the scope of companies subject to the Takeover Code

The Code Committee of the Panel published Public Consultation Paper 2024/1 (PCP 2024/1) on 24 April 2024 which proposes a significant narrowing of the scope of the companies to which the Takeover Code applies. 

If the proposals are adopted, a significantly reduced number of companies will be subject to the Takeover Code and, will in particular, impact UK incorporated companies listed on overseas markets (such as NASDAQ).

The consultation period is open until 31 July 2024.

Proposals

The Code Committee proposes that a company registered in the UK, the Channel Islands or the Isle of Man would only be subject to the Takeover Code if:

• it is 'UK-listed'; or
• has been 'UK-listed' at any time during the preceding 3 years.  This significantly shortens the current 10 year ‘run-off’ period following a delisting.

For these purposes, ‘UK-listed’ means a company having its securities admitted to trading on:

• a UK regulated market (such as the Main Market of the London Stock Exchange);
• a UK multilateral trading facility (such as AIM); or
• a stock exchange in the Channel Islands / the Isle of Man (such as The International Stock Exchange).

It is also proposed that the residency test (i.e. “place of central management and control in UK, Channel Islands or Isle of Man”) be abolished.

Under the new regime the Takeover Code would NOT apply to the following UK-registered companies:

• public or private companies last 'UK-listed' more than 3 years ago; 
• public or private companies traded solely on an overseas market;
• public or private companies whose securities are, or were, traded using a ‘matched bargain facility’;
• any other 'unlisted' public companies; and
• private companies that have filed a prospectus in the UK at any time in the last 10 years,

unless a company had been 'UK-listed' at any time in the previous 3 years.

The Takeover Code would also not apply to companies whose securities are traded using other platforms such as:

• a secondary market of a crowdfunding platform;
• a Private Intermittent Securities and Capital Exchange System; or
• a private market such as TISE Private Markets.

Transitional arrangements

The consultation paper sets out proposed arrangements for a 3 year transition period and all ‘transition’ companies will cease to be subject to the Takeover Code by the end of the transition period.