Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Break fee definition

What does Break fee mean? A break fee (also called an inducement or termination fee) is a pre-agreed payment due if a proposed transaction terminates on specified triggers. In practice it allocates deal risk, helps cover due diligence, advisory and opportunity costs, and can deter conduct that would unreasonably cause the deal to fail. Typical triggers include a change of recommendation, acceptance of a superior offer, material breach, failure to obtain shareholder approval, or failure of conditions within a party’s control. A buyer‑payable “reverse break fee” is common where failure stems from merger control, financing or other bidder risks. The term is a descriptive expression used...

Offer-related arrangements under the UK Takeover Code: Rule 21.2 on break fees and deal protection—prohibitions, exceptions, schemes, Panel dispensations, disclosure and Listing Rules

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Practice notes

This Practice Note examines the ban on break fees and other deal protection devices (‘offer-related arrangements’) in Rule 21.2 of the City Code on Takeovers and Mergers (the Code), together with how Rule 21.2 applies to schemes of arrangement set out in Appendix 7. It also outlines the carve-outs to the general ban and the situations in which the Takeover Panel (the Panel) may permit departures, for instance in the context of competing offers or a formal sale process.

Background—Takeover Panel consultations

Since 11 September 2011, the Code has broadly prohibited break fees and similar deal protection measures in public takeovers, subject to specified exceptions. The restriction was introduced because the Panel was concerned that the growing use of inducement fee arrangements and other protections discouraged potential competing offerors and left offeree boards with little scope to advance or recommend a competing offer...

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Web page updated on 21/05/2026

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