Company takeover bids

SUMMARY OF:

Directive 2004/25/EC on takeover bids

WHAT IS THE AIM OF THE DIRECTIVE?

It lays down measures to coordinate EU countries’ laws, regulations, administrative rules, codes of practice and other arrangements for takeover bids*.

KEY POINTS

• EU governments must ensure compliance with the following principles:
  • All holders of securities* of an offeree company* of the same class must be treated equally.
  • They must have sufficient time and information to reach a properly informed decision on the bid.
  • The board of an offeree company must act in the interests of the company as a whole.
  • Behaviour which makes the securities at stake rise or fall artificially in price is not allowed.
  • The offeror may only announce a bid if they have sufficient financial resources.
  • An offeree company must not be hindered in its activities for longer than is reasonable.
• EU countries must designate an authority, or authorities, to supervise takeover bids. They also decide which judicial or other authority should handle any disputes or irregularities in a bid.
• The offeree company determines which national supervisory authority should judge the bid if its securities are traded in more than one EU country.
• To protect minority shareholders, anyone gaining control of a company must make a bid at an equitable price at the earliest opportunity to all holders of securities.
• The equitable price is the highest price the offeror paid for the securities during a 6- to 12-month period prior to the bid. In specific circumstances, national supervisory authorities may adjust this price.
• A decision to launch a bid should be made public as soon as possible and ensure market transparency and integrity of offeree company securities.
• The offer document containing a bid must provide basic information such as the terms involved and identity of the company or person launching the initiative and of persons acting together.
• National authorities determine the time allowed to accept a bid. This runs between 2 and 10 weeks.
• Before engaging in actions that could block the bid, the board of the offeree company must (subject to an EU country opt-out) obtain prior authorisation from a general shareholders’ meeting.
• Employee representatives must be informed of any takeover bid.
• National rules exist for issues such as the lapsing or revision of bids or disclosure of the result of a planned takeover.

FROM WHEN DOES THE DIRECTIVE APPLY?

It has applied since 20 May 2004. EU countries had to incorporate it into national law by 20 May 2006.

* KEY TERMS

MAIN DOCUMENT

European Parliament and Council Directive 2004/25/EC of 21 April 2004 on takeover bids (OJ L 142, 30.4.2004, pp. 12–23)

Successive amendments to Directive 2004/25/EC have been incorporated into the original text. This consolidated version is of documentary value only.

last update 16.11.2016