Following Brexit as currently envisaged (through a deal or no-deal scenario), a handful of London-listed companies which are registered in another EEA member state will no longer be subject to UK or European takeover rules. The transition, for these companies, will be from a regime subject to the scrutiny of both the UK Takeover Panel (the Panel) and the local (non-UK) regulator to a regime where no regulation for takeover offers applies. The Panel is currently consulting on its post-Brexit rules, which will be of keen interest to practitioners and, not least, the small group of companies to which this applies1.
The concept of the shared jurisdiction rules was introduced by the Directive 2004/25/EC on Takeover Bids (the Takeovers Directive). Shared jurisdiction applies where the target of an offer has its registered office in one EEA member state and its shares are admitted to trading on a regulated market in another EEA member state (but not the member state where it has its registered office). Consequently, any takeover offer for a company:
- whose registered office is outside the UK but in another EEA member state; and
- whose securities are admitted to trading on a UK-regulated market only (or in certain cases on a UK-regulated market and on another EEA member state regulated market outside the country of its registered office),
is currently subject to shared jurisdiction between the Panel and the relevant EEA member state regulator.
The Panel has identified 25 non-UK companies in respect of which any takeover offer would currently be subject to its shared jurisdiction.
Proposed Brexit-related changes to the UK takeover regime
The draft Takeovers (Amendment) (EU Exit) Regulations 2019 (Takeovers (EU Exit) Regulations) set out the proposed post-Brexit framework for takeover regulation in the UK. They require the Panel to make new rules which reflect the fact that the Takeovers Directive will no longer apply in the UK.
In its Consultation Paper on the UK's withdrawal from the European Union (PCP 2018/2) the Panel is proposing to delete the shared jurisdiction rules set out in the Introduction to the Code. This reflects the fact that under the Takeovers (EU Exit) Regulations the Panel will no longer have a statutory duty to retain the shared jurisdiction rules in the Introduction. PCP 2018/2 is asking for views on this approach.
If the Panel adopts its proposal to delete the shared jurisdiction provisions, the likely scenarios are:
- Deal Brexit: the shared jurisdiction rules will continue to apply during the transition period to 31 Dec 2020 (as the Takeovers Directive will continue to apply during the transition period); or
- No-deal Brexit: the shared jurisdiction rules will cease to apply at 11pm on 29 March 2019.
Implications for certain EEA member state issuers
The Panel has discussed the consequences of the shared jurisdiction regime ceasing to apply in the UK with the supervisory authorities in the four EEA member states in which the shared jurisdiction companies have their registered offices: Cyprus, Luxembourg, The Netherlands and Ireland. The supervisory authorities in the first three have confirmed that, upon the Takeovers Directive ceasing to apply in the UK, they would not have jurisdiction over an offer for a company which has its registered office in their country and which has securities admitted to trading only on a UK regulated market 2 .
This is an interesting consequence of Brexit – that a company previously subject to the takeover regime of two jurisdictions will be abandoned by both. In-house legal counsel should bring this possible consequence to the attention of their board. Depending on risk appetite towards takeover offers, the board may consider restructuring (in order to bring the company within the scope of a takeover regime), implementing certain amendments to the company's constitutional documents to replicate as much as possible protections afforded by a takeover regime, or simply doing nothing (consistent with the many other companies listed in London which do not avail themselves of any takeover regime).
1 We have not covered in this note the impact of the withdrawal of the shared jurisdiction regime on companies incorporated in the UK and admitted to trading on a regulated market in another EEA member state. There is also a small group of companies which fall within this category.
2 The Irish Takeover Panel confirmed to the UK Panel that, upon the Takeovers Directive ceasing to apply in UK, it would have "full" jurisdiction over an offer for a company (other than a closed-ended fund) which has its registered office in Ireland and which has securities admitted to trading on a UK regulated market (and not on a regulated market in another EEA member state).
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