The Takeover Panel

Question 1

Briefly explain what the Takeover Panel is

Answer 1

1. Main organisation relevant to takeover in the UK.
2. Responsible for operating and enforcing the City Code on Takeovers and Mergers (the city code)
3. It ensures that takeovers are fair, transparent, and follow the rules, protecting both shareholders and companies.
4. It enforces the Takeover Code, which sets guidelines for how takeovers should be conducted.

Question 2

Briefly explain how the Takeover Panel is financed

Answer 2

The UK Takeover Panel is financed by the companies involved in mergers and takeovers:

1. Document Fees – Companies pay when they submit takeover-related documents.
2. Transaction Fees – A charge based on the value of large takeover deals.
3. Levy on Share Deals – A small fee on certain share transactions.

This way, the panel runs without needing government funding.

Question 3

Explain some concepts of The Panel Levy

Answer 3

1. The Panel Levy: small fee on trades (sales & purchases) in securities of companies which are incorporated in the UK, Channel Islands or the Isle of Man.
2. Shares should be traded on a UK-regulated market or MTF.
3. The current levy rate is one 150p per contract only when the trade is worth greater than £10,000.

Question 4

The Panel Levy is payable/applicable to only certain types of trades.

What are these?

Answer 4

1. Equity share capital/ Equity shares – These are shares in a company that give the owner a right to a share of the company’s profits, whether they have voting rights or not.
2. Convertible securities – These are financial products (like bonds or preferred shares) that can later be turned into company/ equity shares.
3. Rights to buy shares – e.g. warrants (which let you buy shares later at a set price), provisional allotment letters (temporary documents for new shares), and nil-paid rights (which give shareholders the option to buy new shares).
4. US/ Global Depository receipts – These are special certificates that represent shares in companies but are traded in foreign markets.

Question 5

The Panel Levy is NOT payable/applicable to certain types of trades.

What are these?

Answer 5

The below are not considered actual company shares or direct rights to buy shares. Panel Levy applies only to real shares/ rights to buy them, not to financial products that track share prices or act as loans.

1. Covered warrants – These are like options; they give the right to buy or sell shares but don’t represent ownership in the company.
2. Debentures and other debt securities – These are loans to a company rather than ownership, meaning investors get fixed interest instead of company profits.
3. Preference shares – special type of share that pays fixed dividends but usually don’t have voting rights or unlimited profit participation.
4. Permanent interest-bearing securities – work like bonds, offering regular interest payments rather than ownership in the company.
5. Contracts for differences (CFDs) and total return swaps – agreements to pay or receive the difference in a share’s price over time, but you don’t actually own the shares.
6. Spread bets – type of betting on share price movements, not actual share ownership.
7. Option contracts – give the right to buy or sell shares at a future date but don’t count as owning shares themselves.

Question 6

What is the role of The Panel?

Answer 6

1. Act as the referee of the fair conduct of takeover bids.
2. Ensure all shareholders involved in a bid are treated fairly
3. DOES NOT consider competition policy and the public interest.
4. The Takeover Panel is backed by law under the Companies Act 2006. This means that the City Code on Takeovers and Mergers (rules governing takeovers) is legally enforceable. Companies must follow these rules during takeovers, and the Panel has the legal authority to make sure they do.

Question 7

Briefly explain what The City Code is and what does it aim to do?

Answer 7

1. Regulate the conduct of bids and restrict the actions of predator companies (making the bid), target companies (company being taken over) and third companies
2. Aims to provide protection for shareholders and to allow a reasonable period in which a bid may be considered (i.e. to accept/ reject).
3. It has flexibility and therefore, it meant that the UK has not experienced the proliferation of defensive measures.

Question 8

What are some of the rules around The City Code that’s been enforced by The Takeover Panel?

Answer 8

1. The Takeover Panel ensures fairness by treating all shareholders equally.
2. If a company tries to buy 30% or more of another company’s voting shares, it must offer to buy/ make a cash offer for all remaining shares at the highest price it paid in the last year.
3. Any takeover bid must stay open for at least 21 days for shareholders to consider.
4. A company making a bid (offeror) must decide within 28 days whether to proceed or withdraw (“put up or shut up” rule).
5. If the predator company buys 90% or more of the shares, it can force the remaining shareholders to sell.
6. The target company’s management cannot block shareholders from considering a takeover bid.
7. The target company’s directors should normally advise shareholders of their views within 14 days after the offer document is sent.

Question 9

What is the difference between The City Code and The Takeover Panel?

Answer 9

1. The City Code sets the legal framework for HOW takeovers must be conducted, ensuring fairness and transparency.
2. The Takeover Panel is responsible for overseeing and enforcing these rules to make sure companies comply.