Basic Issues Surrounding the TOD's Transposition

The Directive 2004/25/EC on takeover bids was enacted on 21 april 2004. Both the Directive and later the Member States – in their national transpositions – had to adapt to the variety of capital markets, corporate governance regimes, and differing degrees of stakeholder/shareholder orientation in the European Community of the early 2000s. Due to its conception as a framework Directive, Member States had the discretion to balance the interests of the different stakeholders, to frame an adequate national regime for the takeover market and to entrust a body with supervision of the takeover process.

Surprisingly, Member States transposed the mandatory bid rule with little variation in the definition of control, with thresholds varying narrowly in nearly all Member States, between 30 per cent and a third. Also concerning the supervisory authority and concerning squeeze-out and sell-out rights, the transposition of the Directive had a harmonizing effect. Therefore, the occasionally encountered opinion that the Takeover Directive was a failure is plainly incorrect. However, as a result of Member State discretion in transposing the Directive, the overall picture is mixed and harmonization is far from complete. Vested interests and lobby work were simply too strong. Member States vary not only in their legislative approach concerning the offeree’s defence measures, but also in respect of derogations and deviations from the mandatory bid rule.

In order to balance the interests of different stakeholders, the defence measures of the target company are of crucial importance. While in the late 1990s the board neutrality rule was dominant on the continent, Germany, France and Italy – the largest economies – altered their takeover regimes and now favour a more flexible approach, in France and Italy even after the initial transposition of the Takeover Directive. A growing number of Member States later changed their initial transposition of the Takeover Directive’s breakthrough rule.

In a future reform of the Takeover Directive it should be taken into account that the markets for corporate control have changed dramatically since the 2010s. Today shareholder activism, ETFs and passive funds that are incapable of tendering the shares of the target company during the offer period have a significant impact. Mandatory takeover bids have become rare; usually voluntary takeover bids take place in which the bidder and the board of the target company agree on modalities later presented to the shareholders. This increasingly leads to a serious danger of conflicts of interest and insider dealing. Most economically important takeover transactions are P2P transactions aimed at taking the target company private. The consequence is a further reduction of listings with problems for the stock exchanges. Private equity plays an ever increasing role in the transactions. The takeovers take much longer than formerly, up to 12 months, due to various regulatory agencies and proceedings involved. Addressing these problems might lead to a rather different regulatory landscape both in Europe and in the Member States as well as in the United Kingdom.