UK: Changes to companies subject to the Takeover Code

The changes follow a period of consultation earlier this year, and will take effect on 3 February 2025 (Implementation Date) The changes refocus the application of the Code on companies which are UK registered and listed or quoted (or were recently listed or quoted) on a UK market.

Transitional arrangements for companies that cease to be subject to the Code will apply for a two-year period from the Implementation Date until 2 February 2027 (Transition Period).

What is the background?

Although the primary focus of the Panel is to regulate takeovers of listed and quoted companies, the Panel’s current jurisdiction (and the Code’s current application) extend beyond that.

In our earlier briefing on the consultation on narrowing the scope of companies subject to the Takeover Code, we summarised the current position as to when the Code currently applies (as set out section 3(a) of the Introduction to the Takeover Code).

The consultation sought feedback on whether it is appropriate for the Code to continue to apply to all of the non-quoted UK public and private companies which currently fall, or potentially fall, within the Panel’s jurisdiction. Respondents to the consultation were supportive of the proposals for change.

What are the key changes?

In summary, (subject to the transitional arrangements noted below) from the Implementation Date the Code will apply to companies which have their registered office in the UK, the Channel Islands or the Isle of Man (referred to as UK-registered companies) if on the “relevant date” (being the date of announcement of an offer or possible offer for the company or any other event with Code significance), any of the company’s securities:

• are admitted to trading on a UK regulated market (such as the London Stock Exchange's main market), on a UK multilateral trading facility (such as AIM), or on a stock exchange in the Channel Islands or the Isle of Man (referred to as UK quoted); or
• were UK quoted at any time during the previous two-year period (reduced from three years as set out in the consultation),

in each case, irrespective of whether the company is UK resident. The current UK residency test (which applies broadly to Code companies that are not UK quoted) will be abolished.

Transitional arrangements

The transitional arrangements will apply, broadly, to Code companies that will no longer be in scope under the new regime (transition companies) (such as a public company which is not UK quoted or a private company that de-listed more than two but less than ten years ago).

This is to ensure that transition companies will have a period of time to adjust to the new regime and put in place any alternative arrangements that it wishes to implement (such as making changes to its articles of association to include “tag-along” and “drag-along” rights for the benefit of minority shareholders).

During the transition period, the Code (including the residency test) will continue to apply to a transition company in the same way as it did immediately prior to the Implementation Date. At the end of the two-year transition period, the Code will cease to apply to all such transition companies.

Next steps and impact

The Code changes take effect on 3 February 2025. The transitional arrangements end two years later (11:59 pm on 3 February 2027).

The changes to narrow the scope of the companies to which the Code applies are welcome, providing greater clarity and certainty as to the companies falling within the Panel’s jurisdiction (reducing significantly or removing the need for Code waivers or to re-register unlisted UK-registered companies before being able to sell them privately) and focussing the Panel’s remit on those companies which have historically been the primary focus of takeover regulation in the UK in any event.

Further reading on the Takeover Code changes

RS 2024/1: Companies to which the Takeover Code applies

Takeover Panel website: Companies to which the Takeover Code applies