The Divergent Designs of Mandatory Takeovers in Asia

51 Pages Posted: 3 Jun 2021 Last revised: 22 Jun 2021

See all articles by Umakanth Varottil

Umakanth Varottil

National University of Singapore (NUS) - Faculty of Law; European Corporate Governance Institute (ECGI)

Wai Yee Wan

City University of Hong Kong; City University of Hong Kong (CityU) - Centre for Chinese & Comparative Law

Date Written: June 1, 2021

Abstract

Optimal takeover regulation aims to promote efficient changes of corporate control while curbing inefficient takeovers. Viewed from a comparative perspective, the Anglo-American prototypes spearhead not only the discourse but also the dissemination of takeover regulation globally. At the one end of the spectrum, the law in the United States (U.S.) follows the “market rule,” whereby transfers of corporate control benefit from a regulatory freehand. At the other end of the spectrum lies the “mandatory bid rule” (MBR), epitomized by takeover regulation in the United Kingdom (U.K.). Under the U.K.’s version of the MBR, an acquirer who acquires de facto control over a target must make a general offer to the remaining shareholders to acquire all of their shares at the same price it paid to acquire the controlling block.

In this article, we aim to analyze how and why six significant Asian jurisdictions adopted the MBR and its variants. This is puzzling given that the jurisdictions display considerable divergence in terms of structural, legal, and institutional foundations, not only with their Anglo-American counterparts but also even among themselves. In this article, we challenge the prevailing notion that the binary Anglo-American approach constitutes the framework for the dissemination of takeover regulation worldwide.

We claim that because of the political economy of takeover regulation in the Asian jurisdictions, the choice to adopt various intermediate positions is by design and not by default. Considering the market rule provides suboptimal protection to minority shareholders and the MBR curbs the market for corporate control, the intermediate positions aim to balance these somewhat conflicting objectives. Our study contributes to the wider debate surrounding the appropriate takeover regulation and, more specifically, the claims made by the proponents of the market rule on the one hand and the MBR on the other.

Keywords: Mandatory bid rule, Asia, transfers of corporate control, mergers and acquisitions, takeover regulation

JEL Classification: K22

Suggested Citation

Varottil, Umakanth and Wan, Wai Yee, The Divergent Designs of Mandatory Takeovers in Asia (June 1, 2021). NUS Law Working Paper No. 2021/011, European Corporate Governance Institute - Law Working Paper No. 592/2021, Available at SSRN: https://ssrn.com/abstract=3858227 or http://dx.doi.org/10.2139/ssrn.3858227

Umakanth Varottil (Contact Author)

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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Belgium

Wai Yee Wan

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

City University of Hong Kong (CityU) - Centre for Chinese & Comparative Law ( email )

83 Tat Chee Avenue
Room P5300, 5th Floor, Academic 1
Kowloon Tong
Hong Kong

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