Technical amendments to the Takeovers Code

Published 26 October 2018

From time to time, the Panel makes recommendations for amendments to the Takeovers Code. Following consultation with the market in late 2016, the Panel recommended a number of technical amendments to the Code in March 2017.

Amendments to the Code based on those recommendations will come into force on 29 October 2018.

In summary, the recommended amendments:

  • clarify the Code’s timing rules by standardising how timeframes are expressed and changing references from calendar days to working days;
  • facilitate and prioritise electronic communication by enabling the existing communication requirements to be conducted electronically;
  • improve transparency by ensuring information disclosed to shareholders is clear and consistent and that shareholders are fully informed about the entity which will have a controlling interest as a result of a Code-regulated transaction; and
  • make a number of other minor technical changes.

Timing rules

Legislated timeframes play a significant role in the Code, ensuring that, for example, shareholders have adequate time to consider an offer and target companies have adequate time to prepare a response to an offer.

The Code’s timing requirements are contained within 37 different rules and, currently, those rules are calculated on the basis of calendar days. This means that for the purposes of the Code’s timing rules weekends, public holidays, and the days between Christmas and New Year are counted. This can be problematic and impractical when, for example, a takeover occurs during the Christmas holiday.

Consequently, the Code’s timing rules have been updated to refer to “working days”. The number of days allowed in each rule has been updated appropriately to ensure that the effective timeframes are identical (e.g., a rule that previously required something to be done within seven days would now require that thing to be done within five working days).

Also, the wording of each of the timing rules has been updated for consistency. Currently, some rules are inclusive of the day on which a thing must be done, and some rules are exclusive of that day. The amendments ensure that all rules apply in the same way – the rules will include the day on which a thing is to be done. For further guidance, see the Panel’s updated Timing Rules Calculator and Guidance Note on Timing Rules

Electronic communication

The Code was drafted at a time when written communications were expected to be made through the post in hard copy. However, postal services are no longer as efficient as they once were, and feedback indicates that many shareholders prefer to receive communications electronically.

Consequently, several rules in the Code have been updated to facilitate electronic communication by offerors under a takeover, and by Code companies for all Code-regulated transactions. Where a shareholder has opted for electronic communications, they should receive all Code-related documents electronically. Shareholders who prefer posted hard copies can continue to receive them that way.

Identifying the controller of the offeror

The Code requires a takeover offer document to state the name and address of the offeror and the names of the offeror’s directors. However, there is no requirement to state the name of the person who controls the offeror.

This can be problematic because an offeror is often a special purpose entity that has been set up for the express purpose of making the takeover offer. Shareholders in a target company may not be fully informed about the identity of the offeror. This is inconsistent with other parts of the Code, which require the controller of the relevant party to be disclosed (for example, rule 15(a) in relation to acquisitions of parcels of shares).

Consequently, the Code has been updated to require that an offer document disclose the identity of the person or persons controlling the offeror.

Panel executive is available

As always, the Panel executive is available to discuss any questions you might have about the amendments to the Code.