UK: the regulation of takeovers - Takeover Panel consultation paper published

The Takeover Panel Code Committee has published a wide-ranging consultation paper titled Review of Certain Aspects of the Regulation of Takeover Bids: see here (pdf).

The issues discussed include: the minimum threshold of acceptance for a bid by the offeree company shareholders (is the current “50% plus one” too low?); whether voting rights should be withheld from shares in an offeree company acquired during the course of an offer period; the level of information provided by offerors in relation to the financing of takeover bids; and whether protections similar to those afforded by the Code to offeree company shareholders should be afforded to shareholders in an offeror company.

The consultation paper is unusual because the Committee has departed from its usual practice of setting out proposals and draft amendments to the Code. The Committee has, instead, set out background information for each of the issues and the arguments for and against possible change, in order to instigate further debate. Further consultation papers will be published should the debate establish that there is a case for change in respect of the issues covered.

The Secretary of State for the Department for Business, Innovation and Skills - the Rt Hon Dr Vince Cable MP - welcomed the publication of the consultation paper and stated:

Getting the UK takeover framework right for the future is an important step in Government efforts to renew and reform the way markets work. This is not about economic nationalism. Open markets have made a huge contribution to growth in the UK over the past 30 years and must continue to do so in the future. We welcome foreign investors but we want all shareholders to be empowered, the takeover process to be more transparent, directors to think about their wider long term legal duties, and takeovers to be decided on the basis of long term shareholder value rather than short-term speculation. The Takeover Panel's work can play an important part in realising these goals".

UK: objecting to a company's registered office address - BIS consultation

The Department for Business, Innovation and Skills has published a consultation paper - see here (pdf) - in which it states that there is "some evidence that companies may incorrectly use, as their registered office address, the address of another business or private individual with whom they have no connection". The consultation paper seeks views on whether, and if so how, the law should be changed to deal with this problem.

UK: notices of auditors leaving office - BIS consultation

The Department for Business, Innovation and Skills has today published a consultation paper concerning the simplification of the arrangements for the provision of information when an auditor leaves office: see here (pdf). In particular, the Government is seeking views on:

• removing the duty to notify audit authorities of an auditor’s departure in some cases where it is of little interest to those authorities;
• removing the duty on the audit authorities to notify the accounting authorities of all auditor departures of which they are informed;
• whether there should be any changes to requirements for information to be provided to investors when auditors leave listed companies;
• removing the need for companies to notify Companies House in certain cases of auditor departure; and 
• simplifying the legislation by clarifying definitions.
  

UK: statements of capital under the Companies Act (2006) - BIS consultation

The Department for Business, Innovation and Skills has published a consultation paper concerning the financial information required in statements of capital under the Companies Act (2006). The consultation highlights problems with the current requirements - some of which were highlighted by ICSA earlier this year - and sets out a proposed response involving changes in the Act which BIS believes would simply the information required and avoid the need to disaggregate any information below the level of class of share.

UK: OECD Guidelines for Multinational Enterprises - BIS consults on review's terms of reference

The Department for Business, Innovation and Skills has published a consultation paper regarding the terms of reference for an update of the OECD Guidelines for Multinational Enterprises. The purpose of the consultation is to develop a UK position with regard to the scope of the OECD's review.

UK: Lord Mandelson on institutional shareholders and the long-term

Lord Mandelson, the Secretary of State for the Department of Business, Innovation and Skills, has contributed a short comment article to the FT.com website titled "Britain needs investors for the long-term". In his article, Lord Mandelson states:

[Today] I am holding a roundtable discussion with senior investors, fund managers, company chairmen and chief executives to ask if London can set a new standard for high-quality, long term engagement between investors and company directors.

... In recent years the UK government has carried out a number of significant reforms to the corporate governance regime to encourage the right kind of long-termism among company directors. We need an equivalent focus on the long term among company owners, especially those represented by institutional shareholders, who should naturally take a long-term view.

... Reviews of corporate governance by Sir Christopher Hogg and Sir David Walker have started to pose the right questions about getting the right balance between the short and long term. The UK’s new Stewardship Code, on which the Financial Reporting Council is about to consult, must address them". 

UK: Mandelson to meet with institutional investors

Against the background of Kraft's hostile bid for Cadbury, the Financial Times and Times newspapers report (see here and here) that Lord Mandelson, the Secretary of State for the Department of Business, Innovation and Skills, will be meeting with institutional shareholders tomorrow to discuss their role in takeovers. According to the Times report:

A top-level delegation from the Department for Business, Innovation & Skills (BIS) ... will ask Britain’s biggest institutional investors to show “stewardship” by taking a firmer line against opportunistic takeover bidders attempting to pick up listed companies on the cheap".

Takovers were also the subject of a public hearing yesterday organised by the Business, Innovation and Skills Parlimentary Committee. The meeting can be viewed here.

UK: Lord Mandelson's speech to the Work Foundation

In a speech delivered yesterday at the Work Foundation,  Lord Mandelson, the Secretary of State for the Department of Business, Innovation and Skills, stated that his Department was reviewing whether changes introduced by the Companies Act (2006) - including the introduction of Section 172, which sets out the duty of directors to promote the success of the company - had changed boardroom behaviour. Lord Mandelson had much more to say, including: 

... we need to start a debate about how we build a stronger culture of long term commitment to sustainable company growth in this country, based on a strong compact between institutional shareholders and the corporate sector. On one hand we need a system that enables shareholders to discipline poor management. But we also need to give management some scope to plan and build without the excessive demands for quick returns that characterise too much modern public company ownership.

I don’t have any easy answers. Our reforms of company law made clear the importance of directors taking a long term view. At the same time we have empowered shareholders. We are now evaluating whether this has changed behaviour in the board room – and among investors.

Chris Hogg has played a key role in this debate with his review of corporate governance, and it is time for Britain to take a long hard look at the questions he and others have raised. I attach the highest importance to the new Investor Code and will be meeting investors and companies next week in the run up to the further consultation by the Financial Reporting Council.

Takeovers provide a very clear test here - for all involved. Companies making acquisitions should set out transparently and publicly their long term plans for the assets they propose to acquire, including company headquarters, R&D sites and main plants. Although these remain commercial decisions, firms or investors should expect to brave the court of public opinion if they are motivated only by short term profit.

Surely investment managers should be judged on their long term growth and profitability, not their short term performance – and the same goes for CEOs. How many strategic and effective managers are being hobbled with the quarterly race to please the beauty contest of the markets?