UK TAKEOVER PANEL: RESPONSE TO THE EUROPEAN COMMISSION S CONSULTATION DOCUMENT ON THE MODERNISATION OF THE TRANSPARENCY DIRECTIVE

Transcription

1 Introduction UK TAKEOVER PANEL: RESPONSE TO THE EUROPEAN COMMISSION S CONSULTATION DOCUMENT ON THE MODERNISATION OF THE TRANSPARENCY DIRECTIVE The UK Takeover Panel (the Panel ) has been designated by HM Government as the supervisory authority to carry out certain regulatory functions in relation to takeover bids pursuant to the Directive on Takeover Bids (2004/25/EC) (the Takeovers Directive ). The main functions of the Panel are to issue and administer the Takeover Code (the Code ) and to supervise and regulate takeover bids and other matters to which the Code applies. The European Commission s consultation document on the modernisation of the Transparency Directive raises the following questions which are also of relevance to the regulation of takeovers: Uniform EU Regime or maximum harmonisation: major holdings of voting rights 19. Would it be desirable to set up a uniform EU regime (e.g. by a directly applicable EU Regulation) for the notification of major holdings of voting rights? 20. If a fully uniform EU regime is not possible because of insurmountable legal barriers, should Member States be prevented from adopting more stringent requirements than those of the Transparency Directive regarding the notification of major holdings of voting rights? Given the responsibility of the Panel for the regulation of takeovers in the UK, we would like to submit the following comments in response to the Commission s consultation. Summary of response Question 19 Subject to what is set out below, the Takeover Panel (the Panel ) has no view on whether the regime for the notification of major holdings of voting rights is established as a uniform EU regime or as a maximum harmonisation regime. Question 20 The Takeover Code (the Code ) provides for more stringent disclosure requirements during a takeover bid than those in the Transparency Directive. For example, the trigger threshold for disclosures under the Code is 1% of a class of securities, as compared with the 5% threshold under the Transparency Directive. The Code s disclosure regime has widespread support from, among others, companies, investors and advisers. Consequently, if there is to be a uniform EU or maximum harmonisation regime, the Panel believes that the amended Transparency Directive should include:

2 2 a recital stating that the Transparency Directive is solely concerned with particular disclosures to ensure transparent markets generally, and excludes the regulation of takeovers; and a specific Article stipulating that the terms of the amended Transparency Directive shall be without prejudice to laws, regulations and administrative provisions adopted in relation to takeover bids and other transactions regulated by the supervisory authorities appointed pursuant to the Takeovers Directive. Without this there would be significant adverse implications for transparency and market information during takeover bids and this would impact on the Panel s ability to regulate such bids. Background The Takeovers Directive does not require Member States to adopt provisions for the disclosure of dealings and interests in the securities of the offeree company (i.e. the target ) or the offeror (i.e. the bidder ) during the course of a takeover bid. However, since the Takeovers Directive is a minimum harmonisation measure, Member States are allowed to adopt such provisions. The disclosure of dealings and interests in securities under the Code A takeover bid is a particularly important time in the life of an offeree company and, during this period, the offeree company and matters relevant to the offer will be closely scrutinised by the persons involved and the market generally. The Panel believes that a high degree of transparency is essential to the efficient functioning of markets in this critical period and ensuring that this is achieved is one of the Panel s key objectives. Rule 8 of the Code therefore requires certain persons to disclose details of their dealings and interests in the securities of the offeree company and, except where the consideration offered is solely cash, the offeror. The principal objectives of Rule 8 are: to provide transparency as to where voting control of securities lies: Rule 8 seeks to identify the persons who control the voting rights attaching to relevant securities of the offeree company and, in the case of a securities exchange offer, the offeror; to identify concert parties: Rule 8 seeks to identify other persons with significant interests in securities who may be dealing with a view to assisting a party to an offer and who may therefore be acting in concert with an offeror or the offeree company; and to provide market transparency: Rule 8 requires persons with significant interests in securities to disclose publicly certain information in relation to their dealings, including the prices at which they have dealt, thereby enabling offeree company shareholders and the market generally to

