City Code on Takeovers and Mergers

The City Code on Takeovers and Mergers governs how takeover bids in the UK are carried out. It is drawn up by, and is primarily enforced by, the Takeover Panel.

The key requirements of the City Code are:

• All shareholders must be offered equally good terms, as defined by the code.
• All shareholders must be given equal access to information.
• A time table is adhered to that sets time limits for each phase of the bid.
• Bidders and members of a concert party must disclose their dealings.
• The bidder must set an acceptance level (of over 50%) at which the bid becomes unconditional.
• There are limits on the conditions attached to a bid.
• A mandatory offer must be made if a shareholder's or concert party's holdings exceed 30%.
• The board of the target company may not use poison pills and other actions to frustrate a bona fide bid, unless they have shareholder approval.

In addition to these the Companies Act imposes its own requirements: all shareholdings of above 3% must be disclosed, and any changes of more than 1% in such shareholding must also be disclosed, whether or not they are related to a bid.

The City Code is also now required to follow the rules laid down by the EU directive on takeovers. It directly incorporates part of the directive.