TRW & Co · M&A and private capital
How a UK Public Takeover Works under the Takeover Code
The UK Takeover Code governs bids for UK, Channel Islands and Isle of Man companies traded on UK markets. It sets the 28-day put up or shut up deadline, controls the Rule 2.7 firm offer, requires a mandatory bid at 30%, and restricts what target boards can do. This guide covers schemes, offers and the Code's narrowed scope.
Key pointSince February 2025 the Code turns on where a company's securities trade, not where it is managed. Unlisted companies caught by the old residency test remain in scope only as transition companies until 2 February 2027.
At a glance
Narrowed scope
From 3 February 2025 the Code applies to UK, Channel Islands and Isle of Man registered companies traded on UK regulated markets, UK MTFs or local exchanges.
28-day PUSU deadline
A publicly named potential bidder must announce a firm offer or walk away by 5.00 pm on the 28th day, unless the Panel extends at the target board's request.
Rule 2.7 commits bidders
A firm offer announcement obliges the bidder to proceed, so financing and cash confirmation must be in place before it is made.
Mandatory offer at 30%
Acquiring an interest in shares carrying 30% or more of voting rights, with concert parties, normally triggers a mandatory cash offer under Rule 9.
Schemes dominate
Most recommended bids use a scheme needing a majority in number representing 75% in value of those voting, plus court sanction.
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The UK Takeover Code: the short answer
The UK Takeover Code, formally the City Code on Takeovers and Mergers, governs bids for companies registered in the UK, the Channel Islands or the Isle of Man whose securities trade on a UK regulated market or a UK multilateral trading facility such as AIM, or on a Channel Islands or Isle of Man exchange. It is administered by the Panel on Takeovers and Mergers, which has statutory backing under Part 28 of the Companies Act 2006.
The Code's purpose is to ensure that shareholders are treated fairly, have the information they need, and are not denied the chance to decide on an offer's merits. It does not judge whether a deal is commercially good. Its rules control timing, announcements, dealings in shares, the price that must be offered and what the target board can do to frustrate a bid.
A UK public takeover is implemented either by a contractual offer or, more often for recommended deals, by a court-sanctioned scheme of arrangement. This guide explains how each works, the key deadlines, including the 28-day "put up or shut up" rule and the Rule 2.7 firm offer announcement, and the narrowing of the Code's jurisdiction that took effect in February 2025.
Which companies the Code applies to
The Panel narrowed the Code's scope with effect from 3 February 2025. The Code now applies to a company with its registered office in the UK, the Channel Islands or the Isle of Man if any of its securities are admitted to trading on a UK regulated market, a UK multilateral trading facility, or a stock exchange in the Channel Islands or the Isle of Man. It also applies to such a company if its securities were admitted to trading on one of those markets at any time in the two years before the relevant date, such as the announcement of a possible offer.
The old "residency test", which brought certain unlisted public companies and some private companies within the Code if their place of central management and control was in the UK, Channel Islands or Isle of Man, has gone. Companies with securities traded only on overseas exchanges, or through private trading platforms, now generally fall outside the UK Takeover Code.
Companies that were within scope under the old rules but not the new ones are "transition companies". The Panel's guidance and the Code's transitional appendix provide that the Code continues to apply to them for a transition period ending at 11.59 pm on 2 February 2027. After that date, buyers of affected unlisted public and private companies will no longer be subject to Code requirements unless the company falls within the new test.
The Code does not apply to open-ended investment companies or to companies with a sole beneficial owner. The Panel can grant waivers for recently quoted and transition companies where appropriate.
The six General Principles
The UK Takeover Code rests on six General Principles, applied by the Panel according to their spirit rather than as technical rules.
In summary: all holders of the same class of securities must be treated equivalently; shareholders must have sufficient time and information to reach a properly informed decision; the target board must act in the interests of the company as a whole and must not deny shareholders the chance to decide on the offer; false markets must not be created; an offeror must announce an offer only after ensuring it can fulfil any cash consideration in full; and the target must not be hindered in its affairs for longer than is reasonable by an offer.
Those principles explain much of the detailed rulebook. The Panel expects advisers to consult it early when the answer is unclear, and it treats a failure to consult seriously.
