Dennis TourishProfessor of LeadershipRoyal Holloway, University of LondonCo-editor of ‘Leadership’Email: Dennis.Tourish@rhul.ac.uk

DYSFUNCTIONAL LEADERSHIP IN CORPORATIONS

Ken LayAKA ‘Kenny Boy’

Jeffrey Skilling

Amazon March 2016- 161223 books with ‘Leadership’ in their title. That is 60,000 more than one year ago….If you read one every day including weekends it would take you 441 years….

BUT – there are only343 books with ‘Followership’ in their title (80 more than a year ago)We have a fixation on leadership, though without followers there are no leaders…

SOME ASSUMPTIONS• Followers should

conform – mostly, do what they are told

• Leaders know best (but do they always?)• Dissent is resistance

to be overcomeWho’s the bossBBC 2March 2016

INVOLVEMENT… AND POWER

A MAJOR SOURCE

OF ERROR???‘The temptation to tell a Chief in a great position the things he most likes to hear is one of the commonest explanations of mistaken policy. Thus the outlook of the leader on whose decision fateful events depend is usually far more sanguine than the brutal facts admit.’

 Winston Churchill (1931) INGRATIATION...

‘A lot of times in politics you have people look you in the eye and tell you what's not on their mind.’ --George W. Bush, Sochi, Russia, April 6, 2008

‘At GM’s Renaissance Centre headquarters, the top brass were sequestered on the uppermost floor, behind locked and guarded glass doors. Executives housed on that floor had elevator cards that allowed them to descend to their private garage without stopping at any of the intervening floors (no mixing with the drones).’Steve Rattner, Head of Auto Rescue Task Force, Fortune, Nov. 2009

EFFECTS OF FLATTERY• A study of 451 CEOs looked at the impact on them of

more intense and frequent flattery (e.g., offering exaggerated compliments) and opinion conformity (e.g., expression of agreement even when people don't agree).• Flattery and opinion conformity linked to CEOs having more favourable evaluations of their own strategic judgments and leadership skills, being less likely to make strategic changes when firm performance suffered, and more prone to lead firms that suffered persistently poor performance.

Hyuan Park, Westphal and Stern, ASQ, 2011

EFFECTS OF NARCISSISM• Highly narcissistic CEOs less responsive to

whether recent firm performance was good or bad - continued to make equally risky investments (e.g. acquisitions of new companies) regardless of recent performance. Their less narcissistic peers more cautious in bad times and tended to take bigger risks during good times.

Chatterjee and Hambrick, ASQ, 2011

EFFECTS OF NARCISSISM• Less narcissistic CEO's weren’t affected

much by media praise. The highly narcissistic made riskier investments after getting praised in the media. The narcissists were swayed more by "social praise" and less by recent performance!

• ‘The only benefit of flattery is that by hearing what we are not, we may be instructed what we ought to be.’

Jonathan Swift

IRRATIONAL BIAS– ILLUSORY SUPERIORITY

• 69% of drivers consciously worry about being killed when driving

• Only 1% believe they drive worse than average

• 98% think they are safer than, or as safe, as the average driver. Brake (Road Safety Charity) Survey of 800 UK adults, March 2011

PROBLEMS WITH FEEDBACK

People are especially sensitive to negative input – the ‘automatic vigilance effect’

WHAT CAN BE DONE?• Seek out formal and informal

contact with people as often as possible

WHAT CAN BE DONE?

• Scrutinise positive feedback more rigorously than negative feedback

• Institutionalise dissent into the decision-making process – e.g. promote/ cherish/ reward contrarians

• Create a culture that confronts ‘the brutal facts of reality’ – i.e. where the truth is heard

A CLIMATE WHERE THE TRUTH IS HEARD

Lead with questions, not answers

Practice saying:• ‘I don’t know’• ‘What do you think?’• ‘Where have we gone wrong?’• ‘What could we do better?’

