Skip to main content
Corporate Finance Q&ACorporate Transactions Q&AQUESTIONS

Companies subject to the Takeover Code?

Q&A

Establishing what companies are subject to the Takeover Code is not as straightforward as you may think. You might assume that any company listed in the UK is subject to the Code, but this is incorrect. 

Many companies listed on the London Stock Exchange or with shares admitted to trading on AIM are not companies subject to the Takeover Code as they are not UK incorporated.   

You can find out what companies are subject to the Takeover Code by checking the criteria in paragraph 3 of the Introduction to the Takeover Code and seeing if the target company falls within the definition. 

If the company is a UK incorporated company with publicly traded shares then it is likely to be subject to the Takeover Code. If a UK incorporated company has shares traded on a non-UK stock exchange and its head office and central management and control is outside the UK, it is unlikely to governed by the Code.

It is always worth checking carefully whether the Takeover Code will apply as it can make a material difference to how a takeover will be conducted and may impact the investment case.  

What the Takeover Code provides

Paragraph 3 of the Introduction to the Takeover Code provides that – 

  • Only public companies incorporated in the UK, the Channel Islands or the Isle of Man which have shares admitted to a ‘regulated market’ (e.g. Official List of the London Stock Exchange) or a ‘multilateral trading facility’ (e.g. AIM) are automatically subject to the Takeover Code.
  • If a company is incorporated in the UK, the Channel Islands or the Isle of Man but its shares are traded on an overseas market (e.g. NASDAQ) then the Code applies if the company has its ‘central management and control’ in the UK.  The Takeover Panel is the final arbiter of this question and the fact that a company may be tax resident in the UK does not necessarily mean that the Panel will consider its central management and control to be in the UK.  See the Panel statement on Xstrata here.
  • The Code also applies to UK public companies with no shares admitted to trading on a stock exchange if the company has its ‘central management and control’ in the UK, although it is often possible to get a waiver from the Takeover Panel where the shares are closely held.  Even certain UK private companies can be subject to the Code, e.g. where their shares were previously traded on a stock exchange.  Again, sometimes a Code waiver can be obtained.

Example –

  • Bermuda company with a premium listing on the London Stock Exchange will not be subject to the Takeover Code even if its central management and control is in the UK.  Companies such as this may import certain rules of the Takeover Code into their constitution but there will be no Takeover Panel to oversee the takeover.

Steps you can take to clarify a company’s status

If you cannot determine whether a company is subject to the Code you can – 

  • Check if a recent prospectus or published annual accounts has a statement on whether the company believes the Code applies.
  • Speak to the Panel. Sometimes, even the Panel cannot be definitive as the analysis is fact sensitive and the facts which determine whether ‘central management and control’ is in the UK may have changed.
  • Speak to us for guidance.

 

Published – 19/04/21