From approach to firm offer: PUSU and Rule 2.7
When an announcement is required
Before a firm offer, approaches are usually confidential. An announcement becomes mandatory in several situations, most often when there is rumour, speculation or an untoward share price movement after an approach, or when a potential bidder acquires an interest that triggers a mandatory offer. Once an announcement starts an offer period, it must identify any potential offeror with which the target is in talks or which has approached it.
Put up or shut up
Under Rule 2.6, a potential offeror publicly identified in an announcement must, by 5.00 pm on the 28th day after that announcement, either announce a firm intention to make an offer under Rule 2.7 or announce that it does not intend to make an offer. A "no intention to bid" statement generally locks the bidder out for six months, subject to limited exceptions.
The Panel will normally extend the deadline at the request of the target board. In practice, recommended deals often see one or more extensions while due diligence and financing are finalised. A consultation published by the Panel's Code Committee in July 2026 proposed, among other changes, simplifying the wording on extension requests. That consultation closed in October 2026 and its outcome should be checked before relying on the current text.
The Rule 2.7 announcement
A Rule 2.7 announcement commits the bidder to proceed. Rule 2.7 requires that an offeror should announce a firm intention only after the most careful and responsible consideration and when it has every reason to believe it can and will continue to be able to implement the offer. The announcement sets out the terms, the conditions and any pre-conditions. For a cash offer, it must include confirmation by the financial adviser or another appropriate third party that resources are available to satisfy full acceptance. The offer document or scheme circular then follows, normally within 28 days.
From a Rule 2.7 announcement, the bidder can only walk away in limited circumstances, such as a condition failing where the Panel accepts that the circumstances are of material significance to the offeror. Material adverse change conditions are therefore hard to invoke.
Schemes of arrangement versus contractual offers
Most recommended UK public takeovers now proceed by scheme of arrangement under Part 26 of the Companies Act 2006. Contractual offers remain common for hostile bids and where the bidder wants flexibility to buy shares in the market.
| Feature | Scheme of arrangement | Contractual offer |
|---|---|---|
| Who runs it | Target company, with the court | Bidder |
| Approval threshold | A majority in number representing 75% in value of shareholders present and voting at the court meeting, plus court sanction | Acceptance condition of over 50% of voting rights; bidder may set a higher level |
| Route to 100% | All shares transfer when the scheme becomes effective | Statutory squeeze-out once 90% of the shares and voting rights subject to the offer are acquired |
| Hostile bids | Not practical; needs target cooperation | Available |
| Timetable control | Set by court dates and the scheme timetable | Code timetable: Day 21 first close, Day 60 unconditional date |
| Effective date | When the court order is delivered to the registrar of companies | When the offer becomes unconditional |
A scheme gives certainty of 100% ownership on a lower threshold, but the headcount test and court process can give organised minorities leverage. A contractual offer can be launched without board support, but reaching the 90% squeeze-out threshold under section 979 of the Companies Act 2006 can be difficult with a fragmented register.
The contractual offer timetable
Under Rule 31, a contractual offer must remain open until at least Day 21 after publication of the offer document, and all conditions must be satisfied or waived, or the offer must lapse, by Day 60, the unconditional date, unless the Panel agrees an extension. Once the offer becomes unconditional, it must remain open for at least a further 14 days. Regulatory conditions can be dealt with in more flexible ways, which matters for deals needing CMA or other clearances.
Mandatory offers and price rules under the UK Takeover Code
Rule 9 requires a person who acquires an interest in shares carrying 30% or more of the voting rights, together with persons acting in concert, to make a cash offer for the rest of the company. The same applies where a holder between 30% and 50% increases its interest. The mandatory offer must be at not less than the highest price paid by the offeror or its concert parties in the 12 months before the offer, and conditions are tightly limited.
Other price rules follow from equal treatment. Purchases in the three months before an offer period, or during it, set a minimum price for any offer; significant cash purchases in the 12 months before an offer can require a cash alternative. Dealing disclosure rules require holders of 1% or more of relevant securities to disclose positions and dealings during an offer period.