A CLIMATE WHERE THE

TRUTH IS HEARDEngage in debate, not coercion• Have chaotic meetings• Loud debate• Heated discussions• Healthy conflict

Corporate Secretarial Practice

ICSA Conference 2016Luke Thomas, Chief Examiner, Corporate Secretarial Practice

Objectives

1. To provide students with help on:

• their approach to the Corporate Secretarial Practice (CSP) exam

• key topic areas under examination conditions

• avoiding common mistakes

2. To provide students with an opportunity to:

• look at authentic student scripts for further guidance

Today’s your chance to also ask me some questions!

26

What we’re going to cover

• Role and responsibilities

• Analysis of exam papers - Corporate Secretarial Practice

• Tackling exam questions

• Example of a script that failed

• Example of a script that passed

• Good practice – student scripts

• The Examiner’s report

27

The Study Text

• Use the study text – latest version

• Use the checklists in the study text

• Complete the case study in the study text

28

Examination: Pre Read Case Study

• Read it thoroughly

• Apply it to the questions

• Don’t try to use it to question spot!

29

My roles and responsibilities

About me:

• My professional career and role• My work as Chief Examiner, Corporate Secretarial

Practice

Some key links between the exam and your job:• This is a practical exam• You need to be an effective communicator• You need to understand your business and the key

people in it

30

Some key topic areas – tips for success

Some key issues do arise and have frequently drawn comment from the examiner:• Remember, the whole syllabus is examinable• Provide advice• Draft documents where required• You will not be asked to provide generic essay type

questions• Be practical and helpful• Statutory references – not as vital as getting the advice

correct

31

Some key topic areas – tips for success (cont’d)

• Directors – appointment, vacation etc. Shadow and alternate directors

• Model Articles of Association

• Company Formation

• Material Shareholders and takeovers

• Listed companies – Listing Principles

• Meetings – board and general meetings (including procedures)

32

Structuring an exam response – Question 4

Scenario:

You are asked to provide advice to the board about a rights issue. You are asked to explain:• The purpose of a rights issue and whether any shares or

shareholders may not be eligible to participate. • How any ineligible shareholders would be treated in a

rights issue.

• The choices available to eligible shareholders who do not wish to participate in the rights issue.

33

Structuring an exam response – Question 4 (cont’d)

Scenario (cont’d):

Whether additional authorities are required to launch a rights issue.

Typical arrangements and considerations on the issue price under a rights issue and the purpose of underwriting.

Whether it would be possible, instead of a rights issue, to allot shares only to two large institutional shareholders  

34

Structure of Answer to Question 4

Introduction

• Define a rights issue and explain its purpose

Eligibility

• Explain default position and any exceptions (e.g. treasury shares). Also address what steps should be taken for overseas shareholders. [These facts are all in the case study]

• Explain any usual standing provisions for a listed company. For example, allotment authority is usually sought at each AGM

• Explain the choices available to shareholders who wish to participate / not participate in a rights issue

35

Structure of Answer to Question 4 (cont'd)

Authority to launch a rights issue

• Check when allotment authority was last given

• Check whether there are restrictions on amount of shares which can be issued

Issue price and underwriting

• Explain why getting the issue price right is important

• Demonstrate knowledge by explaining that issue price is usually at a discount to prevailing market price

• Explain underwriting and why it is needed

Allotment of shares to selected shareholders only

• Recognise that pre-emption rights need to be dis-applied

• Explain applicable statutory provisions and listed company governance guidelines

36

An example of a Grade A fail response (Question 4)

This answer gained 11/25 marks • Started OK with an introductory explanation of a rights issue

• However, it then lacked sufficient detail on the required authorities

• It also lacked focus on the choices available to shareholders who would participate / not participate

• The dis-application of pre-emption rights were not properly explained, neither were applicable listed company governance guidelines (e.g. ABI limits)

37

Structuring an exam response – Question 6

Scenario: Part (a)A dormant subsidiary company has been struck off by the Registrar of Companies as defunct. There is no Company Secretary on the company which was struck off. You are required to advise:

• why this has happened;

• what steps the Registrar would have taken before striking off the company; and

• what should be done to ensure this does not happen to other companies in the future.

