The code is issued by the “Panel” and operated principally to ensure fair and equal treatment of all shareholders in relation to take-overs, and also to provide an orderly framework within which take-overs are conducted.

The Code itself and the de facto authority of the Panel are recognised by the Courts with the “Panel” being subject to judicial review as if it were a public body.

The Code applies to offers for all listed and unlisted public companies (and where appropriate statutory and chartered companies) considered by the Panel to be resident in the United Kingdom, the Channel Islands or the Isle of Man. There does however seem to be some inconsistent decisions on this question. The Code also applies to offers for private companies considered to be so resident but only when:

  • Their equity share capital has been admitted to the “Official List” of the “UKLA at any time during the 10 years prior to the relevant date; or
  • Dealings and/or prices at which persons were willing to deal in their equity share capital have been published on a regular basis for a continuous period of at least six months in the 10 years prior to the relevant date, whether via a newspaper, electronic price quotation system or otherwise; or
  • Their equity share capital has been subject to a marketing arrangement as described in Section 163(2)(b) of the Companies Act 1985 or the successor provisions of the Companies Act 2006, Section 693(3)(b) at any time during the 10 years prior to the relevant date; or
  • They have filed a prospectus for the equity share capital with the registrar of companies at any time during the 10 years prior to the relevant date.

The key requirements of the City Code are:

  • All shareholders must be offered equally good terms, as defined by the code.
  • All shareholders must be given equal access to information.
  • A time table is adhered to that sets time limits for each phase of the bid.
  • Bidders and members of a concert party must disclose their dealings.
  • The bidder must set an acceptance level (of over 50%) at which the bid becomes unconditional.
  • There are limits on the conditions attached to a bid.
  • A mandatory offer must be made if a shareholder’s or concert party’s holdings exceed 30%.
  • The board of the target company may not use poison pills and other actions to frustrate a bona fide bid, unless they have shareholder approval.

In addition to these the Companies Act imposes its own requirements: all shareholdings of above 3% must be disclosed, and any changes of more than 1% in such shareholding must also be disclosed, whether or not they are related to a bid.

The City Code is also now required to follow the rules laid down by the EU directive on takeovers. It directly incorporates part of the directive.

You can read the complete text of the Code here.

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