Further to our previous post, we believe that on the whole, this is a positive development particularly in view of the uncertainty of the present regime. In our experience, shareholders in most UK registered companies whose shares are quoted on AIM or the ISDX Growth Market expect to be protected by the Takeover Code and it is anachronistic and arbitrary that this protection can be lost inadvertently by, for example, the relocation of its directors. That certainly will however come with a cost – compliance with the Takeover Code can be expensive.
On the other hand, most UK registered companies listed on overseas markets with little connection to the UK aside from their place of incorporation would be surprised if the Takeover Code applied to them as they would expect to be protected by the takeover rules of the place of their central management and control (and/or the market on which they are traded) rather than the UK.
Whilst an objection to retaining the residency test for such companies is that it is difficult for an outside party such as a bidder to determine whether the Takeover Code applies, greater confusion would in our view be caused if the Panel claimed automatic jurisdiction as potentially two sets of takeover rules could apply. In these circumstances, the Panel would share jurisdiction with the overseas regulatory body and this normally means that a transaction specific set of takeover rules acceptable to both bodies would need to negotiated before any bid could be initiated (with the increased compliance costs and delay this would entail).
In our opinion, the Panel was therefore right not to abandon the residency test for these companies. More on our bulletin