The Panel on Takeovers and Mergers (Panel) has published a consultation paper (PCP 2022/2) which sets out a number of proposed amendments to the presumptions of the definition of “acting in concert” in the Takeover Code (Code). The Panel notes that some of these presumptions are largely unchanged since they were first introduced. The proposals are designed to ensure that the amended presumptions reflect properly both changes in the nature of investment markets since the presumptions were introduced and the current practice of the Panel.

Acting in concert

The concept of “acting in concert” is fundamental to the Panel’s application of the Code. Persons acting in concert are defined in the Code as persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control of a company or to frustrate the successful outcome of an offer for a company.  Certain persons are presumed to be acting in concert unless the contrary is established. 

Persons acting in concert are, in effect, treated under the Code as a single person with the consequence that, if one of them deals in the shares in a Code regulated company, that dealing could have consequences for that person and also potentially for the other persons who are acting in concert with it. The existence or not of a concert party is especially important in determining whether or not the 30% mandatory offer threshold in Rule 9 of the Code has been breached.

Under presumption 1 of the definition of "acting in concert", a company, its parent, subsidiaries and fellow subsidiaries and their associated companies, and companies of which such companies are associated companies, are all presumed to be acting in concert with each other. For this purpose ownership or control of 20% or more of the equity share capital of a company is regarded as the test of associated company status.

What's changing?

The Panel intends:

  • to raise the threshold in presumption (1) of the definition of “acting in concert” from 20% to 30%. This will align it with the threshold in the Code’s definition of “control” and
  • to make explicit that the presumption of acting in concert applies to interests in shares carrying voting rights and in equity share capital

The new 30% threshold applies differently to interests in voting share capital and interests in (voting or non-voting) equity share capital.

Two new presumptions will be introduced to replace presumption 1. Certain other amendments are being made to the "acting in concert" definition in respect of funds.

Timing

Comments should reach the Code Committee by 23 September 2022. The Panel expects to publish a Response Statement setting out the final amendments to the Code in late 2022. Any amendments to the Code will come into effect approximately two months after the publication of that Response Statement.

Further information

If you would like to discuss the Code please contact Nick Graves, Rupert Weston, Chris Godfrey or another member of the Burges Salmon Corporate Group.