Company Law Reform Bill [HL]

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL]

Company Law Reform Bill [HL]
Part 24 — Takeovers etc
Chapter 1 — The Takeover Panel
319

(3)
Rules must provide for there to be a right of appeal against a decision of the
Hearings Committee to an independent tribunal (the “Takeover Appeal
Board”) in such circumstances and subject to such conditions as are specified
in the rules.
(4)
Rules may contain—
5
(a)
provision as to matters of procedure in relation to proceedings before
the Hearings Committee (including provision imposing time limits);
(b)
provision about evidence in such proceedings;
(c)
provision as to the powers of the Hearings Committee dealing with a
matter referred to it;
10
(d)
provision about enforcement of decisions of the Hearings Committee
and the Takeover Appeal Board.
(5)
Rules must contain provision—
(a)
requiring the Panel, when acting in relation to any proceedings before
the Hearings Committee or the Takeover Appeal Board, to do so by an
15
officer or member of staff of the Panel (or a person acting as such);
(b)
preventing a person who is or has been a member of the committee
mentioned in section 643(5) from being a member of the Hearings
Committee or the Takeover Appeal Board;
(c)
preventing a person who is a member of the committee mentioned in
20
section 643(5), of the Hearings Committee or of the Takeover Appeal
Board from acting as mentioned in paragraph (a).
Contravention of rules etc
652
Sanctions
(1)
Rules may contain provision conferring power on the Panel to impose
25
sanctions on a person who has—
(a)
acted in breach of rules, or
(b)
failed to comply with a direction given by virtue of section 646.
(2)
Subsection (3) applies where rules made by virtue of subsection (1) confer
power on the Panel to impose a sanction of a kind not provided for by the City
30
Code on Takeovers and Mergers as it had effect immediately before the
passing of this Act.
(3)
The Panel must prepare a statement (a “policy statement”) of its policy with
respect to—
(a)
the imposition of the sanction in question, and
35
(b)
where the sanction is in the nature of a financial penalty, the amount of
the penalty that may be imposed.

An element of the policy must be that, in making a decision about any such
matter, the Panel has regard to the factors mentioned in subsection (4).
(4)
The factors are—
40
(a)
the seriousness of the breach or failure in question in relation to the
nature of the rule or direction contravened;
(b)
the extent to which the breach or failure was deliberate or reckless;
(c)
whether the person on whom the sanction is to be imposed is an
individual.
45

Company Law Reform Bill [HL]
Part 24 — Takeovers etc
Chapter 1 — The Takeover Panel
320

(5)
The Panel may at any time revise a policy statement.
(6)
The Panel must prepare a draft of any proposed policy statement (or revised
policy statement) and consult such persons about the draft as the Panel
considers appropriate.
(7)
The Panel must publish, in whatever way it considers appropriate, any policy
5
statement (or revised policy statement) that it prepares.
(8)
In exercising, or deciding whether to exercise, its power to impose a sanction
within subsection (2) in the case of any particular breach or failure, the Panel
must have regard to any relevant policy statement published and in force at the
time when the breach or failure occurred.
10
653
Failure to comply with rules about bid documentation
(1)
This section applies where a takeover bid is made for a company that has
securities carrying voting rights admitted to trading on a regulated market in
the United Kingdom.
(2)
Where an offer document published in respect of the bid does not comply with
15
offer document rules, an offence is committed by—
(a)
the person making the bid, and
(b)
where the person making the bid is a body of persons, any director,
officer or member of that body who caused the document to be
published.
20
(3)
A person commits an offence under subsection (2) only if—
(a)
he knew that the offer document did not comply, or was reckless as to
whether it complied, and
(b)
he failed to take all reasonable steps to secure that it did comply.
(4)
Where a response document published in respect of the bid does not comply
25
with response document rules, an offence is committed by any director or
other officer of the company referred to in subsection (1) who—
(a)
knew that the response document did not comply, or was reckless as to
whether it complied, and
(b)
failed to take all reasonable steps to secure that it did comply.
30
(5)
Where an offence is committed under subsection (2)(b) or (4) by a company or
other body corporate (“the relevant body”)—
(a)
subsection (2)(b) has effect as if the reference to a director, officer or
member of the person making the bid included a reference to a director,
officer or member of the relevant body;
35
(b)
subsection (4) has effect as if the reference to a director or other officer
of the company referred to in subsection (1) included a reference to a
director, officer or member of the relevant body.
(6)
A person guilty of an offence under this section is liable—
(a)
on conviction on indictment, to a fine;
40
(b)
on summary conviction, to a fine not exceeding the statutory
maximum.
(7)
Nothing in this section affects any power of the Panel in relation to the
enforcement of its rules.

