My comments on this clause also apply to clause 644 on further provisions about rules. The explanatory notes say:
“The Panel is given the power to make rules in relation to takeover regulation. The rule-making power is broadly drawn to ensure that the Panel can continue to make rules on the range of matters presently regulated by the City Code on Takeovers and Mergers.”
The notes go on to discuss certain provisions that are included. For example:
“The Panel is placed under an obligation to make rules as required by specified Articles of the Takeovers Directive” and is permitted
“to make rules on takeover bids... mergers and other transactions affecting the ownership or control of companies.”
The explanatory notes continue:
“When making rules under this clause, the Panel must do so by a committee of the Panel, except in the case of rules for fees and charges under clause 657 which must be made either by a committee of the Panel or by the Panel itself.”
The panel has, at least in recent history, been fairly good at consultation on proposed rule changes, but how do we know that that will continue? Has the Department discussed that with the panel? My hon. Friend the Member for Clwyd, West made the valid point that there needs to be consultation on future statutory instruments. Have the Government considered how those will be tied in with the panel’s consultations?
We are hoping that the panel will continue broadly to make its own rules, as it does now. The objective of setting this out in statute is to give the panel broad discretion. The intention is that, within the terms of the directive and the legislation, the panel will be empowered to make its own rules. Since 1968, it has laid down the rules in what is now called the City code on takeovers and mergers. Those rules have been recognised in statute and section 143 of the Financial Services and Markets Act 2000 provides that they are endorsed for the purposes of powers under the Act. Their importance is overseen by the panel and has been much respected by the courts.
Notwithstanding that, the code is a body of rules for which, historically, no express authority has been provided by law. The clause will change that and has two main objectives. The first is to implement properly the takeovers directive, which requires that rules on takeover regulation laid down by the directive are given legal effect. Consequently, clause 643(1) requires the panel to make rules in respect of the specified provisions of the directive. The directive applies to takeovers of a company trading on the regulated market and contains provisions concerning, for example, protection of minority shareholders and so on.
The second objective is that we wish to ensure that the panel’s rule-making authority over other areas of corporate activity that it has traditionally regulated continues. That includes matters outside the scope of the takeovers directive such as takeovers of public companies whose shares are not traded on regulated markets and mergers. We wish to preserve a unitary principle to the panel’s regulatory functions. It would not have been right to create one set of rules applying to takeovers under the directive and another applying to other types of corporate controls transaction, so clause 643 extends a right for the panel to make rules in areas of activity that are broadly regulated by the takeover code at present.
The proposed functions of the rules committee of the takeover panel, which I understand the panel has decided will continue to be known as the code committee, are set out in the revised introduction to the takeover code available on the panel’s website and, in accordance with its current practice, the panel intends to consult widely on any changes to its rules.
The Department has discussed with the panel how it proposes to go forward with this. I understand that it will continue, in so far as it possibly can, broadly to maintain the current regime through engagement with the City and those over whom it will in due course have some authority if there is a takeover and through consultation with them to ensure that the rules achieve broad acceptance in the City and the wider companies that it regulates.
I have one brief question for the Solicitor-General. Subsection (2)(c)(i) states that
“any such bid or transaction is, or has been, contemplated or apprehended”.
Can he give more specific information on what “contemplated” means? Does it mean, for example, a discussion with board minutes? Will he give some specifics to help the Committee to understand how “contemplation” will be created, because clearly boards often consider matters that might never make it into official documents? Perhaps he can provide some clarity.
Obviously, transactions will be considered and there might be rumours and tentative indications that something may happen. The panel may wish to ensure that the way in which it will deal with a new set of affairs is well known. It could respond to those circumstances were they to arise.