Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Friday, May 19, 2006

Companies face changed takeover regime from May 20th

20 May will see important changes to the UK takeovers regime, many of which have implications for the Investor Relations Officers of UK Plc. Mainly these follow from the implementation of the EU Takeovers Directive, which under EU rules must be applied tomorrow. They will apply through an interim measure, but will eventually be part of the Company Law Reform. In addition, the Panel has been consulting on various issues – especially the SAR’s – and is changing these rules at the same time. What are these changes that apply?
From tomorrow, the Panel will have greater powers to enforce Code Rules (such as applying to the Courts for enforcement, and compelling people to provide any bid-related documents). It will also be a criminal offence for an offer document or defence circular not to contain all the information required by certain Code Rules.
Where an offer involves a 'special deal' with favourable conditions for some shareholders (such as the management in an MBO), shareholders will have to vote on the arrangements at an EGM. In certain circumstances the company’s employees will be able to submit a written opinion on the implications of an offer, and the board will have to circulate this opinion to their shareholders with the offer document or defence circular.
UK companies with shares quoted on the Official List - but not AIM or Ofex - will have to include in their directors’ report information about their share structure, the rights and restrictions attaching to shares, and any rules or arrangements which could affect the success of a takeover bid, such as share schemes, concert parties.
More controversially, the Substantial Acquisitions Rules (SARs) will be abolished, restoring the likelihood of market raids to acquire up to 29.9% of a company in one fell swoop.
And, as Transparency Matters has commented before, all dealings in CFD’s and other derivatives and options will be defined as material interests in the underlying shares, requiring disclosures. This contrasts with the current proposals under the FSA’s implementation of the Transparency Obligations Directive AND the Company Law review – which exclude derivatives from these disclosures.

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