Company Law Reform Bill [HL]
Part 24 — Takeovers etc
Chapter 1 — The Takeover Panel
321

(8)
Section 1 (meaning of “company”) does not apply for the purposes of this
section.
(9)
In this section—
“designated” means designated in rules;
“offer document” means a document required to be published by rules
5
giving effect to Article 6.2 of the Takeovers Directive;
“offer document rules” means rules designated as rules that give effect to
Article 6.3 of that Directive;
“response document” means a document required to be published by
rules giving effect to Article 9.5 of that Directive;
10
“response document rules” means rules designated as rules that give
effect to the first sentence of Article 9.5 of that Directive;
“securities” means shares or debentures;
“takeover bid” has the same meaning as in that Directive;
“voting rights” means rights to vote at general meetings of the company
15
in question, including rights that arise only in certain circumstances.
654
Compensation
(1)
Rules may confer power on the Panel to order a person to pay such
compensation as it thinks just and reasonable if he is in breach of a rule the
effect of which is to require the payment of money.
20
(2)
Rules made by virtue of this section may include provision for the payment of
interest (including compound interest).
655
Enforcement by the court
(1)
If, on the application of the Panel, the court is satisfied—
(a)
that there is a reasonable likelihood that a person will contravene a
25
rule-based requirement, or
(b)
that a person has contravened a rule-based requirement or a disclosure
requirement,

the court may make any order it thinks fit to secure compliance with the
requirement.
30
(2)
In subsection (1) “the court” means the High Court or, in Scotland, the Court of
Session.
(3)
Except as provided by subsection (1), no person—
(a)
has a right to seek an injunction, or
(b)
in Scotland, has title or interest to seek an interdict or an order for
35
specific performance,

to prevent a person from contravening (or continuing to contravene) a rule-
based requirement or a disclosure requirement.
(4)
In this section—
“contravene” includes fail to comply;
40
“disclosure requirement” means a requirement imposed under section
647;
“rule-based requirement” means a requirement imposed by or under
rules.

Company Law Reform Bill [HL]
Part 24 — Takeovers etc
Chapter 1 — The Takeover Panel
322

656
No action for breach of statutory duty etc
(1)
Contravention of a rule-based requirement or a disclosure requirement does
not give rise to any right of action for breach of statutory duty.
(2)
Contravention of a rule-based requirement does not make any transaction void
or unenforceable or (subject to any provision made by rules) affect the validity
5
of any other thing.
(3)
In this section—
(a)
“contravention” includes failure to comply;
(b)
“disclosure requirement” and “rule-based requirement” have the same
meaning as in section 655.
10
Funding
657
Fees and charges
(1)
Rules may provide for fees or charges to be payable to the Panel for the
purpose of meeting any part of its expenses.
(2)
A reference in this section or section 658 to expenses of the Panel is to any
15
expenses that have been or are to be incurred by the Panel in, or in connection
with, the discharge of its functions, including in particular—
(a)
payments in respect of the expenses of the Takeover Appeal Board;
(b)
the cost of repaying the principal of, and of paying any interest on, any
money borrowed by the Panel;
20
(c)
the cost of maintaining adequate reserves.
658
Levy
(1)
For the purpose of meeting any part of the expenses of the Panel, the Secretary
of State may by regulations provide for a levy to be payable to the Panel—
(a)
by specified persons or bodies, or persons or bodies of a specified
25
description, or
(b)
on transactions, of a specified description, in securities on specified
markets.

In this subsection “specified” means specified in the regulations.
(2)
The power to specify (or to specify descriptions of) persons or bodies must be
30
exercised in such a way that the levy is payable only by persons or bodies that
appear to the Secretary of State—
(a)
to be capable of being directly affected by the exercise of any of the
functions of the Panel, or
(b)
otherwise to have a substantial interest in the exercise of any of those
35
functions.
(3)
Regulations under this section may in particular—
(a)
specify the rate of the levy and the period in respect of which it is
payable at that rate;
(b)
make provision as to the times when, and the manner in which,
40
payments are to be made in respect of the levy.
(4)
In determining the rate of the levy payable in respect of a particular period, the
Secretary of State—

Company Law Reform Bill [HL]
Part 24 — Takeovers etc
Chapter 1 — The Takeover Panel
323

(a)
must take into account any other income received or expected by the
Panel in respect of that period;
(b)
may take into account estimated as well as actual expenses of the Panel
in respect of that period.
(5)
The Panel must—
5
(a)
keep proper accounts in respect of any amounts of levy received by
virtue of this section;
(b)
prepare, in relation to each period in respect of which any such
amounts are received, a statement of account relating to those amounts
in such form and manner as is specified in the regulations.
10