The concept of "acting in concert" is central, covering persons cooperating to obtain or consolidate control. Presumptions apply to groups of companies, directors, pension funds, advisers and others, and the Panel's guidance on collective shareholder action is relevant for activist investors. Our corporate governance team advises boards and investors on these issues.
The target board's duties and restrictions
Under the UK Takeover Code, the target board must obtain competent independent advice on any offer and make its views known to shareholders. Once a bona fide offer is imminent or an offer period has begun, the board must not take frustrating action, such as issuing shares or selling material assets, without shareholder approval.
Deal protection is restricted. Rule 21.2 generally prohibits offer-related arrangements between the target and the bidder, including inducement or break fees, subject to narrow exceptions such as confidentiality undertakings and commitments to cooperate on regulatory clearances. Bidder protection therefore relies mainly on irrevocable undertakings from shareholders, which must be disclosed.
Leaks drive timetables. Once a possible offer is announced and the bidder is named, the 28-day PUSU clock runs. Bidders should complete confirmatory diligence, financing and key regulatory analysis as far as possible before approaching the board, and keep the insider list tight to reduce the risk of a premature announcement.
A recommended bid step by step
- Preparation. The bidder appoints financial and legal advisers, assesses financing, regulatory clearances and stakebuilding limits, and prepares an approach.
- Approach and confidentiality. The bidder makes an indicative proposal to the target board, which appoints independent advisers. Leak protocols are agreed.
- Possible offer announcement. If required by leak or by choice, an announcement starts the offer period and, where the bidder is named, the 28-day deadline.
- Diligence and irrevocables. The bidder completes confirmatory diligence and seeks irrevocable undertakings from directors and major shareholders.
- Rule 2.7 announcement. The firm offer is announced with the board's recommendation, cash confirmation included and conditions set out.
- Scheme document or offer document. Published within the Code timetable, with the target board's views and independent advice.
- Shareholder approval and clearances. Court meeting and general meeting for a scheme, or acceptances for an offer, while regulatory conditions are satisfied.
- Completion. Court sanction and delivery of the order to the registrar for a scheme, or the offer becoming unconditional, followed by delisting and any squeeze-out.
An illustrative scenario
This scenario is illustrative only; the parties are generic.
An overseas strategic buyer approaches the board of an AIM-traded UK technology company with an indicative cash proposal. After a share price spike, the target announces that it is in talks with the buyer, starting the offer period and the 28-day PUSU deadline. The board, advised by its independent financial adviser, requests an extension so that diligence and financing can be completed, and the Panel consents.
The buyer secures irrevocable undertakings from the directors and two institutional shareholders and announces a firm offer under Rule 2.7, to be implemented by scheme of arrangement. Because the target provides software to government customers, the offer is conditional on clearance under the National Security and Investment Act. The scheme is approved at the court meeting by the required majorities, the clearance is received, the court sanctions the scheme, and the order is delivered to the registrar.
Risks and common mistakes
Most problems under the UK Takeover Code arise from timing pressure and from underestimating how widely the rules on interests and concert parties reach.
Triggering a mandatory offer by accident
Interests in shares include options, derivatives and irrevocable undertakings in some cases, and concert party presumptions can aggregate holdings across groups, directors and advisers. A bidder or shareholder group that crosses 30% without realising it may be required to make a cash offer on terms it did not plan. Map interests and concert parties before any stakebuilding or shareholder coordination, and consult the Panel where the position is uncertain.
Underestimating regulatory conditions
Many UK bids need merger control or foreign investment clearance, and some need sector regulator approval. If clearances take longer than the Code timetable assumes, the parties may need Panel consent to extend. Build realistic regulatory timetables, consider the UK merger control thresholds early, and draft conditions that can be satisfied or waived within the long-stop date.
Leaks and inside information
Possible offers are inside information for the target and often for a listed bidder. Leaks force announcements and start the PUSU clock, and unlawful disclosure or dealing can engage market abuse rules. Keep insider lists, control who knows, and agree with the target how to respond if rumours appear. Advisers should be ready with a holding announcement.
