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City Code on Takeovers and Mergers


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A code first laid down in 1968, and subsequently modified, giving the practices to be observed in company takeovers (see takeover bid) and mergers. It is administered by a panel (the Takeover Panel) including representatives from major financial and business institutions. The code does not have the force of law but the panel can admonish offenders and refer them to their own professional bodies for disciplinary action. It can also request the Financial Services Authority to enforce its decisions.

The code attempts to ensure that all shareholders, including minority shareholders, are treated equally, are kept advised of the terms of all bids and counterbids, and are advised fairly by the directors of the company receiving the bid on the likely outcome if the bid succeeds. Its many other recommendations are aimed at preventing directors from acting in their own interests rather than those of their shareholders, ensuring that the negotiations are conducted openly and honestly, and preventing a spurious market arising in the shares of either side. One of its rules is that if the number of shares controlled exceeds 30% of the total, a general offer should be made for all the shares in the business (see mandatory bid).

Under the Companies Act 2006 the Takeover Panel will be required to issue new rules to replace the City Code. These will incorporate articles of the EU's Takeover Directive (2005) and will have statutory authority.

Subjects: Economics.


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