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UK Takeover Code Changes Now in Force

Tuesday, 15 October 2013

Changes to the reach of the Takeover Code came into force on 30th of September 2013. Affected companies should take note. Any UK, Channel Islands, and Isle of Man incorporated public company whose securities are admitted to trading on a UK multilateral trading facility such as AIM are now subject to the Takeover Code, regardless of the location of that company’s central management and control.

Previously, those companies falling into the above category were subject to a residency test in order to determine whether or not the regulations contained in the Code applied to them. This residency test consists of the following question: where does the central management and control of the company reside? If the answer was in the UK, Channel Islands, or Isle of Man, the Code applied; if the answer was anywhere else, the Code did not apply.

Residency Test No-longer Applies

As of the 30th of September 2013, the residency test for this category of companies will be redundant: the Code will apply irrespective of the location of the central management and control of the company.

The residency test is being retained for non-traded public companies. Concerning private companies, minor changes will be made to the ten year rule to allow the residency test to remain in place.

What Action is Required of Companies?

Generally, action is likely required by those companies newly coming under the jurisdiction of the Code. In particular, a review of the relevant company’s articles of association or constitution should take place in order to make sure there are no provisions which contradict the Code. There may also be an obligation to make an announcement to the market regarding the Code’s new applicability to the company itself.

It has been deemed by the UK Panel on Takeovers and Mergers (the Panel) as important, that a relevant company reviews its shareholder profile. Otherwise, for example, a newly deemed Code company might find itself unaware of the possibility of Rule 9 mandatory bid being made as a result of a shareholder acquiring or increasing a 30% or greater voting interest. The interests of concert parties should also be taken account of when considering this possibility.

Any on-going transactions interrupted by this reform should have been referred to the Panel before the 30th of September, if there were concerns regarding the impact of the Takeover Code.


In general, the prospect of the removal of the residency test for AIM companies in particular has been welcomed by markets; largely because it makes an important area of law more clear for prospective bidders, as well as for the shareholders of the targeted company. For more information please contact James Crichton via e-mail or by telephone on 0207 611 4848.