Response to the European Commission\u27s Report on the Application of the Takeover Bids Directive

This paper contains the European Company Law Experts\u27 response to the report of the European Commission of 28 June 2012 on the application of the Takeover Bids Directive of 2004 and the reform initiatives announced. For evaluating these initiatives the rationale of the mandatory bid rule is relevant (exit rationale, control premium rationale and undistorted choice rationale). On this basis the paper discusses each of the concerns raised by the European Commission: 1) The concept of acting in concert : The ECLE are of the opinion that a uniform concept for the Takeover Bids Directive, the Transparency Directive and the Acquisition Directive is not useful because of the different objectives of these Directives. As to the Takeover Directive it should be made clear that joint engagement activities of investors should not trigger a mandatory offer. 2) National derogations to the mandatory offer rule differ widely, but there are different types of derogations that pose different concerns. The ECLE recommend that the Directive should provide for a review process with respect to national derogations. 3) The ECLE believe that there are good reasons to close the loopholes against the “creep in” and the “creep on” acquisitions. 4) As to board neutrality and the break-through rule the ECLE believe that the default rules should be changed. The option rights should be given to the shareholders, not to the member states. The reciprocity rule is flawed. 5) The protection of the rights of employees should be addressed in a wider context and should not be taken up specifically for one type of transaction such as takeover bids

The Regulation of Corporate Governance in European Financial Market Infrastructures: A Critique

This article is the first to consider the variations in governance requirements applicable to European financial market infrastructures. It charts the tangled combination of laws, codes and regulations that apply to the governance of the largest European central counterparties, central securities depositories and international central securities depositories. Despite the similarity of these institutions in terms of their sector, criticality, complexity and purpose, there are substantive variations in what is required of their governance. Here we question whether this variance is an appropriate reflection of differing institutional needs or a by-product of piecemeal regulatory reform.Our research found no apparent need to regulate for consistency of board size or structure, nor in relation to specificities of committee requirements. However, there are convincing arguments that change is needed around the meaning and application of independence. The current approach to FMI directorial independence is a poor fit given the sectors highly technical nature, its interconnectedness, and the limited pool of available expertise. On top of this, expertise, diversity and commitment can become trade-offs for adherence to the requirements of independence. We argue that regulation needs to be sensitively calibrated to ensure these important factors do not get squeezed out under the weight of formalized independence. It is our view that independence requirements can be structured to create better balanced boards where the needs of independence, expertise, diversity and commitment can be weighed against each other in contex