This post provides a brief summary of recent updates to the UK’s City Code on Takeovers and Mergers (the “Code”), the primary rule book governing the regulation of takeovers in the UK, and in particular those relating to the categories of companies that are subject to the Code, as well as certain issues affecting the trustees of offeree companies’ defined-benefit pension schemes.

Introduction

On April 22, 2013, the Code Committee of the UK Takeover Panel (the “Code Committee”) published its Response Statement to its consultation paper on certain pension scheme issues. This was followed by a Response Statement to its consultation paper on the type of companies that fall within the jurisdiction of the Code, which was published on May 15, 2013. [1] The amendments to the Code to be introduced in relation to those proposals relating to offeree company pension schemes will come into force on May 20, 2013 and an amended version of the Code will be published on that date. The amendments to the Code in relation to those companies and offers that are subject to the Code will take effect on September 30, 2013 (so as to allow any companies that may be affected to make any changes to their constitutional documents and/or operational procedures they feel are appropriate in light of those changes), although the updated Code will apply to any transactions that straddle that date.

…continue reading: Forthcoming Changes to UK’s City Code on Takeovers and Mergers

This post provides a summary of certain principles of English law and UK and European regulation applicable to UK-listed public companies and their shareholders that may affect shareholder activism, namely (i) stake-building, (ii) shareholders’ rights to require companies to hold general meetings, (iii) shareholders’ rights to propose resolutions at annual general meetings and (iv) recent developments in these and related areas.

I Own or Am Intending to Acquire Shares; Do I Need To Make Any Disclosures?

The UK’s disclosure obligations (under the UK Listing Authority’s Disclosure and Transparency Rules (the “DTRs”)) apply once a person (or persons acting in concert) has (or together have) a holding of 3 per cent. or more of a listed company’s total voting rights and capital in issue (either as a shareholder or through a direct or indirect holding of relevant financial instruments) unless the relevant listed public company enters an “offer period” (as to which, see below). Thereafter, any changes to that holding that cause the size of the holding to reach, exceed or fall below every 1 per cent. above the 3 per cent. threshold (i.e. reaching, exceeding or falling below 4, 5, 6 per cent. etc.) must be disclosed by the relevant shareholder(s) to the listed company and the listed company is then obliged to announce those disclosures to the market. In addition, the disclosure obligations extend to the disclosure of voting rights held by a person as an indirect holder of shares, such as where a person is entitled to acquire, dispose of or exercise the voting rights attaching to shares (for example, via synthetic holdings or contract(s) for difference). It is important to note that any indirect holdings must be aggregated and separately identified in the relevant notification(s).

…continue reading: Shareholder Activism in the UK: An Introduction

The UK Financial Services Authority Publishes Consultation Paper on Implementation of AIFMD

On November 14, 2012, the UK Financial Services Authority (“FSA“) published the first part of its long-awaited consultation paper “CP 12/32 Implementation of the Alternative Investment Fund Managers Directive (“AIFMD“) Part 1″ (“CP 32“). [1]

This post summarises key points from CP 32 and includes a brief reminder of other key issues arising under AIFMD [2] (which we have written about in the past [3] and we assume that you are familiar with these issues). Please note that not all the requirements discussed below apply to all AIFMs and/or AIFs.

…continue reading: EU AIFMD: UK Implementation Update

We promised to keep you updated on the legal and regulatory developments which we identified as pending developments in our Alert “From the Shareholders’ Spring to the Autumn of Activism . . . Power without Accountability — A look at the latest developments in activism and related regulations in the UK and EU” dated 10 August 2012. [1] Since that time there have been a few new developments as summarised below:

1. Institute of Chartered Secretaries and Administrators (ICSA): New Guidance for Shareholder Engagement — Issue of Consultation Paper (October 2012) [2]

In July 2012, ICSA announced that it would partner with the Investor Stewardship Working Party to develop a good practice guide to supplement (not replace) the guidance in the UK Stewardship Code (see 3 below).

Together the groups concluded that in addition to improving the process of holding engagement meetings with shareholders, the very tone of conversation between companies and their investors should change.

ICSA published its consultation paper on 12 October seeking views on:

…continue reading: UK and EU Corporate Governance Developments — Update

This alert discusses some of the recent regulatory developments and debate in the UK and at EU level which may have an impact on institutional investors (asset managers and asset owners) and public companies and takes a look at some examples of investor activism in these jurisdictions.

I. Shareholder Spring — Recent Examples of Activism

The UK press has had a field day over the past 12 months with news of shareholder challenges or activism. In the run up to the AGM season in the spring, barely a day went by without report of shareholders flexing their muscles by taking on the boards of listed companies — the discussions and debates which typically had gone on behind closed boardroom doors had escaped into the public arena.

The issues that boards have been called up on have varied from corporate governance (with a particular focus on the highly emotive board remuneration issues), to influencing corporate events (acquisitions, disposals, takeovers) to more fundamental challenges on corporate and business strategy with a view to unlocking value for shareholders.

