UK: Public Companies Update

Last Updated: 27 May 2011
Article by Mark Howard

There have been a number of developments in the public company arena during the last three months. In this PLC update we summarise:

  • the changes currently proposed to the UK Takeover Code;
  • the new Bribery Act, and in particular the guidance recently published by the Government on how the Act is to be operated;
  • the guidance recently published by AIM Regulation on related party transactions under the AIM Rules for Companies; and
  • the updated guidance recently published by ICSA to assist prospective directors to carry out effective due diligence before joining a new board.


Deadline for comments on consultation paper fast approaching

Following Kraft's controversial takeover of Cadbury at the start of 2010, the Code Committee of the Takeover Panel (the "Panel"), in response to political calls for change, began a consultation to review aspects of the Takeover Code (the "Code"). The period for comments on the latest consultation paper ends on 27 May 2011 (see link below to consultation paper). This briefing note summarises some of the key changes proposed which, whilst being less radical than changes proposed in the first consultation paper, may still prove to be significant.

Virtual bids – changes to "put up or shut up" regime

The first change proposed is to the "put up or shut up" regime. The Code Committee proposes to introduce an automatic 28 day period following an announcement of a possible offer. The announcement must identify the potential bidder. The offer period may be extended by the Panel at the request of the target company and potential bidder. It is hoped that these changes will deter "virtual bids" (an announcement, or leak to the market, by a potential bidder that it is considering making an offer without making a commitment to do so).

At present, the Code does not require that the potential bidder be identified in the announcement of a possible offer. Further, the only way for a target company to control the length of the period between a virtual bid and a formal offer, is for the target company to request that the Panel impose a time limit for the potential bidder to either make a formal offer or announce that it does not intend to make an offer for the target company (and be subject to the 6 month restrictions set out in the Code), the so called "put up or shut up" regime.

There is no doubt that virtual bids create uncertainty and disruption for target companies. The decision to identify a potential bidder and/or apply to the Panel for a "put up or shut up" deadline is also often a difficult decision to make for the board of a target company. The changes would make potential bidders think twice about making a virtual bid, until they are almost ready to make a formal offer, in order to avoid prematurely starting the offer period and potentially being linked to failed offers.

The question is whether the changes, which would clearly provide more certainty and control for target companies in the context of hostile bids, will be detrimental to recommended offers (which constitute the vast majority of takeover offers). Crucially, it will be permissible for the board of target companies to apply for an extension of the 28 day period and the guidance in the consultation paper confirms that such requests should normally be granted. However, this request will obviously need to be made within the 28 day period so the pressure will be on to agree deal terms or make substantive progress in this regard. If this cannot be achieved, the bidder will be forced to announce that it does not intend to make an offer and will be shut out from making a bid for the next 6 months, so procuring an extension will be important. Will this result in less offers to which the Code applies and an increase in auction sales (i.e., where the board of a company triggers an offer period by announcing that it is for sale) which would not be subject to these restrictions?

Prohibition of deal protection measures

The consultation paper contains proposals prohibiting, other than in certain limited cases, deal protection measures such as inducement fees, non-solicitation undertakings and no information undertakings. The concern expressed in the consultation paper is that bidders have been able to establish deal protection measures as "standard" and, as such, have gained an unfair tactical advantage over target companies. Deal protection measures may also adversely impact on shareholders' interests by restricting the ability of the board of a target company from recommending or attracting competing offers. Potential takeover targets will certainly be in favour of these changes. The Code Committee has addressed initial concerns that the prohibition of inducement fees would, in the context of a hostile bid, restrict a target board's ability to attract a "white knight", by proposing a limited dispensation to the general prohibition in this case. However, will certain investors, such as private equity buyers, who typically have to invest more time and resources than a trade bidder who knows the business, be deterred from investing without the contractual protection that break fees offer?

Increased disclosure

In order to increase transparency, changes to the Code are proposed requiring both parties to disclose estimates of offer related fees and expenses including advisers' fees. Detailed financial information should also be disclosed in relation to all offers as opposed to just securities exchange offers. Greater disclosure by the bidder of financing arrangements will also be required.

Interests of employees of target companies

Changes are proposed to increase the quality of disclosures made by the bidder in relation to the bidder's plans for the target company and its employees. If the bidder has no plans relating to the target company's employees, location of business or fixed assets then a negative statement must be made. Further, any statements of intention made in the offer document must remain true for at least one year (unless a different period is stated) from the offer becoming or being declared wholly unconditional.


Whilst the proposed changes will strengthen the position of target companies, especially in the context of hostile takeovers, the question is whether the changes will make offers to which the Code applies less attractive. The automatic 28 day period may deter private equity buyers from investing and may prove problematic to small and mid cap companies who may struggle to announce an offer within this period. Whilst the Panel should grant an extension to the offer period this will be an additional consideration which, in addition to the prohibition on deal protection measures and increased disclosure requirements, may make deals even harder to implement.

What happens next?

Comments on the latest consultation paper (PCP 2011/1 issued on 21 March 2011 ( )) should reach the Code Committee by Friday 27 May 2011. Comments may be sent by post or email to The Code Committee will then issue guidance in relation to the timetable for publication of the response statement and the date for implementation of the amendments.


Guidance recently published

The UK Government has recently announced that the Bribery Act 2010, an act designed to bring the UK in line with the international norms on anti-corruption legislation, will come into force on 1 July 2011. As the Act will be extraterritorial and carry criminal sanctions, it will have far-reaching implications for UK headquartered businesses and multinationals operating in the UK, especially those operating in what are considered to be higher-risk sectors, such as mining and oil and gas, and higher-risk locations, such as developing and emerging economies.

In an attempt to cut through some of the hysteria that had built up around the scope of the Act, the Government has also now published detailed guidance which is intended to clarify how the Act operates and to give a steer on the sorts of procedures that companies should put in place to avoid committing the so called "corporate offence".

The four main offences

The Act introduces four main offences. The first two offences involve the making and receiving of bribes, the third the bribery of foreign officials and the fourth, the corporate offence of failing to prevent bribery. It is this fourth offence which is proving to be the most controversial provision of the new Act.

The corporate offence of failing to prevent bribery

Under the corporate offence, a commercial organisation will be guilty of failing to prevent bribery if an "associated person" performing services on the organisation's behalf offers, promises or gives a financial or other advantage to another person with the intention of obtaining or retaining business or a business advantage for the organisation. An associated person could include employees, agents, joint venture partners, franchisees, introducers or subsidiaries. This is a strict liability offence and the organisation could be found guilty even where it played no role in, and had no knowledge of, the bribery. Organisations will however have a defence of proving that they had "adequate procedures" in place designed to prevent bribery by those performing services on their behalf.

To view this article in full please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Mark Howard
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.