Restricting Share Capital Reductions in Takeovers

March 06, 2015

The Companies Act 2006 (Amendment of Part 17) Regulations 2015 (the “Regulations”) came into force on 4 March 2015. The Regulations amend section 641 of the Companies Act 2006 to prevent a company from reducing its share capital as part of a scheme of arrangement (known as a ‘cancellation’ scheme) by virtue of which a person would acquire all the shares, or all the shares of a particular class, in that company. The Regulations recognise that such schemes may be appropriate in other situations and include a specific carve-out for restructurings that insert a new holding company and do not involve substantial changes to the company’s ultimate shareholders and their respective shareholdings.

The Regulations are in the same form as the draft regulations previously published on 16 January 2015 and contain a transitional provision that restricts their application to takeovers announced on or after 4 March 2015 or, for companies not subject to the Takeover Code, to takeovers where the terms are agreed between the parties on or after 4 March 2015.

Read Restricting Share Capital Reductions in Takeovers.