Mandatory offers under Rule 9 of the Code
Mandatory offers under Rule 9 of the Code

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Mandatory offers under Rule 9 of the Code
  • The nature of a mandatory offer
  • Triggers to a mandatory offer
  • Acting in concert
  • Terms of a mandatory offer

The nature of a mandatory offer

This Practice Note is part of the Corporate toolkit for public company takeovers structured as contractual offers.

Most takeover offers are voluntary, in the sense that the offeror elects to make a bid for control of a company (or for a class of its shares), usually after careful consideration and preparation, and (subject to some restrictions) chooses the consideration to be offered and the conditions to be attached.

However, under Rule 9 of the Code a person may be required to make a cash offer for a company where the interests of that person and its concert parties in the offeree cross certain thresholds.

Mandatory offers are in practice infrequent, as they are generally considered as something to avoid. The UK Panel on Takeovers and Mergers (Panel) identified in its Annual Report for the year ended 31 March 2018 that only three mandatory offers were made in that period compared with a total of two mandatory offers for the year ended 31 March 2017.

The importance of Rule 9 lies in the effect that the existence of the Rule has on investor behaviour, in particular:

  1. by restricting the advantages of acquiring more than 30% of the voting rights in a company (the level at which the Code recognises control of a company as passing)

  2. through the