Background

The Takeover Panel (the Panel) has been keen to show its flexibility in recent times of uncertainty. This was reinforced during the COVID 19 pandemic in the Panel’s response to the enforcement of the U.K. City Code on Takeovers and Mergers (the Code), when the market was turbulent and/or companies were attempting to navigate rescue funding situations that required expedient solutions.

This flexibility has been important as, under the Code, companies that are fundraising may sometimes be required to seek either a derogation, waiver or undergo a whitewash clearance procedure prior to completing that fundraising. While a company would usually acknowledge the need to factor in the additional time needed to comply with these requirements, the delay could potentially be fatal to a company that is seeking emergency rescue fundraising.

One of the first examples of this flexible approach was seen in relation to Flybe Group Plc in 2019. In that instance the Panel was faced with a choice between a strict application of the Code or permitting a transaction which would prevent Flybe Group Plc from immediately entering into administration. The Panel ultimately exercised some flexibility and discretion in permitting the transaction, later noting in their 2019 Annual Report that it “is a testament to the pragmatic and responsive regulatory system that the Panel espouses”.

Global market uncertainty has continued into 2023. As such, the Panel has continued to work on acting more expediently and with even greater flexibility to support distressed companies looking for rescue funding.

Codifying the Panel’s Flexibility

To further codify this existing flexibility, the Code Committee of the Panel published a consultation paper in October 2022, which proposed amendments to various provisions of the Code, including in relation to derogations and waivers from the requirements of the Code:

• to amend section 2(c) of the Introduction to the Code, in order to provide the Panel with greater flexibility to grant a derogation or waiver from the requirements of the Code in exceptional circumstances, for example, to facilitate a rescue of a company which is in serious financial difficulty; and
• to amend Note 3 on the Notes on Dispensations from Rule 9, in order to remove certain limitations on the Panel’s flexibility to waive the requirements of Rule 9 in the case of a rescue operation to save a company which is in serious financial difficulty.

The Code Committee of the Panel published its Response Statement on 4 April 2023, confirming the amendments proposed in October 2022 are to be implemented. These amendments came into effect on 22 May 2023.

As noted, while the Panel did generally have the flexibility to facilitate urgent rescue funding, these amendments to the Code and Note 3 will give the Panel greater ability to react to the needs of distressed companies requiring urgent funding and to facilitate rescue funding without unnecessary delay.

Our Capital Markets team is well versed in guiding and assisting clients through Takeover Code-related issues that arise in the course of transactions. If you have any queries regarding the Code in relation to a potential transaction, please contact one of the authors listed, or your regular AT lawyer.

Disclaimer: This publication is provided by Armstrong Teasdale Limited for informational purposes only. The information contained in this publication should not be construed as legal advice. Any questions or further information regarding the matters discussed in this publication can be directed to Armstrong Teasdale’s U.K. Capital Markets team.