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Companies Act 2006

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This is the original version (as it was originally enacted).

Chapter 2Impediments to takeovers

Opting in and opting out

966Opting 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 on a regulated market.

(3)The second condition is that—

(a)the company’s articles of association—

(i)do not contain any such restrictions as are mentioned in Article 11 of the Takeovers Directive, or

(ii)if they do contain any such restrictions, provide for the restrictions not to apply at a time when, or in circumstances in which, they would be disapplied by that Article,

and

(b)those articles do not contain any other provision which would be incompatible with that Article.

(4)The third condition is that—

(a)no shares conferring special rights in the company are held by—

(i)a minister,

(ii)a nominee of, or any other person acting on behalf of, a minister, or

(iii)a company directly or indirectly controlled by a minister,

and

(b)no such rights are exercisable by or on behalf of a minister under any enactment.

(5)A company may revoke an opting-in resolution by a further special resolution (an “opting-out resolution”).

(6)For the purposes of subsection (3), a reference in Article 11 of the Takeovers Directive to Article 7.1 or 9 of that Directive is to be read as referring to rules under section 943(1) giving effect to the relevant Article.

(7)In subsection (4) “minister” means—

(a)the holder of an office in Her Majesty’s Government in the United Kingdom;

(b)the Scottish Ministers;

(c)a Minister within the meaning given by section 7(3) of the Northern Ireland Act 1998 (c. 47);

and for the purposes of that subsection “minister” also includes the Treasury, the Board of Trade, the Defence Council and the National Assembly for Wales.

(8)The Secretary of State may by order subject to negative resolution procedure provide that subsection (4) applies in relation to a specified person or body that exercises functions of a public nature as it applies in relation to a minister.

  • “Specified” means specified in the order.

967Further provision about opting-in and opting-out resolutions

(1)An opting-in resolution or an opting-out resolution must specify the date from which it is to have effect (the “effective date”).

(2)The effective date of an opting-in resolution may not be earlier than the date on which the resolution is passed.

(3)The second and third conditions in section 966 must be met at the time when an opting-in resolution is passed, but the first one does not need to be met until the effective date.

(4)An opting-in resolution passed before the time when voting shares of the company are admitted to trading on a regulated market complies with the requirement in subsection (1) if, instead of specifying a particular date, it provides for the resolution to have effect from that time.

(5)An opting-in resolution passed before the commencement of this section complies with the requirement in subsection (1) if, instead of specifying a particular date, it provides for the resolution to have effect from that commencement.

(6)The effective date of an opting-out resolution may not be earlier than the first anniversary of the date on which a copy of the opting-in resolution was forwarded to the registrar.

(7)Where a company has passed an opting-in resolution, any alteration of its articles of association that would prevent the second condition in section 966 from being met is of no effect until the effective date of an opting-out resolution passed by the company.

Consequences of opting in

968Effect on contractual restrictions

(1)The following provisions have effect where a takeover bid is made for an opted-in company.

(2)An agreement to which this section applies is invalid in so far as it places any restriction—

(a)on the transfer to the offeror, or at his direction to another person, of shares in the company during the offer period;

(b)on the transfer to any person of shares in the company at a time during the offer period when the offeror holds shares amounting to not less than 75% in value of all the voting shares in the company;

(c)on rights to vote at a general meeting of the company that decides whether to take any action which might result in the frustration of the bid;

(d)on rights to vote at a general meeting of the company that—

(i)is the first such meeting to be held after the end of the offer period, and

(ii)is held at a time when the offeror holds shares amounting to not less than 75% in value of all the voting shares in the company.

(3)This section applies to an agreement—

(a)entered into between a person holding shares in the company and another such person on or after 21st April 2004, or

(b)entered into at any time between such a person and the company,

and it applies to such an agreement even if the law applicable to the agreement (apart from this section) is not the law of a part of the United Kingdom.

(4)The reference in subsection (2)(c) to rights to vote at a general meeting of the company that decides whether to take any action which might result in the frustration of the bid includes a reference to rights to vote on a written resolution concerned with that question.

(5)For the purposes of subsection (2)(c), action which might result in the frustration of a bid is any action of that kind specified in rules under section 943(1) giving effect to Article 9 of the Takeovers Directive.

(6)If a person suffers loss as a result of any act or omission that would (but for this section) be a breach of an agreement to which this section applies, he is entitled to compensation, of such amount as the court considers just and equitable, from any person who would (but for this section) be liable to him for committing or inducing the breach.