…continue reading: From the Shareholders’ Spring to the Autumn of Activism

The Business Secretary of the British government (“Government”), Vince Cable, recently announced a package of controversial plans in a bid to transform UK executive pay culture [1]. Under a new-four-pronged approach, shareholders would for the first time be given a binding vote on executive pay packages. Executive boards may also need to become more diverse — including at least two individuals that had not previously been on a board of directors, and people from a broader range of professional backgrounds.

The Government is to finalize the detail of these plans soon. Mr. Cable was careful to admit that “no proposal on its own is a magic bullet”. There is however real concern that in the quest for the perfect alignment between pay and performance, the seemingly scatter gun approach taken by the coalition government has failed to hit the mark. This alert provides an overview of the proposals, and looks at some of the questions and concerns that they have raised.

…continue reading: Transforming Executive Pay in the UK

Overview

It’s not just a numbers game… Since overhauling its financial penalty framework in March 2010, the UK Financial Services Authority (FSA) has gone a long way to dispel views that it has a lacklustre approach towards levying market abuse fines. However, harsher fines are just one feature of its tougher enforcement regime. Recent cases show that the FSA has generally stepped up its enforcement activity, improving the range of resources and evidence available to successfully investigate market abuse. This will particularly be the case due to the introduction of the Zen monitoring system and requirement for firms to tap employee mobile phones.

Ready to take on the “tricky” cases: The regulator has also shown increased willingness to expunge novel/unusual forms of market abuse involving both non-equity securities, and instruments that do not in themselves fall squarely within the ambit of the Financial Services and Markets Act 2000 (the “Act”). The FSA has also levied fines in respect of individuals that live abroad, yet engage in abusive transactions in UK markets. Although in general, the harshest hitting penalties have been issued to high profile individuals, or those involved in very serious cases of market abuse, recent enforcement action has signaled that the FSA has the potential also to come down on firms that do not take appropriate steps to supervise and manage market abusers. It remains to be seen whether this tougher enforcement regime will transfer to the FSA successor agencies once the regulator is abolished.

This alert looks at a few examples of FSA enforcement action in 2011 in the market abuse area and considers how this heralds a more robust enforcement regime.

…continue reading: The Enforcement Regime of the UK Financial Services Authority

The City Code is a set of general principles and rules governing the conduct of takeovers and mergers of companies with registered offices in the UK, the Channel Islands and the Isle of Man. It also applies to a limited extent to companies in other European Economic Area (EEA) countries. The Code is designed principally to ensure that shareholders are treated fairly and provides an orderly framework within which takeovers are conducted. It is issued and administered by the Takeover Panel (the Panel), which has been designated as the supervisory authority to carry out certain regulatory functions in relation to takeovers under the EU Takeover Directive. The Panel is an independent body made up of representatives from UK financial institutions and professional associations and other members appointed by the Panel. The Panel‘s day-to-day business is carried out by an Executive comprising full-time employees and secondees from the investment banking community, accountancy firms, law firms and the civil service. It is headed by a Director General who is usually a director of an investment bank seconded for generally a two year period.

…continue reading: The City Code on Takeovers and Mergers

Introduction — The Panel Stands Firm

In late November 2010, we published an article on the policy statement of the UK Panel on Takeovers and Mergers (Panel) which set out the ground work for changes to the rules governing the conduct of public takeovers in the UK as embodied in the UK Code on Takeovers and Mergers (Code). [1] Last week, the Panel published a public consultation paper (PCP 2011/1) which sets out the detailed proposed amendments to the Code [2] as trailed in our earlier article. In summary, notwithstanding an outcry from seasoned market participants (in particular the advisory community) on some of the proposed changes which are perceived as having a detrimental impact on the openness of the UK M&A market, disappointingly, the Panel has not shifted from its position as set out late last year on the fundamentals/principles of its new approach on key areas such as the ‘put up shut up’ (PUSU) regime and offeree protection arrangements. We examine below certain critical features of some of these proposed changes.

…continue reading: More Protectionism and Paternalism at the UK Panel on Takeovers and Mergers

On 1 June 2010 the UK Panel on Takeovers and Mergers (Panel), issued a “Green” Consultation Paper [1] on the Review of Certain Aspects of the Regulation of Takeover Bids in the UK (Green Paper). This Green Paper was issued following an announcement earlier in the year by the Panel that it would review certain rules of the UK Code on Takeovers and Mergers (Code) in the lights of widespread commentary and public discussion following the acquisition of Cadbury PLC by Kraft Foods Inc. in Q1 2010. On 21 October 2010 [2], the Code Committee of the Panel issued a statement setting out its findings following this initial consultation period which involved reviewing nearly 100 responses from a broad range of commerce, industry and practice including academics, trade union representatives and the professional advisory community (Response Statement).

…continue reading: Protectionism and Paternalism at the UK Panel on Takeovers and Mergers