Is the Board Neutrality Rule Trivial? Amnesia About Corporate Law in European Takeover Regulation
66 Pages Posted: 4 May 2011
Date Written: March 30, 2011
Whether the European Union's Takeover Directive should have adopted a mandatory neutrality rule has been the subject of much debate. As the European Commission commences its review of the Directive this debate is being reignited. A view is crystallising that the success and failure of the Directive can, in large part, be measured by the number of Member States that have opted-in, or out of the neutrality principle, or have opted-in subject to the reciprocity option. The contestability of European corporations is viewed through this lens as a function of the extent to which EU Member States have adopted an unqualified neutrality rule. This article takes issue with this viewpoint. It argues that the pre-Directive debate and the post-Directive assessment have failed to consider the core lesson of takeover defences in the United States, namely that the construction of defences and their potency are a function of basic corporate law rules. If corporate law rules do not enable the construction of takeover defences, or undermine the extent to which they can be potently deployed, then the adoption or rejection of the neutrality principle in Member States is of trivial significance. This article explores the triviality hypothesis in three central EU jurisdictions: the United Kingdom, Germany, and Italy. It concludes that, although there is variable scope to construct and deploy takeover defences in these jurisdictions, the triviality thesis is well founded.
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