Herbert Smith Freehills Kramer Podcasts
Herbert Smith Freehills Kramer Podcasts
Public M&A EP40: Takeover Panel consultation on miscellaneous changes to the UK Takeover Code
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In this episode of our public M&A podcast series, we talk about the UK Takeover Panel's latest consultation (PCP 2026/1) on a series of miscellaneous changes to the Takeover Code. Proposals being consulted on include:
- when a voting agreement between a shareholder and the directors of a company will result in them being treated as acting in concert;
- a change to the definition of "reverse takeover"; and
- a change to the rules on extending a put up or shut up (PUSU) deadline.
Welcome And What We Cover
Antonia KirkbyHello and welcome to this latest episode in our Herbert Smith Rehals Framer UK Public MMA podcast series. My name is Antonia Kirkb y and I'm joined today by Laura Ackroyd, one of our public MA partners. Today we're going to be looking at the Takeover Panel's latest consultation paper on a package of miscellaneous changes to the takeover code, all set out in the panel, the consultation paper, the PCP 2026-1. At first glance, miscellaneous doesn't sound particularly exciting, but there are actually some interesting proposals in here. But before we get into the detail, Laura, should we just start with why the panel has launched this consultation and what it's looking to achieve?
Why The Panel Consults Now
Laura AckroydYes, absolutely, Antonia. So look, the the panel described the changes here as a mixture of clarifications, simplications, and codifications of their existing practice. So in other words, that's not trying to rewrote rewrite the code substantively. It's instead looking at making sense of certain areas, making certain areas clearer and reflecting how the executive already approaches particular issues, as well as generally trying to keep the code working efficiently. So I describe it not as an over a major overhaul, but more of as a bit of housekeeping that they're doing here.
Acting In Concert Clarifications
Antonia KirkbyThanks, Laura. So if we turn to some of the detail now, shall we start with the changes or clarifications to who will be treated as acting in concert?
Laura AckroydYes. So the consultation looks at two types of arrangements in that context. The first is agreements that restrict a shareholder from reducing their stake, and then the second is certain voting arrangements. So if we start with the first, what the panel wants to do is clarify that where a company or its directors are entering into an arrangement that prevents a shareholder from selling its shares, and we're thinking here about things like lockup arrangements, that shareholder will normally be treated as acting in concert with the directors. And the panel's reasoning for that is that the directors know that those shares can't suddenly be transferred to an unfriendly party. So there's some certainty as to where they will sit. There is, however, a very important carve-out to that position, and that is if the shareholder remains free to accept or agree to accept a takeover offer for the company. In those cases, the presumption of acting in concert would fall away. And it's the panel's view that in those circumstances a shareholder could still support a hostile bidder, and in that way, the directors cannot rely on the shareholders' support indefinitely, and therefore they will not be treated as acting in concert.
Antonia KirkbyAnd then if we move on to the voting agreements, which I know is a topic close to your heart, what are they saying about that?
Laura AckroydIndeed, and actually it's a topical point for a lot of market participants at the moment, given the number of settlement agreements being entered into with activist shareholders, where you often see voting arrangements as a feature of those. So, look, on this, the panel is proposing to codify its existing practice, which is if a shareholder commits to voting in line with a board recommendation on resolutions involving the appointment or removal of directors, then that will normally result in the shareholder and the directors as being treated as acting in concert with each other. And that can sometimes seem a bit strange because often, as I said, you're entering into these types of arrangements with an active shareholder, but having that surety of position is what the panel are focused on there. So where this can typically come up is where you have provisions, for example, saying a shareholder is committed to voting in line with board recommendations on all AGM resolutions. For example, AGM resolutions often contain resolutions dealing with the reappointment of shareholders on an annual basis, and that would be picked up as a result of this clarification. The panel are keen to make clear, however, that if the agreement is more limited, so for example, if it restricts a shareholder from supporting resolutions opposed by the board, which would look like an agreement to abstain from voting rather than a positive obligation to vote in favour of something, then in those circumstances they will not be treated as acting in concert with the directors. So for us, this is all an exercise in looking at the drafting of what's being agreed in those agreements and making sure it toes the right line on the panel's approach on this.
Antonia KirkbyThanks, Laura. As you say, it's all very topical at the moment. Um so it's helpful to have that clarity. Um if we move on now to reverse takeovers.
Reverse Takeovers And Information Rights
Antonia KirkbyUh I have to admit, when I first read this proposal, I thought it looked like a very significant one. But actually, once I got into the detail, it seemed quite sensible and not as impactful as I first thought. Um do you just want to talk us through what they're proposing there?
