On August 15, 2016 the City of London Law Society (CLLS) and Law Society Company Law Committees’ Joint Working Parties on Market Abuse, Share Plans and Takeovers Code issued a second Q&A on the Market Abuse Regulation (MAR). This Q&A follows an earlier Q&A on aspects of MAR issued in July 2016.
The Q&A sets out a suggested approach to implementing certain aspects of MAR, and provides answers to questions including the following:
Market soundings (Article 11)
- If the bidder and target negotiate the terms of an irrevocable undertaking to accept the offer/vote in favour of the scheme (as applicable) that is intended to be given by target directors, will those communications fall within the market soundings regime?
- Where the terms of an irrevocable undertaking to accept the offer/vote in favour of the scheme (as applicable) intended to be given by target directors have been agreed between the bidder and target as outlined above, will the provision of the agreed form irrevocable to the target directors fall within the market soundings regime?
- Will communications between the bidder and shareholders with a view to seeking irrevocable undertakings to accept the offer/vote in favour of the scheme (as applicable) from them fall within the market soundings regime?
- In Article 11(2) of MAR, is a communication within the market soundings regime only if it is made by the bidder – i.e. given the lack of equivalent to Article 11(1)(d)?
- Can market soundings be conducted other than in strict compliance with Article 11 of MAR and the Implementing Technical Standards?
Stake-building on a takeover
- Will due diligence information that amounts to inside information preclude a stake-building pre-announcement as a result of Article 9(4) of MAR?
- Will due diligence information that amounts to inside information cease to be inside information once a bid is announced if the bid price is in excess of the price effect the inside information had been expected to have (i.e. if the impact of any inside information would be absorbed by the bid premium)?
Person discharging managerial responsibilities (PDMR) dealings (Article 19)
- Where a PDMR has entered into an irrevocable undertaking outside a closed period, can they satisfy that irrevocable undertaking during a closed period?
- During a closed period under Article 19(11) of MAR can a PDMR vote in favour of/enter into an irrevocable undertaking to vote in favour of a takeover conducted by way of scheme of arrangement?
- During a closed period under Article 19(11) of MAR can a PDMR accept/enter into an irrevocable undertaking to accept a contractual takeover?
- Do any of the matters referred to in Q9 or Q10, whether they occur within (if permitted) or outside a closed period, need to be disclosed in accordance with Article 19(1)?
The Joint Working Parties note that the Q&A is an explanation of how, in their view, MAR should apply to certain practical situations, but is subject to review and amendment in the light of practice on the implementation of MAR and any relevant future UK or EU guidance published in relation to MAR.
(CLLS, Market Abuse Regulation (EU MAR) Q&A, 15.07.16)