(7)In subsection (6) “the court” means the High Court or, in Scotland, the Court of Session.

(8)A reference in this section to voting shares in the company does not include—

(a)debentures, or

(b)shares that, under the company’s articles of association, do not normally carry rights to vote at its general meetings (for example, shares carrying rights to vote that, under those articles, arise only where specified pecuniary advantages are not provided).

969Power of offeror to require general meeting to be called

(1)Where a takeover bid is made for an opted-in company, the offeror may by making a request to the directors of the company require them to call a general meeting of the company if, at the date at which the request is made, he holds shares amounting to not less than 75% in value of all the voting shares in the company.

(2)The reference in subsection (1) to voting shares in the company does not include—

(a)debentures, or

(b)shares that, under the company’s articles of association, do not normally carry rights to vote at its general meetings (for example, shares carrying rights to vote that, under those articles, arise only where specified pecuniary advantages are not provided).

(3)Sections 303 to 305 (members' power to require general meetings to be called) apply as they would do if subsection (1) above were substituted for subsections (1) to (3) of section 303, and with any other necessary modifications.

Supplementary

970Communication of decisions

(1)A company that has passed an opting-in resolution or an opting-out resolution must notify—

(a)the Panel, and

(b)where the company—

(i)has voting shares admitted to trading on a regulated market in an EEA State other than the United Kingdom, or

(ii)has requested such admission,

the authority designated by that state as the supervisory authority for the purposes of Article 4.1 of the Takeovers Directive.

(2)Notification must be given within 15 days after the resolution is passed and, if any admission or request such as is mentioned in subsection (1)(b) occurs at a later time, within 15 days after that time.

(3)If a company fails to comply with this section, an offence is committed by—

(a)the company, and

(b)every officer of it who is in default.

(4)A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

971Interpretation of this Chapter

(1)In this Chapter—

  • “offeror” and “takeover bid” have the same meaning as in the Takeovers Directive;

  • “offer period”, in relation to a takeover bid, means the time allowed for acceptance of the bid by—

    (a)

    rules under section 943(1) giving effect to Article 7.1 of the Takeovers Directive, or

    (b)

    where the rules giving effect to that Article which apply to the bid are those of an EEA State other than the United Kingdom, those rules;

  • “opted-in company” means a company in relation to which—

    (a)

    an opting-in resolution has effect, and

    (b)

    the conditions in section 966(2) and (4) continue to be met;

  • “opting-in resolution” has the meaning given by section 966(1);

  • “opting-out resolution” has the meaning given by section 966(5);

  • “the Takeovers Directive” means Directive 2004/25/EC of the European Parliament and of the Council;

  • “voting rights” means rights to vote at general meetings of the company in question, including rights that arise only in certain circumstances;

  • “voting shares” means shares carrying voting rights.

(2)For the purposes of this Chapter—

(a)securities of a company are treated as shares in the company if they are convertible into or entitle the holder to subscribe for such shares;

(b)debentures issued by a company are treated as shares in the company if they carry voting rights.

972Transitory provision

(1)Where a takeover bid is made for an opted-in company, section 368 of the Companies Act 1985 (c. 6) (extraordinary general meeting on members' requisition) and section 378 of that Act (extraordinary and special resolutions) have effect as follows until their repeal by this Act.

(2)Section 368 has effect as if a members' requisition included a requisition of a person who—

(a)is the offeror in relation to the takeover bid, and

(b)holds at the date of the deposit of the requisition shares amounting to not less than 75% in value of all the voting shares in the company.

(3)In relation to a general meeting of the company that—

(a)is the first such meeting to be held after the end of the offer period, and

(b)is held at a time when the offeror holds shares amounting to not less than 75% in value of all the voting shares in the company,

section 378(2) (meaning of “special resolution”) has effect as if “14 days' notice” were substituted for “21 days' notice”.

(4)A reference in this section to voting shares in the company does not include—

(a)debentures, or

(b)shares that, under the company’s articles of association, do not normally carry rights to vote at its general meetings (for example, shares carrying rights to vote that, under those articles, arise only where specified pecuniary advantages are not provided).

973Power to extend to Isle of Man and Channel Islands

Her Majesty may by Order in Council direct that any of the provisions of this Chapter extend, with such modifications as may be specified in the Order, to the Isle of Man or any of the Channel Islands.

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