Our July Pensions Update outlined the Takeover Panel‘s Consultation PCP 2012/2 (the Consultation) on the inclusion of pension scheme trustees as “persons affected” for the purposes of the Takeover Code. This would entitle scheme trustees to receive formal information about takeover bids. The Consultation closed on 28 September 2012 and we now await the Takeover Panel’s decision.

The Consultation emerged as a result of responses from trustees to an earlier consultation (PCP 2011/1) which extended the definition of “persons affected” to include employee representatives. The responding trustees took the view that in the context of a takeover bid for a listed company there was no practical difference between current employees and members of the pension scheme (who would in any case comprise employees past and present and be “represented” by the scheme trustees). Further, the trustees argued that in many cases the target’s shareholders would be better served by understanding a bidder‘s intentions regarding the target’s pension fund. Equally, bear in mind that the Pensions Regulator currently does not have the power to require a bidder to publicly disclose its intentions towards the target’s scheme.

However, there appear to be equally strong grounds for asserting that the Code’s provisions should not be extended to trustees. Recall that the Takeover Code implements the provisions of the Takeover Directive into UK national law. The Takeover Directive does not require the inclusion of pension scheme trustees. Therefore, expanding the class of “persons affected” might be seen as increasing the Code’s scope beyond what was originally intended at the European level. In addition, whilst the Pensions Regulator cannot insist on public disclosure, existing pensions legislation (in particular the Pensions Acts 2004 & 2011) does offer significant protection for scheme beneficiaries.

Whichever view you adopt, there will always be an inherent tension between the bidder wanting to get the deal done and adequate consultation of the various interest groups. As things stand, the Consultation proposes a fairly neutral approach to trustee involvement: The discussion of the target’s pension scheme may well be brought forward, but there will be no requirement for the bidder and trustee to reach agreement before the bidder’s offer becomes unconditional.


Arguably, any requirement to consider pension issues at an early stage is a positive development. In our experience, it has often been the case that the pension scheme is not considered in a structured way, if at all, until late in the day. Clearly in relation to acquisitions of very large listed companies with well publicised scheme deficits this may prove to be less of an issue. Hopefully the forthcoming Takeover Panel response will give definitive guidance on if and how the trustees will be involved in the bid process.

Justin McGilloway