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20 Jan 2015

Stamping on cancellation schemes in takeovers


Effect on existing offers
Transitional provisions are included so that the new provisions do not apply to offers already made before the regulations come into force. This is where companies have made a firm intention announcement under the Takeover Code, or in offers not subject to the Takeover Code, where the terms of an offer have been agreed.

The draft regulations (The Companies Act 2006 (Amendment of Part 17) Regulations 2015) must be approved by both Houses of Parliament and will come into effect the day after they are made, expected to be early this year. The government has stated that it wishes to put legislation in place as soon as possible, so as to limit the scope for companies to bring forward takeovers or mergers specifically in order to circumvent the legislation.

Continuing benefits to using a scheme

  • An offer will need to meet the 90% acceptance test if buying-out the minority, a scheme only requires 75% by value plus a majority in number of those present and voting
  • Certainty of obtaining 100% control, on approval by shareholders and court sanction as all shareholders are bound
  • As there is no offer to the public on a scheme, no prospectus is required (unless shares being issued are 10% or more of a class already admitted to trading on a regulated market)
  • In respect of overseas shareholders, there may be less overseas securities legislation issues, as a shareholder vote on a scheme is not considered an investment decision in the same way as an acceptance of an offer
  • Availability of merger relief and merger accounting on schemes (these require at least a 90% holding which cannot be guaranteed on an offer)


Tom Nicholls

Tom Nicholls

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