The Takeover Panel (Panel) has censured certain legal and financial advisers in connection with the acquisition by Vallar plc (Vallar) of interests in two Indonesian coal mining companies.


Vallar was the predecessor of Bumi plc, which subsequently became known as Asia Resource Minerals plc. As a result of connected transactions, Vallar’s three Indonesian counterparties, acquired shares which, in aggregate, carried more than 30 per cent of the voting rights of Vallar. No dispensation had been sought from the Panel under Note 1 of the Notes on Dispensations from Rule 9 of the City Code on Takeovers and Mergers (the Code), referred to as a Whitewash dispensation, and the Indonesian parties had not made a subsequent offer for Vallar in accordance with Rule 9.1 of the Code. The Panel determined that the Indonesian parties had been acting in concert at the time they acquired the voting shares (see the Panel’s ruling on 19 December 2012: PS2012/9). The Panel then launched an investigation to determine why it had not been made aware of the connections between the Indonesian parties and why a Whitewash dispensation had not been sought.

Panel’s Findings

In its Statement of Public Criticism, the Panel found that there had been a number of breaches of the Introduction of the Code, including:

(i) a failure to consult the Panel in accordance with Section 6(b);

(ii) a failure by the financial advisers to discharge their “particular responsibility” to advise their clients in accordance with Section 3(f); and

(iii) a failure by three of the advisers to take reasonable care to ensure that all relevant information was provided to the Panel in accordance with Section 9.

We consider each of these in summary below:

Section 6(b): The Panel highlighted that the threshold for triggering the obligation to consult under this section is “very low” and the obligation arises where the relevant person or advisers are in “any doubt whatsoever” as to whether the proposed course of conduct complies with the Code, emphasising that the Panel is uniquely placed to undertake an investigation of the facts and is “independent and impartial”. The Panel concluded that each of the advisers knew of facts or connections between the Indonesian parties which were relevant and these should have been brought to its attention before the connected transactions were signed or announced, rather than the advisers relying on their own judgement or that of another adviser as to whether the Indonesian parties were acting in concert. When one adviser re-examined the concert party issue subsequent to the transactions, the various steps taken (including consulting internally with those with prior knowledge of the Indonesian parties and, separately, with Vallar’s legal and financial advisers) did not absolve it of the obligation to consult the Panel at that stage.

Section 3(f): The Panel concluded that, prior to the announcement of the connected transactions, the financial adviser to the Indonesian parties failed to make its clients aware of their obligations under Rule 9.1 of the Code, including by failing to make it clear that it was not permissible to take a commercial decision about the regulatory question of whether Vallar needed to seek a Whitewash. The Panel found that Vallar’s financial adviser had failed to consult the Panel about the concert issue or advise Vallar to consider seeking a Whitewash under Rule 9.1, instead allowing Vallar to rely on warranties in the legal documentation that the Indonesian parties were not acting concert.

Section 9(a): The Panel found that, following the announcement of the transactions, despite being aware of the relevant commercial background to certain share sale arrangements, certain of the advisers on both sides failed to take reasonable steps to ensure this was fairly presented to the Panel, in particular failing to properly explain the “direct and causative connection” between collateral requirements under a loan and the share sale arrangements. In addition, those advisers failed to ensure that all facts concerning connections between the Indonesian parties were provided to the Panel.


The Panel concluded that the conduct of certain of the advisers was sufficiently serious to merit a public censure. The sanction has brought into sharper focus the need for both legal and financial advisers on each side of a transaction to take particular care in deciding whether to consult the Panel; that reliance on legal advice, professional opinion, client warranties or representations does not discharge that obligation; and the importance of ensuring that all relevant facts are disclosed during any Panel consultation. The Panel’s censure of legal advisers in this case should not, however, be read as a departure from the well-established principle that financial advisers have particular responsibility to comply with and ensure compliance with the Code, so far as they are reasonably able.