UK Law and Practice Contributed by: Federico Fruhbeck, Alice Brogi, Alex Bluett and Gisele Zouein, Gibson, Dunn & Crutcher LLP
9.4 Independent Outside Advice Directors will typically receive independent advice in a number of areas, which (depending on the particular circumstances and the skill sets available within the company) will commonly include, among other things: • financial advice (including as to valuation and deal terms); • legal and regulatory advice (including as to legal due diligence, transaction documentation and regulatory approvals); • accounting and tax advice; and • specialised technical advice (including, in the con- text of energy and infrastructure M&A, from con- sultants, engineers and environmental experts). Under the Takeover Code, the board of the target is required to obtain competent independent advice in respect of whether the financial terms of an offer are fair and reasonable, and the substance of that advice must be made known to the shareholders. Outside of the advice provided by a financial adviser in the context of a Takeover Code transaction, it is less common to seek fairness opinions from financial advisers in the UK than in some other jurisdictions, particularly the USA.
Such committees may also be relevant when certain directors have a conflict of interest, for example, in the case of a management buy-out. In relation to a transaction to which the Takeover Code applies, directors must ensure compliance with the Code. While the Takeover Code permits a board to delegate the day-to-day conduct of an offer to par- ticular directors or a committee of the board, the board must monitor the conduct of the transaction effectively so that each director can fulfil their Code responsibilities. 9.3 Role of the Board An M&A transaction will typically be negotiated on a day-to-day basis by key executives, under close oversight of the board and with the support of external advisers. Where the Takeover Code applies, the directors of the bidder and the target must ensure compliance with the Takeover Code. While the Takeover Code permits a board to delegate the day-to-day conduct of an offer to particular directors or a committee of the board, the board must monitor the conduct of the transaction effectively so that each director can fulfil their Takeo- ver Code responsibilities. Under the Takeover Code, the target board is also required to provide its recom- mendation to shareholders in relation to the offer. Shareholder litigation is relatively uncommon in the UK, in part because in general, directors’ duties are owed to the company rather than the shareholders (see 9.1 Principal Directors’ Duties ). Where a transac- tion involves public disclosure, investors may be able to bring a claim to the extent the requisite disclosure standard for the relevant document has not been met.
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