Essential Corporate News – Week ending October 9, 2015

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On October 8, 2015 the Takeover Panel Executive published Practice Statement No. 29 (the Practice Statement) providing guidance on the interpretation and application of Rule 21.2 of the Takeover Code, which deals with offer-related arrangements.

Previous Practice Statements No. 27 (Rule 21.2 – Directors’ irrevocable commitments and letters of intent) and No. 23 (Rule 21.2 – Inducement fees and other offer-related arrangements) have been withdrawn as the Practice Statement incorporates the relevant contents of these.

The Practice Statement covers the following areas:

• commitments to maintain confidentiality of information;
• commitments to provide information or assistance for the purposes of obtaining official authorisation or regulatory clearance (including the meaning of “official authorisation or regulatory clearance” for these purposes and agreements relating to the invocation of conditions to an offer);
• directors’ irrevocable commitments and letters of intent;
• agreements, arrangements or commitments which impose obligations only on an offeror or any person acting in concert with it;
• agreements relating to any existing employee incentive arrangement;
• bid conduct agreements;
• inducement fees payable by the target company to an offeror; and
• consulting the Panel.

(Takeover Panel, Practice Statement No. 29, 08.10.15)

On October 8, 2015 the Takeover Panel Executive published Practice Statement No. 30 (the Practice Statement) explaining how the Takeover Panel (the Panel) considers the requirements of Rule 20.2 of the Takeover Code (the Code) apply where commercially sensitive information (Restricted Information) is given to lawyers or economists of an offeror on an “outside counsel only” basis in connection with competition or other regulatory consents but is not provided directly to the offeror.

Rule 20.2 relates to equality of information and requires information given to one offeror or potential offeror to be given on request to any other offeror or bona fide potential offeror, even if the competing offeror is less welcome. Where Restricted Information is provided by the target company only to the first offeror’s competition or regulatory lawyers or economists on an outside counsel only basis for the purposes of enabling them to consider the need for and (where necessary) obtain the consent of a competition authority or other regulatory body, the Practice Statement notes that if the Restricted Information is requested by a competing offeror the Panel will not normally require it to be provided directly to the competing offeror and will treat the requirements of Rule 20.2 as satisfied where it is provided to the competition or regulatory lawyers or economists advising the competing offeror on the same restricted, outside counsel only, basis.

If a target company wishes Rule 20.2 to be applied in this manner they must obtain consent from the Panel before any Restricted Information is provided to any adviser to the first offeror. The Practice Statement sets out factors that the Panel will consider when deciding whether to apply Rule 20.2 in this manner in the context of a particular case as well as the information that should be provided to the Panel when seeking its consent.

(Takeover Panel, Practice Statement No. 30, 08.10.15)

At the end of 2014 the Financial Reporting Council (FRC) committed to undertake market-led work to assess how effective boards shape and embed culture in their organisations and to promote best practice. On October 5, 2015 the FRC launched its initiative which it is pursuing in four workstreams:

• Delivering sustainable success – the role of an effective board.
• People issues – aligning culture, values, human resource practices and, performance reward systems.
• Stakeholder issues – relationships between culture and business models, with shareholders, customers and suppliers, and the impact on the wider community and environment.
• Embedding and assurance – measuring and monitoring culture, the role of internal audit, risk management and public reporting of cultural indicators.

The FRC will publish a report of its observations and activity, identify best practice and develop practical, market-led ‘how to’ resources to help boards across a broad range of sectors and industries take effective action on culture. It will also replace the FRC’s 2011 Guidance on Board Effectiveness with new material that has culture at its heart, to support the application of the principles in the UK Corporate Governance Code.

The FRC has asked for expressions of interest from those who would like to get involved by October 30, 2015. It would also like to identify examples of good practice and develop case studies with companies that have tackled aspects of culture in their organisations.

(FRC, Culture Project - Invitation to Participate, 05.10.15)