The mandatory provisions of the EU Takeover Bid Directive and their deficiencies

The two key provisions of the EU Directive on Takeover bids, the Board Neutrality (Article 9) and the Breakthrough Rule (Article 11), are optional at Member State and individual company level. According to the Directive's Reciprocity Rule, a target company that applies the Board Neutrality and/or Breakthrough Rule is able to opt out, if the offeror company does not apply the same Board Neutrality and Breakthrough provisions. Some of the few obligatory substantial provisions of the EU Directive on Takeover Bids are the Mandatory Bid Rule (Article 5), the squeeze-out right (Article 15) and the sell-out right (Article 16). The purpose of these provisions is to protect minority shareholders according to the legal basis of the Directive (Article 44, paragraph 2g EC Treaty). However, the Directive itself provides the possibility to evade the enforcement of these provisions: (i) at the transposition of the Directive into the national law, and (ii) after the implementation stage, when the parties to a bid are obliged to launch a mandatory bid. Additionally, the provisions themselves are characterized by many drawbacks and problems of interpretation, which reveal theirweakness to contribute to the protection of the shareholders and subsequently to the freedom of establishment through takeover bids. Furthermore, the most important mandatory provisions of the Directive are easily avoidable and become de facto optional. If this conclusion is combined with the optionality of the two key provisions and the Reciprocity Rule, the EU Directive will not have any significant effect on the integration of the European Market for Corporate Control, the promotion of cross-border corporate mobility, the protection of shareholders and the protection of freedom of establishment in general. The Directive does not really 'exist'. This Article will analyse the most important mandatory provisions of the Directive, namely the Mandatory Bid Rule (Article 5), the squeeze-out right (Article 15) and the sell-out right (Article 16).