38

Structuring an exam response – Question 6 (cont’d)

Scenario (cont’d):

Part (b)

You are asked to advise on the setting up a place of business in the UK for an oversea company. Your advice need to cover a permanent UK representative, the required documents and advice on the name of the business in the UK.

[NB: Note that part (a) and part (b) cover completely different parts in the syllabus. This is to be expected in this examination.]

39

Structure of answer to Question 6

Part (a)

• Advise that all companies, including dormant companies, must be properly maintained

• Explain the consequences of failing to properly maintain a company

• Give a structured explanation of the process the Registrar would have taken prior to striking off a Company. Include references such as advertising in The Gazette to demonstrate your knowledge on the topic

• Give practical advice on how to prevent this happening in the future. For example, appoint a Company Secretary to each company to ensure the company is properly maintained. Also, ensure the Secretariat department maintains a calendar with all compliance events properly diarised

40

Structure of answer to Question 6 (cont’d)

Part (b)

• Explain the term ‘oversea company’ and that the Companies Act 2006 applies to such companies – this gives a good framework for the response

• Explain the formation process for an oversea company – be specific and do not explain the generic incorporation process for a UK company. For example, constitutional documents may need to be translated into English

• Explain the process of retaining a person authorised to accept the serving of documents

41

Structure of answer to Question 6 (cont’d)

Part (b) (cont’d)

• Consider and explain ongoing compliance / filing requirements

• Explain statutory name provisions, which broadly match those for UK companies

42

An example of a Pass response (Question 6)

This answer gained 15/25 marksPart (a):

• Directly addressed main problem that all companies, even dormant companies, must be maintained

• Explains process Registrar of Companies took prior to striking off the company as being defunct. Includes, for example, a reference to The Gazette

• Includes practical advice for avoiding problems in the future, such as making sure all filings are up to date and investing in company secretarial software packages

43

An example of a Pass response (Question 6) (cont’d)

This answer gained 15/25 marksPart (b):

• Explains in general terms that constitutional documents need to be filed with Companies House. [The answer could have been improved by mentioning relevant timescales]. The response specifically mentions the need to translate document to English

• Advice provided on name. [However, further advice should have been provided to check the index of existing names at Companies House]. Advice also provided on ongoing filing requirements.

• [More advice was needed on the service of documents]

44

What does a great answer look like?

• It provides the response in the format required and it gives advice

• It fully explains the steps in a process in a well structured manner

• Knowledge on the topic is clearly demonstrated – this is often stating ‘obvious’ points to show understanding

• Excellent level of detail (without being excessively long) along with statutory references

• Able to fully explain the relevance of the principles used to the scenario in question

• Practical advice is given to support the statutory / governance position

45

General tips on approaching the CSP exam

• The Examiner’s report

• Learn the whole syllabus – don’t try to question spot!

• Think laterally and explain the right authority and process. Also who needs to be notified and when? – example

• Link your answer to the actions of a Company Secretary – updating statutory records, convening meetings, providing niche advice etc..

• Participate in the webinar, lead by the Chief Examiner for the CSP exam

• Do you need reference materials?

46

Key re-occurring problems

• Poor presentation

• Inappropriate length answers

• Not being obvious in your answer

• Not reading all of the study text. Using out of date study text or reference materials

• Lack of recognition for plc vs ltd processes

• Guessing

47

Tips for success

Coverage of the whole syllabus – you need 4 strong questions to get a high grade

Exam confidence comes from:

• Sufficient preparation

• Effective study skills

48

Annual Reporting Good Practice

Peter Swabey, FCIS, Policy & Research Director, ICSA

ICSA Conference – 8th March 2016

ICSA Awards 20151st December 2015

Best Strategic ReportFTSE 100 – SSE plc FTSE 250 – Drax Group plc

Shortlisted companies:Aggreko plc

Berendsen plcDairy Crest Group plc

Shortlisted companies:Anglo American plc

Aviva plcBT Group plc

Best Strategic Report• Clear and understandable business model

• Demonstrate clear linkage – strategy – risks – KPIs – remuneration

• Why have KPIs been chosen?

