Goldilocks (Control) and the Three Bears: Panel on Takeovers and Mergers v. King


The UK takeover regulatory landscape must be understood in the context of the interplay between enforcement of the rules and how investors behave in the face of those rules from a corporate governance perspective. From a legal standpoint, the courts have historically never been involved in the regulation of takeover transactions in the UK. However, section 955 of the Companies Act 2006 now enables the Panel on Takeovers and Mergers to seek court enforcement when a party fails to comply with the City Code on Takeovers and Mergers. Although a potentially useful mechanism to support the Panel in its administration of the Code, it was doubted whether the Panel would ever elect to rely on the provision as it involves exposing its regulatory monopoly to judicial scrutiny. The Scottish Court of Session decisions in Panel on Takeover and Mergers v. King mark the first time the Panel has chosen to rely on Section 955, in the context of enforcing the Mandatory Bid Rule. This paper analyses how this important rule is applied and enforced in practice, as well as the relationship between the Panel and the courts. The facts of the decisions also occasion consideration of an investment tactic that can be deployed to avoid triggering the Mandatory Bid Rule, namely what we define as ‘goldilocks control’.

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  1. 1.

    The Court of Session is Scotland’s supreme civil court, which is divided into the Outer House and the Inner House. The Outer House mostly hears cases at first instance. A single judge, called a ‘Lord Ordinary’, typically hears first instance cases. The Inner House is primarily an appeal court that hears ‘reclaiming motions’, i.e., it reviews decisions from the Outer House (and occasionally from other lower courts and tribunals in Scotland).

  2. 2.

    Panel on Takeovers and Mergers v. King 2018 SLT 79 (hereafter ‘King OH’); Panel on Takeovers and Mergers v. King 2018 SLT 451 (hereafter ‘King IH’).

  3. 3.

    Kershaw (2016), para. 4.65 (‘The Code is an autonomous body of rules […] and although the Code is a central aspect of the regulation of the transfer of shares and the protection of shareholders as a result of takeover activity, it is not a part of what traditionally we would understand as UK company law. The words, concepts, rules, and principles which we find in company law cases and the Companies Act 2006 do not control the meaning of the words, concepts, rules, and principles set out in the Code’).

  4. 4.

    See, e.g. Ruling of the Takeover Panel Hearings Committee: Rangers International Football Club plc & Mr David Cunningham King (5 December 2016), para. 17 (hereafter ‘Hearings Committee’).

  5. 5.

    See, e.g. Blitz and Cookson (2013).

  6. 6.

    King IH, n. 2 above, para. 17; Decision of the Takeover Appeal Board: Rangers International Football Club plc & Mr David Cunningham King (30 March 2017), para. 8 (hereafter ‘TAB’).

  7. 7.

    The ‘Three Bears’ moniker originates from one of Rangers’ nicknames—the ‘Teddy Bears’. See, e.g. McDermott (2015). See also Hearings Committee, n. 4 above, paras. 59 and 89.

  8. 8.

    Hearings Committee, n. 4 above, paras. 13, 31, 34 and 39–40; TAB, n. 6 above, para. 4; King IH, n. 2 above, para. 18.

  9. 9.

    The City Code on Takeovers and Mergers, 12th edn (2016), rule 9.1(b) (hereafter the ‘Code’). An acting in concert scenario is one application of the Mandatory Bid Rule; the rule also applies when a single person acquires interests in shares carrying more than 30% of the voting rights in a company.

  10. 10.

    Hearings Committee, n. 4 above, paras. 1, 35, 37 and 67; TAB, n. 6 above, paras. 4–5; King IH, n. 2 above, para. 18.

  11. 11.

    Hearings Committee, n. 4 above, paras. 1, 34, 48 and 93; TAB, n. 6 above, para. 6; King IH, n. 2 above, para. 18.

  12. 12.

    Hearings Committee, n. 4 above, para. 1 (the ruling states that King purchased 14.75% of the shares in Rangers, but the figure should be 14.57%); TAB, n. 6 above, para. 13; King OH, n. 2 above, paras. 35 and 38; King IH, n. 2 above, paras. 17 and 19.

  13. 13.

    This does not concern the present analysis but it should be noted that the acquisition of the shares was conducted through a company called New Oasis Asset Management Limited (‘NOAL’). The single shareholder in NOAL was another company called Sovereign Trust International Limited (‘Sovereign’). Sovereign was the trustee of The Glencoe Investments Trust, King’s family trust. See Hearings Committee, n. 4 above, paras. 1 and 69–70; TAB, n. 6 above, paras. 15, 43–45 and 77–87; King OH, n. 2 above, para. 13; King IH, n. 2 above, paras. 2, 17, 19 and 21–25.