Those accounts must be audited, and the statement certified, by persons
appointed by the Secretary of State.
(6)
Regulations under this section—
(a)
are subject to affirmative resolution procedure if subsection (7) applies
to them;
15
(b)
otherwise, are subject to negative resolution procedure.
(7)
This subsection applies to—
(a)
the first regulations under this section;
(b)
any other regulations under this section that would result in a change
in the persons or bodies by whom, or the transactions on which, the
20
levy is payable.
(8)
If a draft of an instrument containing regulations under this section would,
apart from this subsection, be treated for the purposes of the Standing Orders
of either House of Parliament as a hybrid instrument, it is to proceed in that
House as if it were not such an instrument.
25
659
Recovery of fees, charges or levy
An amount payable by any person or body by virtue of section 657 or 658 is a
debt due from that person or body to the Panel, and is recoverable accordingly.
Miscellaneous and supplementary
660
Panel as party to proceedings
30
The Panel is capable (despite being an unincorporated body) of—
(a)
bringing proceedings under this Chapter in its own name;
(b)
bringing or defending any other proceedings in its own name.
661
Exemption from liability in damages
(1)
Neither the Panel, nor any person within subsection (2), is to be liable in
35
damages for anything done (or omitted to be done) in, or in connection with,
the discharge or purported discharge of the Panel’s functions.
(2)
A person is within this subsection if—
(a)
he is (or is acting as) a member, officer or member of staff of the Panel,
or
40
(b)
he is a person authorised under section 647(5).

Company Law Reform Bill [HL]
Part 24 — Takeovers etc
Chapter 1 — The Takeover Panel
324

(3)
Subsection (1) does not apply—
(a)
if the act or omission is shown to have been in bad faith, or
(b)
so as to prevent an award of damages in respect of the act or omission
on the ground that it was unlawful as a result of section 6(1) of the
Human Rights Act 1998 (c. 42) (acts of public authorities incompatible
5
with Convention rights).
662
Privilege against self-incrimination
(1)
A statement made by a person in response to—
(a)
a requirement under section 647(1), or
(b)
an order made by the court under section 655 to secure compliance with
10
such a requirement,

may not be used against him in criminal proceedings in which he is charged
with an offence to which this subsection applies.
(2)
Subsection (1) applies to any offence other than an offence under one of the
following provisions (which concern false statements made otherwise than on
15
oath)—
(a)
section 5 of the Perjury Act 1911 (c. 6);
(b)
section 44(2) of the Criminal Law (Consolidation) (Scotland) Act 1995
(c. 39);
(c)
Article 10 of the Perjury (Northern Ireland) Order 1979 (S.I. 1979/1714
20
(N.I. 19)).
663
Annual reports
(1)
After the end of each financial year the Panel must publish a report.
(2)
The report must—
(a)
set out how the Panel’s functions were discharged in the year in
25
question;
(b)
include the Panel’s accounts for that year;
(c)
mention any matters the Panel considers to be of relevance to the
discharge of its functions.
664
Amendments to Financial Services and Markets Act 2000
30
(1)
The Financial Services and Markets Act 2000 (c. 8) is amended as follows.
(2)
Section 143 (power to make rules endorsing the City Code on Takeovers and
Mergers etc) is repealed.
(3)
In section 144 (power to make price stabilising rules), for subsection (7)
substitute—
35
“(7)
“Consultation procedures” means procedures designed to provide an
opportunity for persons likely to be affected by alterations to those
provisions to make representations about proposed alterations to any
of those provisions.”.
(4)
In section 349 (exceptions from restrictions on disclosure of confidential
40
information), after subsection (3) insert—
“(3A)
Section 348 does not apply to—

Company Law Reform Bill [HL]
Part 24 — Takeovers etc
Chapter 2 — Impediments to takeovers
325

(a)
the disclosure by a recipient to which subsection (3B) applies of
confidential information disclosed to it by the Authority in
reliance on subsection (1);
(b)
the disclosure of such information by a person obtaining it
directly or indirectly from a recipient to which subsection (3B)
5
applies.
(3B)
This subsection applies to—
(a)
the Panel on Takeovers and Mergers;
(b)
an authority designated as a supervisory authority for the
purposes of Article 4.1 of the Takeovers Directive;
10
(c)
any other person or body that exercises public functions, under
legislation in an EEA State other than the United Kingdom, that
are similar to the Authority’s functions or those of the Panel on
Takeovers and Mergers.”.
(5)
In section 354 (Financial Services Authority’s duty to co-operate with others),
15
after subsection (1) insert—
“(1A)
The Authority must take such steps as it considers appropriate to co-
operate with—
(a)
the Panel on Takeovers and Mergers;
(b)
an authority designated as a supervisory authority for the
20
purposes of Article 4.1 of the Takeovers Directive;
(c)
any other person or body that exercises functions of a public
nature, under legislation in any country or territory outside the
United Kingdom, that appear to the Authority to be similar to
those of the Panel on Takeovers and Mergers.”.
25
(6)
In section 417(1) (definitions), insert at the appropriate place—
““Takeovers Directive” means Directive 2004/25/EC of the
European Parliament and of the Council;”.
665
Power to extend to Isle of Man and Channel Islands
Her Majesty may by Order in Council direct that any of the provisions of this
30
Chapter extend, with such modifications as may be specified in the Order, to
the Isle of Man or any of the Channel Islands.
Chapter 2
Impediments to takeovers
Opting in and opting out
35
666
Opting in and opting out
(1)
A company may by special resolution (an “opting-in resolution”) opt in for the
purposes of this Chapter if the following three conditions are met in relation to
the company.
(2)
The first condition is that the company has voting shares admitted to trading
40
on a regulated market.