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Essential Corporate News – Week ending January 22, 2016

Publication January 22, 2016


Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.

European Commission: Consultation on non-binding guidelines for reporting of non-financial information by companies

On January 15, 2016 the European Commission published an online questionnaire as part of a consultation process relating to Directive 2014/95/EU on the disclosure of non-financial and diversity information by certain large undertakings and groups (the Directive). The Directive entered into force on December 6, 2014 and it is aimed at improving the transparency of the non-financial information provided by large public-interest entities with more than 500 employees. The Directive will require such companies to include in a management report a non-financial statement containing information relating to environmental, social and employee matters, respect for human rights and anti-corruption and bribery matters. Article 2 of the Directive states that the European Commission will prepare non-binding guidelines on the reporting of such non-financial information and the European Commission is now seeking views on what those guidelines should cover.

As well as asking about the aspects of disclosure of non-financial information that should be addressed by the guidelines and the audience for the non-financial information, respondents are asked to opine on the features that make a piece of information material/relevant for the purpose of the non-financial statement. Further specific questions raised include the following:

  • Should the guidelines set out general principles and key ideas or would it be more helpful for companies and users if they put forward solutions in a detailed manner, including on specific sectoral issues?
  • How matters such as the business model, policies, due diligence process, business relationships, key performance indicators and principle risks should be treated in the guidelines.
  • How the guidelines should approach the disclosure of key performance indicators.
  • Whether the guidelines should include guidance on specific sectoral issues such as responsible supply chain management of conflict minerals.
  • How the guidelines should relate to existing national, international or other EU-based frameworks such as UN Global Compact, the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for multi-national enterprises.
  • Whether the content of the guidelines should be different according to the targeted companies.
  • Whether the guidelines should provide more clarity on what companies should disclose in relation to board diversity.

The consultation closes on April 15, 2016.

(European Commission, Consultation Document: Non-Binding Guidelines for Reporting of Non-Financial Information by Companies, 15.01.16)

Takeover Appeal Board: Ruling in connection with Xchanging plc 2016/1

On January 15, 2016 the Takeover Appeal Board (the Board) published a statement setting out the reasons for its dismissal of an appeal from a December 2015 ruling of the Hearings Committee on the interpretation of Rule 2.6(d) of the Takeover Code. Rule 2.6(d) sets out the deadline by which a publicly identified potential offeror which is in competition with an announced firm offer must clarify its position (i.e. announce a firm intention to make an offer or make a “no bid” statement).

In October 2015, Xchanging announced that it had received approaches from Capita plc (Capita) and Apollo Global Management (Apollo). Capita subsequently announced a firm intention to make an offer for Xchanging following which Apollo made a “no bid” statement.

Capita published its offer document on October 17, 2015. On November 12, 2015 Xchanging announced that it had received an approach from Computer Sciences Corporation (CSC) and on November 16, 2015 it announced it had received an approach from Ebix Inc (Ebix).

In accordance with Rule 2.6(d), a deadline of 5pm on December 9, 2015 (the 53rd day following the publication of Capita’s offer document) was set by which each of CSC and Ebix were required to clarify their position. On December 9, CSC announced its firm intention to make an offer for Xchanging and the Panel ruled that the deadline for Ebix to clarify its position would be 5pm on the 53rd day following the publication of CSC’s offer document.

CSC requested that this ruling be reviewed by the Hearings Committee as it felt that it unfairly prejudiced CSC and uncertainty was created. CSC argued that Ebix, as a potential competing offeror, should be required to clarify its intentions in relation to Xchanging by reference to the offer timetable established by Capita as the first offeror, rather than that established by CSC as the second offeror. The Hearings Committee rejected CSC’s appeal and upheld the Panel’s ruling and so CSC appealed to the Board.

The Board accepted that the rationale for requiring a potential competing offeror to clarify its position is to remove uncertainty in the later stages of the offer timetable, at a time when shareholders in the offeree company are making their investment decision. The point of the rules is that shareholders in the offeree company should not be deprived of the opportunity to receive an improved offer and should be able to reach a properly informed decision on an offer. The Board accepted the Panel’s submission that, where there are two or more offerors, the phrases “first offer” and the “first offeror’s initial offer document” in Rule 2.6(d) should be construed as applying to the offeror whose offer document has established the offer timetable, and not the offeror which first published an offer document. As a result, Ebix, as a potential competing offeror, should be required to clarify its intentions by reference to the current offer timetable established by the publication of CSC’s offer document and not by reference to the previous offer timetable established by the publication of Capita’s offer document. As a result, the Hearings Committee was right to dismiss CSC’s appeal.

(Takeover Appeal Board, 2016/1: Ruling of the Takeover Appeal Board - Xchanging plc, 15.01.16)

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