Changes to the definition of acting in concert

Introduction

The Code Committee of the Takeover Panel has published RS 2022/2, its response statement to PCP 2022/2.

Summary of the changes

The changes which have been adopted mainly relate to the definition of “acting in concert” in the Code and are broadly in line with the proposals set out in the PCP. The most significant changes are raising the threshold at which the presumption of acting in concert is engaged from 20 per cent to 30 per cent, making it explicit that the presumption applies to interests in shares carrying voting rights as well as equity share capital and adding a new presumption that a company is presumed to be acting in concert with any other company which “controls”, is controlled by or is under the same control as it (where “control” is defined as 30% or more of the voting rights in a company more than 50% of the equity share capital). The changes also clarify how the presumptions of acting in concert apply to investment funds and limited partnerships in the same way as companies as well as introducing various clarificatory amends.

The response statement also addresses various requests from respondents to the PCP including in relation to rebutting new presumptions (1) and (2), joint ventures, portfolio companies of private equity firms, government-owned entities and the aggregation of direct and indirect equity interests.

Timing

As with other response statements, RS 2022/2 includes a comparison of the changes as against the current Code (in Appendix B) and in its main body shows changes to the provisions as they were proposed to be amended in the PCP. The changes take effect on 20 February 2023 and will apply from that date to all companies and transactions, including on-going transactions, except where doing so would give the changes retroactive effect.

Our view

The changes reflect the very detailed proposals which the Panel put out for consultation. They are in substance non-contentious and, whilst they represent a lot of detail to work through, bring some welcome additional definition and clarification in the Code to the application of various presumptions and codification of the practice of the Executive.