Comments on Enforcement

Published 1 December 2001

Offeror’s statement - disclose upstream parties

Clause 6 of Schedule 1 of the Code relates to shares of the target company held or controlled by the offeror and certain other parties, including “related” parties.

The Panel has noted that some takeover notices received have not disclosed the identities of parties controlling the shares held by the offeror. We have pointed out these deficiencies to the offeror so that details of the number, designation and percentage of shares held or controlled by related companies may be included in the offer document sent to shareholders of the target company.

 It should be noted that “related company” under the Code is defined by reference to the Companies Act 1993. This definition includes a holding company and all subsidiaries.

Offeror’s statement - disclose details of transactions

Clause 7 of Schedule 1 to the Code requires the takeover notices to disclose trading in the equity securities of the target company by certain parties in the six months before the takeover notice is served. The consideration for, and date of every transaction must be disclosed.

The Panel appreciates that, before a takeover notice is served, it would be inappropriate for the offeror to make enquiries of outside parties (particularly substantial security holders) about past share transactions. However in the Panel’s view the offeror should make “proper enquiry” about these details once the takeover notice has been issued and before the directors sign the directors’ certificate required under clause l9 of Schedule l and dispatch the offer document to target company shareholders.

Target companies - directors’ interests in contracts of offeror

It is essential that information about the nature and extent of the interests of directors and officers of a target company in the material contracts of the offeror is made available by all directors of a target company, regardless of whether or not they are independent directors of the parties to a takeover.

This information is required to be disclosed by clause 13 of Schedule 2. The Panel considers that all directors of the target company have a duty to disclose this information even though it may be only the independent directors who sign the target company statement.