The Panel on Takeovers and Mergers v Richard Gary Balfour-Lynn & Ors

Section 955 of the Companies Act 2006 gives the court a broad discretion to make any order needed to secure compliance with a Takeover Panel rule. The discretion should be exercised by balancing the relevant circumstances and the statutory policy of protecting shareholders. It is unhelpful to impose additional thresholds such as “exceptional circumstances”, “very exceptional circumstances” or “rare cases”. Impecuniosity will usually carry little weight, since otherwise parties could structure their affairs to avoid compliance. Bankruptcy may weigh heavily against enforcement where the liability has already been absorbed into the bankruptcy, but the court must have sufficient information to determine that issue. Enforcement remains possible where it promotes the policy of fair and equivalent treatment of shareholders.

The Panel sought orders under section 955 of the Companies Act 2006 to secure compliance with compensation directions made against three former directors and officers of MWB Group Holdings plc. The directions followed findings that the defendants had acted in concert, acquired control in breach of Rule 9 of the City Code on Takeovers and Mergers, and deprived shareholders of the opportunity to accept an informed mandatory offer.

The Hearings Committee directed joint and several payments totalling £44,846,510.92. Its decision was upheld by the Takeover Appeal Board. Two defendants had been adjudged bankrupt before the Committee’s ruling, while the third relied principally on inability to pay. The central issues were whether the court should exercise its section 955 discretion and how bankruptcy affected that discretion.

1. Section 955 discretion. The court made orders under section 955 of the Companies Act 2006 securing payment of the compensation directed by the Panel. The statutory discretion is at large. The court should balance the relevant factors in the usual way and should not add requirements that the case be “exceptional”, “very exceptional” or “rare”. The public policy underlying the Code is an important consideration: shareholders should be treated fairly, should not lose the opportunity to decide on the merits of a takeover, and shareholders of the same class should receive equivalent treatment.
2. Factors favouring enforcement. Relevant matters included the Executive’s thorough investigation, the properly constituted Hearings Committee hearing, the defendants’ admissions, the Appeal Board’s decision, and the public-law character of Panel decisions identified in Ex parte Datafin Plc. An offer made after the Panel’s ruling might weigh against enforcement.
3. Impecuniosity. The third defendant’s alleged inability to pay did not justify refusing an order. He had not provided full disclosure of his assets and liabilities. More fundamentally, giving substantial weight to impecuniosity could enable parties to circumvent Rule 9 by arranging their finances so that they could not comply.
4. Bankruptcy. The bankruptcy of the other two defendants could weigh heavily against an order. If the liability existed before bankruptcy, the creditor would ordinarily prove in the bankruptcy and an enforcement order might serve no practical purpose. The court considered it arguable that shareholders became contingent creditors when the defendants acquired more than 30% and failed to make the mandatory offer, or alternatively when the Committee fixed the compensation date. The issue was not finally determined because the trustees had not addressed it and further information was needed.
5. Disposition. The court nevertheless found good reason to enforce the directions, because doing so promoted the statutory and Code policy of fair treatment. The Panel was directed to serve the judgment on the trustees-in-bankruptcy, and the Panel was given carriage of the order.

This was a first-instance claim under section 955 of the Companies Act 2006. The judgment records that the Hearings Committee’s rulings had been upheld by the Takeover Appeal Board on 26 July 2024; the present hearing was not an appeal from that decision.