Cold-shouldering and the power of Victoriana
Commentary on a recent decision of the Takeover Appeal Board.
On 14 July 2010, the Takeover Appeal Board dismissed an appeal against a decision of the Hearings Committee to publish a "cold-shouldering" statement in respect of three individuals. The last time that such a Victorian sounding statement was published was in 1992.
A cold shouldering statement is a statement made pursuant to Rule 11(b)(v) of the Takeover Code which permits the Takeover Panel to publish a statement that the offender is someone who, in the Hearings Committee’s opinion, is not likely to comply with the Code.
As the Takeover Code itself notes, the rules of the FSA and certain professional bodies oblige their members, in certain circumstances, not to act for the offender in a transaction relating to the Code, including dealing in relevant securities requiring disclosure under rule 8 (disclosure of dealings during an offer period). The statement is therefore an extreme sanction.
Although Rule 11(b)(v) does not itself provide that a cold-shouldering statement should be limited in time, the Panel Executive accepted before the Hearings Committee that a time limit was appropriate. The Hearings Committee however rejected the Executive’s submission that the time limit should be set as a review date (i.e. a date when those affected by the statement could apply for the statement to be lifted). The Hearings Committee decided (and the Appeal Board agreed) instead to set a determinate period during which the sanction would apply. Although the Executive asked for the statement to apply for five years, the Hearings Committee decided to limit the statement to three years (and the Appeal Board dismissed the Panel’s appeal against the sanction).
The combined effect of the sanction of cold-shouldering and the FSA rule at MAR 4.3 which gives effect to any such sanction, is to jeopardise the right of someone to continue to conduct dealings in the City. Although it is important to note that an FSA regulated firm may carry out other activities for a “statemented” person (including regulated activities) where those transactions are not ones to which the Takeover Code applies, in practice, it is likely to be very difficult for anyone to continue to practise in the City while a cold-shouldering statement is in place.
Charles Flint QC, Tom Weisselberg and Javan Herberg acted for Respondents in this case.