Thomas Papadopoulos - EU law and the harmonization of takeovers in the internal market

EU Law and the Harmonization of Takeovers in the Internal Market

EUROPEAN MONOGRAPHS

Editor-in-chief Professor David OKeeffe

In this series European Monographs this book EU Law and the Harmonization of Takeovers in the Internal Market is the seventy-first title. The titles published in this series are listed at the end of this volume.

KLUWER LAW INTERNATIONAL

EU Law and the Harmonization of Takeovers in the Internal Market

Thomas Gr. Papadopoulos

Published by:

Kluwer Law International
PO Box 316
2400 AH Alphen aan den Rijn
The Netherlands
Website: www.kluwerlaw.com

Sold and distributed in North, Central and South America by:
Aspen Publishers, Inc.
7201 McKinney Circle
Frederick, MD 21704
United States of America
Email:

Sold and distributed in all other countries by:
Turpin Distribution Services Ltd.
Stratton Business Park
Pegasus Drive, Biggleswade
Bedfordshire SG18 8TQ
United Kingdom
Email:

Printed on acid-free paper.

ISBN 978-90-411-3740-1

2010 Kluwer Law International BV, The Netherlands

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the publisher.

Permission to use this content must be obtained from the copyright owner. Please apply to: Permissions Department, Wolters Kluwer Legal, 76 Ninth Avenue, 7th Floor, New York, NY 10011-5201, USA. Email:

Printed in Great Britain.

Speech by Jacques Delors

(Luxembourg, 9 September 1985)

The large market is not just for European businessmen; it is to serve the people too. And this raises extremely thorny problems, particularly on security and health protection grounds. We have to harmonize the rules because there can be no internal market with a reasonable degree of competition unless at least a few of them and hence to some extent business costs as well have been brought into line.

On 9 Sep. 1985, President of the European Commission Jacques Delors delivers a speech at the first Intergovernmental Conference (IGC) to be held in Luxembourg. Source: Speech by Jacques Delors, in Bulletin of the European Communities. September 1985, No 9, pp. 710.

About the Author

Thomas Papadopoulos is a visiting researcher at Harvard Law School. He received his DPhil in Law (PhD in Law) from the Faculty of Law, University of Oxford. He received a degree of Magister Juris(MJur/LLM) and a degree of MPhil in Law from the Faculty of Law, University of Oxford. He also received his LLB with Distinction (ranked 1st) from the Department of Law, Aristotle University of Thessaloniki, Greece. He is an alumnus of the Anatolia American College of Thessaloniki, Greece. Furthermore, he is Attorney at law (Greece), North Atlantic Treaty Organization (NATO) Scholar and Scholar of the A.G. Leventis Foundation, Paris. He is a part-time law lecturer at the Law School, University of Buckingham and a law tutor at the Oxford University Programme for Undergraduate Studies(OPUS), University of Oxford, UK. Additionally, he was Academic Student Coordinator of the Financial Law Discussion Group, Faculty of Law, University of Oxford. Moreover, he is a contributor to Law of the European Union edited by D. Vaughan, A. Robertson, P. Eleftheriadis and published by Oxford University Press (2008). He participated in workshops of the Technical Assistance and Information Exchange instrument (TAIEX) managed by the Directorate-General Enlargement of the European Commission. E-mail: .

Foreword by Derrick Wyatt

Corporate takeovers can have profound effects on the interests of shareholders, and employees, as well as on society at large. Particularly when they are contested, takeovers can provoke vigorous debate in the financial press, and attract the critical attention of national governments. The phenomenon of the corporate takeover has long been the subject matter of a prolific literature examining its implications from the financial, economic, social and legal perspectives. This book makes a new and distinct contribution to the legal literature on takeovers, since it places the EU Takeover Bid Directive in the context of the EU company law harmonization programme, and of the fundamental freedom of corporate bodies under EU law to establish themselves in other Member States. The book examines the freedom of establishment of companies, and explains how it is this freedom which provides the rationale and framework for the EU company law harmonization programme, as well as providing the specific logic underpinning the Takeover Bid Directive. The author offers a clear and readable explanation of the relationship between freedom of establishment and takeover bids, and devotes a chapter to the significance of the corporate mobility case law of the Court for the takeover process. The regulation of takeovers is then discussed in the context of the relationship between company law and capital markets law. One of the most impressive chapters in the book comprises an overview of the Takeover Bid Directive in the context of the EU internal market, which includes examination of provisions of the Directive which deal with mandatory bids, board neutrality, and breakthrough, as well as the controversial rules on reciprocity which allow companies which apply the board neutrality and breakthrough rules to opt out if they are the target of a bidder that does not apply the same takeover provisions. As well as analysing the Takeover Bid Directive, the author examines in light of recent case law the potential horizontal effect of EU Treaty provisions on freedom of establishment and the free movement of capital. Thoughtful and provocative questions are raised as to the extent to which the corporate constitution and the conduct of the board in a takeover situation might in themselves constitute restrictions on the freedom of establishment (and of capital movement) of a bidder. It was a very great pleasure to supervise the thesis which has provided the basis for this monograph, and I recommend it without hesitation to the reader as a valuable and original contribution to legal literature.

Professor Derrick Wyatt QC
May 2010

Chapter 1
The Fundamental Freedom of Establishment of Companies

1.1 INTRODUCTION

This chapter will analyse the various characteristics of the fundamental freedom of establishment of companies. In this analysis, some elements of the freedom of establishment case law on natural persons will be invoked, but only to the extent that these elements fit into the special nature of legal persons, such as companies; arbitrary generalizations will be avoided. This general approach will assist in the understanding of some obscure parts of the exercise of this fundamental freedom by companies and in the drawing of a more complete analysis.

1.2 THE RIGHT OF ESTABLISHMENT: A RIGHT OF NATURAL AND LEGAL PERSONS

The European Community (EC) treaty sets out the four fundamental freedoms of the European Communities: the free movement of goods workers, the establishment and provision of services, and capital. These fundamental freedoms contribute to the development and the evolution of the internal market.

According to Article 43 of the EC Treaty, freedom of establishment includes the right for nationals of a Member State to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms in the territory of another Member State under the conditions laid down for its own nationals by the law of the country where such establishment is effected (primary establishment). Article 44(2)(g) constitutes the legal basis for the harmonization of the area of company law by means of directives.