Impact of the Takeover Directive on the Takeover Code Noel Hinton Deputy Director General The Takeover Panel 11 July 2006

Background –Panel established in 1968 –Non statutory, self regulation –General Principles and Rules –7000 offers

Directive Timetable July 1989Discussions start April 2004Passed January 2005DTI Consultation Paper published Panel Explanatory Paper published April 2005Responses to Papers in July 2005Draft clauses for legislation tabled November 2005Draft legislation – Company Law Reform Bill – published Panel Consultation Paper published March 2006Responses to Panel Consultation Paper in May 2006Deadline for Implementation

Implementation in the UK – Main Tasks −Impact on the Panel System −Changes to the Code −Articles 9 and 11 −Other Company Law / Regulatory Issues

The Panel’s Objectives –Retain benefits of current system Speed, flexibility and certainty Panel’s independence Everything in the Code –Give all necessary powers to Panel –Preserve Panel system for non-Directive companies

Key Issues - Framework −Primary legislation –Panel “authorised body” with full rule-making power –Directive applies to listed companies (no residency test) –Article 4(2) Joint Jurisdiction –Code still applies to non-Directive companies

Key Issues – Panel Constitution –Independence retained –Continued separation of rule-making and appeal-hearing functions –Maintain nominating bodies and secondment system –New Nomination and Remuneration Committees –Role of Executive unchanged –Compliant with Human Rights legislation

Key Issues – Panel’s Powers and Sanctions –Remedy problem first, sanctions afterwards –Inter-regulator co-operation – Article 4(4) –Information-gathering powers –Compliance and compensation rulings –Other sanctions unchanged

Key Issues – General Principles and Dispensations –Current Code – 10 General Principles –Article 3 – 6 General Principles –Article 4(5) – Derogations “respecting” General Principles –Existing Panel flexibility unaffected

Changes –Introduction –Jurisdiction –General Principles –Employees –Cash confirmation –Frustrating action

Summary –Speed Panel system essentially unchanged Panel formalises Committee structure Same Executive composition –Certainty Minimise tactical litigation –Flexibility Article 4(5) – scope for discretion Same “style” to Code – need to consult Executive

Conclusion –Business as usual?