Takeover Panel makes changes to the presumptions underlying when parties will be considered to be “acting in concert”
What is happening?
As of today, Monday 20 February 2023, the Takeover Panel (Panel) has effected certain changes to the circumstances in which the Takeover Code (Code) will presume that parties are acting in concert with each other because they have a significant degree of common interest. This follows a consultation paper published by the UK Takeover Code Committee on 26 May 2022 (PCP 2022/2), and a subsequent response statement on 14 December 2022 (RS 2022/2), confirming the changes which have been made.
The amendments are being implemented in order to codify existing Panel practice and provide more clarity to the market. However, the definition of 'acting in concert' (i.e. when parties will be treated as if they were a single person for the purposes of Code rules), is not itself being changed.
Key changes to the presumptions
The most important changes are being made to the current Code presumption (1) (i.e. that companies within a group structure are associated when there is ownership or control of 20% or more of the equity share capital of the company).
First, the presumption is being split into two:
- new presumption (1): to presume a company to be acting in concert with any company which it “controls, is controlled by or is under the same control”; and
- new presumption (2): to presume a company to be acting in concert with (i) any company in which it has a direct or indirect interest in 30% or more of the equity share capital (whether or not the shares carry voting rights) and (ii) any company presumed to be acting in concert with either of them under new presumption (1).
It is also important to note that:
- the 20% threshold has been raised to 30%, to correspond with the threshold in the Code's definition of "control";
- the presumptions clarify that they apply to (1) shares carrying voting rights (whether or not they are also equity share capital) and (2) equity share capital (whether or not the shares also carry voting rights); and
- the presumptions apply to companies, but also now apply to funds, partnerships, trusts and any other legal or natural person.
Other changes include:
- the former presumption (4) (that a fund manager is presumed to be acting in concert with a person whose funds the fund manager manages on a discretionary basis) has been removed; and
- a new presumption (5) has been added stating that an investment manager of or investment adviser to, an offer or an investor in an offeror consortium or the offeree company, together with any person “controlling, controlled by or under the same control as” that investment manager or investment adviser, is presumed to be acting in concert with the bidder or target respectively.
Approach of the Panel
The general approach of the Panel is that the presumptions will apply absent compelling evidence to the contrary. It will therefore not be sufficient to rebut a presumption by indicating that a party has no relationship with another party, as the Panel has said that the presumption itself establishes the relationship. A party will need to provide evidence and relevant facts for the Panel’s consideration in order to try and obtain a derogation from the presumption.
Significance of Changes
The concept of ‘acting in concert’ is extremely important as dealings in shares by anyone being a concert party with a bidder or target can have material consequences, particularly in relation to inadvertently triggering a mandatory bid obligation under Rule 9 of the Code.
Charles Crawshay, the Panel's Deputy Director General, recently remarked during a Panel presentation for market participants on 1 February 2023 that the principle of ‘acting in concert’ is fundamental to the operation of the Code, as without this principle, the provisions of the entirety of the Code could easily be circumvented.
Therefore, a careful analysis of the circumstances and facts at hand must be undertaken prior to any dealings in shares in companies to which the Code applies, so as to ensure that you are not in advertently ‘acting in concert’ or a concert party.
If you have any questions in relation to this topic, please contact Andrew Collins or Nia John directly.