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03 December 2002

EP Working Document on Takeover Bids




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Presenting his working document on the forthcoming Takeover Bids Directive Mr Lehne drew the attention to the differences of the legal basis among Member States. Many problems arise from the diversity of company cultures and the meaning of ownership.

Mr Lehne pointed out that the rejection of the last Takeover Directive was the criticism of its failure to establish a level playing field. He therefore criticized the new Commission proposal as it still fails to do so. The Jaap Winters Group referred in its report to the inadequate degree of harmonisation and determined the basis for calculating an equitable price in the case of company takeovers and also what is known as 'squeeze-out'.

Mr Lehne criticized that although the Commission has accepted the bulk of the proposals, it has neglected to include individual proposals concerning the creation of a level playing field. The 'break-through rule' proposed by the Group has been included in the new Directive only partially. In particular, the new proposal for a directive does not cover multiple voting rights.

The Commission has repeatedly claimed that it is impossible to include multiple voting rights, for instance because including them might infringe constitutionally guaranteed rights of ownership. However, the Commission overlooks the possibility of compensation for such multiple voting rights, Mr Lehne claimed. Other issues that have to be carefully revied is the role of employees' rights and the supervisory authority.

Mrs Gebhardt added that the level playing field is not only crucial within the EU, but also in the relations between the EU and the US, and within the US itself. Many US companies were based in those countries with the most restrictive regulation. She also claimed that employees’ rights have to be respected. This also includes the relationship between EU law and workers co-decision rights in the different Member States, including the role of the board of directors. Mrs Cedershiöld pointed out that also the right of companies owners should be respected to sell their companies. It has to be clarified who owns a company.

With regard to multiple voting rights Mr Rothley pointed our that some kind of a reciprocityclause has to be found. Without any level playing field the Directive would fail again. And Mr Oreja suggested to establish different rules for takeovers for companies within the EU and from third countries.

In his response Mr. Lehne said that the concept of one share – one vote would be ideal. Otherwise a mechanism of compensation is needed. A squeeze out is not acceptable. It will not be accepted that some countries will allow protectionist measures, others not.

An expert opinion will be published in January to complement the Winters report. A hearing will be held on 28 January. The first reading should be completed in May.

Lehne: Working Document

EMAC opinion

The day before EMAC Committee held a first consideration of EMACs opinion on the Takeover Directive, prepared by Mr Huhne. He also referred to the differences in legal structure in law affecting takeovers, the different degree of foreign ownership among Member States, and their the interaction on the different social systems.

One of the main problems is the protection of minority share holders, he said. ‘Poison pills’ have a devastating effect to the attractiveness and may prevent minority shareholders to invest in such companies. Another problem results from the fact that in some cases, once a company succeeded in taking over more than the half of an other companies shares, minority share holders are not offered the same price for their shares.

What is crucial, Huhne stated, is the question about what constitutes a ‘fair’ poison pill and what doesn’t. The share voting structure sometimes gives some shares a higher voting right than others. The question remains, if we shall deal with this issue, Huhne said.

Mr Karas claimed that the Commission did not follow the Winters group report as the current proposal failed to establish a level playing field, and Mrs van den Burg questioned if defence measures should really become part of the directive, while Mr Herzog referred to the different definitions about the role and the duties of a company among the member states.

Huhne: Draft Opinion to be published soon

© European Parliament


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