Proposal for a 13th European Parliament and Council Directive on company law concerning takeover bids (96/C 162/05) (Text with EEA relevance) COM(95) 655 final - 95/0341(COD)

(Submitted by the Commission on 7 February 1996)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 54 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the Economic and Social Committee,

Whereas it is necessary to coordinate certain safeguards which Member States require of companies and firms within the meaning of the second paragraph of Article 58 of the EC Treaty for the protection of members and others, in order to make such safeguards equivalent throughout the Community;

Whereas it is necessary to protect the interests of shareholders of companies governed by the law of a Member State when these companies are subject to a takeover bid or to a change of control and their securities are admitted to trading on a regulated market within the scope of this Directive;

Whereas only action at Community level can ensure an adequate level of protection for shareholders throughout the Union and provide for minimum guidelines for the conduct of takeover bids; whereas Member States acting independently are not able to establish the same level of protection especially in the case of cross-border takeovers or purchases of control;

Whereas the adoption of a directive is the appropriate procedure for laying down a framework consisting of certain common principles and a limited number of general requirements which Member States will be required to implement through more detailed rules according to their national systems and their cultural contexts;

Whereas Member States should take the necessary steps in order to protect shareholders having minority holdings after the purchase of the control of their company; whereas such a protection can be ensured either by obliging the person who acquired the control of a company to make a bid to all shareholders for all or for a substantial part of their holdings or by providing for other means which attain the objective of at least an equivalent level of protection of minority shareholders;

Whereas each Member State should designate an authority or authorities to supervise all aspects of the bid and to ensure that parties to takeover bids comply with the rules made pursuant to this Directive; whereas the different authorities must cooperate with one another;

Whereas it is desirable to encourage the voluntary control exercised by self-regulatory bodies in order to avoid recourse to administrative or judicial action;

Whereas to reduce the scope for insider dealing offerers should be required to announce their intention of launching a bid as soon as possible and to inform the supervisory authority and the offeree company's board of the bid before they are made public;

Whereas the addressees of a takeover bid should be properly informed of the terms of the bid by means of an offer document;

Whereas it is necessary to set a time limit for takeover bids;

Whereas to be able to perform their functions satisfactorily, supervisory authorities must at all times be able to require the parties to the bid to provide information on it;

Whereas to avoid operations which frustrate the bid it is necessary to limit the powers of the board of directors of the offeree company to engage in operations of an exceptional nature;

Whereas the board of the offeree company should be required to make public a document setting out its opinion on the bid and the reasons on which it is based;

Whereas it is necessary that Member States provide for rules covering the cases when the bid may be withdrawn or declared void once the offer document has been made public, the right of the offerer to revise its bid, the possibility of competing bids for the securities of a company which are necessarily to the advantage of its shareholders and the disclosure of the result of the bid,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Scope

The coordination measures prescribed by this Directive shall apply to the laws, regulations and administrative provisions or other mechanisms or arrangements of the Member States relating to takeover bids for the securities of a company governed by the law of a Member State, where such securities are admitted, wholly or partially, to trading on a market in one or more Member States which is regulated and supervised by authorities recognized by public bodies, operates regularly and is accessible, directly or indirectly, to the public.

Article 2

Definitions

For the purposes of this Directive:

- 'takeover bid` ('bid`) shall mean an offer made to the holders of the securities of a company to acquire all or part of such securities by payment in cash and/or in exchange for other securities. A bid may be either mandatory, if so provided by Member States as a means to protect minority shareholders, or voluntary,

- 'offeree company` shall mean a company whose securities are the subject of a bid,

- 'offerer` shall mean any natural person or legal entity in public or private law making a bid,

- 'securities` shall mean transferable securities carrying voting rights in a company or conferring entitlement to obtain transferable securities carrying such rights,

- 'parties to the bid` shall mean the offerer, the members of the offerer's administrative or management board, it the offerer is a company, the addressees of the bid and the members of the administrative or management board of the offeree company.

Article 3

Protection of minority shareholders

1. Where a natural person or legal entity who as a result of acquisition, holds securities which added to any existing holdings give him a specified percentage of voting rights in a company referred to in Article 1, conferring on him the control of that company, Member States should ensure that rules or other mechanisms or arrangements are in force which either oblige this person to make a bid in accordance with Article 10 or offer other appropriate and at least equivalent means in order to protect the minority shareholders of that company.

2. The percentage of voting rights which confers control for the purposes of paragraph 1 and the way of its calculation shall be determined by the law of the Member State where the supervisory authority is located.

Article 4

Supervisory authority

1. Member States shall designate the authority or authorities, which will supervise all aspects of the bid. The authorities thus designated may include associations or private bodies. Member States shall inform the Commission of these designations and shall specify all divisions of functions that may be made.

2. The authority competent for supervising the bid shall be that of the Member State in which the offeree company has its registered office if the securities of the company are admitted to trading on a regulated market in that Member State. Otherwise, the competent authority shall be that of the Member State on whose regulated market the securities of the company were first admitted to trading and are still traded.

