Takeovers and International Securities Laws
In this article, we will talk about some of the different takeover laws in different countries. We have focused so much on the United States laws for the past few months (William Act), it is time to shed some light on other countries’ laws.
Over the past quarter of a century, global financial regulation has substantially evolved. As time goes on, thousands of companies have become more globalized. With this, large variation in securities laws has become an impediment to growth.
It is also noticeable that there is a trend toward common regulations across many nations, as well as securities regulations. And of course, there is no exception to mergers and acquisitions.
Europe
Great Britain
There was a time when the British takeover regulation was a form of self-regulation by the corporate sector and the securities industry. The City Code on Takeovers and Mergers is one of the main principles of the regulations. Its purpose is to have all shareholders treated fairly and equally.
It also helps prevent target firms from adopting antitakeover measures without the approval of shareholders. There are plenty of important provisions that the City Code provides, below are great examples:
- Bidders must only release information regarding the bid in a manner that is consistent with the Code.
- Investors who are acquiring 30% or more of the company’s share must bid for the remaining shares at the highest price paid for the shares that have already been acquired.
- A clarifying announcement must be made by the potential bidder if rumors of the bid occur.
European Union
On the other hand, takeovers in Europe are regulated by the European Takeover Directive. The Code we referred to earlier has been diluted by different countries that wish to give their indigenous companies more ability to oppose hostile takeovers if the bid is from another country. This was done through negotiations among members of the European Union.
It is required that a bidder must make a mandatory offer after they have purchased a certain number of shares. This will help protect the shareholders of minorities. Additionally, the bid must be submitted to shareholders and it should be made at an equitable price. The bid must also have certain disclosures relating to the offer and bidder.
Moreover, the target shareholders only have less than two weeks to evaluate the bid. The said directive should also contain provisions to limit the use of poison pills. Members may also choose to opt-out of the provisions should they find that the provisions are not in their interest.
France
The takeover activity in France is more common compared to other nations in continental Europe. In this beautiful country, the Financial Markets Authority or the AMF regulates the bid. The AMF is a group of 16 members with each member elected for terms that last for five years.
The disclosures a bidder makes must be submitted to the AMF. And the filing period is only within five trading days of crossing various shareholding thresholds. Additionally, the bidders who are planning to acquire additional shares is also required to disclose their holdings on a daily basis.
The offers are also required to remain open for at least 25 trading days, however, it should not be longer than 35 trading days. In France, antitakeover laws also exist. It provides protection top potential targets.
Germany
Now we move on to Germany. In Germany, they are more supportive of management. They are also more accepting of antitakeover defenses. In this country, they put up a system of worker codetermination. This means that it is common for a representative of management to sit on the board of directors and seek to exercise a worker’s claim to corporate profits. The same can be said for the Netherlands.
There are several laws that regulate takeovers in Germany. These include the Takeover Act and are supervised by the Federal Office of Supervision of Financial Services. The Federal Office of Supervision of Financial Services is similar to the FSA in Great Britain and the SEC in the United States.
The offers in Germany must be kept open for 28 days. The maximum days an offer should be open is up to 60 days. As for the target company, they are required to respond to the offer within two weeks. Not only that, but the offers in Germany must be publicized in national newspapers.
Ireland
The Takeover Panel Act of 1997 regulates the takeovers in Ireland. Disclosures are required for acquisitions of shares that are 5% or more. For purchases of 1% or more of the target shares, additional disclosure is also required. The minimum offer period in Ireland is 21 days. On the other hand, hostile bids must be responded to by the target within 14 days.
In Irish takeover rules, equal treatment must be given to all shareholders. This way, minority shareholders will also be protected should the controlling position be acquired by any person.
Italy
In Italy, the takeover rules divide tender offers into two parts: voluntary and mandatory offers. Voluntary bids can either be hostile or friendly. On the other hand, if the bidder acquires enough shares to gain control of the target’s board, a mandatory bid is required.
As expected, the time periods for these two types of tender offers are different, too. Voluntary bids have an offer period of 15 to 40 trading days. On the other hand, Mandatory bids are open for 15 to 25 trading days.
Spain
Hostile bids are also common in Spain. The National Securities Market Commission must be notified if the bidders are planning to acquire 5% or more of a target’s stock. Additionally, bidders are required to make a formal announcement of the bid. The announcement is made public by at least two national newspapers and the commission’s Official Gazette. All of these must be done within five days of making the offer.
In Spain, the offers may be kept open for up to four months. Additionally, the country also requires the controlling party to make a bid for the shares of the remaining shareholders. The said bid must be at the highest price paid by the bidder for the shares in the target that were acquired within the prior 12 months.
These are only some of the takeovers and international securities laws in different countries. Which countries do you want us to feature next?
©image credits to Anni Roenkae