Legal Practice Notes

This Practice Note examines conditions, pre-conditions and standard terms that commonly feature in public company takeover bids. It highlights the key categories—such as the acceptance condition, scheme-related conditions, and commercial and financial conditions—and sets out the constraints in the City Code on Takeovers and Mergers ( Code) on setting, triggering or waiving those conditions. It also outlines additional terms usually found in the offer document, including whether accepting shareholders may withdraw their acceptances. The Practice Note further provides a high-level overview of how the Code addresses competition references and regulatory clearances, while directing readers to Practice Note: Merger control and the Takeover Code for fuller guidance. Introduction A voluntary offer is ordinarily made subject to a customary suite of conditions, all of which must appear in the firm offer announcement. Each such condition should be clearly and fully stated in that...

This Practice Note This Practice Note outlines the law on quorum thresholds for a company’s general meeting or annual general meeting ( AGM) and reviews the minimum quorum requirements under the Companies Act 2006 ( CA 2006) and the Model Articles for private companies limited by shares and the Model Articles for public companies as contained in Schedule 1 and Schedule 3 to the Companies ( Model Articles) Regulations 2008, SI 2008/3229. A general meeting (including an AGM) must satisfy the applicable quorum (be quorate) for business to be validly conducted at the meeting. If the relevant quorum is not met (ie, the meeting is inquorate), any business conducted will be void. In practice, quorum provisions are often included in a company’s articles of association. Where the articles include no such provisions, the relevant provisions of CA 2006 will apply. During the...

This Practice Note is part of the Share purchase transaction collection Carrying out legal due diligence typically entails examining papers the seller provides in a data room or forwards to the buyer for assessment. This commonly covers a range of agreements (including specialist contracts), alongside records, ledgers and lists. On a share acquisition, corporate counsel will invariably scrutinise core corporate documentation, for example the company’s articles of association and its statutory books and records. The process must also comprise searches of public registers, for example Companies House and HM Land Registry. The disclosure letter will often include general disclosures reflecting what those public searches reveal; the buyer should require evidence of searches actually undertaken, not merely information that would have surfaced had a search been carried out. The buyer’s legal due diligence will typically concentrate on: title (the seller’s title to the sale shares, and title to key...

This Practice Note examines how directors exercise power and authority to take decisions, either collectively as the board or via a committee. It also addresses the statutory duties owed when making those choices, and matters particular to groups with shared directors. For convening board meetings—notice, what notices must contain, and who attends—see Practice Note: Directors’ decision-making—convening board meetings. For usual meeting conduct—the chair’s function, quorum and voting, declaring interests, reviewing papers and debate—see Practice Note: Directors’ decision-making—conduct at board meetings. For post‑meeting steps—preparing board minutes and subsequent administrative requirements—see Practice Note: Directors’ decision-making—post board meeting formalities. For decisions made by written resolution and by sole directors—see Practice Note: Directors’ decision-making—written resolutions and decisions by sole directors. Power and authority to make decisions The directors of a company are responsible for its day‑to‑day management. Their authority derives from the company’s articles of...

This Practice Note outlines the steps a private limited company must lawfully take to convert to an unlimited company (a re-registration from private limited to unlimited) under Part 7 of the Companies Act 2006 ( CA 2006). What is an unlimited company? An unlimited company is a body where members' liability to meet the company's obligations on a winding-up is not capped at any amount. An unlimited company cannot be a public company. It may, or may not, have a share capital (for example, a private company limited by guarantee can be re-registered as an unlimited private company without a share capital). For more information, see the Practice Note: Unlimited companies. Why re-register as an unlimited company? Members of unlimited entities forgo what is typically regarded as a principal benefit of incorporation, when compared with operating as a sole trader or a partnership: limited...

It is almost invariably sensible for the partners of a limited liability partnership ( LLP) to put in place a limited liability partnership agreement, both to prevent any unsuitable default rules under the Limited Liability Partnerships Act 2000 ( LLPA 2000) from automatically taking effect, and to augment the statutory legal regime where it is lacking. Default provisions The Limited Liability Partnerships Regulations 2001, SI 2001/1090 ( LLPR 2001) provide default terms that will govern how an LLP operates if, and to the extent that, there is no express agreement to the contrary......

What is environmental insurance? Environmental insurance shifts risk by indemnifying the policyholder for losses arising from potential environmental liabilities. For property-focused cover, the insured might be the purchaser, the vendor, or both. A standalone environmental policy is often necessary because public liability insurance commonly excludes environmental liabilities, except for sudden, unintended and unexpected pollution incidents. In addition, public liability usually responds only to third party damages and not to remediation of the insured’s own property. On-site remediation Off-site remediation Civil disputes Legal expenses Role of insurance Securing insurance can enable transactions or developments to progress where environmental risks and liabilities exist, by providing financial security and reducing uncertainty. It places the burden of liability with a suitable third-party insurer. Insurance can also support operators of high-hazard facilities in making financial provision for environmental loss. Key...