  14. 14.

    Hearings Committee, n. 4 above, para. 98.

  15. 15.

    Hearings Committee, n. 4 above, paras. 76 and 78; TAB, n. 6 above, para. 43; King IH, n. 2 above, para. 21.

  16. 16.

    Hearings Committee, n. 4 above, para. 78; TAB, n. 6 above, para. 43; King IH, n. 2 above, para. 19.

  17. 17.

    Hearings Committee, n. 4 above, paras. 3 and 106–108.

  18. 18.

    Hearings Committee, n. 4 above, paras. 98 and 103.

  19. 19.

    Hearings Committee, n. 4 above, para. 112.

  20. 20.

    TAB, n. 6 above, para. 104.

  21. 21.

    Takeover Panel Statement: Rangers International Football Club plc (2017/8), available at

  22. 22.

    For a history of the Panel, see, e.g. Armour and Skeel Jr. (2007), pp 1759–1764; Kershaw (2016), paras. 3.05–3.45; see generally also, e.g. Johnston (2007).

  23. 23.

    Compared to how the UK regulates takeover transactions, in the US, for example, takeover transactions are governed through a combination of individual states’ company law statutes and federal securities laws. As such, the rules and institutions connected to the regulation of takeover transactions are embedded within company law in the US. The courts themselves are tasked with overseeing issues arising from takeover transactions; this is not the case in the UK. See, e.g. Kershaw (2016), paras. 3.03 and 4.67.

  24. 24.

    Armour and Skeel (2007), p 1744. See generally also Kershaw (2018), pp 877–893.

  25. 25.

    For a general discussion of enrolling market participants in regulatory systems, see Black (2003).

  26. 26.

    This includes, for example, institutional investors, investment banks and socially significant public companies. See Armour and Skeel (2007), p 1745; Kershaw (2016), para. 3.02.

  27. 27.

    The Code, ss. 3(a)(i) and 3(b). Rangers’ holding company is incorporated in Scotland and, at the time of the relevant events, was admitted to trade on the Alternative Investment Market. Rangers’ shares are now admitted to trading on JP Jenkins’ matched bargain platform, which is a platform exchange for unlisted securities.

  28. 28.

    The Code General Principle 1.

  29. 29.

    See, e.g. Pooley (2018).

  30. 30.

    In implementing the Code, the Panel is not concerned with the substantive merits of a takeover transaction; these are matters for the relevant company and its shareholders. See the Code, s. 2(a).

  31. 31.

    See, e.g. R v. Panel on Takeovers and Mergers, ex p Datafin [1987] QB 815, 840 per Sir John Donaldson MR; R v. Panel on Takeovers and Mergers, ex p Guinness [1990] 1 QB 146, 158 per Lord Donaldson MR.

  32. 32.

    Bardell, Palmer and Wilkinson (2015), para. 1.62. However, see also para. 1.63 where the authors note that the position may be different where the takeover transaction has already taken place as concerns over time-sensitivity and speed are not the same as they otherwise would be during an active bid. See generally also, e.g. Ogowewo (2007); Mukwiri (2008).

  33. 33.

    For an analysis of the scope of judicial review of Panel decisions by the courts, see Kershaw (2016), paras. 3.81–3.86 and Bardell et al. (2015), paras. 1.61–1.64.

  34. 34.

    2006 Act, s. 956(2); Kershaw (2016), paras. 3.84 and 4.49.

  35. 35.

    Although this does not concern the present analysis, the Mandatory Bid Rule is also triggered when a person, together with persons acting in concert, already owns interests in voting shares which give him 30% but less than 50% of the voting rights and that person or the concert party acquires any additional interest in voting shares in the relevant company. See the Code rule 9.1 and note 11 on rule 9.1.

  36. 36.

    The Code Definitions, C1.

  37. 37.

    Takeover Panel Statement: Weyburn Engineering Company Ltd (1973/15), p 3, available at ‘In the normal case a holding of 30%, and in many cases less than 30%, would in practice confer control and the Panel’s adoption of this percentage as the general criterion for the application of [the Code] does usually reflect the reality of the matter’.

  38. 38.

    Takeover Panel Practice Statement 26: Shareholder Activism (9 September 2009), available at (hereafter ‘Practice Statement 26’), para. 1.3. Although the Panel’s guidance is expressly directed at ‘fund managers and institutional shareholders’, Practice Statement 26 applies to all types of shareholder. See also the Code note 2 on rule 9.1 on collective shareholder action.

  39. 39.

    Practice Statement 26, n. 38 above, para. 3(a). See also the Code note 2 on rule 9.1.

  40. 40.

    The Code note 2(b) on rule 9.1; Practice Statement 26, n. 38 above, para. 3(b). The Code note 2(c) on rule 9.1 and Practice Statement 26, n. 38 above, para. 3(c) also note that the board positions held by the directors being replaced are also relevant, in the sense that a proposal to appoint or replace two or more non-executive directors would not normally be considered to be ‘board control-seeking’, whereas a proposal to replace two or more of the chairman, chief executive and finance director would be more likely to be considered to be ‘board control-seeking’.

  41. 41.

    See, e.g. Coffee (2001), p 2157.

  42. 42.

    See, e.g. Atanasov, Black and Ciccotello (2011), pp 5–8; Johnson et al. (2000), pp 22–23; Dyck and Zingales (2004), p 540.

  43. 43.

    Kershaw (2016), para. 8.34.

  44. 44.

    See Bardell et al. (2015), paras. 6.1–6.2; Kershaw (2016), para. 8.29; however, see, e.g. Davies (2002), p 25. See generally also e.g. Schuster (2013).

  45. 45.

    The Code Introduction, s. 3(f).

  46. 46.

    The Code Introduction, s. 10(b)–(c). The Executive can also require parties to pay compensation to past and current shareholders in such amounts as it thinks just and reasonable; Kershaw (2016), paras. 4.39–4.40.

  47. 47.

    Hearings Committee, n. 4 above, para. 98.

  48. 48.

    Hearings Committee, n. 4 above, para. 106; TAB, n. 6 above, paras. 12 and 18.

  49. 49.

    Hearings Committee, n. 4 above, paras. 74–75; TAB, n. 6 above, paras. 54–64 and 71–76.

  50. 50.

    Takeover Panel Statement: Takeover Panel Requires Guinness to Make Payments to Former Distillers Shareholders (1989/13) (approved in Takeover Appeal Board Statement: Principle Capital Investment Trust plc (2010/1)) at

  51. 51.

    Hearings Committee, n. 4 above, paras. 26 and 29.

  52. 52.

    Hearings Committee, n. 4 above, para. 39; TAB, n. 6 above, para. 103(6).

  53. 53.

    Hearings Committee, n. 4 above, paras. 40, 64 and 87–88.

  54. 54.

    Hearings Committee, n. 4 above, paras. 89–90.

  55. 55.

    Hearings Committee, n. 4 above, paras. 64 and 68.

  56. 56.

    Hearings Committee, n. 4 above, paras. 76 and 78.

  57. 57.

    Hearings Committee, n. 4 above, paras. 64, 87 and 90; TAB, n. 6 above, paras. 42, 47 and 103.

  58. 58.

    The member of the concert party that will be required to take ‘prime responsibility’ for making an offer on behalf of the group will usually be the member whose share purchases resulted in the 30% threshold being crossed, but it could be some other member of the concert party deemed by the Panel to be the ‘principal member’. See the Code note on rule 9.2.

  59. 59.

    It is worth noting that King attempted to argue that he was not acting for his own purposes, but rather as the mouthpiece of the entire fan body dissatisfied with how the club was being managed at board-level. The tone of his interactions with the Panel and the TAB is that of someone being singled out as a ‘champion’ and leader of a fan-based movement that included thousands of other investor–supporters not coming under the scrutiny of the Code. The Executive stressed that his personal motives for seeking control were irrelevant. The focus is on whether it may be established on the objective facts that persons were cooperating to gain control of a company. In this respect, football clubs are no different to any other company. See Hearings Committee, n. 4 above, paras. 38 and 85–87; TAB, n. 6 above, paras. 93–94.

  60. 60.

    The Code rule 9.5(a), (c); note 3 on rule 9.5.

  61. 61.

    Hearings Committee, n. 4 above, para. 103.

  62. 62.

    The highest price paid by any member of the concert party—in this case Taylor—was 24.92 pence per share. See Hearings Committee, n. 4 above, para. 34.

  63. 63.

    2006 Act, s. 951(1); The Code Introduction, ss. 4(c), 7(a)(i), Appendix 9(1). Technically, a review by the Hearings Committee is not an appeal; rather, it is a mechanism through which the official opinion of the Panel can be obtained; King IH, n. 2 above, para. 26.

