With input from our Corporate Finance Committee, which is comprised of senior representatives from across the banking sector with expertise in mergers and acquisitions, we analysed and responded to the Panel’s proposals.

• PCP 2022/2, ‘Presumptions of the Definition of “Acting in Concert” and Related Matters’.

The proposed amendments in this consultation seek to better reflect the current practice of the Panel and consider the changes in investment markets since the current Code rules were introduced.

The Code currently defines acting in concert as persons who, pursuant to an agreement or understanding (whether formal or informal), cooperate to obtain or consolidate control of a company or to frustrate the successful outcome of an offer for a company.

The Code also sets out nine categories of persons who are presumed to be acting in concert with other persons in the same category unless the contrary is established. The Code treats persons acting in concert as a single person. In effect, dealings in securities by one person within any of these nine categories could have implications for this person and others in the same category. .

At present, presumption (1) sets out the circumstances in which companies are presumed to be acting in concert with each other. In this consultation, the Panel proposes certain amendments to this presumption. According to presumption (1), a company, its parent, subsidiaries and fellow subsidiaries, and their associated companies, and companies of which such companies are associated companies, all with each other are presumed to be acting in concert. Ownership or control of 20 per cent or more of the equity share capital of a company is regarded as the test of associated company status.

The key changes proposed with respect to presumption (1) include the following

• Threshold: Amendments to the Code propose to raise the threshold in presumption (1) of the definition of “acting in concert” from 20 per cent to 30 per cent. This will align it with the threshold for the existing definition of control in the Code.
• Two presumptions: Current presumption (1) would be replaced with two new presumptions (found on p.16, section 2.1 of the consultation paper). Entities can be presumed to be acting in concert under either or both of them.
• Scope: New presumptions (1) and (2) would include other controlling shareholders (e.g. individuals, limited partnerships, and trusts), reflecting current Panel practice.
• Rebuttal of presumptions: Owing to the proposed increase in threshold, the Panel notes that the evidence a person would need to rebut an acting in concert claim would need to be greater than previously required.

The UK Finance view

In responding to the proposals made by the Panel in respect of the Code, our Corporate Finance Committee considered the impact of the increase in the acting in concert threshold in presumption (1), on existing safeguards afforded to target companies. The Committee also highlighted a few areas where market participants would benefit from further guidance from the Panel as to how the new acting in concert presumptions would operate. Our response is published here.

A helpful webinar put on by the Panel, provides a useful set of slides with case studies for practitioners to review and better interpret the proposed changes.

Next steps

The consultation closed on 23 September. The Panel expects to publish a Response Statement setting out the final amendments to the Code in late 2022, amendments to the Code will come into effect approximately two months after the publication of that Response Statement.

For more information, please contact: avanthi.weerasinghe@ukfinance.org.uk and alastair.campbell@ukfinance.org.uk.