Borrowers can choose from a broad range of debt and capital structuring routes. Traditionally, senior debt (typically provided by banks) sat at the top, then mezzanine finance, followed by junior debt, each ranking ahead of unsecured creditors and shareholders/equity holders. After the 2007/8 credit crunch, businesses increasingly tapped capital markets and non-bank sources (eg private credit) to widen their funding, adding further layers of indebtedness. This Practice Note offers a straightforward overview of the different tiers of debt and security a restructuring lawyer may encounter. It outlines the financing layers and the forms of security commonly seen in practice by a restructuring lawyer. It also sketches how those tiers now sit together in practice. Capital structures and interplay between creditors Typically, external borrowings sit at the operating company ( Opco) level. The Opcos own the core business assets (eg premises, key...

Rule 8— Setting This Resource Note distils the chief provisions of Rule 8 of the City Code on Takeovers and Mergers, under which certain persons, during an offer period, must disclose their positions or dealings in relevant securities of the parties to the offer—either publicly, or in some cases privately to the Panel on Takeovers and Mergers ( Panel) only. No disclosure is required for positions or dealings in relevant securities of a cash offeror. It also signposts Panel materials, commentary and guidance, alongside Lexis+® UK analysis and resources, to provide practical direction on the interpretation and application of Rule 8. Practice Statements issued by the Panel Executive (the team handling the day‑to‑day work of takeover supervision and regulation) ( Executive), offering informal guidance on how the Executive typically interprets and applies the Code Panel Statements and Panel...

Treasury shares A limited company can acquire or otherwise deal in its own shares provided it meets the conditions in the Companies Act 2006 ( CA 2006). Any such shares are kept in treasury and are described as the company’s treasury shares. Beyond CA 2006, additional rules and guidance apply to listed and AIM companies. In particular, a listed company must consider the Listing Rules ( LRs) and the Disclosure Guidance and Transparency Rules ( DTRs). An AIM company must also have regard to the AIM Rules for Companies ( AIM Rules), although these do not expressly cover share buybacks; accordingly, AIM Regulation has indicated that following the LRs for buybacks will, in most cases, amount to best practice. An AIM company is also subject to DTR 5. In addition, both types of company may choose to follow guidance issued by...

General meetings and AGMs Members of a private company may adopt resolutions either at a general meeting of the company or by written resolution. By contrast, members of a public company may pass resolutions only at general meetings. Under the Companies Act 2006 ( CA 2006), there are two types of member meeting: general meetings and annual general meetings ( AGMs). A general meeting can be convened and held at any time, and as many times as needed within a year, to enable members to approve particular actions or implement specified changes. For companies incorporated under the Companies Act 1985, the articles of association may still refer to ‘extraordinary general meetings’, a label used to distinguish such ad hoc meetings from AGMs; however, the term ‘extraordinary’ does not appear in CA 2006......

Shares in a company can pass between holders in various situations, with a sale being the most typical example. a transfer arising on the granting or enforcement of security a transfer made as a gift a purchase by the company of its own shares transmission by operation of law (eg, on the death or bankruptcy of a shareholder) This Practice Note concentrates on the directors’ discretion to decline to register a transfer of certificated shares. Legal title to shares and equitable interests One or more individuals may hold a beneficial or equitable interest in shares while different persons hold the legal title. Where a recipient acquires an equitable interest before the legal title passes, this is commonly described as a transfer of the equitable/beneficial title to that person. For more on the relationship between legal title and equitable interests, see Practice Note: Transfer of...

Auction processes Auction processes are pivotal in particular industries; for example, in private equity, in government privatisations, and in other large‑value transactions, where they remain central to those transactions. Selling shares by way of auction is intended to trigger competitive bidding for the target among interested parties, achieving both the highest achievable price and securing the best possible terms. For the seller, there is strong certainty that completion will occur with a preferred bidder (which is preferable from management’s point of view). Auctions may involve numerous bidders, or be narrowed and targeted to a selected few bidders only. This will generally depend on the market in which the target company operates and the nature of its business, that is, the market it operates in and its business’s nature. Typically the seller directs the auction and appoints advisers to act for it—for instance, an...

