4) End of Chapter Questions Flashcards
- What is the scope and purpose of the Panel on Takeovers and Mergers?
Independent body established in 1968
Main functions are to issue and administer the City Code on Takeovers and Mergers and to supervise and regulate takeovers and other matters to which the City Code applies in accordance with the rules set out in the City Code.
Designated as the supervisory authority for certain reg functions re: takeovers pursuant to European Directive on Takeover Bids
- What is the purpose of the Takeover Code and the CMA?
The Code is not concerned with the financial or commercial advantages of a takeover, which it considers to be matters for the offeree company and its shareholders. Wider questions of public interest are dealt with by the BEIS
The PTM’s roles in takeovers is threefold:
- to provide advice and guidance on the application and interpretation of the relevant rules to offeror, offerees, advisers and, where relevant, market participants
- to monitor the progress of an actual or contemplated takeover bid, for breaches of compliance with the relevant rules
- to enforce the Code, through reaching decisions on issues arising or seeking enforcement through the courts
- How might The Pensions Regulator (TPR) be involved in a takeover bid?
Pensions rights of current and future employees should be protected during and after the merger.
Regulator considers whether companies entering into txns (inc. acquisitions or disposals) may weaken their financial position, to the detriment of a defined benefit pension scheme. Such a txn would be classified as a Type A event. Companies contemplating txns may (voluntarily) apply to the regulator in advance for clearance of a txn
- What type of companies does the Takeover Code apply to?
The takeover code applies to all offers to acquire control of the following:
- Companies registered in the UK, Channel Islands or the Isle of Man that are traded on a regulated market or MTF (inc. AIM and ISDX Growth Market), in the UK, or any stock exchange in the Channel Islands or the Isle of Man
- Plcs not traded on a regulated market, which are registered in the UK, Channel Islands or the Isle of Man, but only if they have their place of central management and control within those jurisdictions, and if at any time during the previous 10 years their securities have been admitted to the Official List, or if dealings and/or prices for their securities have been published on a regular basis for a continuous period of at least 6 months in the 10 years prior to the relevant date
- Private companies registered in the UK, the Channel Islands or the Isle of Man, but only if they have their place for central management and control within those jurisdictions, and if at any time during the previous ten years their securities have been admitted to the Official List, or if dealings and/or prices for their securities have been published on a regular basis for a continuous period of at least 6 months in the 10 years prior to the relevant date
- What are the 6 General Principles of the Takeover Code?
- Fair treatment and protection of securities holders
- Sufficient time and info for holders of securities; if the board of the offeree company advises the holders of securities, it must give its views on the effect of implementation of the bid on employment, conditions of employment and the locations of the company’s places of business
- board must act in interests of the company, must not deny holders of securities the opportunity to decide on the merits of a bid
- False markets must not be created in any company involved such that prices of securities rise or fall artificially
- Offeror can only announce bid after ensuring it can fulfil cash consideration and taking all reasonable measures to secure the implementation of any other type of considerations
- offeree must not be hindered in the conduct of its affairs for longer than is reasonable by a bid for its securities
- How would acting in concert apply to an investment bank that undertakes market making as well as providing asset management and corporate finance advice?
The definition of ‘acting in concert’ is ‘Persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control (as defined below) of a company or to frustrate the successful outcome of an offer for a company’
Control in the context of the Code means an interest, or interests, in shares carrying in aggregate 30% or more of the voting rights of a company, irrespective of whether such interest or interests give de facto control
- What is the definition of interests in securities?
A person will be treated as having interests in securities if:
-they own them
-they have the right (whether absolute or conditional) to exercise or direct the exercise of the voting rights attaching to them or have general control of them
-by virtue of any agreement to purchase, option or derivative they a) have the right or option to acquire or call for the delivery, or b) are under an obligation to take delivery of them, whether the right, option or obligation is conditional or absolute and whether it is in-the-money or otherwise
-they are party to any derivative a) whose value is determined by reference to their price and b) which results, or may result, in their having a long position in the security
- in the case of Rule 5 only he has received an irrevocable commitment in respect of them
- During an offer period, is the offeror or any connected party permitted to sell any securities in the target company?
No, except with prior consent of the PTM and following 24 hours public notice that such sales might be made. The PTM will not give consent for sales if a mandatory offer under Rule 9 is being made
