Minority shareholder protection in takeovers: A UK perspective

This article examines the shareholder-centric model of takeover regulation in the UK, and explores two recent developments that potentially impact on this model. The first is the rise of schemes of arrangement as an alternative mechanism for effecting takeovers. Schemes have become the mechanism of choice for recommended bids in the UK, and yet they offer significantly less protection to minority shareholders than traditional bids. The justifications for this discrepancy are explored and it is suggested that the lower level of minority protection is explicable, and acceptable, once the different reasons for minority protection in a traditional bid and in a scheme are understood. The second development follows the successful takeover of Cadbury by Kraft in 2010, and comprises various suggestions for the reform of the UK takeover regime put forward by the Code Committee of the Takeover Panel. This article concentrates on a number of recommendations which, if accepted, would impact on the existing shareholder-centric nature of the UK model. In particular the position of non-shareholder stakeholders in a takeover is examined, as is the role of short term shareholders in the target, and the position of the bidder shareholders is also considered. The Code Committee's proposals in relation to these matters are assessed, but it is suggested that no reform of UK takeover law is required to deal with these issues at the present time.