The Department for Business, Energy and Industrial Strategy recently published a green paper setting out the government's proposals to reform and strengthen its powers to scrutinise investments in critical businesses and infrastructure which could provide opportunities for foreign investors to "undertake espionage, sabotage or exert inappropriate leverage". The proposals aim to ensure that any national security issues can be considered in a clear, consistent and proportionate way.
UK groups with members in at least two member states of the European Economic Area can use Societas Europaea or cross-border mergers to redomicile to another European jurisdiction. Both regimes may be helpful to a group looking to redomicile entities to other parts of Europe in the context of Brexit, although both have been the subject of recent judicial decisions regarding the form of transactions which are considered permissible.
The EU Directive on Cross-Border Mergers of Limited Liability Companies, implemented by the Companies (Cross-Border Mergers) Regulations 2007 (as amended), has proven to be a popular means of reorganising European group structures and has been occasionally used in arm's-length cross-border transactions. However, recent transactions have tested the boundaries of the sorts of structure that may be permitted under the regulations, which could reduce the popularity of the procedure.
A cross-border merger is a transaction involving a true merger of European entities, in which one or more of the participants ceases to exist. In the United Kingdom, cross-border mergers are governed by the Companies (Cross-Border Mergers) Regulations 2007. The procedure has been frequently implemented in connection with solvent reorganisations of group structures. Arm's-length cross-border transactions involving UK companies have also incorporated cross-border mergers.
For a public company with a premium listing in the United Kingdom, certain M&A transactions – including acquisitions and disposals of shares, businesses or assets – may be subject to Listing Rule 10 and ultimately require prior shareholder approval. In 2016 over 15 acquisitions or disposals where the consideration was £100 million or more were announced by premium listed companies and required shareholder approval under Listing Rule 10.
The UK Takeover Panel recently published Panel Statement 2017/1, in which it declared the 'cold shouldering' of two defendants to be a breach of the Takeover Code. The statement is helpful in understanding the panel's approach to 'cold shouldering', as the penalty has been imposed on only two previous occasions. Further, the statement is a helpful reminder of the need for thorough and robust 'concert party' analysis in relation to the Takeover Code.
The UK Takeover Panel recently published Panel Statement 2016/9 prescribing new checklists and supplementary forms to be completed and submitted to the panel by the financial adviser to the bidder or the target (as appropriate), together with the documents required to be sent to the panel under Rule 30.5 of the Takeover Code.
The Takeover Panel recently published the 12th edition of the Takeover Code, replacing in its entirety the previous edition published in the wake of Kraft's takeover of Cadbury. The new edition includes the final text of the amendments that took effect in September 2016 relating to the communication and distribution of information during an offer, including in regards to the equality of information, advertisements and the use of videos and social media and the chaperoning of meetings and communications.
Recent English case law regarding material adverse change (MAC) conditions suggests that parties to acquisition agreements governed by English law should expect provisions to be construed narrowly and as a backstop against significant unforeseen events. A buyer's prospects of protection from adverse changes should be increased if specific and objectively quantifiable criteria are included in the MAC definition.
As a result of ongoing uncertainty around the future of the United Kingdom's relationship with the European Union, a number of M&A transactions with a UK nexus may be affected pending Brexit negotiations. However, with significant fluctuations in exchange rates and share prices, the dislocation in the markets may encourage both opportunistic and defensive M&A transactions.
The UK Takeover Panel has published a number of proposed amendments to the Takeover Code relating to the communication and distribution of information during an offer by a bidder or target. The purpose of these proposals is to provide greater clarity on the rules governing equality of information to shareholders, and to update the code to reflect developments in the use of social media and other forms of electronic communication.
Two recent decisions are helpful in understanding the English courts' approach to the interpretation of provisions in share purchase agreements. In one, the Supreme Court considered whether certain clauses in a share purchase agreement were unenforceable penalty clauses. In the other, the Court of Appeal ruled on two different interpretations of an indemnity in a share purchase agreement.
The Takeover Panel has confirmed a number of amendments to the Takeover Code in three response statements to 2015 public consultations. The amendments – which relate to the treatment of dividends, the definition of 'acting in concert' and the use of restrictions and suspensions of voting rights to avoid the normal application of Rule 9 – came into effect on November 23 2015.
The Takeover Panel has published new guidance explaining its approach to offer-related arrangements, and when a target may provide sensitive information to a bidder's advisers on an 'outside counsel only' basis to assist the bidder in determining whether regulatory consents are required without having to provide such information to a competing bidder in accordance with the principle of equality of treatment of competing bidders.
The English courts have considered a number of recent cases concerning the interpretation of share purchase agreements, shareholders' agreements and articles of association in the context of private M&A transactions. These cases serve as a useful reminder that the courts will adopt a strict interpretation of contractual provisions on the basis that they have been commercially negotiated between sophisticated parties.
New regulations recently came into force which prohibit the use of cancellation schemes to effect public takeovers. A cancellation scheme involves the cancellation of the target's shares by way of a reduction of capital, the application of the reserve arising from such cancellation in paying up a number of new shares in the target and the issue and allotment of such new shares to the bidder.
A number of changes to the UK takeover regime recently became effective. The first set of changes comprises amendments to the Takeover Code intended to clarify areas of uncertainty and codify current market practice. More significant changes relate to statements made by the parties to an offer relating to a particular course of action which they commit or intend to take after the end of an offer period.
The Takeover Panel has published new guidance explaining when a bidder may be permitted to approach a target to reopen takeover talks where it would otherwise be prohibited from doing so. The panel also published a response to its consultation on changes to the Takeover Code, which confirms changes reflecting the development of market practice and tightening the operation of the rules.
Following the 2011 amendments to the Takeover Code, the Takeover Panel has kept further changes to a minimum in order to assess the effect of the reforms, which it believes are working satisfactorily. However, the panel recently published a public consultation paper setting out a number of new changes which largely reflect the development of market practice and tighten the operation of the rules in some cases.
The UK Takeover Panel's rules and enforcement powers have once again been in the spotlight recently, following the AbbVie/Shire and Pfizer/AstraZeneca takeover battles. In both cases, the Takeover Code rules concerning statements made by a bidder during the course of the offer – and the panel's ability to enforce the rules and hold a bidder to the statements that it makes – were the subject of extensive public scrutiny.