Takeover Panel extends scope of jurisdiction to non UK-based AIM companies

Takeover Panel extends scope of jurisdiction to non UK-based AIM companies


Author: Iain Butler

More AIM companies are set to become subject to the provisions of the UK Takeover Code at the end of September 2013 as a result of changes published earlier this year.

Companies registered in the UK, Channel Islands or Isle of Man whose shares are admitted to trading on a UK-based multilateral trading facility such as AIM or ISDX's Growth Market (formerly PLUS Markets), will fall within the scope of the UK Code on Takeovers and Mergers, even if their place of central management and control is overseas, with effect from 30 September 2013.

The change involves the removal of the so called "residency test" which has meant that AIM companies whose management was based outside the UK (even if they had a registered office in the UK, Chanel Islands or Isle of Man) fell outside the jurisdiction of the Takeover Panel until now.

It also addresses the uncertainty felt by many holders of shares in AIM companies who automatically expected to benefit from the protections offered by the Code, and brings the Panel's approach to AIM companies in line with companies whose shares are listed on the Main Market of the London Stock Exchange.

What this means .

For shareholders

The Takeover Panel, through the UK Code on Takeovers and Mergers, regulates the takeovers of companies subject to its jurisdiction. The Code is based upon six general principles which govern the behaviour of companies involved in takeovers. These include the avoidance of the creation of a false market, the provision of sufficient information and equality of treatment of shareholders. Holders of shares in an AIM company that previously fell outside of the Panel's jurisdiction will now benefit from these principles and the rules set out in the Code that derive from them in the event of a takeover even if the company's directors and place of central management are located outside the UK.

For overseas based AIM companies

Overseas based AIM companies that have their registered office in a UK territory who will fall within the jurisdiction of the Code should:

  • Familiarise themselves with the provisions of the Code, particularly the obligation under Rule 9 which requires any person (or persons "acting in concert" with that person) who acquires 30% or more of the voting rights of a target company (including by a series of transactions) to make a mandatory offer to acquire the remaining shares which it does not hold. 
  • Review their Articles of Association to identify any provisions that currently replicate or overlap with the Code so that shareholder approval to remove these provisions can be obtained at the company's next AGM.