After more than 14 years of discussion at the European Level, the European Directive on Takeover Bids (the "Takeover Directive") was finally approved in Europe in April 2004 and is to be implemented by Member States by 20 May 2006. The main implementing provisions are contained in Part 22 of the Company Law Reform Bill (the "Bill"). As the Bill is not expected to come into force until next year, the Government has had to meet the 20 May 2006 deadline by bringing in interim regulations, the Takeover Directive (Interim Implementation) Regulations 2006 to implement the Takeover Directives minimum requirements. Once the Bill is enacted the interim regulations will fall away.
Most of the rules relating to takeovers will still be found in the Code, but from 20 May 2006 until enactment of the Bill there will, in effect, be a dual track regime with the interim regulations applying to certain transactions but not to others (which will remain governed by the Code). The transactions caught by the interim regulations will be takeovers of a company incorporated in the UK, Channel Islands or Isle of Man whose shares are traded on a "regulated" market (most notably the Official List). Companies traded on AIM are not caught by the interim regulations but will continue to be caught by the Code in the way they potentially are at the moment. In practice there should be little meaningful difference between the two regimes. The key differences between the regulations and Part 22 of the bill are:-
- types of transaction – as mentioned, the regulations catch only those with shares listed on a regulated market, such as the Official List. AIM Companies will not fall under the regulations provisions, but remain (if the other conditions set out in the Code are met) subject to the general takeover provisions set out in the Code.
- Panel's rule making power – the Bill gives the Panel power to make rules. They will not be able to exercise this power until the Bill is enacted;
- Squeeze-out and sell out – the regulations contain squeeze out and sell-out provisions as per the Directive, but the Bill has additional changes recommended by the Company Law Review; and
- Certain offences – certain provisions will be restricted to those covered by the Directive.