European Takeover Law and the Freedom of Establishment: Towards Efficient Regulation

The European Takeover Bids Directive has been at the centre of criticism since it was adopted on 21 April 2004. This study adds a voice to the enduring discourse on the extent to which the Directive is fit for purpose. Specifically, the study considers whether and, if so, how the Directive could be reformed in order to facilitate the exercise of the freedom of establishment of companies through takeovers in a more efficient manner. The study culminates in three main reform proposals. First, it calls for the enhancement of pre-bid disclosure requirements as a way of addressing pre-bid takeover defences, in place of the breakthrough rule which has barely been transposed by EU Member States. Second, the study proposes that the task of drawing up an opinion on the merits of a public takeover bid for the benefit of stakeholders should be entrusted to independent experts instead of the board of the target company, to ameliorate agency problems. Third, the study recommends that the mandatory bid rule should be ‘transformed’ into a sell-out right, to render it more effective in protecting minority shareholders whilst mitigating its chilling effect on the market for corporate control.The European Takeover Bids Directive has been at the centre of criticism since it was adopted on 21 April 2004. This study adds a voice to the enduring discourse on the extent to which the Directive is fit for purpose. Specifically, the study considers whether and, if so, how the Directive could be reformed in order to facilitate the exercise of the freedom of establishment of companies through takeovers in a more efficient manner. The study culminates in three main reform proposals. First, it calls for the enhancement of pre-bid disclosure requirements as a way of addressing pre-bid takeover defences, in place of the breakthrough rule which has barely been transposed by EU Member States. Second, the study proposes that the task of drawing up an opinion on the merits of a public takeover bid for the benefit of stakeholders should be entrusted to independent experts instead of the board of the target company, to ameliorate agency problems. Third, the study recommends that the mandatory bid rule should be ‘transformed’ into a sell-out right, to render it more effective in protecting minority shareholders whilst mitigating its chilling effect on the market for corporate control