Certificate in draft offer document accompanying takeover notice

Clause 19 of Schedule 1 of the Code prescribes the form of certificate for the offer document that must be signed by two directors and two senior executives of the offeror. The Code was unclear as to whether the certificate in the draft offer that accompanies a takeover notice must also be signed by those same persons. Market practice has varied.

A signed certificate is now required for the takeover notice and the accompanying draft offer document, in the same way as a signed certificate is required for the final offer document sent to shareholders. This is to ensure that the offeror’s board and management take full responsibility for the information sent with the takeover notice, as well as for the offer document that is subsequently sent to shareholders.

The advice statement on the cover of the offer document

An advice statement on the front page of the offer document is required by clause 4 of Schedule 1 of the Code. This statement did not have to inform shareholders that they would receive, as well as the offer document, a statement from the target company in response to the offer and an independent adviser’s report on the merits of the offer.

The advice statement must now be in ‘plain English’ and tell shareholders when they will receive the target company statement and the rule 21 report on the merits of the offer and, if applicable, a rule 22 report on the fairness and reasonableness of the offers as between classes of securities.

"Intention" of the offeror to acquire equity securities other than under the offer

Offerors are prevented, during an offer period, from acquiring securities other than under the offer, except in the limited circumstances detailed in rule 36.

Rule 36 and clause 13 of Schedule 1 required the offeror to include in its offer document a statement of its intention to acquire securities other than under the offer (e.g. on market) during the offer period.

This statement of intention is no longer required. However, the rule 36 notification requirements have been expanded on any such acquisitions that are made. All rule 36 acquisitions now must be notified to the target company, the Panel, and to the Exchange if the target or offeror is listed. Where both parties are unlisted, rule 36 acquisitions

need to be notified only to the Panel and the target company. It is up to unlisted companies to decide how to keep their shareholders informed (this is not governed by the Code).

Disclosure in the takeover documents of share holding and share trading

Clauses 6 and 7 of Schedule 1 of the Code prescribe disclosures that must be made in an offer document about ownership of, and trading in, securities of the target company. Clauses 5 and 6 of Schedule 2 prescribe information to be disclosed in the target company statement about ownership of, and trading in, securities of the target company. Some of these disclosure requirements have been difficult to manage in practice because, for example, they have required disclosure of information about every single transaction by specified parties that has taken place over a six-month period.

The technical amendments result in:

• clarification of the Schedule 1 clause 7 disclosure in the offer document regarding non-shareholding by related parties or directors of related parties of the offeror; and
• disclosure in the target company statement of details of share trading by substantial security holders of the target company,² with weekly aggregation of this trading information instead of these disclosures being on a per-transaction basis.

Material contracts

Clause 13 of Schedule 2 required the target company statement to disclose information about material contracts to which the offeror (or a related company of the offeror) was a party. This information related to interests in material contracts involving the directors or senior officers of the target company, or their associates, or any substantial security holder of the target company. The nature and extent of any interest had to be disclosed.

The requirement that contracts have to be "material", before being required to be disclosed, has been removed for contracts involving the directors and senior officers of the target and their associates. This means that particulars of all such contracts, whether the target’s directors consider them to be material or not, must now be disclosed. The materiality limitation remains for the interests of the