The Takeover Panel has recently published a consultation paper (PCP 2025/1) on dual class share structures, initial public offerings (IPOs) and share buybacks and two new practice statements on profit forecasts and unlisted share alternatives.

Consultation paper on dual class share structures, IPOs and share buybacks

Companies with a dual class share structure (DCSS)

A company with a DCSS has, in addition to the voting ordinary shares, a class of shares with an enhanced level of voting rights or control as compared to the ordinary shares, usually offered to founders or other significant shareholders, giving them rights such as enhanced voting on certain matters and protection from a change of control.

The changes to the UK Listing Rules in July 2024 enabled companies with a DCSS to list on the equity shares (commercial companies) listing category. Following this, the Takeover Panel is now consulting on amendments to the Takeover Code (the Code) to clarify how the Code applies to companies with a DCSS.

The Code Committee sets out the three principal DCSS it sees in the market, being:

  • Class B shares held by one or more shareholders which carry multiple votes per B share from the point of issue, and which are extinguished or converted to ordinary shares on particular trigger events (DCSS 1)
  • A single special share which confers effective majority or veto rights on some or all resolutions from the point of issue, and which are extinguished on particular trigger events (DCSS 2)
  • A single special share which confers effective majority or veto rights on some or all resolutions from the point of a third party obtaining control of a majority of the ordinary shares, and which is extinguished on particular trigger events (DCSS 3)

Trigger events commonly seen in the market include "time sunsets" of a specified number of years after the IPO; a transfer of the B or special share(s); and the retirement/resignation/death of the holder of the B or special share(s).

The consultation acknowledges that whilst the proposed amendments to the Code are informed by these three DCSS categories, and in particular DCSS 1, the Code Committee considers that the new provisions should be principles based, to allow for flexible application by the Panel to different types of DCSS.

Rule 9.1 mandatory offer requirement in relation to a DCSS company

Under Rule 9.1 of the Code, a mandatory bid for a company must be made by a person (together with those that person is considered to be acting in concert with) who acquires shares carrying 30% or more of the voting rights of that company, or increases their aggregate holding within the 30% to 50% band.

The consultation proposes new provisions to clarify the application of the Rule 9.1 obligation to a DCSS 1 company. If, as a result of the extinguishing or conversion of Class B shares on a trigger event, a shareholder's proportional voting rights increase, this should be treated as an 'acquisition' of interests in shares for the purposes of Rule 9.1. A shareholder would therefore be obliged to make a mandatory offer if their shareholding crosses a Rule 9 threshold. However, it is proposed that the Panel would normally grant a dispensation from this resulting mandatory bid obligation unless the trigger event is the expiry of a time sunset or at the time it acquired interests in shares the shareholder had reason to believe that a trigger event would occur.

Also, at the time of an IPO, the Panel will be able to grant a 'Rule 9 dispensation by disclosure' to a specific shareholder who would otherwise be obliged to make a mandatory offer provided the IPO admission document contains appropriate disclosure.

Acceptance condition to a conditional offer for a DCSS 1 company

There are new provisions making an acceptance condition to a contractual offer for a DCSS 1 company subject to two tests, both of which would need to be satisfied in order for the offer to become or be declared unconditional. These tests are:

  • firstly a 'pre-unconditional test', looking at whether shares carrying more than 50% of the voting rights immediately before the relevant Class B or special shares convert or are extinguished have been acquired by the bidder or accepted to the offer, and;
  • secondly a 'post-unconditional test', whether shares which would carry more than 50% of the voting rights immediately after the Class B or special shares convert or are extinguished have been acquired by the bidder or accepted to the offer.

IPOs

In relation to IPOs, the consultation proposes:

  • a requirement for a company, in the context of an IPO that would result in it becoming subject to the Code, to make appropriate disclosure in relation to the Code in its admission document, including in respect of Rule 9 and details of any person or concert party that is or may become interested in shares carrying 30% or more of the voting rights of the company; and
  • the codification of an ability for the Panel to grant, at the time of a company's IPO that would result in it becoming subject to the Code, a 'Rule 9 dispensation by disclosure' in certain circumstances provided that appropriate disclosure is made in the IPO admission document.

Share buybacks

The consultation proposes amending the provisions relating to the disqualifying transactions, which preclude a Rule 9 waiver in relation to a share buyback. The Code Committee believes this can operate in an overly restrictive manner for companies that would otherwise wish to carry out a share buyback under their normal annual shareholder authority.

In addition, there are proposals in relation to introducing a requirement to disclose the maximum percentage of shares carrying voting rights in which the relevant person, or group of persons acting in concert, might become interested where a company is proposing to carry out a share buyback in which the voting rights of an "innocent bystander" might be increased through a Rule 9 threshold.

Response Deadline

Comments are invited on this consultation by Friday 26th September 2025. The Code Committee intends to publish a Response Statement setting out the final amendments to the Code by the end of 2025 with the amendments expected to come into effect in the first quarter of 2026.

New Practice Statements

Practice Statement 35 on Profit Forecasts, Quantified Financial Benefits Statements and Investment Research describes the way in which the Executive normally interprets and applies:

  • certain aspects of Rule 28 of the Takeover Code in relation to a profit forecast or quantified financial benefits statement published by an offeree company or a securities exchange offeror; and
  • Note 4 on Rule 20.1 in relation to investment research published by a connected firm.

Practice Statement 36 on unlisted share alternatives sets out guidance on how the Executive normally interprets and applies the relevant provisions of the Code in respect of an unlisted share alternative to a cash offer (sometimes also referred to as a "stub equity" alternative).

If you would like to discuss this consultation or practice statement changes in more detail please contact Davey Brennan or your usual Gowling WLG contact.