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Consultation Paper No. 38 Miscellaneous Amendments to the Takeover Rules
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Nov 21 2006 onwards

Consultation Paper No. 38 Miscellaneous Amendments to the Takeover Rules



Download this Consultation Paper in PDF format.

Why are we issuing this paper?

1. This Consultation Paper seeks public comments on the DFSA's proposals to amend the Takeover Rules in the DFSA Rulebook. These amendments, set out in Appendix "A", are designed to clarify the interpretation of the Takeover Rules ("TKO").
2. The purpose of this public consultation is to introduce miscellaneous amendments to the TKO Module based on the takeover practice in the DIFC.

Who should read this paper?

3. The proposal in this paper would be of primary interest to Reporting Entities including their advisers as well as financial market participants generally.

How is this paper structured?

4. In this paper, we set out:
(a) Defined Terms in paragraph 7;
(b) Background in paragraphs 8–11:
(c) Scope, purpose and details of the proposals in paragraph 12–15; and
(d) Appendix A.

How to provide comments?

5. All comments should be forwarded to the person specified below. You may, if relevant, identify the organisation you represent in providing your comments. The DFSA reserves the right to publish, including on its website, any comments you provide, unless you expressly request otherwise at the time of making comments.

What happens next?

6. The deadline for providing comments on these proposals is 14 January 2007. Once we receive your comments, we will consider if any further refinements are required to these proposals. We will then proceed to enact the changes to the DFSA's Rulebook. You should not act on these proposals until the relevant changes to the DFSA Rulebook are made. We will issue a notice on our website telling you when this happens.

Comments to be addressed to:

Ms Sema Dursun-Carver
Legal Counsel
DFSA
PO Box 75850
Dubai, UAE

or e-mailed to: sdursuncarver@dfsa.ae

Defined Terms

7. The terms used in this paper have the same meaning as in the DFSA legislation including the Glossary (GLO) Module of the DFSA Rulebook, unless otherwise stated. All capitalised terms are generally defined terms in the relevant legislation.

Background

8. The deadline for providing comments on these proposals is 14 January 2007. Once we receive your comments, we will consider if any further refinements are required to these proposals. We will then proceed to enact the changes to the DFSA's Rulebook. You should not act on these proposals until the relevant changes to the DFSA Rulebook are made. We will issue a notice on our website telling you when this happens. The TKO Module were made in September 2005 under powers contained in the Regulatory Law 2004 and Markets Law 2004. In particular, Part 7 of the Markets Law 2004 provides for the making of the TKO Module prescribing the procedures for and obligations of persons in respect of a Takeover of a Reporting Entity.
9. The purpose of Rules set out in the TKO Module is to provide the necessary operational detail in relation to the takeovers framework created by Part 7 of the Markets Law 2004.
10. As mentioned in the Consultation Paper No.18, TKO Module is primarily based on the UK City Code on Takeovers and Mergers though adapted for a legislative environment.
11. In drafting the proposed amendments, the takeover practice in the DIFC is taken into consideration as well as international practice. We believe that the amendments will provide clarity to the application of the TKO Module.

Scope and purpose of the amendments

12. In summary, the DFSA is proposing the following amendments:
13. Bid Timing, timing of the posting of Bid document:

It is proposed that the words "the posting of" in TKO Rule 2.4.6 are deleted. Under the amended Rule, when there has been an announcement of a firm intention to make a Bid, the Bidder must proceed with the Bid unless the Bid is subject to the prior fulfilment of a previously disclosed specific condition and that condition has not been fulfilled. We note that the amended TKO Rule 2.4.6 should be read in conjunction with TKO Rule 11.1.1 and TKO Rule 11.1.1 Guidance. Guidance (3) provides that the DFSA expects the bid to be made within 21 days of the announcement of a firm intention. However, a modification may be permitted in the case of pre-bid conditions acceptable to the DFSA.
14. Disclosure of Target Circular, Bid Document, Closing Dates and Extensions:

The purpose of this proposed amendment is to improve continuous disclosure of material information to the public in orderly manner. This should be read together with other disclosure obligations set out in the TKO Module. Under the new TKO Rule 8.1.2, the Governing Bodies of Bidder and Target to a takeover must make timely disclosure of all statements, notices, declarations and bid documents in the same manner as a market disclosure under the Offered Securities Rules.
15. Scope of the prohibition on the Bidder and Persons acting in concert with Bidder to sell Shares in the capital of Target:

It is proposed that the word "Shares" is replaced with "Securities". Under the proposed amended TKO Rule 3.3.1, the Bidder and Persons acting in concert with it will not be able to sell any Securities in the Target. The purpose of this amendment is to promote the integrity of financial markets by extending the scope of the prohibition to a broader category of financial instruments, which now include not only the sale of Shares, but also for instance, depository receipts.

Download this Consultation Paper in PDF format.

•   Download a copy of Appendix A — Proposed amendments to the Takeover Rules in PDF format.