  64. 64.

    2006 Act, s. 951(3); The Code Introduction, ss. 7(e), 8(a).

  65. 65.

    For a discussion on institutions interacting in the same regulatory space, see generally e.g. Black (2009).

  66. 66.

    Kershaw (2016), para. 3.84. Indeed, owing to its success, the UK’s takeover regulatory architecture has been exported—either in whole or in part—abroad to many jurisdictions (e.g. Hong Kong and Singapore). See generally also e.g. Armson (2017).

  67. 67.

    Kershaw (2016), paras. 3.84–3.85, 4.04 and 4.64.

  68. 68.

    See generally e.g. Davies (2018). Another concern was that parties to a takeover transaction would inevitably litigate over the meaning of the Code and decisions taken by the Panel. Doing so would potentially jeopardise the Panel’s legitimacy and its ability to ensure the orderly operation of the UK takeover market. See generally e.g. Ogowewo (2007).

  69. 69.

    Kershaw (2016), paras. 4.03 and 4.68.

  70. 70.

    It is important to clarify that Section 955 is not just a mechanism through which a mandatory bid ruling can be enforced. It is a more general provision that the Panel may rely upon across a range of Code enforcement scenarios.

  71. 71.

    A breach of the Code is not equivalent to a breach of statutory or common company law. Therefore, parties to which the Code applies are not permitted to raise proceedings in the courts in relation to any alleged non-compliance with any Code rule. The only available recourse is through the Panel and the TAB. Being the sole public body charged with Code enforcement, only the Panel enjoys the discretion to raise proceedings before the courts. See the 2006 Act, ss. 956(1) and 955(3).

  72. 72.

    Takeover Panel Statement: The European Directive on Takeover Bids (2005/10), p 14, available at

  73. 73.

    2006 Act, s. 955.

  74. 74.

    King OH, n. 2 above, para. 28.

  75. 75.

    King OH, n. 2 above, paras. 46–50.

  76. 76.

    King OH, n. 2 above, paras. 80–81.

  77. 77.

    King IH, n. 2 above, para. 13. Before the Inner House, the Panel no longer contended that the courts had no discretion in considering an application under Section 955 as to whether to grant an order.

  78. 78.

    The TAB’s Chairman and Deputy Chairman are appointed by the Master of the Rolls and have typically held high judicial office, while other members usually have knowledge and experience of takeover transactions and the Code. The current Chairman of the TAB is Lord Collins of Mapesbury (former Justice of the Supreme Court) and the Deputy Chairman is Sir John Mummery (former Lord Justice of Appeal). The TAB can confirm, vary, set aside, annul or replace the contested ruling of the Hearings Committee. See the Code Introduction, s. 8(c); King IH, n. 2 above, para. 13; TAB, n. 6 above, paras. 99–100.

  79. 79.

    King IH, n. 2 above, para. 29.

  80. 80.

    King IH, n. 2 above, paras. 15 and 37.

  81. 81.

    King IH, n. 2 above, para. 29.

  82. 82.

    See, e.g. Takeover Panel Statement: Inoco plc (‘Inoco’)/Petranol plc (‘Petranol’) (1986/23), available at

  83. 83.

    Kershaw (2016), para. 3.87.

  84. 84.

    Hearings Committee, n. 4 above, paras. 21 and 25–26.

  85. 85.

    Hearings Committee, n. 4 above, para. 38.

  86. 86.

    See generally e.g. Bebchuk and Cohen (2005).

  87. 87.

    See generally Manne (1965).

  88. 88.

    See, e.g. Coffee (1984), pp 1200–1201. Theoretically, a voluntary offer should only be made if an investor believes that the future value of a target company’s share price under a reconstituted board would exceed the price offered, taking into account the high financing and transaction costs. For more detail on voluntary offers, see the Code rule 10 and Appendix 4; Kershaw (2016), paras. 6.01–6.55.

  89. 89.

    Cheffins and Armour (2011), pp 58–60.

  90. 90.

    Christie (2019), pp 6–10 (discussing various types of activism).

  91. 91.

    Cheffins and Armour (2011), pp 62–64 and 70–73.

  92. 92.

    Ibid., p 59.

  93. 93.

    Ibid., p 58.

  94. 94.

    See Sect. 4 above.

  95. 95.

    Mulholland (2017).

  96. 96.

    See generally Rangers International Football Club plc (2018).

  97. 97.