• Why have principal risks been chosen and how do they relate to strategy?

• How do sustainability activities link to your business model?

• Case studies and photos – can be good but can feel ‘advertorial’

• How does investor engagement work?

• Honesty – explain failures, especially if well known

 

Best Board DisclosureFTSE 100 – Land Securities plc FTSE 250 – Provident Financial plc

Shortlisted companies:Great Portland Estates plc

Premier Farnell plcTelecity Group plc – Highly

Commended

Shortlisted companies:Hikma Pharmaceuticals PLC

Marks and Spencer Group plcUnited Utilities Group PLC

Best Board Disclosure• What do the board bring to the table? Why are the company recommending a

vote for someone? Use skill matrices etc rather than bland CVs

• How does what the board have been doing relate to your strategy?

• Talk about what the committees have done and why – the majority now show how the board and committees have spent their time, the good reports explain why

• If you are doing something unusual – explain it 

• Investors want to see something on board evaluation and, especially outcomes

• Talk about succession planning and diversity – what are you doing?

• This is also a great place to talk about culture

Best Audit and Risk DisclosureFTSE 100 – Johnson Matthey plc FTSE 250 – Intermediate Capital

Group plc

Shortlisted companies:Cairn Energy PLC

Tullow Oil plcVesuvius plc

Shortlisted companies:GKN plc

Marks & Spencer Group plcNational Grid

Best Audit and Risk Disclosure• The needle has shifted this year – expectations from readers were very high 

• Talk not just about what you do, but why

• Comment on audit rotation or tendering is expected – glossing over this looks weak

• Ensure principal risks are aligned with strategy – if not, why take them?

• Don’t have too many principal risks !

• There will be a lot of focus on viability statements in 2016 – why is that the right period?

• A split between one-off and recurring risks is helpful

• If there is an ‘obvious’ risk to your business – don’t ignore it

Best Remuneration ReportFTSE 100 – National Grid plc FTSE 250 – FirstGroup plc

Shortlisted companies:Great Portland Estates plc

Shaftesbury PLCWS Atkins plc

Shortlisted companies:Hammerson plc

Taylor Wimpey plcTesco PLC

Best Remuneration Report• Ensure that linkages to strategy and KPIs are clear

• If claiming commercial confidentiality for not reporting targets – explain why ……. and do it convincingly – few companies did

• Explain any use of discretion clearly – an analysis of external influences on performance is useful

• What is being done to ensure that remuneration does not encourage poor behaviours?

• Don’t avoid known issues – creates an impression that there may be others

Best Sustainability DisclosureFTSE 100 – Johnson Matthey plc FTSE 250 – Pennon Group plc

HIGHLY COMMENDEDLonmin Plc

Shortlisted companies:Galliford Try plcInterserve Plc

HIGHLY COMMENDEDThe British Land Company PLC

Shortlisted companies:Antofagasta plcKingfisher plc

Best Sustainability Disclosure• Link your sustainability efforts to your business model and strategy – why does

sustainability matter to you?

• How many of your KPIs are sustainability related?

• Does your sustainability performance have external benchmarking?

• Is there clear board and/or executive engagement and accountability?

• Does sustainability appear throughout the report – or just in the sustainability report?

• Integrated reporting can help here – but needs clear thought

Best Annual ReportFTSE 100

Marks and Spencer plcFTSE 250

Berendsen plc

Shortlisted companies: bwin.party digital entertainment plc

Great Portland Estates plcHalfords Group plc

Shortlisted companies:BHP Billiton Plc

Smith & Nephew plcUnited Utilities Group PLC

Small Cap and AIMPremier Foods plc

Shortlisted companies:Renold plc

Shanks Group plcThe Vitec Group plc

Best Annual Report• All the points I’ve mentioned so far

• A strong Chairman’s letter really sets the tone of a report – but if he refers to an issue it should appear elsewhere in the report

• Aim to speak with ‘one voice’ throughout the report

• Readability is important

• Graphics and pictures are good, but should add to the point being made, rather than just being ‘pretty’ - they can become ‘annoying’

• This is a fantastic communications opportunity for the company

• Make the best use of that !

