Essential Corporate News: Week ending February 11, 2022

Takeover Panel: Amendments to Practice Statement 20

On February 9, 2022 the Takeover Panel (Panel) published an amended version of Practice Statement No 20: Rule 2 – Secrecy, possible offer announcement and pre-announcement responsibilities (Revised PS 20).

The amendments clarify certain aspects of the requirement under Rule 2 of the Takeover Code (Code) to consult the Panel in the event of movement in the share price of a potential target company.

Under Note 1 on Rule 2 of the Code the Panel must be consulted (inter alia) where there is a price movement of 10% or more since (a) the first active consideration of an offer by a potential bidder; (b) the receipt of an approach by the target company; or (c) the time at which a potential bidder is first sought (a 10% price movement). There is a separate requirement to consult the Panel in the event of an abrupt price rise of a smaller percentage, for example a rise of 5% in the course of a single day.

In Revised PS 20, the Panel has clarified its approach to 10% price movements. It notes that this is relevant for determining the last time by which the Panel should first be notified of a potential offer – if it has already been notified of the potential offer prior to a 10% price movement, it will not expect to be consulted again solely because of the 10% price movement. However, the Panel stresses that consultation continues to be required in the event that the target company is the subject of rumour and speculation or if there is a 5% price movement in the course of a single day.

Panel Statement 2022/6: Amendments to Practice Statement No 20, 09.02.2022)

Details of amendments to Practice Statement No 20

Revised Practice Statement 20

Takeover Panel: Removal of restriction on anonymous order book dealings – PCP 2022/1

On February 7, 2022 the Takeover Panel published Consultation Paper 2022/1 which proposes the removal of the restriction on an offeror purchasing shares in the offeree company through an anonymous order book, as set out in Rule 4.2(b) (Restriction on dealings by the offeror and concert parties) of the Takeover Code (Code).

Rule 4.2(b) of the Code provides that, during an offer period, an offeror and persons acting in concert with it must not acquire an interest in any securities of the offeree company through any anonymous order book system, or through any other means, unless, in either case, it can be established that the seller, or other party to the transaction in question, is not an exempt principal trader connected with the offeror. It is proposed that Rule 4.2(b) should be deleted on the basis that it is no longer proportionate for the Code to restrict purchases of offeree company shares by an offeror on an anonymous order book. In addition, it is proposed to make consequential amendments to Rule 38.2 (Dealings between offerors and connected exempt principal traders) and minor and clarificatory amendments to Rule 4.2(a).

The Code Committee invites comments on the proposed amendments to the Code by March 18, 2022. The Code Committee expects to publish a Response Statement setting out the final amendments to the Code in Spring 2022, at the same time as it publishes its response to the consultation on PCP 2021/1 (Miscellaneous Code amendments). The Code Committee expects that the amendments would come into effect approximately one month after the publication of the Response Statement.

(Takeover Panel: Removal of restriction on anonymous order book dealings – PCP 2022/1, 07.02.2022)

FRC: Preliminary thoughts on sustainability reporting

On February 9, 2022 the Financial Reporting Council (FRC) published its preliminary thoughts to the International Sustainability Standards Board (ISSB) on the prototypes published by the Technical Readiness Working Group in November 2021 to support the development of International Sustainability Standards.

The FRC strongly supports the development of global standards for sustainability reporting and the UK adoption of those standards. In developing those standards, the FRC recommends that the ISSB:

• Provides stakeholders with an outline of the architecture of the development of sustainability standard setting;
• Includes a hierarchy so that in the absence of a specific standard on a sustainability matter, preparers can use existing voluntary non-financial frameworks as an interim step while a standard is developed provided they are consistent;
• Considers the four pillars of the TCFD recommendations (Governance, Strategy, Risk Management, Metrics and Targets) in the context of the overall framework for narrative reporting;
• Develops a separate standard on the application of materiality to sustainability information; and
• Discuss the extent to which governance reporting will be within the scope of the ISSB standards.

(FRC, Preliminary thoughts on sustainability reporting delivered to the ISSB, 09.02.2022)