Parliament: The Economic Crime (Transparency and Enforcement) Act 2022 (Commencement No. 4) Regulations 2022
On October 14, 2022 the Economic Crime (Transparency and Enforcement) Act 2022 (Commencement No. 4) Regulations 2022 (Regulations) were published. These were made on October 12, 2022 and they bring into force certain provisions of the Economic Crime (Transparency and Enforcement) Act 2022 (Act) which received Royal Assent in March 2022.
Provisions in force from October 12, 2022
The Regulations bring into force the provisions of Part 1 (but not sections 7 and 8) of, and Schedules 1-5 to, the Act that are not already in force. These include sections 9 and 10 of the Act, that concern applications by overseas entities to be removed from the “live” list of registered overseas entities maintained by Companies House, and section 11, which enables the Registrar of Companies to transfer documents relating to an overseas entity removed from the register to the Public Records Office.
Provisions in force from January 16, 2023
The Regulations bring sections 7 and 8 of the Act into force from this date. Section 7 sets out the annual updating duty that registered overseas entities must comply with and section 8 sets out the criminal offence (which can be committed by the overseas entity and defaulting officers) which applies if the updating duty is not complied with.
Takeover Panel: The offer timetable in a competitive situation – PCP 2022/3
On October 19, 2022 the Takeover Panel (Panel) published PCP 2022/3 (the Consultation) relating to offer timetables in competitive situations.
A number of changes were made to the Takeover Code (Code) in 2021 intended (among other things) to better accommodate the potentially lengthy timeframes required to satisfy conditions relating to official authorisations and regulatory clearances. The Panel notes that, since then, it has encountered certain competitive situations where (a) one or both bidders have required one or more official authorisations/regulatory clearances which could not be obtained within the normal 60 day timetable for a contractual offer and (b) one of the offers was proceeding by way of a contractual offer and the other by way of a scheme of arrangement.
In light of these cases, the Panel believes that certain amendments should be made to the Code to clarify the manner in which the offer timetable prescribed by the Code applies in a competitive situation. The principal changes are to clarify:
- That the Panel will not normally introduce an auction process to bring the competitive bidding dynamic to a conclusion until the last condition relating to a relevant official authorisation/regulatory clearance has been satisfied or waived by both bidders.
- How the Panel will establish a framework for shareholders of the target company to decide between the competing transactions once each of the bidders has made its final offer.
The Consultation discusses the approach to situations where both bidders are proceeding by way of a contractual offer, where one or more bidders is proceeding by way of a scheme, where one of the bidders wants to complete its offer prior to the introduction of an auction procedure, and where a contractual offer and scheme are both submitted to target company shareholders for acceptance or approval.
Appendix B to the consultation sets out a summary of the provisions of the Code which prescribe the timetable for a takeover by way of a contractual offer and by way of a scheme and the Panel notes that this provides important context for practitioners and market participants in relation to the requirements of the Code relating to the amendments proposed in the Consultation.
The deadline for responding to the Consultation is January 13, 2023 and the Panel expects to publish a response statement setting out the final amendments to the Code in Spring 2023 (with the amendments expected to come into effect approximately one month thereafter).
(Takeover Panel, The offer timetable in a competitive situation - PCP 2022/3, 19.10.2022)
Takeover Panel: Miscellaneous Code amendments - PCP 2022/4
On October 19, 2022 the Takeover Panel (Panel) published PCP 2022/4 (the Consultation) relating to miscellaneous amendments to the Takeover Code (Code).
The key changes proposed in the Consultation are summarised below. The deadline for responding to the Consultation is January 13, 2023 and the Panel expects to publish a response statement setting out the final amendments to the Code in Spring 2023 (with the amendments expected to come into effect approximately one month thereafter).
Derogations and waivers from the requirements of the Code
These changes would provide the Panel with greater flexibility to grant derogations or waivers in exceptional circumstances (for example, to facilitate a rescue of a company that is in severe financial difficulty) and would also remove certain limitations on the Panel's ability to waive the requirements of Rule 9 in the case of a rescue operation to save a company which is in severe financial difficulty.
Situations where rumour and speculation or an untoward share price movement is caused by a clear public statement
The Consultation proposes that Note 2 on Rule 2.2 should be removed.
Note 2 currently provides that, where a bidder is actively considering an offer but has not made an approach to the target company, it will not normally be required to make an announcement under Rule 2.2(d) if the Panel is satisfied that the rumour or speculation/untoward price movement results only from a clear and unequivocal public statement – for example a disclosure of the acquisition of shares under the FCA Handbook, an announcement of a dawn raid or an intention to purchase shares, or an announcement of a tender offer.
Adjusted mandatory offer price under Note 3 on Rule 9.5
Under Rule 9.5(c), in certain circumstances the Panel may determine that the highest price paid by a bidder/its concert parties for shares in the target company (and therefore the minimum price to be paid under the mandatory offer) should be adjusted. Note 3 on Rule 9.5 sets out circumstances which the Panel may take into account when considering an adjustment of the highest price paid and notes that the adjusted price will be the price that is “fair and reasonable” (taking into account all relevant factors) and that in any case where the highest price is adjusted the Panel will publish its decision.
The Consultation proposes amending Note 3 so that it requires the price to be “appropriate” rather than “fair and reasonable” and to provide that a decision by the Panel to adjust the price must be “made public” rather than published by the Panel itself.
Target board recommendations
The Consultation sets out amendments that would introduce an express requirement for the target company board to make a recommendation as to the action that shareholders should take in relation to the offer (and any alternative offers) and that holders of Rule 15 securities should take in respect of any Rule 15 offer or proposal. The Consultation notes that, in practice, target company boards will almost always provide a recommendation to shareholders in relation to the “main” offer but that there have been a number of cases where target company boards have sought to argue that they should not be required to provide a recommendation in relation to an alternative offer and/or a Rule 15 offer or proposal. The Panel considers that it is important for shareholders to be provided with a recommendation on the basis that the directors are the persons best placed to evaluate the merits or demerits of an offer and therefore their recommendation will be important information for shareholders in making their acceptance decision.
Note 2 on Rule 25.2 (which deals with situations where the target company board is unable to reach a clear opinion or there is a divergence of views) would continue to apply with minor amendments – although the Panel notes that in the large majority of cases it should be possible to form a clear opinion and provide a corresponding recommendation.
Disclosure of target company directors' intentions
The Code currently requires the target board circular to include information on whether the target company directors intend to accept the offer in respect of their own beneficial holdings and (if there are alternative offers, and if so required by the Panel) which alternative, if any, they intend to elect for. The Consultation notes that, where there are alternative offers, the Panel's practice is almost invariably to require the target company directors to state which alternative (if any) they intend to elect for and proposes that this should be codified together with the ability for the Panel to require the inclusion of the directors' reasons for electing for a particular alternative.
Irrevocable commitments and letters of intent
The Consultation proposes that if a party to an offer (or any of its concert parties) procures an irrevocable commitment or letter of intent before the announcement of a firm offer under Rule 2.7, that party should be required to publish it on a website by the current deadline for announcing the details of the irrevocable/letter of intent (rather than only following the announcement of a firm offer).
(Takeover Panel, Miscellaneous Code amendments – PCP 2022/4, 19.10.2022)
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