Thought leadership from ICSA

Considering and preparing for an IPO

March 2016

Tracey Brady – Managing DirectorMarco Murray – Assistant Manager

Agenda1. The Dual Track Process2. Pre-IPO steps / planning3. Day 14. Challenges for the year ahead5. Key considerations

The Journey

• Appointment of company secretary

• Provision of registered office and corporate secretarial support

• Share registration and corporate action

• Project management of IPO closing settlement mechanics

• Employee share scheme development

• Share dealing support

• Provision of a corporate nominee

• Accounting & finance including: o GAAP conversiono HFI, preparationo FPPP preparationo Working capital model o Board memorandum

• Corporate secretarial and corporate governance structures and policies set-up

• Creation of corporate calendar and reporting timetable

• Director Training and induction• Secondment of experienced IPO staff

• Corporate secretarial and governance assistance including on-site support

• Ongoing financial control and outsourced finance function

• Share registration and share plans maintenance

• AGM services and transaction support• Project managements of accounts and

audit process• Financial modelling and share options• Subsidiary governance framework• Internal audit and risk management

services• Tax & Regulatory Compliance

Pre – IPO preparation Listing Post – IPO

CoSecIPO

responsibilties

Health checks

Training for directors and company secretaries

Governance Gap Analysis and Advice

Ongoing Guidance with AIM rules, Listing Rules, DTRs

Review of admission documents

Support with listing application process, filings and returns

Directors’ dealing process, Insider lists and Model Code compliance

Co Sec Responsibilities Pre and Post IPO

Board & Committee structure, Corporate Calendar & Meeting support

Things to think about

New Registers Board Composition

Board Processes

Committee structure

Directors and PDMRs

Remuneration Share DealingTraining &

Professional development

Corporate calendar Website

LSE/FCA/UKLA Corporate Governance Registrars Investor

RelationsAnnual Report

and AGM

Pre IPO steps – Getting the structure• Restructuring of Group/share capital• Board/Persons Discharging Managerial Responsibilities (PDMRs)

o New NEDso Identifying the PDMRs (senior executive with regular access to inside information

and power to make managerial decisions affecting future development/business prospects)

o Training – directors’ duties, listed company requirements particularly for executive directors and senior management team

• Committees o Review/establish for compliance with the UK Corporate Governance Codeo Membership, sufficient independence o Consider disclosure committee

Pre IPO steps – Complying with new regulationListing Rules and Disclosure and Transparency Rules

o Listing Principles

o Continuing Obligations

o Inside Information policy and Insider Lists – DTR 2

o Model Code and Share Dealing

o Process for meeting disclosure obligations

o FCA contact

Pre IPO planning – Other key things to consider• Corporate calendar

o Key events now include; annual report, prelim/AFR announcement, half-year, dividend payments, quarterly trading updates, TVRs, option grants, AGM

• Websiteo Regulatory information; RNS updates, share price feedo Investor area; registrar contact details, results, shareholder FAQs

• New systems o Stock Exchange RIS (RNS, PR Newswire)o National Storage Mechanism o Managing insiderso Board papers

• Registrars and share plan provider o Share register analysiso E-comms

Registrar timeline

• Attend planning meetings• Review prospectus• Obtain ISIN• Create share register• Prepare and lodge CREST

application forms• Identify selling shareholders

(secondary shares)• Prepare share certificate

template

When issued dealing commences:• Receive board minute

confirming number of shares to be allotted (primary shares)

• Preload share allotment to advisor CREST account

• Process any selling shareholders (secondary shares)

• Dealing notice published 8.00am

• CREST enablement letter submitted

• Share register ‘live’• DVP settlement occurs• Issue share certificates, if

required• Provide information for the

return of allotment (SH01)• Set up web portals

Your relationship manager will take over as your day to day contact• Maintain the register• Set up web portals• Arrange post IPO review

and strategy meeting re: corporate calendar

• Provide initial investor relations reports

• Set up electronic communications

Pre IPO Execution (T-3) Listing (T) Post IPO

The Next Day!Breathe a sigh of relief!

