COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to the second subparagraph of Article 251(2) of the EC Treaty concerning the Common position of the Council on the adoption of a European Parliament and Council Directive on company law concerning takeover bids

1. BACKGROUND

* Date of transmission of the proposal to the European Parliament and the Council (document COM(1995)655 final - 1995/0341/COD): 8 February 1996.

* Date of the opinion of the Economic and Social Committee: 11 July 1996.

* Date of the opinion of the European Parliament (first reading): 25/26 June 1997.

* Date of transmission of the amended proposal: 14 November 1997.

* Date of political agreement and of formal adoption of the common position:

- political agreement: 21 June 1999.

- common position: 19 June 2000.

2. PURPOSE OF THE COMMISSION PROPOSAL

The proposal has two main aims:

- to harmonise national rules on takeover bids, particularly regarding the transparency of the procedure, in order to facilitate restructuring throughout Europe; and

- to provide throughout the Union equivalent protection for minority shareholders where there is a change of control of their company, by laying down the requirement to making a mandatory bid at an equitable price for all remaining securities.

3. COMMENTS ON THE COMMON POSITION

3.1. General remarks

The common position reproduces the principal features of the Commission proposal, i.e. the establishment of equivalent measures of protection for minority shareholders where there is a change of control of their company and arrangements for transparency in the takeover procedure under the scrutiny of a supervisory authority.

3.2. Response to the amendments adopted by Parliament at first reading

- Amendments accepted by the Commission and incorporated in the common position

Most of the amendments were accepted by the Commission and incorporated in the common position. However, in three cases the Council introduced amendments:

Article 4(2)(c) Supervisory authority

The amendment retains Parliament's concepts but with a new criterion: when the competent authority has not been determined in accordance with the preceding paragraphs (Article 4(2)(a) and (b)), the offeree company has to determine it.

Article 5(1) (former Articles 3(1) and 10) Protection of minority shareholders

The amendment goes further than requested by Parliament since mandatory bids must be made to all holders of securities and extend to all of their securities.

Article 7 (former Article 6a) Period for acceptance

The amendment provides for altering the period for acceptance in specified cases.

The Commission considers that those amendments reflect the wishes of Parliament.

- Amendments accepted by the Commission but not incorporated in the common position

Article 2 Definitions

The definition of "offeror" has not been supplemented by a reference to the national law applicable to the supervisory authority.

Article 3(1)(c) (former Article 5(1)(c) General principles

The requirement of taking employment into consideration has not been taken up.

Article 4(1) Supervisory authority

The provision that the authority designated by Member States is competent to supervise the entire course of the bid has not been taken up.

Article 5(3) (former Article 3(2)) Protection of minority shareholders

The possibility of granting derogations from the obligation to protect minority shareholders where a person holds securities that confer control only provisionally or without the intention of exercising control has not been taken up.

Article 6(3)(d) Information

The example of payment to shareholders resident in a Member State other than that of the offeree company's registered office or that in which the securities are listed has not been taken up.

Article 7(2) Disclosure

The rules which provide for the disclosure of all information or documents required have not been extended to shareholders resident in a Member State other than that of the offeree company's registered office or that in which the securities are listed.

The Commission regrets that those amendments had to be omitted following lengthy discussions but emphasises that the essence of its proposal has been retained.

3.3. New provisions introduced by the Council and the Commission's position

Article 2(d) Definitions

The term "persons acting in concert" with the offeror or the offeree company has been added to the definitions.

The Commission considers that this is an important contribution to harmonisation in this field.

Article 4(2) Supervisory authority

A distinction has been introduced concerning offeree companies whose securities are not admitted to trading on a regulated market in their country of origin since procedural issues and the price to be paid are determined in accordance with the law of the Member State where the offeree company is listed and issues concerning information for employees and company law are settled by the law of the Member State where the offeree company has its registered office.

The Commission considers that this distinction corresponds to economic realities although its application in practice will have to be monitored.

Article 5(1) (former Article 3(1)) Protection of minority shareholders

The mandatory bid, which was introduced to protect minority shareholders, has been extended to cover all remaining securities; when the consideration offered by the offeror does not consist of liquid securities admitted to trading on a regulated market, it must include a cash consideration at least as an alternative.

The Commission considers that this compromise, which is the result of lengthy negotiations with the Member States, will protect minority shareholders.

Article 5(3) Protection of minority shareholders

The right has been introduced, for a transitional period and subject to certain conditions, to retain protection equivalent to a mandatory bid.

The Commission considers that this constitutes an acceptable transitional measure.

Article 6(2) Information

A provision has been introduced to ensure mutual recognition of offer documents by Member States.

The Commission emphasises that this constitutes a considerable advance for cross-border operations.

Article 9(2) Obligations of the board of the offeree company

It has been provided that Member States may allow the board of the offeree company to increase the share capital during the period for acceptance of the bid on condition that prior authorisation has been received from the general meeting of shareholders not earlier than 18 months before the beginning of that period, with full recognition of the right of pre-emption of all shareholders.

The Commission accepted this limited derogation from the principle of neutrality of the board of the offeree company in order to arrive at a consensus on the basic principle without, however, compromising it.

Article 14 (former Article 5a) Amendment of Article 1(1) of Directive 88/627/EEC

In order to harmonise the definition of "regulated markets", provisions have been introduced amending Directive 88/627/EEC of 12 December 1988 concerning the information to be published when there is a change in the holding of voting rights in a listed company.

4. CONCLUSIONS OR GENERAL OBSERVATIONS

The Commission has endeavoured to take account as far as possible of Parliament's point of view as expressed at the first reading and has amended its proposal to incorporate the proposed amendments.

It is aware of certain differences between its amended proposal and the Council's common position.

It has, however, cooperated with the Council on the amendments to the wording of its proposal following discussions and endeavours throughout several presidencies and considers that the proposal as presently worded already constitutes progress in the harmonisation of takeover bids in Europe.

It is pleased that a compromise has eventually been reached on the text of the common position and hopes that its definitive adoption will follow quickly.