Takeover Code Rule 9: The 30% Mandatory Offer Trigger Explained

Takeover Code Rule 9 can turn a small share purchase into an obligation to offer for the remaining shareholders’ holdings. The danger is not the size of the latest trade: it is the buyer’s resulting voting position, including relevant concert parties.

For CISI Mergers & Acquisitions and Market Regulations, separate three questions: has an offer obligation arisen, can the Panel waive it, and what terms must the offer contain? A correct percentage alone does not answer all three.

Rule 9: what the 30% threshold actually measures

First establish that the company and transaction fall within the Takeover Code. The following examples assume one ordinary share class, one vote per share and no special dispensation.

The ordinary trigger covers an acquisition that brings the relevant aggregate interest to 30% or more. Once the relevant interests are between 30% and 50%, inclusive, an acquisition increasing the percentage can also trigger an offer. The Panel’s Rule 9.1 supplies the governing test.

Suppose an investor has 2.95 million of a company’s 10 million voting shares. Buying another 50,000 produces:

3 million ÷ 10 million = 30%.

That is not safely below the boundary. In a different case, moving from 34% to 34.1% also raises the issue; the rule does not give the holder a general allowance for small annual purchases.

Write the before-and-after percentages beside the transaction. This prevents an answer based only on the new parcel.

Acting in concert: whose interests belong in the calculation?

Assume A holds 24% and B holds 5%, and the facts establish that they act in concert. B’s proposed 1.5% purchase takes their combined interest from 29% to 30.5%. B’s individual 6.5% is not the relevant total.

Do not infer concert status merely because two investors favour the same outcome. The Code contains specific presumptions and looks at cooperation to obtain or consolidate control. Voting the same way on a particular resolution is not, by itself, normally sufficient.

In a case question, underline the relationship evidence separately from the numbers: an agreement, a presumed relationship, a control-seeking proposal, or a statement that the parties are independent. When the relationship is uncertain, the practical response is to consult the Panel before the acquisition—not to choose whichever denominator avoids a bid.

Can a buyback trigger Rule 9 without a purchase?

Yes, a company buyback can increase another person’s voting percentage even though that person’s holding stays constant.

A shareholder retains 29 million votes while the total falls from 100 million to 95 million. Its interest becomes 29 ÷ 95 = 30.53%, approximately. That identifies a threshold issue; it does not establish that an offer is unavoidable.

Under Rule 37.1, distinguish:

• Directors and relevant related persons: a waiver normally involves the prescribed process, including independent shareholder approval.
• Other holders: a dispensation is normally available, but prior acquisition with reason to expect a specific buyback can change that treatment.
• Every doubtful case: advance Panel consultation matters.

The same arithmetic can therefore produce different regulatory outcomes. Keep the ownership calculation and the waiver analysis on separate lines.

Cash consideration: calculate the floor, not the average

A mandatory offer normally requires cash or a cash alternative. Its ordinary floor is the highest relevant price paid by the bidder or its concert parties for that share class during the 12 months before announcement, subject to the Code’s adjustment provisions. See Rule 9.5.

Imagine the bidder paid 210p in January and a concert party paid 225p in June. A September offer is not ordinarily priced using their average or the current market price. With no adjustment, 225p is the relevant minimum.

For 7 million shares still to be acquired, an illustrative 225p cash price means £15.75 million of consideration if all those shares are purchased. Financing fees and other transaction costs are separate. This calculation shows why a seemingly modest stake-building decision needs funding analysis before execution.

An all-share proposal does not remove the cash requirement. Equally, a premium-looking price is not necessarily compliant if an earlier relevant acquisition was higher.

The acceptance condition is a different test

The 30% trigger is not the level of acceptances needed to complete a mandatory offer. Rule 9.3 ordinarily requires the bidder and concert parties to hold shares carrying more than 50% following the relevant acquisitions and acceptances.

Exactly half is not more than half. Nor does triggering Rule 9 let a bidder freely add a “satisfactory due diligence” escape clause. Mandatory-offer conditions are tightly restricted, subject to Panel consent and relevant special provisions.

A useful case note has two rows: “obligation triggered?” and “acceptance condition satisfied?” Marking both with the same percentage is a warning that the reasoning has become confused.

This article stops at the obligation and offer terms. The separate contractual offer versus scheme guide explains the route to acquiring the remaining shares.

A five-line pre-acquisition check

Before selecting an answer or advising on the next step, record:

1. Scope: does the Code apply to the target?
2. People: who holds the relevant interests, including established concert parties?
3. Movement: what changes the numerator or voting-rights denominator?
4. Panel treatment: is consent, waiver or dispensation actually established?
5. Consequences: what cash terms and acceptance condition follow?

If a question states no exemption, do not invent one. If it supplies director status or advance knowledge of a buyback, explain why that fact matters rather than giving only the percentage.

The 15 practice questions above use original scenarios, not recalled exam questions. For the wider Making Acquisitions syllabus and integrated cases, use the CISI Academy MAMR course. Check official candidate updates for your sitting; this educational explanation is not transaction-specific legal advice.