The Panel considers that the role of the independent adviser is critical to the effectiveness of the Code in regulating the market for the control of Code companies.

The independent adviser helps ensure that there are well-informed shareholders whenever a takeover offer is made or another transaction is occurring that requires shareholder approval under the Code. For this reason the Panel takes a close interest in the skills as well as the independence of any company or individual proposed for appointment as an independent adviser.

Advisers need to fully appreciate the philosophy of the Code, the rights it creates for shareholders, and the importance of their role in the process. Reports must be of a high quality and give balanced advice.

The Panel intends to continue with its current policy of reviewing reports prepared by independent advisers for the purposes of the Code and will provide comments to the advisers on draft reports where it considers this is necessary.

The independent directors of the target or allotting company also have important responsibilities in the process. The Panel believes, on the basis of some of the reports it has seen, that not all independent company directors have appreciated the extent of those responsibilities.

The directors need to ensure that the appointed adviser is given all the information necessary to provide a comprehensive report. They should, in the course of reviewing the independent adviser's draft report, satisfy themselves that it is sufficiently comprehensive, is factually accurate, and covers all the relevant issues.

This paper replaces the guidance note issued by the Panel in July 2003.