City Code on Takeovers and Mergers

A code first laid down in 1968, and subsequently modified, giving the practices to be observed in company takeovers (see takeover bid) and mergers. Encouraged by the Bank of England, the code was compiled by a panel (the Takeover Panel) including representatives from the London Stock Exchange Association, the Issuing Houses Association, the London Clearing Bankers, and others. The code does not have the force of law but the panel can admonish offenders and refer them to their own professional bodies for disciplinary action.
The code attempts to ensure that all shareholders, including minority shareholders, are treated equally, are kept advised of the terms of all bids and counterbids, and are advised fairly by the directors of the company receiving the bid on the likely outcome if the bid succeeds. Its many other recommendations are aimed at preventing directors from acting in their own interests rather than those of their shareholders, ensuring that the negotiations are conducted openly and honestly, and preventing a spurious market arising in the shares of either side.

Accounting dictionary. 2014.

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