Commission Opinion pursuant to Article 251 (2) (c) of the EC Treaty on the European Parliament's amendments to the Council's common position regarding the proposal for a Directive of the European Parliament and the Council on company law concerning takeover bids amending the proposal of the Commission pursuant to Article 250 (2) of the EC Treaty
Date: 2001-02-12
Institutions: European Commission
Subjects: access to information, approximation of laws, company law, protection of shareholders, takeover bid

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 12.02.2001
COM(2001) 77 final

1995/0341 (COD)

COMMISSION OPINION

pursuant to Article 251 (2) (c) of the EC Treaty
on the European Parliament’s amendments
to the Council’s common position regarding the
proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND THE COUNCIL

ON COMPANY LAW CONCERNING TAKEOVER BIDS

AMENDING THE PROPOSAL OF THE COMMISSION
pursuant to Article 250 (2) of the EC Treaty

1995/0341 (COD)

COMMISSION OPINION

pursuant to Article 251 (2) (c) of the EC Treaty
on the European Parliament’s amendments
to the Council’s common position regarding the
proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND THE COUNCIL

ON COMPANY LAW CONCERNING TAKEOVER BIDS

1.

PROCEDURE

The Commission adopted an initial proposal for a Thirteenth Council Directive on
company law concerning takeover bids on 19 January 1989 (COM(88)823 final –
SYN 0186)1

The Economic and Social Committee delivered its opinion on 27 September 19892.
Parliament delivered its opinion on 17 January 19903.

The Commission on 10 September 1990 adopted an amended proposal which took
account of those two opinions (COM(90) 416 final – SYN 0186)4.

The Commission presented a second proposal for a Thirteenth Directive on company
law concerning takeover bids to the Council and Parliament on 8 February 1996
(COM(95)655 final ( 1995/0341 COD)5.

The Economic and Social Committee delivered its opinion on 11 July 19966.
Parliament delivered its opinion (first reading) on 26 June 19977, approving the
proposal by a large majority and proposing twenty amendments.

The Commission transmitted to the Council and Parliament on 11 November 1997 an
amended proposal for a Directive which incorporated most of the amendments
proposed by Parliament and the wishes expressed by the Economic and Social
Committee8.

The Council unanimously adopted a common position on 19 June 2000.

The Commission accepted that common position on 26 July 2000.

1

2

3

4

5

6

7

8

OJ C 64, 14.3.1989, p. 8; with explanatory memorandum, Suppl. 3/89 - Bull. EC.
OJ C 298, 27.11.1989, p. 56.
OJ C 38, 19.2.1990, p. 41.
OJ C 240, 26.9.1990, p. 7; with explanatory memorandum, COM(90) 416 final - SYN 0186.
OJ C 162, 6.6.1996, p. 5; with explanatory memorandum, COM(95) 655 final.
OJ C 295, 7.10.1996, p. 1.
OJ C 222, 21.7.1997, p. 20.
OJ C 378, 13.12.1997.

2

The Council common position and the Commission opinion were transmitted to
Parliament on 7 September 2000.

Parliament voted on 13 December 2000 (second reading), approving the common
position with fifteen amendments.

In this opinion, the Commission adopts a position on Parliament's amendments in
accordance with Article 251(2)(c) of the EC Treaty.

2.

OBJECTIVE OF THE DIRECTIVE

The proposal for a framework Directive lays down certain common fundamental
principles governing the conduct of takeover bids but leaves the Member States free
to determine the implementing details. It has two main objectives:

– 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 requiring that a mandatory
bid be made for all remaining securities.

3.

COMMISSION OPINION ON THE AMENDMENTS PROPOSED BY PARLIAMENT

Parliament adopted (second reading) fifteen amendments to the Council common
position.

The Commission accepted three of those amendments in full and one in part, but
rejected the others.

3.1.

Amendments accepted by the Commission

Amendment 7 concerns Article 4(5) of the common position and limits derogations
by deleting the expression "in specific appropriate cases".

The Commission can accept this amendment in the interests of clarity.

Amendment 14 adds a point (la) to Article 6(3) with a view to specifying in the bid
document "the law which governs the contracts between the offeror and the holders
of securities of an offeree company which arise as a result of the bid".

The Commission can accept this amendment, which does not alter the spirit of the
Directive.

Amendment 18 concerns Article 15(1) and reduces the period for transposing the
Directive to two years.

The Commission can accept this amendment, which reflects its original proposal.

3

The first part of Amendment 20 concerns Article 9(1)(a) and extends application of
the "principle of neutrality" from the time when, by whatever means, the existence of
a bid becomes known to the managers of the offeree company.

The Commission can accept this amendment, which reinforces the principle in
question.

3.2.

Amendments rejected by the Commission

3.1.1.

Amendments concerning the recitals and definitions

Amendment 1 makes two changes to recital 5: the term "minority", referring to the
holders of securities that are to be protected, is deleted, as are the last two sentences
concerning a transitional period.

The Commission cannot accept this amendment
in its entirety because the first
change could alter the whole meaning of the Directive and the second is not justified
because the two sentences in question concern Article 5(3), which is not deleted.

Amendment 2 makes two changes to Article 2(a) by deleting the term "public",
which qualifies the offer referred to in the Directive, and the expressions "may be
either mandatory or voluntary" and "and [must] follow or", thus limiting the types of
bid caught by the Directive.

