15 September 2003

ECGI: Company and Takeover Law Reforms in Europe: Misguided Harmonization Efforts or Regulatory Competition?

The European Corporate Governance Institute (ECGI) released a papers suggesting that most of the proposed harmonization is likely to be ineffective or to promote bureaucratic uniformity rather than enable market-driven diversity.

Indeed, disclosure, board structure and director liability proposals as currently structured are unlikely to satisfy the needs of shareholders. Moreover, reforms aimed at the establishment of a permanent structure providing advice on future EU regulatory initiatives and at requiring Member States to adopt director disqualification mechanisms are likely to result in excessive regulatory intervention. Similarly, many provisions of the proposed Takeover Bids Directive can be expected to hamper rather than enhance the development of a competitive corporate control market.

By contrast, the authors recommend regulatory changes that facilitate private litigation, as this should be beneficial for shareholders and could enable regulatory competition without stimulating a 'race to the bottom.' Finally, the authors endorse a default arrangement for takeovers that would allow firms to choose to be governed by either the proposed Takeover Bids Directive or existing Member state law.

Full paper

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