TWENTY-EIGHTH REPORT
24 JUNE 2003
By the Select Committee appointed to consider European
Union documents and other matters relating to the European Union.
ORDERED TO
REPORT
IF AT FIRST YOU DON'T SUCCEED … TAKEOVER
BIDS AGAIN
12846/02 Proposal for a Directive of the European
Parliament and of the Council on takeover bids
Un-numbered Council Presidency compromise proposal
for a Directive of the European Parliament and of the Council
of 14 February 2003 concerning takeover bids
Un-numbered Council Presidency compromise proposal
for a Directive of the European Parliament and of the Council
(OTNYR) of 28 April 2003 concerning takeover bids
SUMMARY
The Takeovers Directive lays down general principles
to be applied, basic procedures to be followed and standards to
be met in the conduct of takeovers in the Union. The Directive
is an important element of the Financial Services Action Plan
agreed at the Lisbon Summit in March 2000 and scheduled for completion
by 2005.
From the narrow viewpoint of the domestic impact
of the Directive on the conduct of bids in the UK, there seems
to be little, if any, advantage to be gained from the Directive.
The UK has, in the Takeover Panel and City Code, an efficient
and effective system. The Directive would not necessary lead to
any significant improvements. But it would require the Panel and
the Code to be put on a statutory footing. This could provide
more opportunities for legal challenge, which could be used tactically
to obstruct a bid.
The Committee's analysis of the Directive also reveals
serious defects or shortcomings. The Committee recommends that:
(1) there should be a common minimum threshold for
triggering a mandatory bid (Article 5);
(2) the rules on jurisdiction be simplified (Article
4); and
(3) the "breakthrough" rule be amended
(Article 11).
On the other hand, the Committee finds that the Directive
would introduce a significant measure of harmonisation, with the
potential for increasing shareholder protection and opening up
markets in other Member States for UK companies.
The Directive requires a difficult judgement to be
made, balancing the potential advantages that would be available
for UK companies/investors in Europe against potential disadvantages
with the risk of increased litigation in the UK.
The Committee concludes that if the balance of advantage
is to tilt in favour of the Directive, some important changes
need to be made and certain key provisions must not be given up
or weakened.
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