The Takeover Bid Directive

Chiara Mosca

Chiara Mosca, Dipartimento di studi giuridici, ha pubblicato The Takeover Bids Directive: An Opportunity for Europe or Simply a Compromise?, Paolo Baffi Centre Research Paper No. 2009-64.

Abstract: The European Directive on takeover bids (2004) was a highly debated piece of law and the opposition raised by the Member States was so strong that it took more than 30 years to reach agreement over the text now in force. There was full awareness that the matter under discussion was one of the most important to define the structure of the European financial market and to intervene, at the European level, in the development of the market for corporate control. The underlying idea shared by all the projects for a European Directive in this area was to remove the main hindrances to cross-border takeovers and to establish a level playing field between contenders. Traditionally, however, the debate in Europe around the idea of a common takeover law went even further. More precisely, the previous, unsuccessful, proposal for a Directive tried to introduce strict and binding rules preventing the target company from frustrating the bid. In the light of this, the perplexities raised on many sides over the rigour of rules on antitakeover defences can be better understood. They reflected the concern of the Member States about losing control over their national enterprises. In other words, their opposition was motivated by a protectionist approach, namely that of preventing the acquisition of national companies by a foreign majority shareholder (or a coalition of shareholders). Actually, the final text of the Directive includes two rules of wide application banning defences against takeover (articles 9 and 11, known as the board neutrality rule and the breakthrough rule). The agreement over a law containing such provisions was reached thanks to a compromise (article 12, referred to as the optional arrangements) which grants wide margins of flexibility to the Member States at the transposition stage. In particular, they are allowed to opt out of one or both of the two central rules banning defences against takeover, thus giving rise to a rather diverse situation in which some internal jurisdictions have adopted the board neutrality rule and/or the breakthrough rule, while some others, quite lawfully, do not. Finally, if we take a picture of the current situation, the Directive represents the hard-won achievement of a uniform legal framework throughout Europe, at least with regard to the essential aspects of the offer procedure and the information required from the bidder, on one side, and from the target company (i.e., the public document drawn up by the board of the target) or the potential target (i.e., disclosure of the target’s capital structure), on the other side. In this article I will try to apply this positive judgment to the more contentious part of the Directive, which provides for an extensive and innovative regulation of anti-takeover defences. In particular, I will assess whether the framework of the Directive corresponds to substantial uniformity across Europe, or is rendered vain by the flexibility granted by the Directive itself.