Now the real work begins…….

The In-tray

Key considerations • Reporting and AGM

o Ready for first announcements/request for dealing? Does everyone know the timescales (is the process embedded)?

o Half year report / annual report and accounts - shortened timetable and a lot more work!

o AGM planning (retail investors?)

o First dividend! (Particular care on first interim dividend)

Key considerations • Embedding the plc cultureo ‘Public’ information – ensuring those talking to outsiders are clear

o Inside information (flow / restriction) / insider dealing

o Share dealing/ permission to deal

o New governance processes

o New regulations for the company, which continue to increase!

How we can help?Products Solution

Due Diligence Health checks A complete review of all corporate records for UK or international entities

Pre IPO Services Full company secretarial support through to listing

Board & Committee Support Pre-meeting support, minute taking and follow-up of actions, advise on UK corporate governance and best practice

Director Training Tailored for your Board - giving an overview of key duties, liabilities, roles and responsibilities in respect of the Listing Rules, the Companies Act 2006 and the UK Corporate Governance Code and recent developments.

Advisory Company Secretarial services We have a hotline number for newly listed organisations: 0207 204 1601

Thank you!Do you have any questions?

We are Capita Asset Services, a division of Capita plc, a FTSE 100 company and the UK’s leading provider of business process outsourcing and integrated professional support solutions.

We firmly believe that one size doesn’t fit all, so our solutions are specifically designed around our clients’ needs. Whether it is providing corporate, private client, treasury, debt or fund administration or shareholder and employee solutions, Capita Asset Services can help you manage and grow your business.

We have over 2,500 professional staff dedicated to making your life easier by delivering service excellence and creating efficiencies for your organisation. Our operations are based in the UK, Ireland, Jersey, mainland Europe and India, with representative offices in the US and Asia – we have over 4,000 multi national and UK based clients and relationships.

Further information about our full range of expertise can be found at www.capitaassetservices.com.

Capita Asset Services is a trading name of Sector Treasury Services Limited which is authorised and regulated by the Financial Conduct Authority only for conducting advisory and arranging activities in the UK as part of its Treasury Management Service.Registered office: 71 Victoria Street, Westminster, London, SW1H 0XA. Registered in England No. 2652033.

Contact us

Tracey BradyManaging DirectorCapita Company Secretarial ServicesCapita Asset ServicesT: +44 (0)7747 066 905E: tracey.brady@capita.co.uk

Marco MurrayAssistant ManagerCapita Company Secretarial ServicesCapita Asset ServicesT: +44 (0)7808 010 317E: marco.murray@capita.co.uk

Mergers and AcquisitionsICSA ANNUAL CONFERENCE 2016

Sheelagh Duffield, Group General Counsel & Company Secretary, Miller GroupJeremy Evans, Assistant Director General, The Takeover Panel

Stephen Shapiro, Group Company Secretary and Deputy General Counsel, SAB Miller

Chaired by Will Pearce, Partner, Davis Polk

Jeremy Evans, Assistant Director General, The Takeover Panel

Mergers & Acquisitions ICSA Annual Conference 2016

THE CITY CODE ON TAKEOVERS AND MERGERS

Jeremy EvansAssistant Director General

8 March 2016

1. PANEL OVERVIEW – BASICS

• The Takeover Panel regulates takeovers and administers the Takeover Code

• Approaching 50 ‘not out’ - regulated over 8,500 bids

• Statutory footing in 2006 but still an independent and self-funding regulator

• Members drawn from investors, industry and market practitioners (investment banks, stockbrokers and accountants)

• Broadly, Code applies to public companies incorporated in UK and:– securities traded on regulated market/MTF in UK; or– managed and controlled in UK

