In the coming weeks the negotiation on the proposed EU directive on takeover bids will enter into the heart of the matters within the Council and the Parliament.
The new Commission proposal has retained the principle of shareholder decision on defensive measures when there is a takeover bid (article 9) and has introduced two major new elements: an enhanced transparency provision (Article 10) and the so-called breakthrough rule (Article 11). The transparency provision mandates full disclosure of ownership structures, governance arrangements and restrictions on voting rights and the transferability of shares, with a view to ensuring they are known to market participants and potential shareholders. The breakthrough rule renders restrictions on voting rights and the transfer of securities provided for in the articles of association or contractual arrangements unenforceable against the bidder, while leaving underlying shareholder rights untouched.
Thus, rather than accommodating the concerns of those who wanted some leeway for management, or supervisory boards, to adopt defensive measures, the Commission has taken the opposite course of making defensive measures more difficult for all.
A new amendment to the Commission proposal has now been put forward in the Council and the Parliament which would “ex officio” grant each share one vote on the occasion of a takeover bid, thereby nullifying arrangements that grant multiple votes to certain classes of shares, an instrument of control of listed companies that is legal in some EU countries (e.g. Nordic countries) but illegal in others (e.g. Germany and Italy).
While apparently building on the Commission approach, this amendment raises fresh objections since it would change the ownership rights inherent in shares. Consequently, the directive would no longer be limited to regulating transactional rules and the rights of shareholders on the occasion of a bid, but it would extend its reach into the domain of property rights, with a remarkable expansion of Community competences. Rather than facilitating a compromise, it may prove to be the undoing of the directive.
Four main objections can be raised. From a legal standpoint, it is questionable whether the legal basis of the Commission’s proposal – Article 44 (2) (g) of the EC Treaty – can be used to justify Community legislation that modifies property rights, even if provision is made for compensation, especially in view of the retroactive effects on shareholders. So far, it has been taken for granted that the protection of freedom of establishment does not require the adoption of uniform corporate governance rules, but only a common platform of minimal safeguards for shareholders and other parties, together with national treatment. Moreover, Article 295 of the EC Treaty states: “this Treaty shall in no way prejudice the rules in Member States governing the system of property ownership”. The Court off Justice may well consider that multiple votes are part of a system of ownership, rather than individual rights cancelled on grounds of public policy.
From an economic standpoint, a thriving market for corporate control does not require uniform governance structures. This is clearly shown by the US experience and the fact that the Swedish capital market, where multiple-vote shares are common, has one of the highest proportions of foreign ownership of the capital of listed companies. Moreover, capital markets place a price on governance structure, raising the cost of capital for companies whose management eschews the discipline of a potential takeover.
From a practical standpoint, the proposed amendment eliminates one governance arrangement while leaving many others in existence that represent more effective obstacles to hostile takeovers, such as pyramidal ownership structures, non-voting shares, the interposition of a trust or administration office for the expression of votes, golden shares and other anti-takeover legislation. By itself the abolition of multiple votes would not create a level playing field.
Finally, the most fundamental objection is of a political nature. If this amendment were to be accepted, the ownership structure of companies incorporated in some countries would be modified by a qualified majority vote in the Council, where the majority would consist of countries that would retain their own arrangements, and the minority of countries that would lose theirs.
This would create a most dangerous precedent for the forthcoming round of EU legislation in the field of commercial law, which other small countries in the EU might well come to regret.
Fonte: European Voice - 16 maggio 2003
