The Takeovers Code helps to protect shareholders in takeover situations, but the wide ambit of the Code unintentionally hamstrings small, high growth companies in the process. The Takeovers Panel is looking at creating an exemption for small companies, and has been consulting with industry on potential solutions.
You can read our full submissions here.
In brief, we think that the board of small Code companies should have the ability to opt out of the Code on a transaction by transaction basis, and shareholders should have the ability to override a board decision to opt out. We have suggested the following process:
- If a transaction triggers a Code compliance process, the board must determine whether it's in the best interests of the company to opt out of normal Code compliance for that transaction.
- If the board decides to opt out, it must complete a prescribed form which sets out the details of the proposed transaction and includes details of any associated interests in the transaction. The form is circulated to all shareholders, who have 10 days to opt in to normal Code compliance for the proposed transaction.
- If 10% or more of voting rights opt for normal Code compliance for the proposed transaction, the transaction must proceed with normal Code compliance (or be abandoned).