The Mandatory Bid Rule in the European Community and in Brazil: A Critical View

Abstract

How should the legislator fine-tune the balance between minority protection and control shifts promotion? Which interests, if any, should hence be protected? Are there enough benefits that outweigh costs of implementing a mandatory bid rule? This dissertation aims at identifying possible answers to these questions by means of analysing, comparing and exploring the controversial aspects related to the diverse mandatory bid rules in the UK, in Brazil and in the other Member States of the European Community. A logic and legal study in which the rules currently in place will be confronted and tentatively matched with the possible grounds that support them in the first place is proposed. Finally, it will be argued that companies in which the controlling shareholder can only extract legitimate benefits by means of the proportional distribution of profits are better managed and, therefore, the economic and share value performance are enhanced, reducing capital costs and encouraging minority investment. The so-called governance function of the mandatory bid rule.

Keywords: Mandatory bid, Tag Along, Mandatory Bid Rule, Tender Offer, UK, City Code, Brazil, CVM, UK, European Directive, Takeover, Corporate Governance, Controlling Shareholders, European Community, Control, Transfer of Control, Acquisition of Control, Tag Along, Tag Along Rights, Ownership, Shares, Corporat