Section 3

Question 1

Disclosure rules

Answer 1

• EU Transparency Directive outlines disclosure thresholds as follows:
- 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%
• UK Disclosure rules require disclosure to the issuer within two business days when:
- Reach 3%
- (Above 3%) change up or down to the next whole % point
- Fall below 3%
- Fund managers – at 5%, 10% then every % point
- Market makers – exempt below 10%
- Custodians and bare nominees – exempt
- Shares held as collateral - exempt
• Issuer then tells the markets
• Companies Act 2006 S793 Letter requires disclosure of shares held:
- At present time
- In the last three years

Question 2

An interest in shares

Answer 2

An investor can have an interest in the shares owned by other people. The rules list these people as connected parties. Connected parties are as
follows:
• The investor’s spouse
• The investor’s children (less than 18 years old)
• Companies controlled by the investor (holds at least one third of the voting rights)
• Concert parties: Any person where there is an agreement to influence the company together

Question 3

The UK Takeover Code

Answer 3

• Administered by the Takeover Panel (also known as the Panel on Takeovers and Mergers, or ‘PTM’)
• Code ensures that shareholders are treated fairly and are not denied the opportunity to decide on the benefits of a takeover
- Not to do with:
• Financial or commercial advantages/disadvantages
• Competition policy
• Six General Principles
- All shareholders given equal treatment and protected
- Shareholders given sufficient time and information to decide
- Board of target to act in best interests of company as a whole
- False markets must not be created
- Predator to make a bid only after ensuring they can meet cash requirements of bid
- Target company not to be hindered in its business affairs for any longer than is necessary

Question 4

Important definitions under the Takeover Code

Answer 4

Acting in concert
• A company and other members of the same group
• A company and its directors
• A company and its pension fund
• A fund manager and its discretionary portfolio
• A client and its professional adviser
Dealings
• Any action that may increase or decrease a holding in a relevant security Interest in shares
• A person who owns relevant securities or has a right to exercise or direct the voting rights on them
Relevant securities
• The securities under offer
• Equity share capital of offeror or offeree
• Other connected investments, e.g. convertible instruments