Acting in concert

This definition has particular relevance to mandatory offers and further guidance with regard to behaviour which constitutes acting in concert is given in the Notes on Rule 9.1.

Persons acting in concert comprise persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control (as defined below) of a company or to frustrate the successful outcome of an offer for a company. A person and each of its affiliated persons will be deemed to be acting in concert all with each other (see Note 2 below).

Without prejudice to the general application of this definition, the following persons will be presumed to be persons acting in concert with other persons in the same category unless the contrary is established:

1. a company (“X”) and any company which controls#, is controlled by or is under the same control as X, all with each other;

2. a company (“Y”) and any other company (“Z”) where one of the companies is interested, directly or indirectly, in 30% or more of the equity share capital in the other, together with any company which would be presumed to be acting in concert with either Y or Z under presumption (1), all with each other;

3. a company’s pension schemes, and the pension schemes of any company with which the company is presumed to be acting in concert under presumption (1) or (2), with the company;

4. the directors of a company (together with their close relatives and the related trusts of any of them) with the company;

5. an investment manager of or investment adviser to:

   1. an offeror;

   2. an investor in a new company (or other vehicle) formed for the purpose of making an offer; or

   3. the offeree company,

   with the offeror or offeree company (as appropriate), together with any person controlling#, controlled by or under the same control as that investment manager or investment adviser;

6. a connected adviser with its client and, if its client is acting in concert with an offeror or the offeree company, with that offeror or offeree company respectively, in each case in respect of the interests in shares of that adviser and persons controlling#, controlled by or under the same control as that adviser (except in the capacity of an exempt fund manager or an exempt principal trader);

7. the directors of a company which is subject to an offer or a possible offer (together with their close relatives and the related trusts of any of them) from the beginning of the relevant period as defined in Rule 21.1(b) or, where Note 9 on Rule 21.1 applies, from the beginning of the offer period. (See also Note 5);

8. a person, the person’s close relatives, and the related trusts of any of them, all with each other;

9. the close relatives of a founder of a company to which the Code applies, their close relatives, and the related trusts of any of them, all with each other; and

10. shareholders in a private company or members of a partnership who sell their shares or interests in consideration for the issue of new shares in a company to which the Code applies, or who, in connection with an initial public offering or otherwise, become shareholders in a company to which the Code applies.

For the purposes of presumptions (1) and/or (2):

1. a reference to a company includes any other undertaking (including a partnership or a trust) or any legal or natural person;

2. under presumption (1), interests of either 30% or more in a company’s shares carrying voting rights or the majority of a company’s equity share capital do not dilute through a chain of ownership;

3. under presumption (2), interests of 30% or more in a company’s equity share capital dilute through a chain of ownership;

4. the reference in presumption (2) to a company being “indirectly” interested in the equity share capital in another company refers only to the economic rights attached to such shares and not to any voting rights carried by such shares; and

5. except for the purposes of establishing whether a person is acting in concert with a new company (or other vehicle) formed for the purpose of making an offer (see paragraph (a) of Note 7 below), if an investor invests in a fund or company and that fund or company in turn invests in another fund or company, the investor’s indirect interests in the latter fund or company will (in addition to the investor’s direct interests) only be taken into account in determining whether the investor and that fund or company are presumed to be acting in concert under presumption (2) if each link in the chain of interests represents 30% or more of the relevant fund’s limited partnership interests or the relevant company’s equity share capital.

See also Rule 7.2.

#See the Note on Definitions at the end of the Definitions Section.

NOTES ON ACTING IN CONCERT

Break up of concert parties

Where the Panel has ruled that a group of persons is acting in concert, it will be necessary for clear evidence to be presented to the Panel before it can be accepted that the position no longer obtains.

Affiliated persons

For the purposes of this definition an “affiliated person” means any undertaking in respect of which any person:

1. has a majority of the shareholders’ or members’ voting rights;

2. is a shareholder or member and at the same time has the right to appoint or remove a majority of the members of its board of directors;

3. is a shareholder or member and alone controls a majority of the shareholders’ or members’ voting rights pursuant to an agreement entered into with other shareholders or members; or

4. has the power to exercise, or actually exercises, dominant influence or control.

For these purposes, a person’s rights as regards voting, appointment or removal shall include the rights of any other affiliated person and those of any person or entity acting in their own name but on behalf of that person or of any other affiliated person.

Underwriting arrangements

The relationship between an underwriter (or sub-underwriter) of a cash alternative offer and an offeror may be relevant for the purpose of this definition. Underwriting arrangements on arms’ length commercial terms would not normally amount to an agreement or understanding within the meaning of acting in concert. The Panel recognises that such underwriting arrangements may involve special terms determined by the circumstances, such as weighting of commissions by reference to the outcome of the offer. However, in some cases, features of underwriting arrangements, for example the proportion of the ultimate total liability assumed by an underwriter, the commission structure or the degree of involvement of the underwriter with the offeror in connection with the offer, may be such as to lead the Panel to conclude that a sufficient level of understanding has been created between the offeror and the underwriter to amount to an agreement or understanding within the meaning of acting in concert. In cases of doubt, the Panel should be consulted.

Other statutory or regulatory provisions

This definition applies only in respect of the relevant provisions of the Code. Any Panel view expressed in relation to “acting in concert” can only relate to the Code and should not be taken as guidance on the interpretation of any other statutory or regulatory provisions.

