Target Company Statements – Directors’ Disclosure Obligations – Specialist Advice

Published 1 September 2011

The Directors of a target company are responsible for preparing the target company statement (TCS) in response to a takeover offer.[1] The TCS must contain all the information required under Schedule 2 of the Takeovers Code. The Directors must disclose in the TCS any information that could reasonably be expected to be material to the making of a decision by the offerees to accept or reject the offer.[2]

Commonly, the Board of a target company obtains advice from professional advisers in relation to a takeover offer. The Panel endorses the seeking of specialist advice by Directors because it puts them in a better position to give advice to shareholders on the merits of the offer.[3]

The onus is on the target company’s directors to turn their minds to the content of the advice and determine whether it includes information or views that could reasonably be expected to be material to the offerees’ decision as to whether to accept or reject the offer. If the advice does include such information, then the TCS must be drafted in a way that ensures all such material information is disclosed.

If the directors have taken advice, they should consider whether their recommendations and general approach to the takeover are consistent with that advice. If the advice received by the directors is inconsistent with the recommendations and general statements, then it would be appropriate for the directors to consider carefully whether the advice should be disclosed (or described) for the offerees.


[1] Rule 46 of the Code.

[2] Clauses 18(5) and 24, Schedule 2 of the Code

[3] Takeovers Panel Guidance Note (August 2008) Recovery of Expenses Under Rule 49(2), paragraph 4.7

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