The Takeover Panel (the "Panel") recently amended the Introduction
to The City Code on Takeovers and Mergers (the "Code"). These
amendments reflect certain changes to the membership of the Panel
and in the procedures of the Panel itself.
Following its incorporation as a public company,
the London Stock Exchange is no longer a member of the Panel. The
Association of Private Client Investment Managers and Stockbrokers
and the Fund Managers' Association have joined the Panel and the
Securities Trading Committee of the London Investment Banking
Association has been given separate representation.
The changes to Panel procedures in the most part
are driven by the requirements of the Human Rights Act 1998 (the
"HRA") which came into force in England and Wales on 2 October
The HRA effectively incorporates into domestic law
almost all of the rights and freedoms contained in the European
Convention on Human Rights (the "Convention").
At the centre of the HRA are "public authorities"
which must not act in a manner that is incompatible with Convention
rights (HRA, section 6). These are the rights and fundamental
freedoms specified in section 1, HRA. Although it is not clear from
the legislation whether or not the Panel is a "public authority"
under the HRA, the Code now says that the Panel operates in
accordance with the requirements of the HRA. It appears therefore
that the Panel, without expressly accepting that as a matter of law
it is a "public authority", will operate, for HRA purposes, on the
basis that it is a "public authority" and seeks to act, and
discharge its functions, in a manner compatible with Convention
rights. This has necessitated amendments to the Introduction to the
Code to reflect the HRA.
Aspects of the HRA (in addition to section 6
mentioned above) which are likely to be of greatest relevance to
the operations and procedures of the Panel, include:
- Where a public authority infringes the Convention rights of a
private party, that party may bring proceedings against the
authority in an appropriate court or tribunal. In addition that
party can rely on its Convention rights in any proceedings brought
against him by the authority (HRA, section 7);
- So far as it is possible to do so, primary legislation and
subordinate legislation must be read and given effect to in a
manner that is compatible with Convention rights (HRA, section 3);
- Any court or tribunal determining a question that has arisen in
connection with a Convention right will be bound to comply with the
"right to a fair trial". It must also take into account the case
law of the European Court of Human Rights and certain other
Strasbourg bodies (HRA, section 2).
Particular changes to the Introduction to the Code
The Panel has established a Code Committee to keep
under review and, where appropriate, amend the substantive
provisions of the Code and The Rules Governing Substantial
Acquisitions of Shares (the "SARs"). The Code states that the Panel
may delegate its rule making function concerning amendments to the
Code and the SARs to the Code Committee whose members would not
normally participate in Panel hearings. There is thus a separation
of the rule making and tribunal functions. The Code Committee will
normally consult publicly on any proposed amendments to the Code.
Historically the Panel tended to seek views on proposed alterations
on a much more informal basis.
Conditional and unconditional rulings
Parties can obtain rulings from the Panel Executive
(the body that is responsible for the general administration of the
Code) on a conditional (ex parte) or unconditional basis. If the
Executive has not heard the views of all the parties involved (for
example because that is the preference of the applicant) it may
only give a conditional ruling (on an ex parte basis). A
conditional ruling may be varied or set aside when any views of the
other parties have been heard. Obviously, if the Executive is able
to hear the views of the other parties involved it may give an
unconditional ruling. As a practical matter, it is going to be very
important that a party is made aware if a ruling is conditional and
that there is a possibility of it being set aside. A party can then
take account of this risk in any decision it makes as to whether to
Appeals to the Panel
If a party or his adviser wishes to contest a
ruling of the Executive he has the right to request that the matter
be re-considered by the Panel. Previously the Code gave such person
the right to ask for the matter to be re-considered by the Panel).
The Panel (or its Chairman) retains a discretion to deal summarily
with frivolous or vexatious appeals.
The Panel will allow parties to be represented at
Panel hearings by legal advisers. Although not expressly
prohibited, the Code had said that the Panel’s normal
practice was not to allow presentation of a case by lawyers.
Proceedings before the Panel will usually remain
private unless the Chairman, at his discretion, directs otherwise.
However, parties are now entitled to request that the hearing be
held in public and such request will be ruled upon by the Chairman
(or at his discretion the Panel itself). If a hearing is held in
public, the Chairman has the discretion to direct that the Panel
hears part or parts of the hearing in private. It will be
interesting to see whether any parties do request a public hearing
(and if they do how this is handled by the Panel). In the case of
disciplinary hearings, it is difficult to envisage that many people
will elect to have their dirty linen aired in public. However, in
the context of a takeover bid a party may in certain circumstances
consider that a public hearing would be to his tactical advantage.
Equally, the possibility of a public hearing being requested by
another party (and granted) may become a factor in considering
whether to request a Panel hearing in the first place.
The Chairman has the power to deal with, and
resolve, possible conflicts of interest of any members of the Panel
attending a hearing. The Chairman has the same power in respect of
any other objections raised by the parties.
The proceedings will be tape recorded (for the
administrative assistance of the Panel only) and a transcript
normally made. This transcript can be given to the parties on
request subject to conditions, for example, as to its
confidentiality and use.
The requirement for the Panel to announce its
decision to the parties immediately as informal guidance has been
removed. The Panel will provide its reasoned decision to the
parties in writing as soon as practicable after the hearing,
followed by a public statement. The Panel may make a separate
public statement of its decision (without providing reasons) in
advance of the publication of its reasoned decision.
The Appeal Committee
For those cases where the Code does not expressly
provide an automatic right of appeal of a Panel decision to the
Appeal Committee, the leave of the Panel is required. The Chairman
(or, at the discretion of the Chairman, the Panel) may now
stipulate the time for making applications for leave to appeal to
the Appeal Committee. If no time is stipulated, applications must
be made within two business days of receiving the reasoned
decision. The application is determined by the Chairman (or, at the
discretion of the Chairman, by the Panel itself). Leave to appeal
may be granted, amongst other things, if the Chairman (or the Panel
if it is hearing the application) considers that the case is one of
general importance or one which for some other special reason
should be considered by the Appeal Committee.
Notice of appeal must be given within the time
stipulated on the grant of leave to appeal. In the absence of such
a stipulation, notice must be given within two business days of the
grant of leave (where leave is required). In other cases notice
must be given within two business days of receipt of the reasoned
The Panel will no longer normally suspend
publication of the reasoned decision whilst the decision is being
taken whether or not to give notice to appeal although it may still
choose to do so. Whether any suspension will continue if there is
an appeal to the Appeal Committee is at the Chairman’s
The quorum for the Appeal Committee is three. The
restrictions on when the Appeal Committee can hear new evidence
have been removed although the Code still says that the Appeal
Committee does not normally hear new evidence.
For further information please see Takeover Panel
Statement 2001/3 or contact Nick Callister Radcliffe (who was
seconded to the Takeover Panel for 2 years up to September 2000) on
44 (0)20 7367 2394 or by e-mail: