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PA SGS 1 Consolidation
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Comprehensive notes on SGS 1 private acquisitions based on learning outcomes and SGS activities.
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Learning Outcomes1. appreciate the regulatory concerns of a seller on a share sale including the FCA, competition and data
protection;
2. appreciate that pre-completion consents for a corporate transaction may be necessary from regulators and/or
shareholders;
3. outline the early stages of a corporate transaction; and
4. identify some particular concerns for a buyer or seller of a publicly listed company.
LO1: regulatory concerns of seller
a. FCA – General Prohibition
Client:
NB: FSMA only applies to share sales bcs shares are a specified investment Art 76 RAO
NB: FSMA restrictions can apply to clients as well as to their solicitors.
o Could the auction process be a ‘specified activity’ (client and solicitor)?
1. S.19 FSMA -‘general prohibition’ unless authorised or exempt
2. s.22(1) FSMA - is it a ‘regulated activity’? -> i.e activity of a specified kind - RAO
3. Activity of a specified kind – RAO
o Auction process:
‘dealing in investments’ (art. 14 RAO); or
‘arranging deals in investments’ (art. 25 RAO)
4. Exclusions to s.19 FSMA -> RAO and they very often apply:
o Art. 70 (sale of shares in body corporate) – where 50% or more of voting shares in a company
are being sold- most likely to apply to target;
o Art. 28 (arranging transactions to which arranger is the party) – this would apply to the seller
as it is one of the parties to the share sale agreement.
Seller’s solicitors could be subject to the general prohibition under s. 19 FSMA:
1. ‘advising’ (art. 53 RAO) on the merits of selling securities; or
2. ‘arranging deals in investments’ (art. 25 RAO).
However -> seller’s solicitors would be able to rely on the same exemptions under art. 70
RAO; or
Art. 29 RAO - ‘arranging deals’ specified activity if the deal is arranged through an authorised
person (i.e seller’s financial advisor is authorised).
b. FCA: Financial promotion (only share sale)
In share sales or sale of business (including shares!) of target -> Information Memorandum may constitute a
financial promotion falling under restrictions in s.21 FSMA
o criminal offence for an unauthorised person (i.e not authorised under s.31 FSMA) to communicate a financial
promotion unless an authorised person has approved its contents or a relevant exemption applies under FPO
FPO exemptions (can include this in IM)
o Art.62 FPO – either
Acquire/sale of 50% or more of voting rights in share capital of a body corporate; OR
together with any shares already held by the persons acquiring the shares, they carry not less than
50% of the voting rights; AND
in either case, the seller is a body corporate/partnership/ individual/group of connected individuals
and buyer is also one
this exemption is commonly available for acquisitions of private limited companies
o Art.62 FPO (2) (b) (ii) – if above not satisfied:
IM can still be subject to exemption if:
IM is made by or on behalf of a body corporate/partnership/ individual/group of
connected individuals; and
Relates to a transaction of acquiring/disposing shares in a body corporate; and
Object of transaction may reasonably be regarded as being the acquisition of da-to-
day control of the company.
o Art. 49 (2) FPO – IM is given to ‘investment professionals’ (Art. 19 FPO)
Prospectus Requirement: Public Companies
s. 85(1) FSMA - prospectus is required if shares are to be offered to the public
s. 86(1) FSMA – exemptions: i.e distribution of info to less than 150 persons –OR- sent out only to ‘qualified
investors’ (i.e banks, investment institutions)
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