1. PANEL OVERVIEW – CITY CODE KEY FEATURES

• Objectives - fair shareholder treatment, orderly framework and market integrity

• Flexibility - principles-based and spirit as well as letter must be observed

• Pragmatism - primary focus is on remedies and redress

• Speed - Executive committed 24/7 and appeals procedures are efficient and quick

• Successful British export

• No tactical litigation

2. CURRENT PANEL ACTIVITY

• During 2015, 62 firm offers were announced (59 in 2014)

• Remained steady following pick-up in 2014 from preceding years

• Significant post-Cadbury changes to Code are still working well– Fixed 28 day “put up or shut up” period– “Naming” regime– Prohibition on “break fees” and other deal protection

• In 2015, nearly 40% of all offer periods commenced with a firm offer announcement

• Unprecedented number of on-going investigations

3. HOT TOPICS

• Announcements under Rule 2 are of critical importance – PS No.20

• Golden rule – information to be disseminated via a RIS and parties will be “held to what they say”

• Statements by parties of their future intentions following completion of the offer should be made with care

• Restriction on offer related arrangements in Rule 21.2 – PS No.29

4. DEALING WITH THE PANEL – WHAT WE EXPECT

• Asia Resource Minerals Plc (Panel Statement 2015/15) – statement of public criticism of Credit Suisse, Freshfields and Holman Fenwick Willan

• Good understanding of Code and Practice Statements

• Consult Executive if in any doubt

• Disclose all relevant facts

• Be open and transparent

• Don’t be tempted to “spin”

• Special responsibility on financial advisers to ensure Code compliance

Stephen Shapiro, Group Company Secretary and Deputy General Counsel, SAB Miller

Mergers & Acquisitions ICSA Annual Conference 2016

Reflections on the Company Secretary’s role in a takeoverStephen Shapiro

Group Company Secretary

SABMiller plc

© SABMiller 2016

One of the top 5 largest M&A deals of all time

Largest ever takeover of a UK listed company

The deal

NewcoCombined market cap: ~US$ 230bn

(at 1 March 2016)

Historical basis combined:Revenues: US$ 64bnEBITDA: US$ 24bn

2nd largest global brewerFTSE 10 company

Largest global brewer

© SABMiller 2016

Stakes in the businessShareholding

Public shareholders59.54%

Altria26.56%

Bevco(Santo Domingo)

13.90%

Board

Chairman Exec. Directors Non-Exec. Directors

Altria Bevco (Santo Domingo)

© SABMiller 2016

September October 13 Oct – 11 Nov Date 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14

PUSU 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Extension

£38 £40 £43.50 £44

• Series of private proposals made by AB InBev and rejected by SABMiller

• Intense preparation for public defence

• Complex set of board / shareholder issues

• Rumours of a proposal in the press

• SABMiller required to make an announcement

• PUSU period starts

1) Private offers

• SABMiller delivers investor presentation and accelerated cost saving programme

• AB InBev makes initial public proposal of £42.15 per share along with investor presentation

• SABMiller rejects rapidly• AB InBev makes

clarificatory statement about shareholder support

• AB InBev issues statement saying SABMiller rejection ‘lacks credibility’

• SABMiller brings forward strong H1 trading statement

2) Concentrated public fight

£42.15

• AB InBev makes increased offer of £43.50

• Agreement in principle on £44.00 per share with cash and share alternative

• $3bn reverse break fee and regulatory “best efforts” commitment from AB InBev

• PUSU extension announced

3) Price agreed and announced

• Extensions to PUSU on 13-Oct, 28-Oct and 4-Nov

• 2.7 RNS setting out terms on 11-Nov

4) Negotiation ofnon-price terms

£40 / £42(1)

