Contravention of rules, etc
Section 952: Sanctions
1205.This section confers on the Panel the power to make rules for imposing sanctions for breach of its rules or directions given under section 946. The Panel’s current sanctions regime, which is set out in the Introduction to the City Code on Takeovers and Mergers and which it is envisaged will remain in place under the Act, provides for private and public statements of censure of persons in breach of the Code.
1206.Particularly flagrant breaches may lead to the Panel publishing a statement indicating that the offender is someone who is not likely to comply. The rules of the Financial Services Authority and certain professional organisations contain provisions obliging their members, in certain circumstances, not to act for a person named in such a statement. This is referred to as “cold-shouldering”. The provisions in question cover transactions that are subject to the City Code on Takeovers and Mergers, such as transactions in relevant securities requiring disclosure under rule 8 of the Code. Under section 952, it will continue to be possible, in the case of transactions that are subject to the Panel rules, for the Panel to issue “cold-shouldering” statements in appropriate cases. (The Panel will also be able to pass information concerning breaches of rules to other regulatory authorities and professional bodies by virtue of the statutory “gateways” set out at section 948 and Schedule 2.)
1207.Should future rules made by the Panel confer a power on the Panel to impose a sanction of a kind not contained in the City Code on Takeovers and Mergers as it has effect immediately before the passing of the Act, the Panel must prepare a policy statement in respect of the sanction. The policy statement must set out the policy of the Panel with regard to imposition of the sanction and, for financial penalties, the penalty that may be imposed. An element of the policy must be that the Panel, in making a decision about any such matter, have regard to the seriousness of the breach or failure, the extent to which the breach or failure was deliberate or reckless and whether the person on whom the sanction is to be imposed is an individual.
Section 953: Failure to comply with rules about bid documentation
1208.This section creates new offences in relation to takeover bid documentation (i.e. offer documents prepared by the bidder and documents in response to the bid prepared by the board of the target company). Provisions related to bid documentation are laid down in particular by Articles 6.3 and 9.5 of the Directive which are to be implemented by rules which the Panel are obliged to make under section 943. Consequently, in each case an offence will be committed where the document in question does not comply with rules designated by the Panel as giving effect to those provisions. The offence relating to offer documents may be committed by the bidder and any of its directors, officers or members who caused the offer document to be published. The offence relating to response documents may be committed by directors or other officers of the target company. Where either offence is committed by a corporate body (for instance, a corporate director), provisions are also included dealing with liability of directors, officers or members of that body. In each case, an offence will be committed only where the relevant person knew that the document did not comply (or was reckless as to whether it did so) and failed to take all reasonable steps to ensure that it did comply.
1209.A person guilty of an offence under this provision is liable on conviction to a fine (on summary conviction limited to the statutory maximum).
Section 954: Compensation
1210.This section confers on the Panel the power to make rules providing for financial redress (together with interest (including compound interest)) in consequence of a breach of rules which require monetary payments to be made (for instance, a payment by the bidder to shareholders of any difference between the price actually paid and any higher price for shares that the bidder should have paid under the rules).
Section 955: Enforcement by the court
1211.This section provides a mechanism by which the Panel may, if necessary, apply to the court in order to enforce Panel rule-based requirements as well as requests for documents and information under section 947. The Panel may apply to the court either where there is reasonable likelihood that a person will contravene a requirement imposed by or under the rules or where a person has failed to comply with such a requirement or with a requirement imposed under section 947.
1212.It is expected that in accordance with usual practice, the court will not, in exercising its jurisdiction under this section, rehear substantively the matter or examine the issues giving rise to the ruling or, as the case may be, the request for documents or information except on “judicial review principles”, where there has been an error of law or procedure.
1213.The court is given a broad discretion as to the order it may make to secure compliance with the requirement; but aside from the power granted to the Panel by this section, there is no right to seek an injunction (or interdict) to prevent a person contravening, or continuing to contravene, a rule-based requirement or disclosure requirement.
Section 956: No action for breach of statutory duty etc
1214.Compliance with the rules made by the Panel is a matter solely for the Panel. This section does two things:
it excludes new rights of action for breach of statutory duty for contraventions of requirements imposed by or under rules or a requirement imposed under section 947; and
in order to ensure certainty, it provides that a contravention of a rule based requirement does not make a transaction void or unenforceable and (subject to any provision of the rules) does not affect the validity of any other thing. As currently, transactions will be capable of being set aside or unravelled in cases of, for example, misrepresentation or fraud.
