[No. 35] EU Commission Report on the Takeover Directive

Recently, the European Commission's report on the operation of the Takeover Directive has been published.

The review of the operation of the Takeover Bids Directive shows that, generally, the regime created by the Directive is working satisfactory. Nevertheless, there are areas where the rules of the Takeover Bids Directive might be clairified in order to improve legal certainty.

Firstly, the concept of "acting in concert" could be clarified on EU level, in order to provide more legal certainty to international investors as to the extent to which they can cooperate with each other without being regarded as "acting in concert" and running the risk of having to launch a mandatory bid.

Secondly, the review shows that there is a wide variety of national derogations to the mandatory bid rule and that it is not always clear how the general principle of the directive, which requires the protection of minority shareholders in situations of change of control, is respected when a national derogation applies. As a possible way forward, the Commission intends to carry out further investigation on how minority shareholders are protected when a national derogation to the mandatory bid rule applies.

Thirdly, the exemption to the mandatory bid rule included in the Takeover Bids Directive, for situations where control has been acquired following a voluntary bid for all shares of the company, has created a possibility for offerors to get round the mandatory bid rule by acquiring a stake close to the mandatory bid threshold and then launching a voluntary bid for a low price. As a consequence, the offeror would cross the mandatory bid threshold without giving minority shareholders a fair chance to exit the company and share in the control premium. This technique is clearly not in line with the objective of the Directive to protect minority shareholders in situations of change of control, although it does not appear to breach the letter of the Directive. The Commission will take the appropriate steps to discourage the use of this technique across the EU.