By Eileen Grace and Ursula Earley
The Irish Takeover Panel ("the Panel") has been operating in Ireland since July 1, 1997. The Panel replaces the U.K. Panel on Takeovers and Mergers which previously had involvement in takeovers of Irish publicly listed companies.
The Panel differs from its UK counterpart in that it is statute based and has the power to apply to the Irish High Court for an order to enforce a ruling or decision.
The Irish Takeover Panel Act 1997 (Takeover) Rules ("the Rules") comprise rules made by the Panel under the powers granted to the Panel by the Irish Takeover Panel Act 1987 ("the Act") and are contained in the "Green Book". The Rules have been made principally to ensure that takeovers and other relevant transactions comply with the principles as set out in the schedule to the Act. The Rules also provide an orderly framework within which takeovers are conducted.
Companies to which the Act and Rules Apply
The Act and the Rules apply to takeovers and other relevant transactions in respect of relevant companies. A "relevant company" is defined in section 2 of the Act and means any public limited company or other body corporate incorporated in Ireland any of whose securities are authorised for trading (or have been so authorised within five years prior to the relevant proposal) on a market regulated by the Irish Stock Exchange. This therefore covers companies whose securities are traded on the DCM and the Exploration Securities Market as well as the Official List. Also caught is any other public limited company which is prescribed by the Minister for Enterprise and Employment as such "in order to secure more fully the protection of shareholders". The Minister is required to consult with the Panel before so prescribing. Section 2 of the Act specifically provides that the following are not included in the definition of "relevant company": (i) UCITS; (ii) Investment companies within the meaning of Part XIII of the Companies Act 1990.
A "takeover" is defined as: (1) any agreement or transaction (including a merger) whereby or in consequence of which control of a relevant company is or may be acquired; or (2) any invitation, offer or proposal made or intended or required to be made with a view to concluding or bringing about such an agreement or transaction.
"Control" is defined in the Act in relation to a relevant company as the holding whether directly or indirectly of securities that confer in aggregate not less than 30 per cent (or such other percentage as may be prescribed) of the voting rights in that company.
"Relevant transactions" are defined as including: (1) a substantial acquisition of securities; (2) a partial offer or tender offer relating to voting securities of a relevant company which if accepted in full in the case of a partial offer could result in the offeror under the partial offer or (as the case may be) the purchaser under tender offer and any parties acting in consort with it holding an aggregate less of 30 per cent of the voting rights in that company; (3) a reverse takeover transaction (not constituting a takeover of the relevant company which enters into the reverse takeover transaction); and (4) any other offer not being a takeover to acquire voting securities of a relevant company.
The Rules do not apply to offers for non-voting non-equity capital unless they are in relation to convertible securities or options.
Principles Underlying the Rules
The principles on which the Rules are based are the following:
1) All shareholders of the same class of the offeree shall be treated similarly by an offeror.
2) Where information is tendered by the offeror or offeree or their respective advisers to shareholders of the offeree in the course of any offer it shall be made available equally to all of its shareholders who may accept the offer.
3) No offer shall be made and no announcement of a proposed offer shall be made save after careful and responsible consideration of the matter by the offeror and any advisers of the offeror and only if the offeror and any advisers of the offeror are satisfied that the offeror will be able to implement the offer if it is accepted.
4) Shareholders to whom an offer is made shall be entitled to receive such information and advice as will enable them to make an informed decision on the offer. For that purpose the information and advice should be accurate and adequate and should be furnished to the shareholders in a timely fashion.
5) It is the duty of all parties to a takeover or other relevant transaction to prevent the creation of a forced market in any of the securities of the offeror or offeree and to refrain from any statement or conduct which could mislead shareholders or the market.
6) It is the duty of the directors of an offeree when an offer is made or when they have reason to believe that the making of an offer is imminent to refrain from doing anything as respects the conduct of the affairs of the offeree which might frustrate that offer or deprive shareholders of the opportunity of considering the merits of the offer except upon the authority of those shareholders given in general meetings.
7) The directors of the offeree shall give careful consideration before they enter into any commitment with an offeror (or any other person) which would restrict their freedom to advise shareholders of the offeree in the future.
8) The directors of the offeree and (if it is a company) of the offeror owe a duty to the offeree and the offeror respectively and to the respective shareholders of those companies to act in disregard of pesonal interest when giving advice and furnishing information in relation to the offer. In discharging that duty the said directors shall be bound to consider the interests of the shareholders as a whole.
9) Rights of control must be exercised in good faith and the oppression of a minority is not acceptable in any circumstances.
10) Where an acquisition of securities is contemplated as a result of which any person may incur an obligation to make an offer he or she must before making the acquisition ensure that he or she can and will continue to be able to implement such an offer.
11) An offense ought not to be disrupted in the conduct of its affairs beyond reasonable time by an offer its securities.
12) A substantial acquisition of securities (whether such acquisition is to be effected by one transaction or a series of transactions) shall take place only at an acceptable speed and shall be subject to adequate and timely disclosure.
The Rules are not concerned with the financial or commercial merits of a takeover, nor matters which are regulated under the legislation such as competition and mergers policies.
Rules
For the most part the Rules mirror the London City Code; certainly practitioners will recognise the various thresholds which give rise to obligations under the Rules and to the requirements which arise when such thresholds are passed eg restrictions on acquisitions giving control over an aggregate holding of 30 per cent or more and requirement to make mandatory offers.
