15 May 2013

UK Takeover Code Update

Overview

On 15 May 2013 the Takeover Panel issued its response statement following its consultation regarding companies subject to the Takeover Code (the "Code"). The Code applies in certain circumstances to companies incorporated in Guernsey and Jersey. Carey Olsen has been actively involved in the consultation process. 

We are pleased to say that the proposed amendments to the Code are expected to be very positively received. The amendments will become effective on 30 September 2013.

Guernsey and Jersey have proven to be a popular choice for groups seeking to list on exchanges throughout the world, in particular through the formation of a new parent company the shares of which are then admitted to listing. Guernsey and Jersey offer many advantages in this respect, including sophisticated corporate laws, electronic trading and electronic communication enabling provisions, tax neutrality, a proven track record and familiarity with investors.  

In some cases, using Guernsey and Jersey companies also offers the advantage of Takeover Panel jurisdiction, which many companies and investors desire.

Guernsey and Jersey incorporated companies are very popular choices for the main board of the London Stock Exchange and AIM listed companies, and have also been successfully used for other international exchanges such as NYSE and HKSE.

Key Points to Note

  • The Code will apply to Guernsey and Jersey companies (as well as UK and Isle of Man companies) whose shares are admitted to trading on a UK-based multilateral trading facility (MTF) and it will no longer be necessary for those companies to satisfy the "residency test" for the Takeover Code to apply. MTF's include the Alternative Investment Market (AIM) of the London Stock Exchange. There are a substantial number of Guernsey and Jersey companies listed on AIM, many of which have their operations outside the UK (including China and the Far East). For the first time, these companies will become subject to the Takeover Code, which will bring them into line with companies listed on the main board of the London Stock Exchange and other regulated markets. In Carey Olsen's experience, most of these companies listed on AIM wish to be subject to the Takeover Code and have, until now, been forced to rely on provisions within their constitutional documents which replicate the Takeover Code (but in practice could not fully replicate the position, for instance because the Takeover Panel did not have jurisdiction to oversee a takeover) – and such companies should consider whether to remove such provisions. The position for companies which are not incorporated in Guernsey, Jersey, Isle of Man or the UK will be less favourable.
  • The Code will continue not to apply to Guernsey and Jersey companies whose shares are admitted to trading on a public market which is not a regulated market (either in the UK or in another EEA member state or the Channel Islands or Isle of Man). So by way of example, the Code will continue not to apply to such companies listed on NYSE, HKSE or other international exchanges. This assumes, as will usually be the case, that such companies do not satisfy the "residency test". The "residency test" will only be satisfied if the Takeover Panel considers the place of central management and control of the company to be in the UK, Channel Islands or the Isle of Man.
  • We understand the Code will continue not to apply to open-ended investment companies (as defined).

Please note that this briefing is only intended to provide a very general overview of the matters to which it relates. It is not intended as legal advice and should not be relied on as such.

© Carey Olsen 2013

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