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Takeover panel’s response to takeover code changes

  • United Kingdom
  • Corporate


The Code Committee of the Takeover Panel has published a Response Statement following the October 2020 consultation paper (PCP 2020/1) (PCP) on proposed amendments to the Takeover Code (Code) in relation to the treatment of offer conditions and the offer timetable.

The key proposals for change set out in the PCP were covered in our earlier briefing Takeovers: proposed changes to the offer timetable and conditions to offers. The Response Statement largely confirms the proposals that were set out in the PCP. However, there are some minor modifications to the original proposals which have been made as a result of the consultation, and also some clarifications which have been provided. Whilst there is some technical detail to the proposals, some of the key changes from the consultation are explained below.

Clarifications from the Consultation Paper

The Response Statement has clarified certain areas where queries were raised as part of the consultation, including in relation to the meaning of an ‘official authorisation or regulatory clearance’. The PCP proposed that the Code should apply consistent treatment to all official authorisations and regulatory clearances to which an offer is subject, and not apply different treatment to conditions relating to there being no Phase 2 Competition and Markets Authority (CMA) reference or Phase 2 European Commission proceedings.

The Code Committee has clarified in the Response Statement that, for the purposes of the Code, an official authorisation or regulatory clearance is an authorisation or clearance which is obtained from a governmental or regulatory body and which relates to the question of whether the bidder is required to acquire the target company or one or more of its assets. This would, therefore, include a clearance from a competition authority (such as the CMA) or a regulator such as the Financial Conduct Authority or the Prudential Regulatory Authority. However, a clearance from the Pensions Regulator would not be regarded as an official authorisation or regulatory clearance, the distinction being that such a clearance relates to the costs, if any, the bidder will be required to incur as a result of acquiring the target. See the comments below specifically  in relation to the National Security and Investment regime.

The Code Committee has also clarified that if at the long-stop date, a condition relating to an official authorisation or regulatory clearance has not been satisfied, the Panel will normally permit the offeror to lapse its offer.

The Response Statement has also provided clarifications in relation to:

  • the evidence to be provided by a unilateral offeror in relation to the setting of its long stop date for its offer and around remedial action and the material significance requirement in Rule 13.5(A); and
  • the guidance provided around various aspects of the requirement for the offeror to take the procedural steps necessary to make a scheme become effective.

Key changes from the consultation

  • Acceleration Statements

The PCP introduced the concept of an ‘acceleration statement’ which would enable a bidder to bring forward the unconditional date and set a shorter timeframe for satisfaction or waiver of the conditions. The Response Statement clarifies that disapplying the restriction on the target board announcing material new information after Day 39 following the publication of an acceleration statement will only apply if the acceleration statement is published prior to Day 39. This will be the case even if the offeror subsequently sets aside its acceleration statement (where it has reserved the right to do so in specified circumstances and those circumstances arise).

  • Acceptance condition invocation notices

The PCP proposed that if a bidder wishes to lapse its offer for non-satisfaction of the acceptance condition at any time prior to the unconditional date, it will be required to publish an ‘acceptance condition invocation notice’ (ACIN) giving the target’s shareholders 14 days’ notice that it intends to lapse the offer if insufficient acceptances are received by a specified date (being on or after Day 21).

The Code Committee has confirmed that the rules would not prevent a bidder from serving an ACIN at the same time as it published its offer document (provided the notice period was at least 21 days) or from serving more than one ACIN during the course of an offer. This might occur, for example, where the offer timetable was suspended for a long period of time where there are delays in satisfying regulatory conditions. However, a bidder should not be permitted to serve a new ACIN until after the relevant date set by an existing ACIN.

The requirement for an ACIN to be sent to target company shareholders has been replaced with a requirement for it to be published in accordance with Rule 30.1 via RIS announcement.

  • Offeree protection conditions

The PCP proposed the deletion of Offeree Protection Conditions (Rule 13.6), on the basis that target company shareholders who had accepted the offer would be able to exercise withdrawal rights at any time following publication of the offer document and prior to the satisfaction of the acceptance condition. However, the Code Committee accepted that the standard required for a target board to invoke an offeree protection condition (ie circumstances …. of material significance to the shareholders in the offeree company in the context of the offer) should be retained, and accordingly Rule 13.6 and Note 1 will be retained, and not deleted as proposed in the PCP.

  • Invocation of conditions and pre-conditions to offers

The PCP proposed that the provisions of Rule 13.5 (invoking conditions and pre-conditions) be amended to clarify that a bidder is restricted from invoking a condition or pre-condition unless the circumstances are of ‘material significance’ to the bidder in the context of the offer. There would be an exception where securities are offered as consideration. In these circumstances, a condition required in connection with listing or admission would not be subject to the ‘material significance’ test. The Code Committee agrees that this exception should also apply to conditions relating to a legal or regulatory requirement in connection with the issuance by the bidder of consideration securities.

National security and investment (NSI) regime

Since publication of the PCP, the draft National Security and Investment Bill has been introduced to Parliament in the UK to establish a new standalone foreign direct investment regime (see our briefing here). The Response Statement notes that the Code Committee does not expect to make any specific amendments to the Code as a result of the implementation of the NSI regime in the UK in its current form. The Panel would be likely to treat a clearance from the Secretary of State under the NSI regime as a “material official authorisation or regulatory clearance” for the purposes of the Code. Accordingly, to the extent that any review period or assessment period under the NSI regime has not ended by Day 37 of a contractual offer, it will normally be possible for the timetable to be suspended pending the outcome of the review or assessment.

Timing and next steps

The amendments to the Code will take effect on 5 July 2021. The amended Code will apply in relation to all takeover bids that are announced on or after this date, except where to do so would give the amendments retroactive effect. Any ongoing firm offers which straddle 5 July 2021, and any competing bids to such offers announced on or after such date, will continue to be subject to the previous version of the Code.


As we noted previously, these are the most significant changes to the Code since those introduced following the Kraft/Cadbury offer. The changes will now be implemented in just over three months’ time. We are reviewing the detail of the final changes and will be working with intermediaries and clients to help them become familiar with these changes and the effect they will have on contractual offers prior to the changes to the Code taking effect.

Useful links

Panel Statement 2021/5

Response Statement: Conditions to offers and the offer timetable

Amendment Instrument 2021/1