Select Committee on European Union Minutes of Evidence

Letter from the CBI

  Many thanks for your letter of 13 March and for the Commission's revised draft text of the Directive.

  In general terms we are very happy with most of the proposed amendments, particularly since amongst them they seek to address one of the principal changes the CBI sought to the Directive when we gave evidence in February, namely inclusion of multiple voting rights within the ambit of Articles 9 and 11.

  We therefore support the proposed amendments regarding multiple voting rights.

  We also support the other proposed changes highlighted in the text—in particular those referred to in Article 5.5 on mandatory bids and the equitable price; Article 10.3 on information to shareholders (which was made in an earlier revised proposal and is not highlighted in this version); and Article 14 on the squeeze out right.

  However, we do have concerns with the proposed periods of time referred to in Articles 18 and 19. We consider the periods of time referred to should be kept as short as possible.

  As Article 18 is presently drafted in the amended text, it will be more than ten years before the reviews proposed under that Article take place. That seems far too long.

  Most review periods in EU Directives are generally set at five years, and this is the period to aim for. It is complicated in this case because the Commission propose an option for Member States to defer implementation of Articles 9 and 11 under Article 19, for which the Commission also proposes a period of five years.

  We know that the provisions of Article 11, and Article 9 as proposed to be amended, are controversial for some States, and indeed some commentators consider that the provisions of Article 11 may be difficult to implement in practice because of legal difficulties over contractual rights. Accordingly, subject to getting a workable Article 11 with any further necessary changes, we understand why the Commission may feel the need to offer some concession in order to seek to secure agreement and adoption of the Directive.

  However we would like to think that the period in Article 19 could be kept to not longer than three years as in the original proposal last October, if it is necessary to offer this concession. In which event would like to see the period in Article 18 also reduced to three years, making a six year period in all rather than ten years.

  Another issue briefly flagged in my oral evidence in February is regarding Article 13, which makes reference to various existing Directives, including the Information and Consultation Directive. There is a need to ensure that the Information and Consultation Directive is not, and the way it is implemented in Member States, is not inconsistent with the provisions and objectives of the Takeovers Directive. The issue relates to the timing of the requirements to inform the employees of the bid.

  There is significant concern that the provisions of the Information and Consultation Directive could require employees to be informed before the offeror is ready to go public and launch its bid. Issues of market abuse, insider information and false markets and the like arise. Although the Government has now issued its proposals for implementing the Information and Consultation Directive in the UK, having read them we are not at all clear as to their affect, if any, on Takeovers. The DTI position has been that the Takeover Directive makes it clear that Takeovers are not to be taken as any exemption to whether information or consultation might be necessary under the Information and Consultation Directive, so we are concerned now that the UK implementation has been published we get distinctly better information on how the ground lies. Your Committee may want to do the same—we have raised with the FSA who had not previously seen as an issue but are now somewhat concerned. So are the Takeover Panel.

  We also understand that some MEPs in the debates in the European Parliament may also seek to reinforce the rights of employees in takeovers, which could make the Directive unworkable.

  I hope these comments will assist the Committee.

27 March 2003

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