Advisers working on transactions involving unquoted PLCs or private companies which currently fall within the scope of the Takeover Code will welcome the publication of RS 2024_1 - Companies to which the Takeover Code applies.  

UK quoted companies and recently quoted UK companies

The Takeover Panel has now confirmed that, when the changes take effect on 3 February 2025 and subject to a transitional period, the Takeover Code will only apply to a company if the company has its registered office in the United Kingdom, the Channel Islands or the Isle of Man and:

  • A: any of its securities are admitted to trading on
    • a UK regulated market;
    • a UK multilateral trading facility; or
    • a stock exchange in the Channel Islands or the Isle of Man; or
  • B: any of its securities were admitted to trading (on one of those markets) at any time during the two year period before the date on which:
    • an announcement is made of an offer or possible offer for the company; or
    • some other event occurs in relation to the company which has significance under the Takeover Code.

The current ten year run-off period has been reduced to two years (and that has come down from the three year period which featured in PCP 2024_1 Companies to which the Takeover Code applies which the Takeover Panel published in April 2024). See our previous update here: Public M&A Update: Takeover Panel consults on narrowing the scope of companies subject to the Takeover Code.

The run-off period will be fixed at two years. The Response Statement confirms that the Panel will not have any discretion to shorten this period. 

What does this mean in practice?

It means that, when the changes take effect on 3 February 2025 and subject to a transitional period, the Takeover Code will not apply to

  • a public or private company which ceased to be UK quoted more than two years
    prior to the relevant date;
  • a public or private company whose securities are, or were previously, admitted to trading solely on an overseas market; 
  • a public or private company whose securities are, or were previously, traded using a matched bargain facility, such as Asset Match or JP Jenkins;
  • any other public company which is not UK quoted (unless it is a recently quoted UK company); and 
  • a private company which filed a prospectus at any time during the 10 years prior to the relevant date (unless it is a recently quoted UK company).

The Response Statement contains a helpful summary of the current position, the arrangements which will apply during the transition period and how the Takeover Code will apply following the end of the transition period. For details of the transition period see “Transitional arrangements and transition companies” below.

What about a UK registered company which has securities traded on another platform?

If the company is not UK quoted (and has not recently been UK quoted) then the fact that the company has securities traded on a platform will not bring the company within the scope of the Takeover Code.

Helpfully the Takeover Panel has confirmed that: "following the implementation of the proposals, it will be clear that the Code does not apply to a UK registered company which is not UK quoted (and which has not recently been UK quoted) solely by virtue of its securities or other interests being traded using another platform, such as:

(a) a Private Intermittent Securities and Capital Exchange System (or PISCES); 

(b) a private market, such as TISE Private Markets; or 

(c) a secondary market of a crowdfunding platform, such as the Seedrs Secondary Market."

What's happened to the residency test?

The subjective residency test will be removed (although it will continue to apply to transition companies).  If a company cancels the admission to trading of its securities on a UK RM, a UK MTF, or a stock exchange in the Channel Islands or the Isle of Man it will remain subject to the Takeover Code for the duration of the run-off period, regardless of the residency of its directors. So board composition will not determine whether the Takeover Code applies.

Currently section 3(a) of the Introduction to the Takeover Code states that the Code applies to all offers for unquoted public and certain private companies which:

  • have their registered offices in the United Kingdom, the Channel Islands or the Isle of Man; and
  • are considered by the Panel to have their place of central management and control in the United Kingdom, the Channel Islands or the Isle of Man.

Transitional arrangements and transition companies

Transitional arrangements will be introduced to cover public companies which are not UK quoted and private companies which fall within the scope of  paragraphs (A) to (D) of section 3(a)(ii) of the Takeover Code. These arrangements will apply for two years from 3 February 2025 (reduced from the three year transition period set out in the Public Consultation Paper). The intention here is to give relevant companies time to adjust to the new regime and to introduce alternative arrangements / make amendments to their articles of association which cater for an environment in which the Takeover Code does not apply.

A company which is currently within the scope of section 3(a)(ii) of the Takeover Code will need to consider the following questions if it receives an offer during the transition period:

  • First, is it a “transition company” ?
  • Second, if so is it also a “Code company”?

Appendix D of RS 2024_1 contains a flowchart which a company can use to determine whether it is a “transition company”. Whether a company is a “transition company” during the transition period is determined by the company’s status immediately prior to the implementation date, i.e. on 2 February 2025.

Appendix E of RS 2024_1 contains a flowchart which a “transition company” can use to determine whether it is a “Code company” in respect of a specific transaction. Whether a “transition company” is a “Code company” in respect of a specific transaction will be determined by the company’s status on the relevant date. For these purposes, the relevant date is the date on which an announcement is made of a proposed or possible offer for the company or the date on which some other event occurs in relation to the company which has significance under the Takeover Code.

A new Transitional Appendix will be added to the Takeover Code. So the current regime will still need to be considered until the transition period ends and then the simplified regime will apply in all cases and only companies within A or B above will be subject to the Takeover Code.

The transition period ends at 11.59 pm on 2 February 2027.

Further information

If you would like to discuss what these changes mean for your company or for a transaction involving an unquoted PLC then please contact AJ Venter (Corporate and M&A Partner) or Nick Graves (Head of the Corporate and M&A Team).