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ACCA Strategic Professional · Advanced Financial Management · Regulatory framework and processes

Under the City Code, an offeror acquires shares carrying 30% or more of the voting rights of an offeree company to which the Code applies. What is the general consequence?

Acquiring 30% or more of the voting rights triggers a mandatory offer to all other shareholders. It must be in cash, or have a cash alternative, at no less than the highest price the bidder paid in the previous 12 months, protecting minority shareholders.

  1. AIt must make a mandatory cash offer, or one with a cash alternative, to all remaining shareholders at the highest price paid in the previous 12 monthsCorrect
  2. BIt must make a voluntary offer at a premium of at least 30% to the market price
  3. CIt must obtain approval from the offeree's board before any further purchases
  4. DIt must sell down its holding to below 30% within 12 months

Explanation

Crossing the 30% threshold triggers a mandatory bid for all remaining shares. The offer must be in cash (or have a cash alternative) at no less than the highest price paid by the offeror in the preceding 12 months. The Code does not require a fixed 30% premium, board approval or a forced sell-down.

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