TOMORROW, July 1st, the newly established Irish Takeover Panel will assume the regulation of takeovers of Irish listed companies. It will do so under a statutory regime, replacing the voluntary regime administered by the London based Panel on Takeovers and Mergers, which has applied to Irish listed companies for almost 30 years.

Last week, the panel published its takeover rules. The Government's declared objective for the panel, apart from the protection of shareholders was to provide support and credibility for the Irish financial markets following the separation of the Irish and London stock exchanges.

Ireland's statutory regime accords with the requirements of the proposed EU directive on takeovers.

. Role of the Panel

The principal function of the Panel, established under the Irish Takeover Panel Act 1997 (Act), is to monitor and supervise takeovers of "relevant companies" so as to ensure that the "general principles" set out in the Act and the rules made by the panel are complied with.

Like the general principles in the City (of London) Code, the general principles enshrine broadly stated, fundamental principles designed to protect shareholders so as to ensure, for example, that all shareholders of the same class are treated similarly by an offeror. In the context of widely dispersed share ownership, effective control may frequently be obtained at levels well below 50 per cent. A person who succeeded in acquiring sufficient shares to obtain such control might, in the absence of regulation, see no reason to make a commensurate offer to the remaining shareholders.

A "relevant company" is, broadly, an Irish incorporated company any, of whose securities are for the time being authorised by the Irish Stock Exchange to be traded on any of its markets or were so authorised within the five years prior to a proposed takeover of the company. This means that, unlike the City Code, the rules will apply to Irish companies quoted on the Exploration Securities Market or Developing Companies Market and, in certain circumstances, to Irish companies which have ceased to be quoted on the Irish Stock Exchange.

The basic meaning of "takeover" is an agreement or transaction whereby control of a relevant company is or may be acquired, and "control" means the holding, directly or indirectly, of securities of a company which confers not less than 30 per cent of the voting rights in the company.

. The Rules

Under the Act, the panel has a general power to make rules to ensure that takeovers comply with the general principles. The Act obliges the panel to make rules on three matters:

- the requirement that a person or persons acting in concert who acquire control of a relevant company make a "mandatory offer" for the remaining securities of the company. The rule made by the panel for this purpose is similar to the City Code's mandatory offer rule and is undoubtedly the most significant rule from the viewpoint of shareholder protection.

- the interaction between the rules and the requirements of the mergers legislation.

- the speed with which a person or persons acting in concert may make a "substantial acquisition of securities" below the control threshold. The rules made by the panel for this purpose follow the form of the London panel rules.

It was always expected that the rules made by the panel would closely mirror the City Code, and the rules certainly fulfil this expectation. The move to a statutory regime, however, has involved various changes related to rules and "notes" which are an important part of the City Code. Thus, it has been necessary to separate completely all provisions intended to have rule status from mere guidance notes which have no legal status whatsoever.

. Rulings and directions

The panel will have power, of its own accord or at the request of an interested person, to make a ruling as to whether any activity or proposed activity complies with the general principles and the rules. To ensure that the general principles and the rules are complied with, the panel also has an extensive power to give a direction to any party to a takeover to do or refrain from doing any act.

If the panel believes that a ruling or direction made by it has not been complied with or is unlikely to be complied with, it may apply to the High Court for an order enforcing the ruling or direction. Failure to comply with such an order would constitute contempt of court and be punishable accordingly.

The panel may conduct hearings for the purposes of making rulings or directions, and the panel will have the same powers as the High Court to oblige witnesses to attend for examination under oath and to compel the production of documents. The panel may, following an inquiry into the conduct of any person, advise, admonish or censure that person if he has contravened the general principles or the rules and may publish notice of that advice, admonition or censure.

. Judicial review

The validity of a rule, a derogation from a rule, a ruling or a direction may be questioned only by way of an application to the High Court for judicial review. Further, a rule may not be so questioned unless the panel has made a ruling or direction by reference to that rule.

An application for leave to apply for judicial review must normally be made within six days after the date of the relevant ruling, direction or derogation. The court may not grant leave unless the applicant appears to have substantial grounds for his contention. Except where the constitutionality of any law is in issue, no appeal to the Supreme Court can be made from a decision of the High Court, either in an application for leave to apply for judicial review or in an application for judicial review, unless the High Court considers that a point of exceptional public importance is involved and that an appeal is desirable in the public interest.