Changes to the Takeover Code

Welcome changes to the Takeover Code (‘Code’) have come into effect from 3 February 2025 narrowing the scope of companies to which the Code applies. 

Which companies does the Code apply to?

The Code is now focused primarily on the companies which are registered or listed (or recently listed) in the UK. The application of the Code is divided into three categories: 

1. companies whose registered office is in the United Kingdom, the Channel Islands or the Isle of Man;

2. recently quoted companies; and 

3. transition companies. 

1. Companies with registered office in the UK, the Channel Islands or the Isle of Man 

Subject to transitional provisions (which we detail below), the Code will apply to all offers for companies which: 

• have their registered office in the United Kingdom, the Channel Islands or the Isle of Man; and 

• their securities are admitted to trading on:

  • a UK regulated market (being the Main Markets operated by the London Stock Exchange and Aquis Stock Exchange); 

  • a UK multilateral trading facility (being AIM and the Aquis Growth Market); or 

  • any stock exchange in the Channel Islands or the Isle of Man. 

2. Recently Quoted Companies 

Subject to the transitional provisions, the Code will apply to all offers for companies which: 

• have their registered office in the United Kingdom, the Channel Islands or the Isle of Man; and 

• at any time during the two years prior to the relevant date their securities were admitted to trading on: 

  • a UK regulated market;

  • a UK multilateral trading facility; or 

  • any stock exchange in the Channel Islands or the Isle of Man. 

The relevant date is the date on which announcement is made of an offer or possible offer for the company or on which some other event occurs in relation to the company which has significance under the Code. This two-year period is less than the three-year period that was originally proposed in the consultation on narrowing the scope of companies subject to the Code.

The two-year period is one of the most significant changes to the Code as previously the Code continued to apply to companies whose securities were admitted to trading 10 years prior to the relevant date. In addition, the Code is concerned with the location of the company’s registered office – previously the location of the central management and control of the company was relevant as well.  

A further change is that the Code no longer applies to companies whose dealings (and/or prices at which persons were willing to deal in any of the company’s securities) were published on a regular basis for a continuous period in the 10 years prior to the relevant date or companies which have publicly filed a prospectus for the offer, admission to trading or issue of securities in the 10 years prior to the relevant date. 

3. Transition Companies

The Takeover Code Committee (‘Committee’) has introduced a two-year transition period running from 3 February 2025 to 2 February 2027. The purpose of the transition period is to give the companies to which the Code will no longer apply (so called “transition companies”) and their shareholders time to adapt to the changes. 

A transition company might for example be a public company which is not admitted to trading on one of the relevant exchanges or a private company that de-listed more than two years ago (but less than 10 years ago). Transition companies may consider changing their articles of association in order to introduce provisions similar to certain provisions of the Code, such as building in “drag and tag” rights. Additionally, where there are shareholders who wish to be protected by the Code, transition companies may decide to enable shareholders to exit their investments. 

There may be some transition companies that decide they would prefer to be subject to the Code (for example to attract more investors) and therefore choose to admit their shares to trading on a regulated or other market to which the Code applies.

Will the Code apply to the PISCES? 

Back in December 2022 the government proposed introduction of the Private Intermittent Securities and Capital Exchange Systems (‘PISCES’), a new market for private companies. PISCES is intended to provide an avenue for private companies to raise capital via secondary trading, as well as a first step to listing on public markets. PISCES will not be a UK regulated market or UK multilateral trading facility. 

The Committee considered whether the Code should apply to PISCES and at this stage, it is of the view that companies looking to raise capital on PISCES would be growth companies which are likely to find the compliance with the Code too burdensome. It further recognised that such companies are likely to have “drag and tag” provisions in their articles of association included in any event.  

Conclusion 

The changes to the Code bring the UK more in line with current market practices and provide greater clarity on the companies within the jurisdiction of the Code.  By narrowing the scope of companies to which the Code applies, the Takeover Panel can focus its efforts on businesses where its regulatory role is most relevant (i.e. those companies currently or very recently listed on relevant exchanges). The changes also simplify the regulatory process for some companies which were previously subject to the Code.

How our corporate lawyers can support you

If you’re experiencing any issues in relation to the Takeover Code, our experienced equity capital market lawyers can provide invaluable guidance and ongoing support.

From addressing complex legal issues, to providing clear and practical advice, our team will be by your side, wherever your are, to guide you toward the best outcome for your business. Contact us today to get started.