    Booker (2005), pp 231–232 (noting ‘The final form of three, the one capable of the most sophisticated development, is what may be called the “dialectical three” where, as we see reflected in Goldilocks, the first is wrong in one way, the second in another or opposite way, and only the third, in the middle, is just right. This idea that the way forward lies in finding an exact middle path between opposites is of extraordinary importance in storytelling and, as we shall see, some of the ways in which it finds expression are of breathtaking subtlety’).

  98. 98.

    For a discussion of each of these elements, see Christie (2019), pp 3–5, 11–14 and 32–34.

  99. 99.

    See, e.g. Ayres and Cramton (1994), p 1051.

  100. 100.

    The empirical evidence suggests that the average activist holding is approximately 8%. See Gilson and Gordon (2013), p 899. It is also noted that median initial ownership is 6.3%. See Brav et al. (2008), p 1747. In more extreme examples from the US, activist hedge funds have secured board representation in cases where they hold a very low percentage of a target company’s shares. For example, in 2013 ValueAct Capital gained a seat on Microsoft’s board with less than 1% of the company’s shares. Likewise, in 2017 Jana Partners had a 5% stake in Tiffany & Co and reached an agreement to add three non-affiliated directors to the board. See Christie (2019), pp 14 and 39.

  101. 101.

    Gilson and Gordon (2013), p 896.

  102. 102.

    Christie (2019), pp 7–8 and 27–28.

  103. 103.

    Ibid., pp 11–12 and 38–39.

  104. 104.

    A recent example of goldilocks control is activist hedge fund Elliott Advisors’ investment in Scottish FTSE 250 company Alliance Trust. Elliott gradually built up a 12% holding in Alliance Trust and—with the backing of three other large institutional investors—nominated three non-executive directors to Alliance Trust’s board. One day before the general meeting, Alliance Trust agreed to add two of Elliott’s nominees to the board. 6 months later, under pressure, the CEO of Alliance Trust stepped down from the board. See Christie (2019), pp 14 and 17–19.

  105. 105.

    For a discussion of the concept of ‘quasi-control’ and the recent phenomenon of activist board representation, see Christie (2019), pp 3–4 and 9–14.

  106. 106.

    Practice Statement 26, n. 38 above, para. 1.7. This leniency applies to all types of investor (e.g. institutional investors and natural persons) who incur the obligation to make an offer under Rule 9 due to an ‘inadvertent mistake’. See the Code note 4 on Dispensations from Rule 9.

  107. 107.

    For criticisms of the current stewardship framework, see, e.g. Cheffins (2010); Reisberg (2017). See also Kershaw (2016), para. 8.16.

  108. 108.

    See Hearings Committee, n. 4 above, paras. 42 and 46.

  109. 109.

    See Rose and Sharfman (2014), pp 1034–1038.

  110. 110.

    See, e.g. Gunn (2018).

  111. 111.

    Takeover Panel Hearings Committee: Rangers International Football Club plc (‘Rangers’) and Mr David Cunningham King (‘Mr King’) (2018/8), para. 24. Interestingly, this is not the first occasion that King has faced contempt of court proceedings. See generally Sports Direct International plc v. Rangers International Football Club [2016] EWHC 85 (Ch).

  112. 112.

    See Contempt of Court Act 1981, s. 15(2).

  113. 113.

    Court of Session Undertaking by David Cunningham King (Court Ref: P341/17), available at:

  114. 114.

    Final Mandatory Cash Offer by Laird Investments (Pty) Ltd to acquire the entire issued ordinary share capital of Rangers International Football Club plc, 25 January 2019, available at:

  115. 115.

    The Code rule 10.

  116. 116.

    Final Mandatory Cash Offer for Rangers International Football Club plc by Laird Investments (Pty) Ltd—Lapse of Offer, 15 February 2019, available at:


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The authors would like to warmly thank Professor David Kershaw (London School of Economics and Political Science), Professor Marc Moore (University College London), Professor David Cabrelli (University of Edinburgh) and the anonymous reviewers for their helpful comments on earlier versions of this paper. The usual disclaimers apply.

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Christie, A.L., Liptrap, J.S. Goldilocks (Control) and the Three Bears: Panel on Takeovers and Mergers v. King. Eur Bus Org Law Rev 21, 591–609 (2020).

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  • Panel on Takeovers and Mergers v. King
  • Takeover regulation
  • Mandatory Bid Rule
  • Shareholder activism
  • Corporate governance
  • Section 955 of the Companies Act 2006