The Securities Market Association has published a new Helsinki Takeover Code, which entered into effect on 1 January 2014, relevant for all parties involved in public takeover bids, including bidders, target companies and their advisors. The new code contains recommendations for bidders and target companies, as well as their shareholders and management.
The Helsinki Takeover Code was revised in response to the enactment of the Securities Market Act (746/2012). Chapter 11, Section 28 of the Securities Market Act requires that listed companies belong to an independent body, which is widely recognised within industry and commerce and established in Finland, and which has issued a recommendation to promote compliance with good securities markets practice on the actions of the management of the offeree company with regard to a takeover bid and on structures based on contract relating to maintenance of control or to guide the corporate-law procedures to be complied with in takeover situations. The Securities Market Association functions as the above-mentioned body and the Helsinki Takeover Code is the above-mentioned recommendation referred to in the Securities Market Act.
The Helsinki Takeover Code replaces the 2006 takeover code. Whereas the previous code was nonbinding, the new code is based on the “comply or explain” principle, meaning that a party not committed to complying with the code must provide an explanation for this. Because of this difference, the target company and the bidder are required, in some situations, to disclose more information to the market than before.
The substance of the new code is similar to the old code, but some changes have been made to reflect changes in the law and market practice. However, most of the code’s recommendations have been rewritten to conform to the “comply or explain” principle.
The code consists of fourteen recommendations, each of which is supported by an introductory section and followed by explanatory notes describing good securities markets practice, providing background information and clarifying the actual recommendation. Only the actual recommendations are part of the Takeover Code. However, the introductory and explanatory parts of the text also present standards applicable to the situations covered by the recommendations that cannot be deviated from on the basis of the ”comply or explain” principle.
At the end of the code, there are so called other observations that describe certain best practices in public takeovers. The ‘comply or explain’ principle does not apply to these observations. The observations concern the duty of disclosure at various stages of the takeover bid process and provisions based on the articles of association of the target company.
The code also includes principles of interpretation of the code. According to the introduction of the code, the recommendations relating to public takeover bids shall, in different situations, be interpreted in the light of the objectives set for them. It is important in such situations that the procedure chosen in the individual case shall 1) increase the predictability of the takeover bid process; 2) contribute to the standardisation of the procedures complied with in takeover bids; 3) provide different parties to a takeover bid with increased access to information and enhance the transparency of securities markets; and 4) ensure legal protection for the different parties to a takeover bid.
The objective of the new code is to standardise the procedures to be complied with in public takeover bids in Finland and by doing so promote the legal protection of the parties in a takeover bid. In addition, the purpose of the Helsinki Takeover Code is to promote good market practices.