Produced with input from Rebecca Cousin of Slaughter and May on market practice This Practice Note explores the step-by-step processes for effecting the purchase by a bidder (offeror) of all shares, or one or more share classes, in a target company (offeree) that it does not yet hold, using a scheme of arrangement under Part 26 of the Companies Act 2006 ( CA 2006) (scheme). Distinct from a takeover offer, a scheme creates no contract between the offeror and the offeree’s shareholders. Rather, it is a statutory device employed to deliver various corporate transactions. In a takeover setting, the offeree proposes the scheme to its shareholders, or to the relevant class holders, and so the offeree’s board will generally need to participate and co-operate. A scheme has hallmark features, most notably the requirement for approval by offeree shareholders at a...

Accounting treatment of joint arrangements, including joint ventures and associates This Practice Note sets out how to account for joint arrangements, encompassing joint ventures and associates. Although the relevant standards may appear straightforward, applying them in real life can be challenging, so what seems simple at first glance often proves complex in practice. IFRS and FRS 102 largely align, whereas old UK GAAP diverged markedly in several respects. Accordingly, this Practice Note touches on old UK GAAP only incidentally, because FRS 102 applies to accounting periods commencing on or after 1 January 2015 and will govern the overwhelming majority of present and forthcoming transactions that involve joint ventures and associates. Given the close similarity between FRS 102 and IFRS, we spotlight the principal differences instead of analysing each framework in depth. In practice, the main difficulties arise when determining the substance of an...

ARCHIVED: This Practice Note has been archived and is not maintained. A major overhaul of the UK listing regime took effect on 29 July 2024, removing the premium and standard listing segments and creating a single category for equity shares in commercial companies. This commercial companies category is strongly disclosure‑based and sits alongside other listing categories, such as: Shell companies Secondary listing Closed ended investment fund The UK Listing Rules sourcebook was brought in to implement these reforms, and the previous Listing Rules sourcebook has been revoked. For more detail, see Practice Note: Reform of the UK listing regime—fundamentals. That fundamentals note sets out the regime as it applied before 29 July 2024 and is retained for reference. This document explains class 1 transactions carried out by companies that formerly held a premium listing under the pre‑29 July 2024 regime. The prior Listing Rules have now...

This Resource Note summarises the principal features of Rule 18 of the City Code on Takeovers and Mergers ( Code). It addresses the basis on which an offeror may, as a condition of accepting an offer, require a shareholder to appoint a proxy to vote in respect of its shares, or to exercise other rights or take other action relating to those shares. It flags relevant materials, commentary and guidance from the Panel on Takeovers and Mergers ( Panel), together with Lexis+® UK analysis and resources, to provide practical guidance on interpreting and applying Rule 18. Materials covered in this Resource Note include: Practice Statements issued by the Panel Executive (the body that undertakes the day-to-day work of takeover supervision and regulation) ( Executive), offering informal guidance on how the Executive typically interprets and applies the Code Panel Statements published by the Panel ( P/ S) and Panel...

This archived Resource Note summarises the principal provisions of the iteration of Rule 31 of The City Code on Takeovers and Mergers (the Code) that applied to firm offers announced before 5 July 2021. It has not been updated since the Code was revised in July 2021. For details of the version of Rule 31 relevant to firm offers announced before 5 July 2021, see Resource Note: Takeover Code— Rule 31— Timing of the offer... Materials covered in this Resource Note include: Practice Statements issued by the Panel Executive (the body responsible for the day‑to‑day supervision and regulation of takeovers) ( Executive), offering informal guidance on the Executive’s usual interpretation and application of the Code Panel Statements ( P/ S) and Panel Instruments published by the Panel Public Consultation Papers ( PCP) and Response Statements ( RS) from the Code...

Resource Note This Resource Note sets out the principal elements of Rule 1 of The City Code on Takeovers and Mergers ( Code), which concerns the obligation on an offeror (or its advisers) to give the offeree board notice in the first instance of a firm intention to make an offer. It flags materials, commentary and guidance issued by the Panel on Takeovers and Mergers ( Panel), together with Lexis+® UK analysis and resources, to provide practical direction on the interpretation and......

To ensure takeovers of listed companies are policed efficiently and impartially, the City Code on Takeovers and Mergers ( Code) prescribes a precise schedule detailing the actions required of the offeror and the offeree as a bid moves from first announcement to the ultimate payment of consideration if it succeeds, and specifies the relevant deadlines throughout. Where a prospective offeror issues a 'no intention to bid' statement, or an offer subsequently lapses, is withdrawn, or otherwise fails, it remains just as vital that all parties have clarity about the conduct permitted and the actions prohibited thereafter. Above all, the offeree should be free to continue running its business without undue doubt or additional disturbance, allowing normal operations......