69. The Community has been struggling to agree a
Takeover Directive for over 22 years. The last attempt failed
in the European Parliament on 4 July 2001.
A further attempt failed in the Competitiveness Council on 19
May 2003. The Committee raised this issue with the Chair of the
European Parliament, Economic and Monetary Affairs Committee,
Dr Christa Randzio-Plath, who said:
"I am very sorry I cannot give you a guarantee
that at the end we will have a Directive but I can give you the
impression that there is a positive approach to try to find reasonable
70. Asked what the sticking points were, Dr Randzio-Plath
"the problems that you have are that you have
the different cultures of the shareholders" [Q. 307-308].
71. Part of the European Parliament's difficulty
lay in deciding where responsibility resided. Dr Randzio-Plath
"we deal with this Directive in three different
the Social Affairs Committee insists on
the rights of the employees, there is also support in the Economic
Affairs Committee. We do not know what the Legal Affairs Committee
is doing" [Q. 304-308].
72. For the Commission, Dr Schaub said:
"we believe that we need a Directive which eliminates
at least some of the more unreasonable obstacles to cross-border
takeovers" [Q. 313].
73. The two most difficult aspects of the Takeover
Directive relate to articles 9 and 11. Article 9 proposes a ban
on directors taking frustrating action, such as issuing new shares
to a friendly party, when in receipt of a hostile bid. Article
11 would seek to override differential voting rights when an acquirer
has more than 75% of the risk bearing capital of the target company.
In this context, readers are invited to refer to the Committee's
published in June 2003 in which we examined the extent to which
the potential advantages that the draft Directive would make available
to UK companies/investors outweighed the potential disadvantages
and the risk of increased litigation in the UK. The Government's
Response sets out the Government's position in detail.
74. The Committee did not explore the nature of the
new Portuguese compromise on the draft Directive nor whether it
might succeed in attracting a majority in the European Parliament.
Our concern was to determine how the failure to adopt this Directive
within the deadline might seriously affect the FSAP. The Treasury
witnesses believed that it would not [Q 499].
75. It will be important for the capital markets
that a level playing field in the regulation of takeovers emerges.
The lack of an agreement on the Takeover Directive by the April
2004 deadline would not in itself seriously affect the ability
of the EU to make progress with the other elements of the Financial
Services Action Plan but such a failure could weaken the movement
towards the efficient and effective operation of a single market
in capital including that in existing companies. However, key
provisions in the proposed Directive should not be diluted. There
is, as we have said before,
a clear UK interest in the Directive improving the position in
other Member States, and in particular opening up markets for
UK companies and making more secure the position of UK investors