The Panel considers it is acceptable for a committee of independent directors to approve the contents of the target company statement for the board of directors. However, all other directors must explicitly not approve the statement and explain why in the target company statement.

A problem can arise if the target company statement includes information relating to the interests of directors and officers of the target company in material contracts with the bidder (as required by clause 13 of Schedule 2). In particular, officers or directors of the target company who are also officers or directors of the bidder, will probably have contractual arrangements with the bidder. However, the independent directors of the target company, who have to approve the statement, may not be privy to information about the interests of directors and officers unless those persons tell them. Non-independent directors are obliged to disclose information about any contractual arrangements with the bidder to the independent directors who are to approve the statement.

For their part, independent directors should ensure that nonindependent directors verify information in the target company statement about the interests of directors and officers in any material contracts they have with the offeror or its related parties before they (the independent directors) approve the statement.

The Code prescribes the certificates that must be signed for the offeror in the offer document and the target company in the target company statement. The certificates require a combination of executive and board level responsibility to be taken for the contents of the offer document and target company statement. (Clause 19 of Schedule 1 and clause 26 of Schedule 2)

The executives who must sign the certificate in the offer document and the target company statement respectively are specified in clause 19(2)(b)(i) of Schedule 1 and clause 26(2)(a) of Schedule 2. These clauses state that the certificate must be signed by The chief executive officer and the chief financial officer of the offeror [the target company] or their respective agents authorised in writing, or if there is no chief executive officer or chief financial officer, the person or persons fulfilling those roles respectively, or their respective agents authorised in writing.

In several instances takeover notices reviewed by the Panel executive indicated that the subsequent takeover offer document would not be signed by a person in one or other of the executive capacities. In these instances the Panel executive usually talks to the offeror’s legal advisers to ascertain who is filling the executive roles. In one or two instances the offeror’s advisers have overlooked that there are incumbent executives filling these roles although they don’t have the job titles. In other instances the offeror has been a small investment holding vehicle with only one or two directors and no executive staff. In these cases the directors must be filling the executive roles and should sign the certificates. The issue is the role and not the titles.

Those who fulfil the roles have to sign the certificates.

Where target company statements have been issued without being signed by the responsible executives the Panel has acted swiftly to have the matter remedied. In one case the target company had overlooked the need to have the chief executive sign the document while the chief financial officer (a secondee from an accounting firm) had not signed because he thought that the contractual arrangements between the accounting firm and the target company prevented him from doing so. It was only after the Panel had called a section 32 meeting to deal with the non-compliance that the chief financial officer signed (by way of an addendum) the target company statement.

The requirement for the chief executive officer and the chief financial officer (or the persons fulfilling these roles) to sign the target company statement is a legal obligation that must be complied with. The only exception would be if the Panel granted an exemption. See Practice Note – Exemptions from Clause 26 of Schedule 2 on page 4 of this issue of Code Word.

The offer document or target company statement must include the particulars of agreements or arrangements entered into, or of interests in contracts, or of restrictions in company constitutions that are relevant to the takeover transaction. (Clauses 10, 11, 12, 15 and 16 of Schedule 1 and 10, 11, 12, 13, and 16 of Schedule 2) There is a tendency in takeover documents for responses to the requirements of these clauses to be general rather than particular.

In the Panel’s view particulars means names and amounts.

Clause 12 of Schedule 2 covers the circumstances where a target company has entered into certain arrangements with its directors and/or senior officers. These arrangements relate to payments or other benefits for compensation for loss of office, or remaining in or retiring from office. These payments may be quite modest and reasonable. Or they may be poison pills, i.e. very large payments that entrench existing management by having a significant adverse effect on the value of the target company if a takeover succeeds.

The Panel expects the names of the people concerned and the amounts of the prospective payments to be disclosed. The amounts may be disclosed in terms of multiples of salary (e.g. 3 months’ salary, one year’s salary) in some instances.

If the amounts are modest and reasonable, disclosure should not cause any embarrassment or discomfort. If the amounts are large, disclosure of the amounts and the names of the recipients is very important. If the names and amounts are not disclosed, the offerees and the market will not know if there is reason for concern.