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This week’s edition of Corporate highlights includes news analysis of the Takeover Panel’s ruling that Disney will need to make a mandatory offer following the acquisition of Twenty-First Century Fox, concerns over the failure of FTSE 350 companies to meed gender diversity targets and the case in which the Supreme Court defines the scope of Wrotham Park (negotiating) damages. We also have a Market Tracker dividends trend report in the pipeline.
The Takeover Panel (Panel) has ruled that following the completion of the acquisition by Disney of Twenty-First Century Fox, Disney will be required to make a mandatory offer for Sky pursuant to Rule 9.1 of the Takeover Code (Code). The ruling is an example of the so-called ‘chain principle’ under the Code.
The ‘chain principle’ is dealt with under Note 8 on Rule 9.1 of the Code. Under this principle, an obligation to make a mandatory offer can arise where a person acquires 50% or more of the voting rights of a company (which need not be a company to which the Code applies) and, as a result, acquires or consolidates control of another company to which the Code does apply, by virtue of the first company's interest in that second company.
In its ruling the Panel said it considered that securing control of Sky might reasonably be considered to be a significant purpose of Disney’s acquiring control of Fox and that therefore Disney should be required to make a mandatory offer following completion of the acquisition. The Panel ruling also provides clarity on further ruled that the Offer must be at £10.75 in cash for each ordinary share in Sky.
For further information, see Panel confirms that Disney will need to make mandatory offer following Fox acquisition.
The Investment Association (IA) and the Hampton-Alexander Review have called for change, as figures show one in ten FTSE 350 companies have fallen below gender diversity targets. The IA and the Hampton-Alexander Review have written to 35 of the FTSE 350 questioning their low female representation at leadership level.
They call on businesses to take ‘swift action’ to ‘urgently address gender diversity’ within their companies and argue that diverse companies ‘typically outperform their less diverse peers and make better long-term decisions’.
For further information, see LNB News 17/04/2018 111.
The government has launched an independent review to examine the role and powers of the Financial Reporting Council (FRC), the regulator for auditors, accountants and actuaries. The review—to be led by Sir John Kingham—will assess the FRC’s governance, impact and powers, to help ensure it is fit for the future. The review is scheduled for completion by the end of 2018.
Responding to the announcement, the chair of the FRC, Sir Win Bischoff, has welcomed the review, which he believes will ensure the FRC is best placed to support UK efforts to attract investment in business for the long term.
For further information, see LNB News 17/04/2018 46.
The Supreme Court has allowed the appeal of the defendants on the assessment of damages for breach of non-compete and non-solicitation covenants in the sale of a business providing ‘supported living’ services for children leaving care and vulnerable adults. The courts below had erred in assessing the award of damages on a so-called Wrotham Park basis and the case will now be remitted to the High Court for a hearing on quantum to measure the claimant’s actual financial loss. Christopher Hare, barrister at Guildhall Chambers explains that the decision is important as it clarifies the nature of Wrotham Park awards and the circumstances in which they may be appropriate.
For further information, see LNB News 18/04/2018 89
The case of LRH Services Ltd (in liquidation) v Trew underlines that a company and its directors must take great care when reviewing information leading to the making of a solvency statement under the Companies Act 2006. Failure to do so has the potential for criminal repercussions and possible personal liability in the future. Rebecca Zaman, of 3 Verulam Buildings, explains a case that offers clarity for insolvency practitioners.
For further information, see Of debts and dividends (LRH Services Ltd v Trew).
In this case the High Court ruled that a company’s affairs had been conducted in a manner unfairly prejudicial to the interests of the petitioners as members. The court rejected the respondents' contention that there had been unanimous consent of the company's shareholders, such as to authorise or ratify any steps taken to transfer the company's business and assets to the respondents under the ‘Duomatic principle’. It was clear that, in order to rely on informal consent by shareholders as authorising, waiving or ratifying any such acts, the shareholders had to have given their consent with full knowledge of the relevant facts.
For further news, see Sandhu and another v Nagra and others.
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We have in the pipeline the Market Tracker Trend Report: Dividends. This Lexis®Nexis Market Tracker Trend Report looks at market practice across the FTSE 350 for payment of final, interim and special dividends. We have looked at:
New Q&As added this week:
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