3. Without prejudice to their duty of professional secrecy, the competent authorities of the Member States shall cooperate, in so far as is necessary for the performance of their duties and for this purpose shall supply each other with any information that may be necessary.

4. The supervisory authorities shall have all the powers necessary for the exercise of their functions, which shall include responsibility for ensuring that the parties to a bid comply with the rules made pursuant to this Directive. In addition Member States can provide that their supervisory authorities may, on the basis of a reasoned decision, grant derogations from the rules drawn up in accordance with this Directive provided that in granting such derogations the supervisory authorities shall respect the principles mentioned in Article 5.

5. This Directive does not affect the power which courts may have in a Member State to decline to hear legal proceedings and to decide whether or not such proceedings affect the outcome of the bid provided that an injured party enjoys adequate remedies, whether through an appeals procedure operated by the supervisory authority or through the right to take proceedings before the courts to claim compensation.

Article 5

General principles

1. For the purposes of the implementation of this Directive, Member States shall ensure that the rules or other arrangements made pursuant to this Directive respect the following principles:

(a) all holders of securities of an offeree company who are in the same position are to be treated equally;

(b) the addressees of a bid are to have sufficient time and information to enable them to reach a properly informed decision on the bid;

(c) the board of an offeree company is to act in the interests of the company as a whole;

(d) false markets must not be created in the securities of the offeree company, of the offerer company, or of any other company concerned by the bid;

(e) offeree companies must not be hindered in the conduct of their affairs for longer than is reasonable by a bid for their securities.

2. In order to attain the objective set out in paragraph 1, Member States shall ensure that rules are in force which satisfy the minimum requirements set out in the following Articles.

Article 6

Information

1. Member States shall ensure that rules are in force requiring that the decision to make a bid is made public and that the supervisory authority and the board of the offeree company are informed of the bid before this decision is made public.

2. Member States shall ensure that rules are in force requiring the offerer to draw up and make public in good time an offer document containing the information necessary to enable the addressees of the bid to reach a properly informed decision on the bid. Before the offer document is made public, the offerer shall communicate it to the supervisory authority.

3. Those rules shall require that the document state at least:

- the terms of the bid,

- the identity of the offerer or, where the offerer is a company, the type, name and registered office of that company,

- the securities or class, or classes of securities for which the bid is made,

- the consideration offered for each security or class of securities and the basis of the valuation used in determining it with particulars of the way in which that consideration is to be given,

- the maximum and minimum percentages or quantities of securities which the offerer undertakes to acquire,

- details of any existing holdings of the offerer in the offeree company,

- all conditions to which the offer is subject,

- the offerer's intentions with regard to the future business and undertakings of the offeree company, its employees and its management,

- the period for acceptance of the bid, which may not be less than four weeks or more than 10 weeks from the date on which the document is made public,

- where the consideration offered by the offerer includes securities, information about those securities.

4. Member States shall ensure that rules are in force requiring that the parties to a bid to provide the supervisory authority at any time on request with all information in their possession concerning the bid which the supervisory authority considers necessary for the discharge of its functions.

Article 7

Disclosure

1. Member States shall ensure that rules are in force which require a bid to be made public in such a way as to avoid the creation of false markets in the securities of the offeree company or of the offerer.

2. Member States shall ensure that rules are in force which provide for the disclosure of all information or documents required in such a manner as to ensure that they are both readily and promptly available to the addressees of the bid.

Article 8

Obligations of the board of the offeree company

Member States shall ensure that rules are in force requiring that:

(a) after receiving the information concerning the bid and until the result of the bid is made public, the board of the offeree company should abstain from any action which may result in the frustration of the offer, and notably from the issuing of shares which may result in a lasting impediment to the offerer to obtain control over the offeree company, unless it has the prior authorization of the general meeting of the shareholders given for this purpose;

(b) the board of the offeree company shall draw up and make public a document setting out its opinion on the bid together with the reasons on which it is based.

Article 9

Rules applicable to the conduct of bids

In addition Member States shall ensure that rules are in force which govern the conduct of bids at least for the following matters:

(a) withdrawal or nullity of the bid

(b) revision of bids

(c) competing bids

(d) disclosure of the result of bids.

Article 10

Mandatory bid

1. Where a Member State provides for a mandatory bid as a means to protect the minority shareholders, this bid shall be launched to all shareholders for all or for a substantial part of their holdings at a price which meets the objective of protecting their interests.

2. If the mandatory bid comprises only a part of the securities of the offeree company and the shareholders offer to sell to the offerer more shares than the partial offer covers, shareholders should be treated equally by means of a pro rata treatment of their shareholdings.

Article 11

Transposition of the Directive

1. Member States shall ensure that the laws, regulations and administrative provisions or other mechanisms or arrangements necessary for them to comply with this Directive are in force before 1 April 1998.

2. Member States shall communicate to the Commission the provisions or other arrangements referred to in paragraph 1, making express reference to this Directive.

Article 12

Addresses of the Directive

This Directive is addressed to the Member States.