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Takeover Code Amended
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Derivatives Options - Takeover Code - Shares - Interests in Securities - Substantial Acquisitions Rules
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14 November 2005
Law Now Takeover Code Amended
On 7 November Rule 8 of the Takeover Code was amended to require certain dealings in options and derivatives related to target shares to be disclosed to the market in the same way as dealings in actual shares. Under the revised Rule 8.3 of the Code, a person who is directly or indirectly interested in 1% or more of any class of relevant securities of the target company or, if appropriate, the bidder (or who will be interested in 1% or more as a result of a transaction) must disclose publicly all dealings in such relevant securities of that company carried out during an offer period. A new definition of interests in securities provides that a person who has long economic exposure to changes in the price of securities (ie. essentially, he will benefit if the price rises) is treated as interested in them. Such an interest will be held by a person who owns or controls the actual shares, who has a call option or written put option in respect of them, or who has a long derivative referenced to them. But a person with only a short position will not be treated as interested. A new definition of dealings captures any transaction which results in an increase or decrease in the number of securities in which the person is interested or in respect of which he has a short position, including buying and selling securities, granting or exercising an option, subscribing for securities, and entering into, closing out or varying a derivative referenced to securities. At the same time, the Panel amended various other Rules of the Code to require disclosure of derivatives and options in (particularly) Rule 2.5 announcements, offer documents, defence documents, and announcements of levels of acceptances. Proposed further changes to the Code (1) Dealings in derivatives and options: control issues On 2 November the Panel published a further consultation paper (PCP 2005/3) containing its detailed proposals to amend various Rules which deal with obtaining control of a target. In general terms, the Panel again proposes to treat long exposure under derivatives or options as equivalent to interests in actual shares for the purposes of the thresholds in Rules 5 (Timing restrictions on acquisitions) and 9 (mandatory offers). However, derivatives and options will not count towards a bidders acceptance condition under Rule 10. (2) Proposed abolition of the Substantial Acquisitions Rules (SARs) On the same day, the Panel issued a separate consultation paper (PCP 2005/4) in which it proposes to abolish the majority of the SARs. Only those parts of the SARs that relate to tender offers will be retained (re-located as a new Appendix to the Code). With both sets of proposals, if they are supported by the majority of market-users, they are likely to come into effect towards the end of February or in March next year. Click on or copy and paste this link for an article containing further details. For further information, please contact Mike Jones (Corporate This article first appeared in Law-Now, CMS Cameron McKenna's free |
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