Skip to content

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

Under the UK Takeover Code's general approach, which action may the board of an offeree company take after it has received a bona fide offer, without first obtaining shareholder approval?

The board may look for a white knight, a competing bidder, without shareholder approval. The Takeover Code's no-frustration rule bars the board from issuing shares, selling major assets or buying back shares during an offer unless shareholders approve, but seeking a better offer does not frustrate the bid.

  1. AIssue new shares to a friendly party to dilute the bidder's stake
  2. BSell a major subsidiary to frustrate the offer
  3. CSeek a competing bid from a white knightCorrect
  4. DBuy back its own shares in the market to raise the share price

Explanation

Rule 21 prevents frustrating action without shareholder approval, which covers issuing shares, disposing of material assets or buying back shares. Seeking a competing offer is not frustrating action and remains permitted, as the board is still acting in shareholders' interests.

Did you get it right without looking?

One question tells you little. A timed set on Regulatory framework and processes shows your real accuracy, how long you take and where you lose marks.

Practise Regulatory framework and processesFree diagnostic mock

More Regulatory framework and processes questions