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M&A hub: Developments driving and shaping M&A
Key legal and regulatory developments driving and shaping M&A
United Kingdom | Publication | April 2023
On March 30, 2023 the UK Government published its second Economic Crime Plan 2023-2026 (Plan), following the first published in 2019. It seeks to build on the foundations laid in the first Economic Crime Plan, focussing more directly on impact and outcomes, to help cut crime, protect national security, and support the UK’s legitimate economic growth and competitiveness.
Among other things, the Plan commits the Government to reducing money laundering and recovering more criminal assets, combatting kleptocracy and driving down sanctions’ evasion, and cutting fraud. Points to note include the following:
Reducing money laundering and recovering more criminal assets
The Government sees limiting the abuse of corporate structures as a key part of this and points to the Economic Crime and Corporate Transparency Bill (ECCT Bill) which is aimed at reforming the role of Companies House and improving transparency in relation to UK companies and partnerships. The ECCT Bill should strengthen the UK business environment, support national security and combat economic crime, while delivering a more reliable Companies Register to underpin business activity. The Plan anticipates Royal Assent for the ECCT Bill in Q2 2023, with the timeline for secondary regulations to be confirmed during the same period.
The timing of roll-out of matters such as ID verification of new and existing directors, partners, presenters and People with Significant Control will be confirmed once the ECCT Bill has received Royal Assent.
Reforming the UK’s Anti Money Laundering/Combatting Financing of Terrorism regimes
The Government sees the UK’s Anti Money Laundering/Combatting Financing of Terrorism (AML/CFT) regulatory and supervisory regime as a critical component of the fight against economic crime. A 2022 review of the UK's Anti-Money Laundering regulatory and supervisory regime set out a shortlist of four options for reform, and the Government states that it will consult further before selecting and implementing the chosen model. In the interim, it will continue to work with supervisors to ensure that shorter-term improvements to effectiveness are still achieved while longer-term reform options are developed.
Criminal corporate liability and fraud
The Plan refers to the Law Commission’s review of the law on criminal corporate liability published in June 2022, and says that the Government is considering the options presented by the Law Commission with a view to introducing legislation on the identification doctrine to strengthen its application to all corporate structures, including large organisations, and deter instances where corporations can evade liability for committing crime, including economic crime.
The Government states that it is also committed to introducing a failure to prevent fraud offence in the ECCT Bill that holds companies criminally liable for fraud conducted by an employee, where reasonable procedures are not in place to prevent it. The timing of this is stated to be Q3 2023.
Reducing sanctions evasion
The Government believes that actions across the Plan to improve the whole system response to economic crime will address the broader systemic vulnerabilities that can enable evasion of sanctions but notes that to enhance sanctions compliance, increased collaboration is essential. As a result, the Government is committed to continuing to provide all relevant sectors with the proper guidance, support, and collaboration around these various sanctions regimes.
(HM Government, Economic Crime Plan 2, 2023-2026, 30.03.2023)
On April 4, 2023 the Takeover Panel (Panel) published RS 2022/3 relating to offer timetables in competitive situations. This follows on from PCP 2022/3 (Consultation) published in October 2022 (see here).
The Panel is making the changes proposed in the Consultation, subject to certain modifications.
The changes will take effect on May 22, 2023 (Implementation Date) and will be applied to all companies and transactions to which they relate (including those on-going transactions which straddle the Implementation Date).
Where parties have any doubts about the impact of the changes (in particular, in relation to a transaction that is in existence or contemplation) they should consult the Panel prior to the Implementation Date to obtain a ruling or guidance.
The Panel has also noted that it intends to further consider the extent to which the Takeover Code restrictions on frustrating action should apply to a target company board seeking to sanction a scheme in a competitive situation. It proposes to consult further on this as part of a general review of the frustrating action rules to be carried out later this year. In the meantime, the Panel proposes to continue its practice to date of generally agreeing to disapply the restrictions in Rule 21.1(a) in these circumstances.