Assuming the Code no longer applies after the 2025 changes
The narrowing of the Code's scope removed many unlisted public and private companies, but transition companies remain within the Code until the end of the transition period on 2 February 2027, and companies delisted in the last two years remain within scope. Check the target's status at the relevant date before planning a deal on the assumption that the Code does not apply.
Cross-border points and next steps
Overseas bidders, including groups from Bangladesh, the Gulf and Asia, make UK bids regularly. They must meet the same cash confirmation standard as domestic bidders, plan currency and financing early, and address UK foreign investment screening. Bidders whose own shares are offered as consideration also need to consider prospectus and listing rules; see our article on UK Listing Rules reform.
Before approaching a target governed by the UK Takeover Code, a bidder should confirm Code status, map shareholdings and concert parties, line up financing capable of supporting cash confirmation, assess regulatory conditions, choose between scheme and offer, and plan for a leak. Target boards should appoint independent advisers early and agree protocols for approaches.
TRW & Co's public takeovers team and wider M&A practice advise bidders, targets and shareholders on UK bids. Our London office is authorised and regulated by the Solicitors Regulation Authority, and where advocacy in the higher courts is needed for a scheme, we instruct specialist counsel. Contact us to discuss a potential transaction.
Frequently asked questions
01Which companies are subject to the UK Takeover Code?
Since 3 February 2025, the Code applies to companies with a registered office in the UK, the Channel Islands or the Isle of Man whose securities are admitted to trading on a UK regulated market, a UK multilateral trading facility such as AIM, or a stock exchange in the Channel Islands or Isle of Man. It also applies if they were so traded in the previous two years. Companies caught only by the old residency test remain in scope as transition companies until 2 February 2027.
02What is the put up or shut up deadline?
Under Rule 2.6, once a potential offeror is publicly identified, it must by 5.00 pm on the 28th day after that announcement either announce a firm intention to make an offer under Rule 2.7 or announce that it does not intend to make one. The Panel normally extends the deadline if the target board asks. A no-intention statement generally prevents the bidder from making an offer for six months, subject to limited exceptions.
03What is a Rule 2.7 announcement?
It is the announcement of a firm intention to make an offer. It sets out the terms, the identity of the offeror and all conditions and pre-conditions. After it is made, the bidder must proceed unless a condition fails in circumstances the Panel accepts are of material significance. Because of that commitment, the bidder must have every reason to believe it can implement the offer, including having cash consideration fully available.
04When must a shareholder make a mandatory offer?
Under Rule 9, a person who, with persons acting in concert, acquires an interest in shares carrying 30% or more of the voting rights must make a cash offer to all other shareholders. The same applies where someone holding between 30% and 50% acquires more shares. The offer price must be at least the highest price paid by the offeror or concert parties in the previous 12 months. The Panel can waive the requirement in some cases, such as with independent shareholder approval.
05What is the difference between a scheme of arrangement and a takeover offer?
A scheme is run by the target with the court. It needs approval by a majority in number representing 75% in value of shareholders present and voting at a court meeting, followed by court sanction, after which all shares transfer. A contractual offer is made by the bidder directly to shareholders and needs acceptances carrying over 50% of the voting rights; reaching 100% requires the 90% squeeze-out threshold. Schemes are usual for recommended deals, offers for hostile ones.
06Can a target agree a break fee with a bidder?
Generally not. Rule 21.2 prohibits the target and its concert parties from entering into offer-related arrangements with a bidder during an offer period or when an offer is reasonably in contemplation, including inducement fees. Narrow exceptions cover matters such as confidentiality, non-solicitation of employees and cooperation on regulatory clearances. The Panel can consent in limited circumstances, for example in some competitive situations. Bidders therefore rely mainly on irrevocable undertakings for deal protection.
Sources and official materials
- The Takeover Code (Takeover Panel) — Full text of the Code and Panel materials
- Companies to which the Takeover Code applies — Jurisdiction changes from February 2025
- Takeover Code Rule 2 — Announcements, PUSU and Rule 2.7
- Takeover Code Rule 9 — Mandatory offers
- Companies Act 2006, Part 26 — Schemes of arrangement
- Companies Act 2006, section 979 — Squeeze-out after a takeover offer
- Companies Act 2006, Part 28 — Statutory basis of the Takeover Panel
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.