The Commission cannot accept this amendment in its entirety because, firstly, it
would alter the scope of the Directive, which, as its title indicates, concerns only
takeover bids, albeit all
takeover bids, whether mandatory or voluntary, and,
secondly, because it would deprive this definition of any precision.

Amendment 3 makes an addition to Article 2(e), extending the scope of the Directive
to securities which may carry voting rights as a consequence of their being exercised
or converted.

The Commission cannot accept this amendment, although the idea is interesting,
because its practical repercussions are difficult to envisage and the current means of
monitoring markets are insufficient.

3.1.2.

Amendments clarifying the Directive

Amendment 8 concerns Article 5(1) and adds a definition of "equitable price" and an
obligation to effect payment
in cash for the acquisition of blocks of shares
representing at least 5% of the total.

The Commission cannot accept this amendment for the following reasons. With
regard to the price, the Member States proved unable to choose a more precise
definition - in spite of two years of negotiations - from among the various national
definitions applied because they could not decide which might be the best for all of
them. It was therefore thought deemed expedient to leave this matter to the discretion
of the competent supervisory authorities. Parliament disagrees with this approach but
is unable to demonstrate in what respects its definition is better than any other. As
regards cash payment, there is no justification for the proposed arrangements.

4

3.1.3.

Amendments contributing new ideas

Amendment 12 inserts a new Article 5a, which provides for a mechanism
consolidating the offeror's position.

The Commission cannot accept this amendment, although the idea is interesting,
because it has ramifications not just for takeover bids but also for the functioning of
companies in general. The idea might be taken up as part of a review of company
law.

3.1.4.

Amendments concerning employees' rights

Amendment 4 concerns Article 3(1)(b) and gives the employees of the offeree
company or their representatives a voice in decision-making on bids. Amendment 15
concerns Article 6(4) and ensures that the employees of the offeree company or their
representatives are provided with the same information as the supervisory authorities.

The Commission cannot accept these amendments because they have no place in
these provisions. With regard to the first amendment, only the holders of securities
can decide whether or not to sell them and they are therefore the only parties
concerned by it. With regard to the second amendment, the system was established to
provide information to the supervisory authorities, and they are therefore the only
parties concerned by it.

Amendment 5 inserts into Article 3(1)(c) adds a list of "interests" to be taken into
consideration. Similarly, amendment 13 inserts into Article 6(3)(h) a list of
information to be provided.

The Commission cannot accept these amendments for the following reasons: an
excessively detailed list has no place in a framework directive, and there is invariably
the added risk that it may not be exhaustive. In addition, whereas the purpose of the
Directive is to harmonise company law, Amendment 13 tends to focus on labour law,
which is already governed by other directives
(see in particular Council
Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the
Member States relating to the safeguarding of employees' rights in the event of
transfers of undertakings, businesses or parts of businesses (OJ L 61 of 5.3.1977,
p. 26), Council Directive 94/45/EC of 22.9.1994 on the establishment of a European
Works Council
and
a
informing and
Community-scale groups of undertakings for
consulting employees (OJ L 254 of 30.9.1994, p. 64), Council Directive 98/59/EC of
20.7.1998 on the approximation of the laws of the Member States relating to
collective
and Council
of
Directive 91/533/EEC of 14 October 1991 on an employer's obligation to inform
employees of the conditions applicable to the contract or employment relationship
(OJ L 288 of 18.10.1991, p. 32)).

in Community-scale

the purposes of

redundancies

undertakings

12.8.1998,

(OJ L 225

procedure

p. 16),

or

The third part of Amendment 20 concerns Article 9(1)(b) and requires the opinion of
the employees' representative body to be published.

The Commission cannot accept this amendment for the reasons indicated in the
previous paragraph.

5

3.1.5.

Amendments of principle

Amendment 16 affects Article 7 in three respects: 1) the period for acceptance of a
bid may not be more than three months, as opposed to ten weeks; 2) the final
sentence of Article 7(1) providing for the possibility of extending the period is
deleted; 3) Article 7(2) now provides for the period to be extended only in the event
of alternative takeover bids.

The Commission cannot accept this amendment in its entirety because the wording
of the common position is the result of a delicate compromise designed to reconcile
the need to avoid unduly disrupting the functioning of the businesses concerned with
the need to take account of the fact that procedures may sometimes take longer,
particularly in the United Kingdom. There are no grounds for restricting derogations,
particularly in connection with the organisation of a general meeting. Since
convening such meetings can be a lengthy, cumbersome procedure, this possibility of
a derogation seems perfectly justified.

The second part of Amendment 20 concerns Article 9(1) and adds the requirement
that the authorisation of the supervisory board, if there is one, must also be sought
before defensive measures are adopted.

The Commission cannot accept this amendment because in some companies the
supervisory board is a management or executive board which,
like the other
managers, is subject to the "principle of neutrality".

The second part of Amendment 17 adds to Article 9 a paragraph 2a listing other
situations in which the supervisory authorities or the courts may authorise defensive
measures.

The Commission cannot accept this amendment for the following reasons: 1) it is
incompatible with the spirit of the rule whereby only the holders of securities can
determine a company's future; 2) the supervisory authority must act as an arbiter, and
it is not its role to take sides between two companies; 3) involvement of the courts
may result in delays which are unacceptable to all parties to the bid, and should be
avoided.

4.

CONCLUSION

In accordance with Article 250(2) of the Treaty, the Commission is altering its
proposal as indicated above.

It hopes that the Council and Parliament will be able to find common ground so that
this Directive, which is keenly awaited by European companies and financial
markets, can be adopted without further delay.

6