The Takeover Panel Executive published a Practice Statement on 17 January 2014 to clarify the way in which it interprets and applies Rule 21.2 of the Takeover Code in relation to irrevocable commitments and letters of intent given by offeree company shareholders who are also offeree directors. The Executive clarified that such person is permitted to enter into an irrevocable commitment or letter of intent to accept an offer (or to vote in favour of a scheme of arrangement) with respect to the shares in the offeree company that he holds or controls. Such person is not permitted to enter into any other type of offer-related arrangement with the offeror or the offeror's concert parties, and these include commitments:
- not to solicit a competing offer;
- to recommend an offer to offeree company shareholders;
- to notify the offeror if the director becomes aware of a potential competing offer;
- to convene board meetings and/or vote in favour of board resolutions which are necessary to implement the offer;
- to provide information in relation to the offeree company for due diligence or other purposes;
- to assist the offeror with the satisfaction of its offer conditions;
- to assist the offeror with the preparation of its offer documentation; and
- to conduct the offeree company's business in a particular manner during the offer period.
However, provisions that are aimed solely at giving effect to a commitment to accept the offer (or vote in favour of the scheme) are permitted. The Executive should be consulted at the earliest opportunity if there is any doubt as to whether a proposed irrevocable commitment or letter of intent is in compliance with Rule 21.2.
The Practice Statement is available at:
http://www.thetakeoverpanel.org.uk/wp-content/uploads/2008/11/PS27.pdf
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