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SUP 11.4 Requirements on firms

SUP 11.4.1GRP

A summary of the notification requirements in this section is given in SUP 11 Annex 1.1

Requirement to notify a change in control

SUP 11.4.2RRP

A UK domestic firm other than a UK insurance intermediary must notify the FSA of any of the following events concerning the firm:1

  1. (1)

    a person acquiring control or ceasing to have control

  2. (2)

    an existing controller acquiring an additional kind of control or ceasing to have a kind of control;

  3. (3)

    an existing controller increasing or decreasing a kind of control which he already has so that the percentage of shares or voting power concerned becomes or ceases to be equal to or greater than 20, 33 or 50;

  4. (4)

    an existing controller becoming or ceasing to be a parent undertaking.

SUP 11.4.2ARRP

1A UK insurance intermediary must notify the FSA of any of the following events concerning the firm:

  1. (1)

    a person acquiring control;

  2. (2)

    in relation to an existing controller:

    1. (a)

      the percentage of shares held in the firm decreasing from 20% or more to less than 20%; or

    2. (b)

      the percentage of shares held in a parent undertaking of the firm decreasing from 20% or more to less than 20%; or

    3. (c)

      the percentage of voting power which it is entitled to exercise, or control the exercise of, in the firm decreasing from 20% or more to less than 20%; or

    4. (d)

      the percentage of voting power which it is entitled to exercise, or control the exercise of, in a parent undertaking of the firm decreasing from 20% or more to less than 20%;

  3. (3)

    an existing controller becoming or ceasing to be a parent undertaking.

SUP 11.4.3G

SUP 11 Annex 2 gives examples of the circumstances in which a notification in accordance with SUP 11.4.2 R is required.

SUP 11.4.4RRP

An overseas firm must notify the FSA of any of the following events concerning the firm:

  1. (1)

    a person acquiring control or ceasing to have control;

  2. (2)

    an existing controller becoming or ceasing to be a parent undertaking.

SUP 11.4.5G

If there is uncertainty whether a particular relationship constitutes control, it may be appropriate for the firm or controller or proposed controller to ask the FSA for individual guidance (see SUP 9) and to obtain its own legal advice. For example, if the control is to be held through a trust, then certain trustees, beneficiaries and other parties may qualify as controllers for the purposes of the Act and this chapter. Furthermore, a person may qualify as a controller if he is able to exercise 10%. (20% if the firm is a UK insurance intermediary) or more of the voting power at a firm's general meeting as a result of the ability to exercise proxy votes.1

SUP 11.4.6G

If a firm is required to obtain approval from the Society of Lloyd's for any changes in its controllers, it should apply for this approval as well as notifying the FSA.

Content and timing of the notification

SUP 11.4.7RRP

The notification by a firm under SUP 11.4.2 R, R or SUP 11.4.4 R must:1

  1. (1)

    be in writing;

  2. (2)

    contain the information set out in:

    1. (a)

      in the case of acquiring or increasing control, SUP 11.5.1 R (subject to SUP 11.5); or

    2. (b)

      in the case of reducing control, SUP 11.5.7 R; and

  3. (3)

    be made:

    1. (a)

      as soon as the firm becomes aware that a person is proposing to take a step that would result in the event concerned; or

    2. (b)

      if the eventtakes place without the knowledge of the firm, within 14 days of the firm becoming aware of the change in control concerned.

SUP 11.4.8GRP

Principle 11 requires firms to be open and cooperative with the FSA. A firm should discuss with the FSA, at the earliest opportunity, any prospective changes of which it is aware, in controllers' or proposed controllers' shareholdings or voting power (if the change is material). These discussions may take place before the formal notification requirement in SUP 11.4.2 R, R or SUP 11.4.4 R arises. (See also SUP 11.3.2 G). As a minimum, the FSA considers that such discussions should take place before a person:1

  1. (1)

    enters into any formal agreement in respect of the purchase of shares or a proposed acquisition or merger which would result in a change in control (whether or not the agreement is conditional upon any matter, including the FSA's approval); or

  2. (2)

    purchases any share options, warrants or other financial instruments, the exercise of which would result in the person acquiring control or any other change in control.

SUP 11.4.9GRP

The obligation in SUP 11.4.2 R andSUP 11.4.2AR (1) and R (2) applies whether or not the controller himself has given or intends to give a notification, in accordance with his obligations under the Act.1

Identity of controllers

SUP 11.4.10RRP

A firm must take reasonable steps to keep itself informed about the identity of its controllers.

SUP 11.4.11GRP

The steps that the FSA expects a firm to take to comply with SUP 11.4.10 R include, if applicable:

  1. (1)

    monitoring its register of shareholders (or equivalent);

  2. (2)

    monitoring notifications to the firm in accordance with Part 223 of the Companies Act 20063;

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  3. (3)

    monitoring public announcements made under the relevant disclosure provisions of the Takeover Code or other rules made by the Takeover Panel;

    2
  4. (4)

    monitoring the entitlement of delegates, or persons with voting rights in respect of group insurance contracts, to exercise or control voting power at general meetings.