There are, however, some differences, including the following:
i) The Rules contain in certain instances detail which is contained as notes in the corresponding provision of the City Code, while in other areas, the reverse is true.
ii) The Rules contain some provisions additional to those in the City Code eg Rules 2.9 and 2.10 which deal with Announcements, in particular the mode and service thereof.
iii)The Panel has been specifically granted discretion to make certain rulings or to refrain from making such or to prohibit certain activity. While arguably the City Code, because it is sufficiently flexible, has such discretion, the position is clear as regards the Panel's power. This is particularly desirable and necessary given the statutory basis of the Panel.
Rule 9 - mandatory offer
Equality of treatment among shareholders is the most important principle of the Rules. Rule 9 contains provisions relating to the acquisition and consolidation of a control and, for such purposes, the holding of 30 per cent or more of the voting rights of a company is deemed to give control. This follows almost identically Rule 9 of the City Code.
The rationale behind Rule 9 is that a premium attaches to securities giving control of a company, and in the interests of equality all shareholders should be able to share that premium. Accordingly, Rule 9 requires any person who, together with persons acting in consort with them:
i) acquires 30 per cent or more of the voting rights in the company to which the Rules apply or increases a holding of less than 30 per cent of such voting rights to 30 per cent or more; or
ii) holds between 30 and 50 per cent of the voting rights in such a company and who acquires additional securities carrying more than 1 per cent of the voting rights in any period of twelve months
to make an offer to all other shareholders at the highest price paid by the relevant person in the last twelve months, which offer shall be in cash or be accompanied by a cash alternative unless the Panel otherwise agrees.
Substantial acquisitions of shares
The Rules issued by the Panel governing substantial acquisitions of shares are the Irish Takeover Panel Act, 1997 (Substantial Acquisition) Rules 1997 ("SARs"), contained with the Rules in the "Green Book".
The purpose of the SARs is to restrict the speed with which a person may increase a holding of or rights over voting securities carrying between 15 and 30 per cent of the voting rights of a relevant company. The SARs also provide for accelerated disclosure of the acquisition of securities between these percentages.
The principle provision of the SARs is that, subject to exceptions, a person may not within a period of seven days acquire securities carrying voting rights in a company (or rights over such securities) representing 10 per cent or more of the voting rights, if, as a result, that person would hold securities or rights over securities carrying between 15 and 30 per cent of the voting rights of that company.
The restriction does not apply to a substantial acquisition:
i) from a single shareholder if it is the only such acquisition within any period of seven days; or
ii) made pursuant in a tender offer in accordance with the SARs; or
iii) immediately before the offeror announces a firm intention to make an offer provided that the offer would be publicly recommended by, or the acquisition is made with the agreement of, the board of the offeree and the acquisition is conditional upon the announcement of the offer; or
iv) after the offeror has announced a firm intention to make an offer, provided that the posting of the offer is not, at the time of the acquisition, subject to a pre-condition.
The SARs do not apply where the acquirer has announced a firm intention to make an offer under the Takeover Rules which is not subject to a pre-condition, as in such event the Takeover Rules will apply. Neither do the SARs apply to an acquisition which results in the acquirer holding securities which when aggregated with any other voting securities held by him or other persons acting in consort with him carry 30 per cent or more of the voting rights of the company: such a person will be subject to the provisions of the Takeover Rules and of appropriate may be obliged to make a mandatory offer under Rule 9 of the Takeover Rules.
The Panel and Panel Decisions
The Members of the Panel are as follows:
Each Member shall be entitled to appoint one director to the Board of the Panel and the Central Bank is entitled to appoint the Chairman and deputy Chairman. In addition, the Board may appoint a further three parties to the Board.
- the Consultative Committee of Accountancy Bodies of Ireland
- the Law Society of Ireland
- the Irish Association of Investment Managers
- the Irish Bankers Federation
- the Irish Stock Exchange
Formal decisions on the interpretation and enforcement of the Rules and principles thereof are made by the Board of the Panel in the form of rulings and directions. Rulings may be made by the Panel on its own volition or on the application of any interested person. The Panel may give a direction to a party or parties to take specified action or to refrain from a specified action and where it considers it appropriate the Panel may publish any ruling or discretion given by it.
The Panel is entitled under the Act to require any party to a takeover or other relevant transaction to disclose to it any information which is specifies. The Panel expects full and prompt co-operation from those from whom it requires information so that its decisions may be properly informed and given as speedily as possible.
The Panel may apply to the High Court for an order to enforce a ruling or direction. The court has extensive powers including the power to annul any transaction that it has carried out in contravention of the Panel's ruling or direction. The court may also refuse to make any order. A person may only question the validity of a ruling or direction of the Panel, a Rule itself or any derogation from or waiver of a Rule by way of application to the High Court for judicial review of the matter concerned. A person who has been advised, admonished or censured by the Panel may appeal the matter to the High Court. The court may confirm the Panel's decision or annul it and in the latter case will either direct the Panel to conduct a fresh enquiry or require the Panel to publish a notice of the decision of the court.
Neither the Panel nor any member, director, other officer or employee of the Panel shall be liable in damages in respect of anything done or outlined to be done by it or him or her in the performance of its, his or her functions unless the act or omission concerned was done in bad faith.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