Standstill agreements

Agreements between a company, or the directors of a company, and a person which restrict that person or the directors from either offering for, or accepting an offer for, the shares of the company or from increasing or reducing the number of shares in which the person or the directors are interested, may be relevant for the purpose of this definition. However, the Panel will not normally consider the parties to the agreement to be acting in concert provided that the agreement does not restrict any of the parties from either:

1. accepting an offer for the company’s shares at any stage; or

2. agreeing to accept any offer for the company’s shares either before or after its announcement.

The same approach will normally apply to an agreement to which the company’s financial adviser or nominated adviser and/or its sponsor and/or underwriter, rather than the company itself (and/or its directors), is a party, for example, an agreement entered into at the time of an equity offering with a view to ensuring an orderly aftermarket in the company’s shares.

Where parties intend to enter into standstill agreements to which neither the company (and/or its directors) nor its financial adviser or nominated adviser, its sponsor or underwriter is a party (for example, an agreement between two shareholders), or in any other cases of doubt, the Panel should be consulted in advance.

Offer by a consortium offeror

1. Where an offeror is a new company (or other vehicle) formed for the purpose of making the offer (a “consortium offeror”):

   1. each shareholder (or other investor) in the consortium offeror; and

   2. save as described in this Note, any person presumed to be acting in concert with that shareholder (or other investor) under presumption (1),

   will be presumed to be acting in concert with the consortium offeror.

2. Where a person presumed to be acting in concert with the consortium offeror is part of a larger organisation, the Panel may, depending on the circumstances of the case, agree to disapply the presumption in relation to the members of that larger organisation (see paragraphs (c) and (d)).

3. Where the investment is, or is likely to be, 10% or less of the equity share capital (or other similar interests) in the consortium offeror, the Panel will normally disapply any presumption that the members of the larger organisation are acting in concert with the consortium offeror, provided it is satisfied as to their independence from the relevant person referred to in paragraph (b).

4. Depending on the circumstances of the case, where the investment is, or is likely to be, more than 10% but less than 30% of the equity share capital (or other similar interests) in the consortium offeror, the Panel may be prepared to disapply any presumption that the members of the larger organisation are acting in concert with the consortium offeror, provided it is satisfied as to their independence from the relevant person referred to in paragraph (b).

5. This Note 6 will also apply if one or more shareholders (or other investors) subscribes for new equity share capital (or other interests) for the purpose of the former consortium offeror (or the former offeree company) making another offer.

6. See also: Note 7; the definition of connected fund manager and connected principal trader; and Rule 7.2.

Investors in limited partnerships and other investment funds

Where a limited partnership or other investment fund (a “fund”) (including a fund managed by an independent investment manager):

1. invests in a new company (or other vehicle) formed for the purpose of making an offer; or

2. acquires an interest in shares in a company to which the Code applies,

the Panel will apply presumptions (1) and/or (2) so as to presume an investor in the fund to be acting in concert with the offeror (in the case of paragraph (a)) or the fund (in the case of paragraph (b)) if the percentage of the investor’s interests in the fund is such that the presumption would apply if the fund were a company and the investor was interested in a corresponding percentage of the company’s equity share capital.

Pension schemes

Presumption (3) will normally be rebutted if it can be demonstrated to the Panel’s satisfaction that the assets of the pension scheme are managed under an agreement or arrangement with an independent third party which gives such third party absolute discretion regarding dealing, voting and offer acceptance decisions relating to any securities in which the pension scheme is interested. Where, however, the discretion given is not absolute, the presumption will be capable of being rebutted, provided that the pension scheme trustees do not exercise any powers they have retained to intervene in such decisions.

Irrevocable commitments

A person will not normally be treated as acting in concert with an offeror or the offeree company by reason only of giving an irrevocable commitment. However, the Panel will consider the position of such a person in relation to the offeror or the offeree company (as the case may be) in order to determine whether the person is acting in concert if either:

1. the terms of the irrevocable commitment give the offeror or the offeree company (as the case may be) either the right (whether conditional or absolute) to exercise or direct the exercise of the voting rights attaching to the shares or general control of them; or

2. the person acquires an interest in more shares.

The Panel should be consulted before the acquisition of any interest in shares in such circumstances.

Disclosure where presumption rebutted

Where it is accepted by the Panel that a person who would normally be presumed to be acting in concert with either an offeror or the offeree company should not in fact be considered in a particular case to be acting in concert with that party, the Panel may, where it considers it appropriate, require the person concerned to make private disclosures to the Panel (containing the details that would be required to be disclosed under Rule 8.4) of any dealings by it in any relevant securities of any party to the offer.

Indemnity and other dealing arrangements

1. For the purpose of this Note, a dealing arrangement includes any indemnity or option arrangements, and any agreement or understanding, formal or informal, of whatever nature, relating to relevant securities which may be an inducement to deal or refrain from dealing.

2. If any person is party to a dealing arrangement of the kind referred to in Note 11(a) with any offeror or any person acting in concert with any offeror, whether in respect of relevant securities of that offeror or the offeree company or any competing offeror, such person will be treated (during an offer period) as acting in concert with that offeror. If any person is party to a dealing arrangement of the kind referred to in Note 11(a) with an offeree company or any person acting in concert with an offeree company, such person will be treated (during an offer period) as acting in concert with the offeree company.

   Such dealing arrangements must be disclosed as required by Rule 2.4(c)(iv), Rule 2.7(c)(xii), Note 5 and Note 6 on Rule 8, Rule 24.13 and Rule 25.6.

3. Note 11(b) does not apply to irrevocable commitments or letters of intent, which are subject to Rule 2.7(c)(x) and Rule 2.10.

4. See also Rule 4.4.