Goldilocks (Control) and the Three Bears: Panel on Takeovers and Mergers v. King

Abstract

The UK takeover regulatory landscape must be understood in the context of the interplay between enforcement of the rules and how investors behave in the face of those rules from a corporate governance perspective. From a legal standpoint, the courts have historically never been involved in the regulation of takeover transactions in the UK. However, section 955 of the Companies Act 2006 now enables the Panel on Takeovers and Mergers to seek court enforcement when a party fails to comply with the City Code on Takeovers and Mergers. Although a potentially useful mechanism to support the Panel in its administration of the Code, it was doubted whether the Panel would ever elect to rely on the provision as it involves exposing its regulatory monopoly to judicial scrutiny. The Scottish Court of Session decisions in Panel on Takeover and Mergers v. King mark the first time the Panel has chosen to rely on Section 955, in the context of enforcing the Mandatory Bid Rule. This paper analyses how this important rule is applied and enforced in practice, as well as the relationship between the Panel and the courts. The facts of the decisions also occasion consideration of an investment tactic that can be deployed to avoid triggering the Mandatory Bid Rule, namely what we define as ‘goldilocks control’.