Takeover Panel confirms narrowing of Takeover Code jurisdiction: Key Changes Set for February 2025
On 6 November 2024, the Takeover Panel (the Panel) published its response statement (RS 2024/1) confirming the impending changes to the jurisdictional scope of the Takeover Code (the Code) which are set to take effect on 3 February 2025. This update follows the initial consultation that took place in April (PCP 2024/1) which proposed narrowing the jurisdictional scope of the Code; the details of which were covered in Takeover Panel consults on narrowing the scope of the Takeover Code.
The Panel's announcement largely adheres to the proposals outlined in the April draft, with a notable amendment being the transitional arrangements in place for affected companies. Originally set at three years, the Panel has now decided to reduce this period to two years. During this period, such transition companies can explore alternative arrangements, such as amending their articles of association, to provide shareholders with comparable protections to the Code. This run off period also allows shareholders to digest the implications of their from no longer benefiting from the protections afforded by the Code and, if necessary, exit their investments.
What this means for companies subject to the Code
The following table provides a snapshot of the application of the Code up to implementation, during the transition period and following the transition period.
| Up to 2 February 2025 (before the implementation date) | During 3 February 2025 – 2 February 2027 (the transition period (“TP”)) | From 3 February 2027 (following the transition period) | ||
|---|---|---|---|---|
| Company status | Is the company and Code company? | Is the Company and Code Company? | Company status | Is the company and Code company? |
| UK quoted | Yes |
Yes If the company ceases to be UK quoted during TP, it will be come subject to new 2-year run-off |
Remains UK quoted | Yes |
| UK quoted for less than 2 years prior to 3 February 2027 | Yes (for 2 years from ceasing to be UK quoted) | |||
| Public or private company that ceased to be UK quoted less than 2 years prior to 3 February 2025 | Yes, if UK resident |
Transition company, subject to the transitional arrangements. Residency test still applicable, so:
|
Ceased to be UK quoted more than 2 years prior to 3 February 2027 | No |
| No, if not UK resident | ||||
|
Public or private company that ceased to be UK quoted 2-10 years prior to 3 February 2025; Public company that was never UK quoted; or Private company in the 10-year run-off period |
Yes, if UK resident |
Transition company, subject to the transitional arrangements. Residency test still applicable, so until earlier of end of: (i) TP and (ii) 10-year run-off:
|
Ceased to be UK quoted more than 2 years prior or has never been UK quoted | No |
| No, if not UK resident | ||||
Implication of the changes to the Code
The amendments to the Code represent a significant shift in simplification of the Code’s applicability criteria. By providing clarity and reducing the scope of applicability, the Panel has taken a step towards a more efficient and targeted regulatory regime that serves better the needs of the market. The Panel's decision to reduce the run-off period reflects a balance between the need for regulatory oversight and the desire to streamline and simplify the jurisdictional scope of the Code. This change is likely to be welcomed by many, as it reduces the duration of uncertainty for companies that have restructured or changed their corporate structure.
As previously commented in April, the changes are expected to be welcomed by many as it seeks to address criticism that the Code’s current jurisdictional rules are too complex and onerous, leaving it difficult for both market participants and companies to ascertain whether or not the Code is applicable. As the implementation date approaches, it is crucial that affected companies review their status and prepare accordingly.
