Mr Philip Remnant, Director General of the Take-Over Panel (UK), took the floor as first expert. He pointed to the problem that a division of the jurisdiction between the target company on the one hand and country of origin on the other hand will certainly turn into a chaotic situation as it is unclear which is the competent authority in the case of any arising problems (article 4). He recommended that one competent authority should be responsible for everything and would be best located in the country of the target company. With regard to article 5 he proposed that cash offers should be possible. On the problem of multiple voting rights he was not sure if they should be included in the directive, but if so, a detailed regulation had to be found.

Paul Arlman, Secretary General of the Federation of European Securities Exchanges in Brussels, said that the key point should be the protection of minority shareholders. Therefore, the place of jurisdiction has to be defined a priori as well as the competences of the different competent authorities. He also said that cross-border trade will increase in future and will have to be considered carefully. He also recommended the possibility of cash offers.

José Maria Garrido Garcia, Director of CNMV of the Financial Supervisory Authority, complained that the threshold of the break-through rule is not generally the 75% proposed in the Winter report, but is variable. He was also in favor of including multiple voting rights in the break-through rule and paying a compensation for those shareholders who have to give up their multiple voting rights.

Christopher Gent, Vodafone, United Kingdom, referring to his company’s takeover of Mannesmann, said that hostile takeovers were not always the best way, but sometimes there is no other possible way of getting control over the target company.

Hans-Jürgen Hellwig, Chairman Company Law Committee CCBE, Germany, said, with regard to multiple voting rights, that ‘ownership protection’ could not be an exemption criterion per se. Germany outlawed multiple voting rights in 1998. A solution had to be found to eliminate multiple voting rights.

Mads Øvlisen, Board of Novo Nordisk, Denmark, was worried that scrapping multiple voting rights would leave his company more vulnerable to hostile takeover bids from abroad, especially from investors in the United States who are not bound by EU rules. Many companies use takeovers to balance their own budgets, and about half of all takeovers are not successful, he argued.

Eckart Sünner, BASF Group, Germany, stated that 95% of the current proposals are already implemented in Germany. What Europe needs is a unique legal framework and equality of competition conditions. He also supported the idea of eliminating multiple voting rights. A minimum solution as now foreseen in the Commission proposal is not acceptable. With regard to the US he said that Europe should not open the doors for countries that highly protect their own markets.

Joan Bloemarts, Legal Advisor of CES-ETUC, questioned whether market forces should always to be seen positively. Recent experience shows that equating entrepreneurial success with share prices is not always valid. The discussion about this directive has to be seen in a broader perspective within the debate about corporate governance.

Pierre Nothomb, Deminor, Brussels, supported the idea of cash payments as a way of financial compensation for minority share-holders. He also added that the level playing field should not be extended to the US, and that the threshold for the break-through rule should be 65%.

Jaap Winter, Legal Adviser, Unilever, and chair of the High Level Group of Company Law Experts, stated that the key problem was the creation of a level playing field. He recommended a break-through rule, which would allow a bidder that acquired 75% of a company to control it, regardless of the voting power that this equity stake confers. “If someone is willing to take onboard 75% of the financial risk of a company, why shouldn't they be able to control the entire company”, Mr Winter said. Mr Winter also did not believe that compensation for multiple voting rights is really the way forward. He recommended a break-through rule without compensation but with an exemption period of five to ten years.

The ensuing debate concentrated on the following questions:

Mr Lehne wound up the hearing by saying that he still regarded the abolition of 'multiple voting rights' with 'fair compensation' for their holders as the best solution. However, if no agreement could be reached on that basis he would opt instead for the total elimination of the articles in the proposal that deal with the obligations of the board of the offeree company and restrictions on the transfer of securities and voting rights. He would then push for the directive to focus on the requirements concerning information and transparency. The report will be published by the end of February.

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