UK: Removal Of The Residency Test – What Do You Need To Think About?

Last Updated: 25 October 2013
Article by Jodie Dennis


In a previous issue of ENeRgize (October 2012), we highlighted certain proposed changes to the Takeover Code ("Code") which determine the companies that are subject to the Code, namely the removal of the residency test. When we last addressed this issue, the consultation period had just closed and we were awaiting the Takeover Panel's response statement.

In May 2013, the Code Committee of the Takeover Panel published its response statement, confirming that for the most part the proposals would be adopted as initially drafted.

The changes to the Code have now come into effect, from 30 September 2013, and will apply from that date to all companies and transactions to which the Code relates. This includes live transactions which were in progress at the effective date.

The Residency Test

Formerly, the Takeover Code applied to all companies listed on the Official List that are registered in the UK, Channel Islands or Isle of Man. However, it would only apply to other public companies registered in these jurisdictions (including those listed on AIM or the ISDX Growth Market) if they were also considered by the Takeover Panel to have their place of central management and control in the UK, Channel Islands or Isle of Man. This was known as the residency test.

Under the initial proposals, the residency test was to be removed in its entirety. However, in its final proposals, the Code Committee rowed back from this slightly, such that from 30 September:

  • the residency test will no longer apply to offers for companies which have their registered offices in the UK, the Channel Islands or the Isle of Man and which have securities admitted to trading on a multilateral trading facility (such as AIM or the ISDX Growth Market) in the UK; and
  • the residency test will be retained for public companies whose registered office is situated in the UK, the Channel Islands or the Isle of Man but whose securities are admitted to trading solely on an overseas market or are not listed on any public market (or in certain limited circumstances, private companies).

What do the changes mean for your company?

Application to AIM or ISDX Listed Companies - By the Takeover Panel's estimation, there are approximately 200 additional listed companies which will now fall within the Code's jurisdiction as a result of these changes. A disproportionately high number of these come from the Energy and Natural Resources ("ENR") sector as many such companies opted to list on AIM (or ISDX) with a UK plc, or Channel Islands or Isle of Man company, at the top of the corporate group, although management was located elsewhere. Such companies would not have been regulated by the Code up to now, however, going forward they will be.

Application to ENR sector public takeovers - Whilst there will be a loss of flexibility in structuring bids for some AIM (and ISDX) companies, for whom offers will now have to be made in full compliance with the Code, overall the changes have been welcomed by the majority of commentators.

The phasing out of the residency test will remove uncertainty for many public companies, their shareholders and prospective bidders around whether the Code does or doesn't apply at a given point in time, especially relevant for companies whose place of management and control is fluid. It will also remove the need for the kind of "mandatory bid" provisions adopted by many listed companies in their articles of association, which have provided a partial solution at best of how to achieve Code-equivalence for companies falling outside of the scope of the Code (see also below).

Considerations for Directors - Directors of public companies now falling within the Code's remit should familiarise themselves with the Code and their obligations under it, and will no doubt require the assistance of their advisers in connection with this. As referred to above, the changes apply to transactions which are in progress at the time of the introduction so companies in an offer period or for whom an offer was in contemplation as at 30 September should already have been in consultation with the Panel as to the impact of the rule changes on them.

Directors will also need to consider whether changes need to be made to their company's constitution. Many listed companies previously outside the jurisdiction of the Code have attempted to adhere to core Code principles by including in their constitutional documents provisions which mimic the requirements of Rule 9 of the Code. Rule 9 is the cornerstone of the Takeover Code and requires, amongst other things, any shareholder (or connected group) that becomes interested in shares carrying 30% or more of the voting rights of a company to make an offer for the remaining shares. For companies now subject to the Code post 30 September, such "Rule 9-equivalent" provisions in their constitution will have ceased to be relevant, and may even conflict with the requirements of the Code itself. In either case, companies should be considering whether and when to remove provisions from their constitution.

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.

Jodie Dennis
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.