Q&As

Does the definition of 'associate' extend to an individual for the purposes of the compulsory squeeze-out provisions in CA 2006, ss 974–982?

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Published on LexisPSL on 12/03/2015

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • Does the definition of 'associate' extend to an individual for the purposes of the compulsory squeeze-out provisions in CA 2006, ss 974–982?
  • Background
  • Definition of ‘associate’
  • Takeover Code observations
  • Case law

Does the definition of 'associate' extend to an individual for the purposes of the compulsory squeeze-out provisions in CA 2006, ss 974–982?

Your question concerns the definition of ‘associate’ in CA 2006, s 988 and the interesting issue of whether this definition can or should extend to an individual (X) who is the sole shareholder of a corporate bidder (B) in the context of an offer for a target (T) in which X is also a shareholder.

We have assumed for the purpose of this response that the shares in T were acquired by X prior to the date of the bid.

Background

A bidder is entitled to exercise the compulsory acquisition procedure in CA 2006, ss 974–982 if it has acquired (or unconditionally contracted to acquire) 90% of the shares to which the offer relates and 90% of the voting rights carried by those shares. Under CA 2006, s 977(2), ‘shares to which the offer relates’ do not include shares that an associate of the bidder holds at the date of the offer, even if the offer extends to such shares.

If X is an associate of B, his T shares will be ignored in calculating the 90% threshold, and the required level of acceptances will be 90% of a correspondingly lower proportion of T’s share capital, thus making it harder to achieve.

Definition of ‘associate’

The full definition

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