CODEWORD

The Panel has recently dealt with a number of enforcement matters and takes this opportunity to remind Code companies and their directors and advisers of the following matters. 

First, transactions undertaken in accordance with a class exemption granted by the Panel must accord strictly with the conditions of the exemption. If a condition of a class exemption is not met, then the exemption will not apply to the transaction in question. Any resulting breach of the Code will require the Panel to consider whether to exercise its enforcement powers under Part 3 of the Takeovers Act 1993.

Secondly, when Code companies are allotting shares to raise capital they need to consider whether any shareholder’s voting control position could be subject to the Code. If so, then the company will have certain compliance obligations under the Code. When considering these obligations, directors of Code companies planning on participating in the capital raising should consider whether they are associates of the relevant shareholder. If so, those directors may have Code compliance obligations as well.

Directors of Code companies should consider seeking legal advice on compliance with the Code and any applicable class exemption. Legal advisers are reminded that the Panel executive is available to discuss Code matters on a confidential basis.

An amendment has been made to the Takeovers Code (Class Exemptions) Notice (No 2) 2001. New clauses 25A and 25B grant exemptions from compliance with rule 6(1) of the Code in relation to intra-group transactions where the group is headed by a natural person or by a number of persons including at least one natural person.

As indicated in CodeWord 39, the Panel has now granted the Takeovers Code (Small Code Companies) Exemption Notice 2015 for persons who increase their holding or control of voting rights in a “small”, unlisted Code company as a result of an allotment of voting securities by the Code company. 

For the purposes of the exemption, a company is “small” if its assets total $20 million or less. The exemption permits a small company to opt out of Code compliance. The exemption applies only if: 

• the company’s board has resolved that, in its opinion, opting out is in the best interests of the company;
• the company has given shareholders a disclosure document and an opportunity to object to the opt out and to require full Code compliance; and
• objections to the opt out represent less than 5% of the “free float” shares.

Free float in this context means the shares belonging to shareholders who are not relying on the exemption. 

The Panel intends to consider whether it is appropriate to extend the application of the class exemption to other Code transactions after the operation of the class exemption for allotments has been observed.

The Panel has published a consolidated Guidance Note on Rule 64 of the Code. The updated Guidance Note consolidates the previous publications relating to rule 64 in CodeWord 22 (December 2007) and CodeWord 29 (September 2011) and now includes case summaries of the section 32 determinations that the Panel has made in relation to rule 64.

The Panel has recently updated its Guidance Note on Independent Advisers and the Code with new disclosure requirements for independent adviser applications. The Panel now also asks both the applicant and appointor to disclose as part of the application whether the applicant and the appointor have discussed the price and/or any parameters of the valuation. See Appendix B of the Guidance Note for the full requirements.

IA1, the template application for approval as an independent adviser, and IA2, the template information from the appointor, have also been updated with the new disclosure requirements.

The Panel has published updated administrative guidelines on the fees and charges payable for work carried out by the Panel under the Takeovers (Fees) Regulations 2001.