Isle of Man
Answer ... As the Isle of Man does not have its own stock exchange, all of the responses in question 6 assume that the transaction is subject to the Takeover Code.
Isle of Man companies are listed on many of the world’s major stock exchanges so, if an Isle of Man target is listed in a jurisdiction outside the British Isles, local advice should be obtained in respect of the requirements of applicable stock exchange rules.
The following discussion assumes that the bid is recommended.
Scheme: As noted at question 1.1, schemes of arrangement have been the most common structure for public-to-private transactions in recent years, so we consider these first.
Once the bidder has completed its due diligence, it will formally announce the bid. Within 28 days, the target must send the formal scheme circular. The shareholders’ meetings will be held at least three weeks after the scheme circular is posted, and the Isle of Man High Court of Justice hearing to sanction the scheme can be held as soon as two business days after the shareholders’ meetings. The scheme becomes effective upon the court order and various ancillary documents being filed at the Isle of Man Companies Registry, which typically takes place within one or two business days after the sanction hearing.
The consideration must be paid to the shareholders of the target within 14 days after the scheme becomes effective (unless that period is extended with the consent of the Takeover Panel).
Contractual offer: As noted at question 1.1, certain amendments to the contractual offer timetable in the Takeover Code came into effect on 5 July 2021. Once the bidder has completed its due diligence, it will formally announce its bid, including a high-level description of the terms. The bidder must send the offer document within 28 days after the announcement, provided that the offer document can only be sent within the first 14 days with the consent of the target’s board. The earliest first closing date for acceptances is three weeks after the offer document is posted, and the offer must be declared unconditional as to acceptances before midnight on the day falling 60 days after the offer document is posted (unless that period is extended with the consent of the Takeover Panel).
The consideration must be paid to the shareholders of the target within 14 days after the offer becomes unconditional in all respects (unless that period is extended with the consent of the Takeover Panel).
Isle of Man
Answer ... Subject to anything to the contrary in the Isle of Man target’s constitutional documents, there is generally no restriction on stake-building under Isle of Man law, although care must be taken to ensure that any dealings do not constitute an offence under Isle of Man insider dealing legislation.
Separately, the Takeover Code restricts dealings in the target’s shares by:
- any person (other than the bidder) that has confidential price-sensitive information about the bid or contemplated bid after there is reason to suppose that a bid is contemplated and before the bid being announced; and
- the bidder and its concert parties during the offer period.
There are no specific requirements in the Isle of Man for public disclosure during the transaction process, but the Takeover Code requires the bidder to make a public disclosure after the announcement that first identifies it as a bidder and during the offer period if it deals in any shares of the target.
Isle of Man counsel should work closely with UK counsel in respect of the above matters, and UK counsel should also be consulted about whether purchases before or during the offer period could constitute offences under UK insider dealing or market abuse legislation.
Isle of Man
Answer ... Yes. Both the 1931 act and the 2006 act permit the compulsory acquisition of shares from minority shareholders if the bid is approved within a specified period by at least 90% in value of the shares affected. The relevant provisions do not expressly exclude any shares owned by the bidder or its affiliates from being taken into account when determining whether this threshold is met.
The precise rights of minority shareholders in an Isle of Man company will depend on whether it is incorporated under the 1931 act or the 2006 act, and what protections (if any) are included in its articles.
As a general protection, a shareholder in an Isle of Man company may apply to court for an appropriate order if:
- in the case of a 1931 act company, the affairs of the company are being conducted or the powers of the directors are being exercised in a manner that is oppressive to, or that disregards the proper interests of, that shareholder or some part of the shareholders (including that shareholder); or
- in the case of a 2006 act company, the affairs of the company have been, are being or are likely to be conducted in a manner that is, or any act or acts of the company have been or are likely to be, oppressive or unfairly prejudicial to that shareholder in its capacity as such.
Isle of Man
Answer ... The Takeover Code requires the bidder’s financial adviser to confirm that the bidder has access to sufficient cash resources to satisfy full acceptance of the bid.
Before giving such a confirmation, the bidder’s financial adviser will conduct due diligence together with its own legal advisers to ensure that, whatever the source of financing, the bidder has sufficient funds committed to it to enable it to satisfy the consideration under the bid. Where relevant, this will include a review of any commitment letters from, or other agreements with, the providers of any debt or equity financing to the bidder, which must be legally binding with strictly limited conditions.
The extent of this due diligence exercise will depend on the value of the transaction, the bidder’s financial position and the financial adviser’s familiarity with the bidder.
The bidder will also be required to give various confirmations to its financial adviser regarding any existing or new debt facilities that it will use to finance the bid.
Isle of Man
Answer ... Assuming that the bidder, or a controlling shareholder that is a bidder, is interested in 50% or less of the voting rights in the target before announcing the bid, the bidder must acquire or agree to acquire, by virtue of its shareholdings and acceptances of the bid, shares carrying at least 75% of the voting rights of the target in order to cancel the listing.
Isle of Man
Answer ... Although the threat of so-called ‘bumpitrage’ (where an activist shareholder buys a stake in the target following the announcement of a bid with a view to forcing the bidder to improve the terms of its offer) is perceived to be on the rise in Europe generally, there have been no major instances of bumpitrage in the context of an Isle of Man public M&A transaction to date.
That said, however, Isle of Man targets are as susceptible to shareholder activism as companies in other jurisdictions. As noted at question 1.1, schemes of arrangement have been the most common structure for public-to-private transactions in recent years. The procedure to implement an Isle of Man scheme of arrangement is broadly the same as that for UK companies, so the tactics that bumpitraging activists have developed in the context of UK takeover schemes could easily be replicated for takeover schemes involving Isle of Man companies. For this reason, on recent takeover schemes involving Isle of Man companies, the parties have carefully monitored movements in the shareholder base during the offer period with a view to detecting potential activists as soon as possible.
Isle of Man
Answer ... If the bidder acquires interests in shares within three months before the offer period, or between the start of the offer period and the announcement of the bid, the offer price must be at least as high as the highest price paid for any such purchase.
In addition, if the bidder acquires an interest in shares at above the offer price during the offer period, it must increase its offer price to at least the highest price paid for any such purchase.
Isle of Man
Answer ... The Takeover Code generally prevents bidders from invoking any conditions unless the circumstances are of material significance to the bidder in the context of the bid. After a bid has been announced, bidders must use all reasonable efforts to ensure that any conditions are satisfied.
Although MAC conditions are frequently included in announcements and offer documents relating to public M&A transactions involving Isle of Man targets, the reality is that the bar for a bidder to invoke such a condition is very high. The bidder will need to demonstrate that circumstances have arisen that are of very considerable significance, striking at the heart of the purpose of the transaction.
The Takeover Panel has clarified that, although this is a high standard, the test does not require the bidder to demonstrate frustration in the legal sense.
Isle of Man
Answer ... Yes, bidders may, and frequently do, seek irrevocable undertakings from key shareholders and directors who are also shareholders to accept the bid or, in the case of a scheme of arrangement, to vote in favour of the relevant resolutions.