Statement of the Takeovers and Mergers Executive

7 Apr 2000



Rule 32 and Paragraph 3 of Schedule VI of the Takeovers Code


Panel Decision


The Takeovers Panel issued a statement on 5 April, 2000 in relation to a referral by the Executive to the Panel for a ruling on the interpretation and application of Rule 32 of the Takeovers Code and Rule 8 of the Share Repurchase Code in relation to Regent Pacific Group Limited and in general whether share repurchases may constitute disqualifying transactions under paragraph 3 of the Whitewash Guidance Note set out as Schedule VI to the Code.

The Panel held that share repurchases are acquisitions of voting rights for the purposes of the Code and that share repurchases fall within the category of potentially disqualifying transactions comprehended within paragraph 3 of Schedule VI to the Code. The Panel pointed out that, although an announcement of the proposed transaction was made on 15 March 2000, the application for a whitewash waiver had not yet been made. In these circumstances, share repurchases made between the date of the announcement and prior to the grant of a waiver clearly could not of themselves invalidate a waiver since no waiver had yet been given.

The Panel believes that the wording of paragraph 3 of Schedule VI to the Code and also the wording of paragraphs (i) and (ii) of Note 1 of the Notes on Dispensations from Rule 26 should be re-examined in future revision of the Code and the issue identified in the current application to the Panel clarified. The Panel recommended that the Executive should issue a press release to clarify its current practice.


Paragraph 3 of Schedule VI to the Code


Paragraph 3 of Schedule VI reads as follows:

“Notwithstanding the fact that the issue of new securities is made conditional upon the prior approval of a majority of the shareholders independent of the transaction at a general meeting of the company:-

a. the Executive will not normally waive an obligation under Rule 26 if the person to whom the new securities are to be issued or any person acting in concert with him has acquired voting rights in the company in the 6 months prior to the announcement of the proposals but subsequent to negotiations, discussions or the reaching of understandings or agreements with the directors of the company in relation to the proposed issue of new securities;
b. a waiver will be invalidated if, without the prior consent of the Executive, any acquisitions or disposals of voting rights are made by such persons in the period between the announcement of the proposals and the shareholders’ meeting.”

The Executive’s Practice


When this paragraph was drafted it was the normal practice of the Executive to grant a whitewash waiver at the time of the announcement of the proposals. Since then the practice has changed so that the waiver is not normally applied for until after the date of the announcement and is not normally granted until the circular to shareholders, referred to in paragraph 4 of the Schedule, has been approved by the Executive in final form. As the Panel statement pointed out, it is not possible to invalidate a waiver that has not been granted. Accordingly there may be acquisitions or disposals originally contemplated by paragraph 3(b) in the period between the announcement of the proposals and the posting of the circular to shareholders. The Executive wishes to make it clear that, if such acquisitions or disposals are made without the consent of the Executive in the period between the announcement of the proposals and the posting of the circular, a whitewash waiver will not normally be granted. The Executive also wishes to draw the attention of the market to the fact that share repurchases by the company concerned may fall within the category of disqualifying transactions.




Page last updated : 1 Aug 2012