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Key Finding

Despite the lukewarm reception of the long negotiated TO-directive in 2004, there would be little appetite to reopen the file.


Thirty years passed between the publication by Prof. Robert Pennington of a report for the European Commission containing a draft directive on takeover bids and the adoption of the Directive 2004/25/EC on Takeover Bids. This paper explores the various proposals put forward during this time and the manner in which both the nature of the Directive and its provisions changed. It examines the Commission’s 1989 and 1997 proposals and the Council’s 2000 Common Position focusing on: the General Principles; the determination of the supervisory authority and applicable law; the mandatory bid rule; and the board neutrality rule.

The paper proceeds to identify the various contentious issues which emerged in the subsequent conciliation process, the political difference that influenced the discussions and the compromises that were reached in order to arrive at the joint text approved by the Conciliation Committee in June 2001. Very unusually, this proposal was rejected by Parliament on July 4th 2001 and the paper describes the lead-up to this 273 tied vote and the fraught atmosphere in the Chamber. It reviews the steps taken by the Commission to move forward and meet the concerns of Parliament including by the establishment of a High Level Group of company law experts to advise on the next draft. The 2002 Proposal which ensued responded with a number of changes most significantly the break-through rule. This led to a period of very intense negotiations and drafting with compromise proposals being introduced in March, April and May 2003.

The paper explains how the controversial ideas of optionality and reciprocity were introduced and how a further compromise proposal was put forward reflecting many of the amendments agreed at COREPER. This final period involved an intensification of lobbying, political maneuvering and consensus building. Ideological debates became intertwined with economic debates and practice with theory. The paper concludes by noting the rather unenthusiastic reception from Member States and commentators and the obvious disappointment of the Commission at what it perceived as a watered down proposal.

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