How the PUSU period played out

© SABMiller 2016

Reflections on the Company Secretary’s role in a takeover

You arethe bridge

Communicationis vital

Work asa team Be prepared

© SABMiller 2016

Reflections on the Company Secretary’s role in a takeover

Getgood advice

Remember, your board documents will be under the

microscope

Clear your diary and put your life

on hold

You have a responsibility to

express your view

Will Pearce, Partner, Davis Polk

Mergers & Acquisitions ICSA Annual Conference 2016

Davis Polk & Wardwell London LLP

Mergers and Acquisitions: the roles of company secretary and external counsel

Presented byWill PearcePartner

March 8, 2016

Indicative steps in a public takeover

Bidder prepares to approach

target

Initial discussions

between parties and

diligence

Negotiation of terms and conditions

Bidder puts financing in

place

Rule 2.4 announcement of a possible

offer

Rule 2.7 announcement of a firm offer

Publication of offer document // publication of

scheme circular

Deadline for acceptances //

shareholder vote if scheme

Offer unconditional and minority squeeze-out

begins // scheme

becomes effective

Your role preparing for a takeover approach

Companies don’t prepare for takeovers, but they do prepare to defend! Defence team contact details and engagement letters Defence manuals and response protocols Annual drill now taking on a broader remit – responding to activists What can you do?

Keep up to date – monitor legal developments and your share register Make sure the board are kept up to date Know who to contact and where to find information (quickly)

Your role during the takeover process

Role differs depending on whether you are the bidder or target – but common ground

Cabinet responsibility Managing the board – from directors’ responsibilities and board minutes to

directors’ holidays …. Share capital and stock options Verification Release of announcements

The role of external counsel

Application and interpretation of the Code and interaction with the Panel Structuring the deal Due diligence – limited Preparing transaction documentation Advising on directors’ duties and responsibilities Financing – certain funds Anti-trust/regulatory Work closely with you and the board, as well as with your financial advisers

Indicative steps in a private M&A transaction

Seller commences sale process

Buyer conducts initial due diligence

and makes indicative offerSeller provides

diligence material and

draft transaction documents

Buyer reviews draft

transaction documents and

arranges financing

Buyer submits formal offer to

seller

Negotiation of transaction documents

Buyer and seller sign

binding transaction documents

Buyer and seller work to satisfy closing

conditions

Closing of acquisition and

payment of consideration

Your role during the sale process

Extent of role will depend on whether a public company is involved – compliance with the Listing Rules or the AIM Rules

On the sell-side Collating due diligence materials, responding to queries Assisting with the disclosure process

On the buy-side Assisting with due diligence Arranging necessary board/shareholder approvals Assisting with the issue of consideration shares

The role of your external counsel

If a public company is involved, application of the Listing Rules or the AIM Rules Structuring the deal Due diligence – extensive Running the competitive sales process with the financial adviser Preparing transaction documentation Advising on rights of shareholders/investors Financing Anti-trust/regulatory Work closely with you/the board, shareholders/investors and financial advisers

Sheelagh Duffield, Group General Counsel and Company Secretary Miller Group

Mergers & Acquisitions ICSA Annual Conference 2016

SHEELAGH DUFFIELD, GROUP GENERAL COUNSEL AND COMPANY SECRETARY, MILLER GROUP

Reflections on the Company Secretary’s role in private M&A transactions

Communication, Communication, Communication

• Large number of stakeholders• Board• Shareholders• Employees / Employee shareholders through share

schemes• Due diligence

Board

• Quality of Board papers– Authors live and breath the deal – readers don’t!– Readers (the directors) are responsible for the decisions.

• Time to review– Chairman – Additional calls/meetings

• Meetings– Main– Ad-hoc or Committees

• Communication outside meetings

Shareholders

• Communication determined by– Complexity of deal– Number and mix of shareholders– Tax

• Q&A documents• Help lines

Employee shareholders

• General employee communications• Share scheme explanations• Q&A documents• Help lines• Presentations

Due diligence

• What’s its purpose?• Manage the process

– To guide or not to guide?– Invest time at the beginning– Control costs– Keep talking as principals

• Disclosure letter process

Mergers and AcquisitionsICSA ANNUAL CONFERENCE 2016

QUESTIONS