Corporate Law Update: 13 - 19 January 2024
- Takeover Panel gives guidance on nominated directors passing information to shareholders in the context of a public takeover
- A clause prohibiting assignments of contractual rights did not prevent a transfer of those rights by operation of law
The Takeover Panel has published a new bulletin providing further guidance on the application of the Takeover Code where a shareholder (the appointing shareholder) has appointed a nominated director (the representative director) to the board of a target company (in Code terminology, an offeree company) and that director proposes to pass information to the appointing shareholder.
Rule 20.1 of the Takeover Code (which applies to public companies and some private companies in the UK, Channel Islands or Isle of Man) requires all information or opinions relating to a takeover offer or a party to a takeover to be made equally available to all shareholders of the proposed target.
Broadly, if any material new information or significant new opinion relating to a takeover or a party to a takeover is provided to a bidder shareholder or target company shareholder (or certain other persons), it must be publicly announced.
Separately, if any new information (whether or not material) or new opinion (whether or not significant) is provided to, or used in any meeting or call with, a bidder shareholder or target company shareholder (or certain other persons), it must be published on a website promptly afterwards.
These rules are designed to ensure that all target shareholders are treated equally and fairly and that no individual shareholder has any advantage over any other(s).
If a target company has any representative directors, the Panel recommends that the target company’s advisers draw Rule 20.1 to the target board’s attention, particularly its representative directors, as early on as possible. This is especially important where representative directors routinely share information with their appointing shareholder(s).
Representative directors should consider Rule 20.1 before providing any information relating to a takeover to their appointing shareholder(s).
The Panel also recommends that a target company’s advisers consult the Panel on Rule 20.1 before any information relating to a takeover is provided to any representative directors (including as to whether any derogation from the Rule may be required).
The Court of Appeal has held that a clause in a contract that prohibited the parties from assigning their rights under the contract did not prevent one party’s rights being transferred automatically to an insurer by operation of law.
The case (Dassault Aviation SA v Mitsui Sumitomo Insurance Co. Ltd  EWCA Civ 5) concerned a contract for the sale of aircraft. The contract contained a clause stating that it could not be “assigned or transferred in whole or in part by any Party to any third party, for any reason whatsoever, without the prior written consent of the other Party”.
The buyer under the contract took out insurance against late delivery by the seller. The aircraft were indeed delivered late and the buyer successfully claimed under its insurance policy.
Following the insurance claim, Japanese law stated that the buyer’s contractual rights against the seller, including the right to sue the seller for late delivery, were transferred automatically to the insurer, giving the insurer the right to claim directly against the seller.
However, the seller claimed that the assignment prohibition clause prevented this transfer from taking place without the seller’s consent.
The Court of Appeal disagreed. It noted that the clause only prevented an assignment “by any Party” to the contract. However, the transfer of rights to the insurer had taken place by operation of law, and the clause did not prohibit this.
The judgment shines a light on how the courts may interpret a prohibition of assignment clause.