More AIM-listed energy companies will be caught by the Takeover Code from this month, says expert

Corporate law expert James Broadhurst of Pinsent Masons, the law firm behind Out-Law.com, said that many energy and natural resources companies would be caught when the regime is extended to cover all companies admitted to trading on a UK-based multilateral trading facility, including AIM, where the company's registered office is in the UK, Channel Islands or Isle of Man.

"The oil and gas and natural resources industries will feel the effect as there is a trend in these sectors for directors to be based overseas despite being headquartered in the UK, Channel Islands or Isle of Man," he said.

"Given the volume of energy and natural resources companies trading on AIM, having clarity on the issue will be good news for shareholders and those companies trading on AIM," he said.

Currently, the Code only applies to an AIM-listed company which is the target of a takeover bid if the Takeover Panel, which created and enforces the Code, considers it to be "centrally managed and controlled" in the UK, Channel Islands or Isle of Man. This test centres on where the company's board members are resident, and means that whether a company is subject to the Code can change with changes in its board or the relocation of its directors.

This test will be repealed from 30 September, when the application of the Takeover Code to an AIM-listed company will instead depend on where the company's registered office is located. From this date, shareholders and third parties, such as a potential offeror or investor, will be able to tell whether or not the protections contained in the Takeover Code apply by referring to a company's publicly-available registered address, rather than relying on potentially inaccurate statements made by the company.

Companies which are not publicly traded, and private companies which are potentially subject to the Code because they have had securities admitted to trading on a regulated market or multilateral trading facility in the UK within the last ten years will remain subject to the residency test.

The Takeover Code contains six overarching general principles governing the behaviour of companies involved in takeovers. These include equality of treatment for shareholders in the target company; providing target company shareholders with sufficient information to make an informed decision on the merits of a particular bid; avoidance of the creation of a false market in the securities of either company involved in a takeover; and certainty that an offer is deliverable, with particular reference to the consideration being offered.

A number of other significant changes to the Takeover Code will also come into effect from 30 September, as set out in a summary published by the Panel in May (31-page / 121KB PDF). These include changes in relation to profit forecasts, statements about potential synergies and other merger benefits, and material changes to previously-published information that occur during an offer period.

Corporate law expert James Broadhurst said that AIM-listed companies that had made their own specific provisions in relation to takeovers should check these carefully to see if any changes were necessary as a result of the Code now covering them.

"Many AIM companies that were not subject to the Code have provisions in their constitutional documents which seek to replicate the mandatory takeover provisions set out in the Code," he said.

"These provisions may be inconsistent with the rules afforded by the Code, potentially necessitating a shareholder vote to amend the relevant constitutional document. If so, companies should consider dealing with this in their next AGM," he said.