Examining the Effectiveness of the UK Non-frustration Legislation in a Time of Crisis

This research investigates the adequacy of the United Kingdom’s takeover regulations, namely The City Code on Takeovers and Mergers, in a period of crisis. The crisis period under study is the Covid-19 crisis spanning between 25 March 2020 to 25 March 2022, during which the number of takeovers of British companies reached a 14-year high. The aim of this research is to test the effectiveness and efficiency of The Code within the global Covid-19 crisis concurrently with takeover legislation in other industrialised jurisdictions by answering the following overarching research questions: How likely are UK companies to be taken over during a period where asset prices are depressed compared to other jurisdictions and what impact does this have on innovation? Is "The Code" the appropriate legislation within a crisis period, such as the Covid-19 crisis context? How does this regulation compare with similar legislation in industrialised nations, such as the United States, France, and Japan, where protective mechanisms exist? How can legislation be amended to offer varying degrees of defensive actions as permissible protective mechanisms? To answer the above questions and in order to meet the research aim, the thesis meets the following objectives: to contribute to the ongoing debate on takeover regulation; to determine the effectiveness of The Code during a time of global economic crisis; to compare The Code to provisions in purposively sampled industrialised nations where they are less vulnerable; to examine the related challenges in takeover reform posed by corporate law; and propose takeover regulation and corporate law reform to enable the better protection of target companies. This study uses the purposive sampling methodology with jurisdictions fulfilling the following conditions: each being a member of the Organisation for Economic Co-operation and Development; each having a high score in the Transparency International Corruption Perceptions Index; and having a capital market capitalisation of £100 billion or more. Doctrinally, this research has analysed the law in each jurisdiction to determine which protections exist for companies from takeovers, how they are employed and whether they are successful. Further, this project has measured the number of takeovers that took place in each jurisdiction during the Covid-19 crisis. With this number, a ratio has been generated depicting the likelihood of any particular company becoming subject to a successful bid, or takeover, giving a vulnerability index for each sampled country. Also, this research makes reference to available patent, design and trademark filings and citations as a measure of innovation, generating an innovation index for each jurisdiction. The findings of these indices have been used to calculate if jurisdictions with higher vulnerability to takeovers produce fewer innovations. The levels of innovation are additionally used for comparative analysis between the jurisdictions under study. Finally, this research proposes reforms for the UK to improve takeover protection during times of crisis. This is important because it finds that takeover regulation together with economic instability are inhibiting innovation, to the detriment of British competitiveness.<p></p>

Author dc:creator

• Moses M'Mutungi (21041411)

• Non-frustration Legislation
• UK Takeover Regulation
• Mergers and acquisitions law
• Foreign Direct Investments law
• Takeover Code Rule 21

Statement dc:rights

• All rights reserved
• Open Access after 2027-10-27

Identifier

10779/exe.32578368.v1

OAI identifier oai:identifier

oai:figshare.com:article/32578368