‘Baby, It's Cold Outside…’ – A Comparative and Economic Analysis of Freeze-Outs of Minority Shareholders

46 Pages Posted: 17 Jun 2017 Last revised: 26 Jul 2018

See all articles by Tom Vos

Tom Vos

KU Leuven, Jan Ronse Institute for Company and Financial Law

Date Written: June 7, 2017

Abstract

Because minority shareholders can be a nuisance for a company, a majority shareholder may want to freeze them out. In general, the approach in the United States towards freeze-outs is more flexible than in the European Union. Law and economics scholarship suggests that a flexible regime for freeze-outs may be beneficial for society, as it addresses a free rider problem and a holdout problem in the market for corporate control. However, these insights are rarely integrated into European legal scholarship. This article endeavours to determine what constitutes an efficient legal framework on freeze-outs through a comparative law and economics approach. First, the legal regime on freeze-outs in the United States is compared with the regime of the Takeover Directive in the European Union and with Dutch law. Then, these legal systems are evaluated on their efficiency. Finally, some suggestions of reform are made for the European Union.

Keywords: Freeze-out, squeeze-out, delisting, free rider problem, holdout problem

Suggested Citation

Vos, Tom, ‘Baby, It's Cold Outside…’ – A Comparative and Economic Analysis of Freeze-Outs of Minority Shareholders (June 7, 2017). European Company and Financial Law Review Vol. 15, No. 1, Available at SSRN: https://ssrn.com/abstract=2898461 or http://dx.doi.org/10.2139/ssrn.2898461

Tom Vos (Contact Author)

KU Leuven, Jan Ronse Institute for Company and Financial Law ( email )

Oude Markt 13
Leuven, Vlaams-Brabant
Belgium

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