The proposal follows the recommendations set out for the Commission in the Jaap Winter Group Report as regards a common definition of the 'equitable price' in a mandatory bid and the introduction of a squeeze-out right enabling a majority shareholder to require the remaining minority shareholders to sell him their securities. This is combined with a sell-out right enabling minority shareholders to require the majority shareholder to buy their securities following a takeover bid. The new proposal also introduces a 'break-through' rule whereby structural defensive measures will be neutralised following a successful takeover bid.

However, the draft Directive does not take on board the break-through rule in full as it does not outlaw the use of multiple voting rights during a takeover bid, thus not endorsing the principle 'one share, one vote', which is considered essential to establish a 'level playing field' in Europe. Commissioner Bolkestein justified this by saying that a total block on multiple voting rights risked being interpreted as a form of expropriation.

Not all Parliaments' demands have been met to a satisfactory degree. In particular, the non-inclusion of multiple voting rights in the break-through rule will allow minority shareholders to block hostile takeover bids. Thus it cannot be said that a 'level playing field' has been created.

'The aim of this proposal is to enable takeover bids to be made in the EU under the best possible conditions for all those concerned,' EU Internal Market Commissioner Frits Bolkestein said.

Klaus-Heiner Lehne, EP rapporteur to the last proposal in 2001 and will also shepherd the new draft, said that the new proposal was 'much better than last year,' but he promised amendments to create a level playing field. The main points of concern are the issues of multiple voting shares and reciprocity, especially with the view to US legislation. He concluded by saying 'the Commission has done its job by delivering an improved proposal. It is now up to Parliament and Council as co-legislators to make the necessary changes and work out compromises that will allow the directive to be adopted at first reading'.

The rapporteurs' objections were broadly endorsed by members of the committee. The committee vice-chairman, Willi Rothley, emphasised that if the principle 'one share, one vote' were not endorsed in full, the Commission proposal had no chance of getting through Parliament.

Luis Berenguer Fuster and Ieke van den Burg, stressed the need for better protection of employees' rights while acknowledging the key progress made with the introduction of a specific Article to deal with these points.

Other Parliamentarians stressed the need to abolish 'golden shares', irrespective of whether they are allowed or not by the European Court's jurisprudence; this point, however, was immediately dismissed by Commissioner Bolkestein, who pointed out that the present proposal deals only with company law, i.e. with private and not public law issues like the question of 'golden shares'.

'With the new takeover guidelines, the EU Commission is again discriminating against German companies,' Michael Rogowski, head of the Federation of German Industry, is cited in an AP article. 'Basically, we're back to where we were a year ago.'

Berlin has been critical of Brussels for wanting to restrict the use of poison pills - the main mean of defense for German companies against unwanted takeovers - while leaving untouched other defensive measures like golden shares, which are more common in places like France, Sweden and Denmark.

The new proposal attempts to allay German fears by allowing a three-year transition period for imposing some of the new rules.

In an interview with AP, Lehne accused the European Commission of giving in to lobbying from powerful family business interests. 'There is no real reason why these family controlled but not family owned companies have to be especially protected,' he said.

A panel of company law experts had recommended doing away with such golden shares, but EU diplomats said including it in the proposal would have made it difficult for the Commission to win the majority backing it needs from the 15 EU governments. They also note that the Commission has indicated it will go after golden shares in court.

The first formal hearing on the Takeover Bids Directive is expected for December.

Proposal on Takeover Bids Directive
Bolkestein speech on new proposal on Takeover Bids
Commission press release
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