Corporate: Amended proposal for a Directive on company law concerning takeover bids

The Commission has published an amended proposal for a Directive to apply to the company law of Member States and arrangements established by regulatory bodies dealing with take-over bids for public companies.

Supervisory bodies must be designated by the relevant Member State for the supervision of bids. The Member State authority responsible for any particular bid will be that in which the offeree company has its registered office if its securities are traded on a regulated market in that Member State; otherwise, the competent authority will be that of the Member State on whose regulated market the securities of the company were first admitted to trading; failing that, the competent authority will be that of the Member State on whose regulated market the company's securities are principally traded during the period of acquisition of the securities conferring control on the company. The law applicable will be that of the same Member State.

The proposal contains mechanisms for protecting minority shareholders. If a shareholder has a controlling stake in a company a Member State may provide for mandatory bids to protect minority shareholders. Any such mandatory bid must be launched to all shareholders for all or a substantial part of their holdings at a price which ensures equal treatment for shareholders. 'Substantial part' means at least 70 % of all securities. Only a supervisory authority may authorise a lesser sum, and then only if justified. If a Member State does not require a controlling shareholder to make a mandatory bid, then it must ensure that measures are in place requiring a controlling shareholder to offer other appropriate and at least equivalent means of protecting minority shareholders.

Member States' regulators will retain authority to decide what is a controlling stake and whether the Directive applies to temporary holdings of securities or the acquisition of majority holdings without intention to exercise control over the company.

The proposal outlines general principles which should govern take-over bids. Shareholders of offeree companies should be treated equally; addressees of a bid should be given enough time and information to make a properly informed decision; the board of an offeree company must act in the best interests of the company as a whole, and false markets must not be created in the securities of an offeree company.

The proposal also contains rules to ensure that the board of the offeree company will not, after receiving information about a bid and before the result of the bid is made public, take any action to frustrate the offer, without the prior authorisation of a shareholders' general meeting given for this purpose during the period of acceptance of the bid.

The supervisory authority and the board of the offeree company must be informed before a bid is made public. After publication, the board of the offeree company will be required to inform its employee representatives or the employees themselves. The offeror must draw up and make public the offer document, which must contain certain specified information to allow the addressees of the bid to reach a properly informed decision within good time.

Member States will also be required to ensure that rules exist to govern the withdrawal/nullity of a bid, revision of a bid, competing bids and disclosure of the result of bids.

The proposal is currently in the Council but it seems unlikely that it will be adopted in time for the planned date for transposition into national law of 1 January 1999.