Laura AckroydUh yeah, absolutely. So look, currently the definition of a reverse takeover in the code is limited to a transaction where a code company is acquiring another code company and may need to increase its share capital by more than 100% of the result. The proposal here is that any acquisition by a code company involving the potential issue of more than 100% of its share capital would fall within that reverse takeover definition. So that is regardless of whether the target itself is actually a code company or not. So, as you say, on first blush, that looks like a much wider definition than the one that we currently have under the code. However, um, in practice, what that actually means is if a target announces that type of acquisition right after a potential bidder has made a no intention to make a bid statement or after a lapsed offer, that potential bidder would actually be able to set aside the no intention to bid statement, and the panel would also consent to any rule 35.1 restrictions, which do things like preventing the offer or from coming back within 12 months after a failed offer being set aside. So actually, it is more limited in practice as you've described. The other code provisions which refer to a reverse takeover are the requirement under rule 3.2 for a bidder on a reverse takeover to obtain independent advice, and also the provisions on frustrating actions under note 8 on rule 21.1, which apply equally to a bidder on a reverse takeover. And indeed the prohibition on offer related arrangements as well, which again applies to a bidder on reverse takeover. These provisions are only relevant where the transaction in question is an offer or possible offer to which the code applies, so are unaffected by that change.
Antonia KirkbyThank you. And there's also a proposal around equality of information, isn't there?
Laura AckroydYes, you're absolutely right. So the panel wants Rule 21.3 to apply to reverse takeovers. So the target is discussing a transformational acquisition, such as an alternative to an offer, then a bidder or potential bidder could be entitled to receive the information that that target has provided to the other transaction counterparty. Um that's quite interesting for us because often the scope of DD is a little bit wider when you're looking at that type of transaction rather than a code governed deal.
Antonia KirkbyUm Thanks.
PUSU Extensions And Board Discretion
Antonia KirkbyAnd another proposal concerns the rules around extending a PUSU or put up and shut up deadline. Before we look at what's changing, do you just want to quickly remind us what a PUSU deadline is? Of course.
Laura AckroydSo put up or shut up or PUSU, as everyone will be familiar with, is the deadline that's automatically triggered when a potential bidder is publicly identified. So once that happens, they have 28 days to put up or shut up, and that's to announce a firm intention to make an offer, which a rule 2.7 announcement, or indeed to announce that it has no intention to bid, so to put out a rule 2.8 announcement. In practice, only a target can request an extension of that deadline. Um, and currently the code includes a number of factors that the panel considers when it's deciding whether to extend the put up or shut up deadline, and the target board is in fact expected to comment on those factors when they announce any extension.
Antonia KirkbyAnd it's that part which is changing, isn't it?
Laura AckroydYeah, that's right. So the the the executive's practice has evolved to a point where actually it routinely agrees to extensions requested by a target board, and it actually doesn't require the target board to comment on those factors in practice. Um, and the panel's view here is that the board is best placed to decide whether an extension actually serves shareholders' interests or not, and therefore how much information should be included in any announcement. So the changes are making it clear that that that is not followed in practice.
Rule 9 Notes And Rule 16 Wording
Antonia KirkbyAnd then the consultation also contains, I mean, there's a whole heap of changes, aren't there? Smaller ones. Are there any in particular which stood out to you?
Laura AckroydYeah, there are a couple. So um the first was the notes on Rule 9, which deals when with when a mandatory offer is required. Um, so those are being overhauled. Um the panel's proposing various drafting changes and simplifications to those notes, but it does emphasize that those changes aren't intended to change substantive practice, but there is a little bit of drafting there to kind of work through. The other one is the wording of the fair and reasonable opinion that needs to be given by an independent financial advisor in relation to special deals or management incentivisation arrangements under rule 16 of the code. Um so the proposal is to make the code clear that the opinion will have to say that it is fair and reasonable, and the qualification is so far as shareholders are concerned, which is what we would have advised anyway, but suggests that that is an issue that's sort of cropped up on a transaction in the past. Um I think it's probably fairly safe to say that some of those other changes that you've described as you know stem from issues that have cropped up on particular deals, whereas the rest are genuine tidy-ups just to make the code a little bit more efficient.
Antonia KirkbyGreat,
Consultation Timing And Listener Feedback
Antonia Kirkbythank you, Laura. Um, it's really helpful to hear what's going on. And also what I thought as I went through the consultation paper that um as many of these changes are actually codifying the panel's executive panel executives' current practice, there are some useful nuggets in there already for us public MA practitioners and parties, uh, even ahead of those final rules being uh published. And in terms of timing, the consultation closes on the 2nd of October this year, so we'll perhaps see the final rule changes by the end of the year or early next year, would be my guess. Um thank you for joining me today, Laura, and thank you too to our listeners. Uh, we'd really welcome any feedback or thoughts you have on our public MA podcasts and any areas you'd like uh to hear us discuss in future episodes. Um in the meantime, we look forward back to you joining us on the next one. Thank you very much, and bye bye.