5.11 Shares as a Means of Payment 251tion for minority shareholders to abuse their rights. Time-consuming litigation
could frustrate a merger that has already been approved by the general meeting. It
is therefore normal to restrict the right of dissenting shareholders to contest the
merger resolution. Provisions of EU merger law limit situations in which the
merger can be declared null and void.^572
In principle, members of the company’s administrative or management bodies
or the experts that are responsible for reports submitted to the general meeting^573
might be liable to the company or its shareholders for any loss caused by breach of
duty. However, shareholders are generally protected in other ways.
The appraisal remedy is the most important remedy available to dissenting
shareholders. The appraisal remedy means that shareholders who dissent are given
the right to have the fair value of their shares determined and paid to them in cash,
provided that the shareholders comply with the statutory procedure.^574 EU merger
law does not require such a remedy. However, Member States are free to adopt the
appraisal remedy. According to the Third Company Law Directive, Member
States’ laws may permit the disclosure of less information to shareholders, if the
minority shareholders of the entity that will not survive the merger are entitled to
have their shares acquired by the acquiring company for a consideration corre-
sponding to the value of their shares.^575
Special remarks: the valuation of shares and the appraisal remedy. Legal rules
on the valuation of shares belong to factors that shareholders of the company that
will not survive the merger will take into account when deciding whether to vote
against the merger and ask for a better price for their shares. For this reason, the
form of consideration and the exchange ratio will be influenced by those rules.
EU merger law does not determine how exactly shares should be valued in the
context of mergers. Generally, the valuation of shares is determined by the na-
tional provisions of Member States’ laws (generally, see Chapter 10).
Review by competent authorities. In addition to the appraisal remedy and other
remedies, shareholders may be protected through the review of the legality of the
merger by the competent authorities. The existence of such a review could make it
more difficult to breach minority shareholders’ rights, and it could reduce the need
of some of the other remedies.
However, EU merger law only requires Member States to adopt such a system
in cross-border mergers (see below).
In public takeover bids, the legality of the transactions is monitored even by the
competent authoritites that supervise capital markets.^576
(^572) Recital 9 of Directive 78/855/EEC (Third Company Law Directive). See also Article 22
of Directive 78/855/EEC (Third Company Law Directive); recital 8 and Article 17 of
Directive 2005/56/EC (Directive on cross-border mergers); Article 30 of Regulation
2157/2001 (SE Regulation).
(^573) Article 21 of Directive 78/855/EEC (Third Company Law Directive).
(^574) See Bainbridge SM, Mergers and Acquisitions. Foundation Press, New York (2003) pp
192–193.
(^575) Article 28 of Directive 78/855/EEC (Third Company Law Directive). See also Article
25(3) of Regulation 2157/2001 (SE Regulation).
(^576) Article 4 of Directive 2004/25/EC (Directive on takeover bids).