Legal Aspects of the Breakthrough Rule of the European Takeover Bid Directive

Abstract

The Non-Frustration Rule (Art. 9), the Breakthrough Rule (Art. 11) and the Reciprocity Rule (Art. 12) of the EU Takeover Bid Directive (Directive 2004/25/EC) constitute the core regulation of the takeover bid process on EU level. The first two rules (Articles 9 and 11) regulate the behavior of the management of the target company during the pre- and post bid period. The intended contribution of these Articles is watered down due to a complicated opt-in/opt-out/reciprocity system which renders their application optional on both company and national legislation level. Moreover, there are some additional substantive deficiencies of those provisions, which are something negative for the integration of the European market for corporate control. It seems that the main goal of the EU Takeover Bid Directive, the establishment of a level playing field for Takeovers at European level, is not a reality. This paper will try to explain in a concise way the basic features of the Breakthrough Rule of the EU Takeover Bid Directive and will adopt a critical stance towards some choices of the European legislature.

Keywords: Takeovers, Takeover Bid Directive, Breakthrough Rule, Corporate Law, Securities Regulation, Capital Market Law, Financial Law, EU Law, Internal Market

JEL Classification: K22, K20, K23, K29