(Takeover Panel, Offer timetable in competitive situations, RS 2022/3, 04.04.2023)
On April 4, 2023 the Takeover Panel (Panel) published RS 2022/4 (Response Statement) relating to miscellaneous amendments to the Takeover Code (Code). This follows on from PCP 2022/4 (Consultation) published in October 2022 (see here).
The changes to the Code set out in the Response Statement will take effect on May 22, 2023 (Implementation Date) and will be applied to all companies and transactions to which they relate (including those on-going transactions which straddle the Implementation Date except where to do so would give the amendments retroactive effect).
Where parties have any doubts about the impact of the changes (in particular, in relation to a transaction that is in existence or contemplation) they should consult the Panel prior to the Implementation Date to obtain a ruling or guidance.
Target board recommendations
The Consultation proposed the introduction of an express requirement for the target company board to make a recommendation as to the action that shareholders should take in relation to the offer (and any alternative offers) and that holders of Rule 15 securities should take in respect of any Rule 15 offer or proposal.
The Panel has adopted the changes as proposed in the Consultation, subject to certain modifications including the introduction of (a) a new Note 3 on Rule 25.2 setting out how the board may satisfy the requirement in situations where there are alternative offers, more than one of which can (in the board’s opinion) be recommended to shareholders, but where the appropriate action for individual shareholders to take will depend on various factors and their particular circumstances; and (b) a similar new Note 3 on Rule 15.
The Panel has also prepared illustrative examples of language which a target board could use to comply with the requirements of the Code in giving its recommendation to shareholders. These are set out in Appendix C to the Response Statement and cover situations where there is:
The Panel has also confirmed that an ability for shareholders to make a mix and match election is not regarded as an alternative offer and will not therefore be subject to new Rule 25.2(c).
Disclosure of target board intentions
The Panel is proceeding with the changes proposed in the Consultation to codify a requirement, where there are alternative offers, for target company directors to state which alternative (if any) they intend to elect for (together with the ability for the Panel to require the inclusion of the directors’ reasons for electing for a particular alternative).
The Response Statement notes that, in the context of a recommended offer, the Panel would normally expect the directors to have decided which of the alternative offers they intend to elect for by the time the offer document or scheme circular is published. However, it recognises that there may be circumstances in which one or more of the directors may not have formed an intention by that time. The Panel should be consulted in such circumstances, but it is noted it would normally be appropriate for the director(s) to explain they have not yet formed an intention, to set out the factors they are likely to take into account in making their decision, and to make an announcement of their intention as and when a decision is made.
While statements the directors make about their intended elections will not be binding, the Panel notes that a subsequent change of intention would require announcement.
Other changes
The Panel is proceeding with the other changes proposed in the Consultation, including in relation to:
The Response Statement also sets out certain formatting amendments that have been made to assist with the preparation of a digital version of the Code. As these amendments do not alter the effect of the provisions in question, they have been made without consultation.
(Takeover Panel, Miscellaneous Code amendments, RS 2022/4, 04.04.2023)
Following the announcement on March 9, 2023 by HM Treasury that a Chair of a new independent review of investment research and its contribution to the competitiveness of the UK’s capital markets (the Review) had been appointed, on April 3, 2023 a Call for Evidence was launched by the Review team. The Call for Evidence is the first step in the Review.
The Call for Evidence sets out a non-exhaustive list of questions on which views (with supporting examples and evidence where possible) are sought. These include the following:
The call for evidence is open until April 24, 2023. The Review team will also hold a series of discussions with interested parties to explore the issues raised further and will then provide its report to HM Treasury.
(HM Treasury, Call for Evidence – UK Investment Research Review, 03.04.2023)
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Key legal and regulatory developments driving and shaping M&A
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On 3 September 2024, the ECJ delivered its judgment in Illumina’s appeal against the General Court’s (GC) judgment confirming the European Commission’s (EC) powers to review concentrations under the EU Merger Regulation (EUMR) in circumstances where no Member State has jurisdiction under national law.
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