Public M&A and capital markets – Takeover Code changes on share buybacks, companies with DCSSs and IPOs in force

The changes to the Takeover Code on how the Code applies on a share buyback, how it applies to companies with a dual class share structure (DCSS) and the disclosures required under the Code on an IPO (which were set out in RS 2025/1) have now come into force. The Takeover Panel has also published new Notes to advisers.

The key rule changes relate to:

• Share buybacks - The rules around share buybacks have been made clearer, and in particular when an obligation to make a mandatory offer may be triggered by a buyback that takes a shareholder's interests through 30%.
• Companies with a DCSS - A DCSS company typically has both ordinary voting shares and a class of shares with an enhanced level of voting rights or control, held for example by a founder of the company. The new Code provisions primarily apply to a structure where the 'founder' shares carry multiple votes per share and then are extinguished or converted to ordinary shares on particular trigger events, such as a "time sunset" a specified number of years after the company's IPO or the retirement/resignation of the founder shareholder. The new rules set out a framework for how the Takeover Code applies to DCSS companies, including how the mandatory bid requirement applies when a shareholder's percentage of voting rights is increased as a result of the conversion or extinction of the founder shares, and how the acceptance condition on a contractual offer for a DCSS company should work.
• IPOs - On an IPO that would result in a company becoming subject to the Code, the company will have to disclose any controlling shareholders (and their concert parties) and describe the mandatory offer requirement under the Code in its prospectus/admission document. The ability of the Panel to grant a "Rule 9 dispensation by disclosure" has also been codified - meaning that the Panel will be able to grant a dispensation from a potential future obligation for a shareholder to make a mandatory offer (for example, upon the conversion or extinction of founder shares in a DCSS company, or the conversion of convertible securities), if certain criteria are met.

The Takeover Panel has published a new Note to advisers in relation to IPOs or admissions to trading on the disclosure requirements on an IPO and a revised version of its Note to advisers in relation to Rule 9 waivers to reflect these changes.

For more information on the rule changes, see our UK public M&A e-bulletin here.