3 3 understand the possible impact of such dealings on the market prices of securities. The requirements of the Rule 8 disclosure regime are more stringent than the minimum standards of the Transparency Directive and of the super-equivalent provisions in Chapter 5 of the Disclosure Rules and Transparency Rules (the DTRs ) of the Financial Services Authority (the ( FSA ). For example: (d) (e) (f) the threshold for disclosure under Rule 8.3 is a long interest of 1% or more (as opposed to 5% under the Transparency Directive and 3% under the DTRs); public disclosures of dealings are required to be made on the business day following the dealing; a person subject to Rule 8 must disclose all dealings in securities, not only dealings that take the person through a specified percentage threshold; disclosures are required to include details of the prices at which dealings have taken place; since 2005, Rule 8 has required the disclosure of dealings in contracts for differences and other cash-settled derivative instruments; once the disclosure threshold has been triggered, a person is required to disclose dealings, long interests and short positions in each of the parties to the offer (and not only the party in which the 1% long interest is held). During takeover bids, the disclosure requirements of Rule 8 have operated in parallel with the DTRs and predecessor provisions for more than 20 years. The Code s disclosure regime has widespread support from, among others, companies, investors and advisers. For example: when the Code s derivatives and options disclosure requirements were reviewed in 2007 following their introduction in 2005, 90% of the 89 respondents declared themselves to be in favour of the new disclosure regime and a large proportion expressed the view that the new rules had significantly improved transparency during offer periods; 1 there was widespread support for various extensions to the Code s disclosure regime which were consulted upon in 2009 and introduced in April 2010; 2 and certain commentators have even suggested that the 1% trigger threshold for the disclosure of dealings and positions in securities under the disclosure regime in Rule 8 should be reduced to 0.5%. In fact, this 1 See Panel Statement 2007/15 ( Derivatives and options regime: 2007 review) dated 29 June 2007: 2 See Response Statement 2009/1 ( Extending the Code s disclosure regime ) dated 16 December 2009:

4 4 suggestion was included in a recent consultation on various aspects of the regulation of takeovers, which has not concluded as at the date of this paper. 3 Potential conflict between the Transparency Directive and the Code The Panel has received legal advice that placing the Transparency Directive (in its present form) on a maximum harmonisation basis would, in the absence of a relevant carve-out for takeovers, be likely to result in overlaps and conflict between the Transparency Directive and the Code. The Panel has further been advised that, in the event of conflict, where the amended Transparency Directive and the Code share the same scope, the amended Transparency Directive would prevail. In other words, provisions of the Code that conflicted with the Transparency Directive would need to be removed from the Code. This would lead to significant adverse implications for transparency and market information during takeover situations and adversely impact on the Panel s ability to regulate bids. Takeovers carve-out The Panel is, therefore, strongly of the view that, if the amended Transparency Directive were to be adopted on a maximum harmonisation basis, in order to prevent any reduction in standards of takeover regulation, it should provide a carve-out for takeovers in the form of: a recital to the amended Transparency Directive stating that it is solely concerned with particular disclosures to ensure transparent markets generally, and excludes the regulation of takeovers; and a specific Article stipulating that the terms of the amended Transparency Directive shall be without prejudice to laws, regulations and administrative provisions adopted (as permitted by the Takeovers Directive) in relation to takeover bids and other transactions regulated by the supervisory authorities appointed pursuant to the Takeovers Directive. Other comments Question 24 also asks respondents for any other comments on the Transparency Directive. The Panel understands that there is a view that the concept in Article 10 of an agreement, which obliges [shareholders] to adopt, by concerted exercise of the voting rights they hold, a lasting common policy towards the management of the issuer would benefit from clarification. The Panel has no comment on the need for such clarification but would be concerned if, in a search for clarity, the concept of acting in concert, as included in the Takeovers Directive, were to be introduced into the Transparency Directive. 3 See Public Consultation Paper 2010/2 ( Review of certain aspects of the regulation of takeover bids ) dated 1 June 2010:

5 5 The purpose of the concept of acting in concert in the Takeovers Directive (preventing persons from avoiding the requirement to make a mandatory bid by acting together to acquire control of (or to frustrate an offer for) a company) is different from the purpose of the requirement in the Transparency Directive (providing clarity as to when the voting rights of different persons should be aggregated for disclosure of major shareholdings) and needs to be a wide concept which can be applied on the facts of any particular case. It would therefore have to be clear that any clarification of Article 10 would not have any impact on the application of the concept of acting in concert in the context of takeovers. 23 August 2010