506 18 Takeover Defences
transactions can also trigger the personal liability of board members for damage
sustained by the company, or, less often, by shareholders and third parties.^9
18.2 Pre-Bid Defences Well in Advance
The starting point is that it is legally easier to take pre-bid measures well in ad-
vance of a takeover offer. (a) Pre-bid measures which have been decided on and
fully implemented before the bid was made public or the board became aware that
the bid was imminent^10 are less likely to be constrained by mandatory provisions
of law. (b) In a listed company, takeover defences which have not yet been fully
implemented before that point of time are subject to more constraints under the
Directive on takeover bids. In that case, “the general meeting of shareholders shall
approve or confirm any decision which does not form part of the normal course of
the company’s business and the implementation of which may result in the frustra-
tion of the bid”.^11
18.3 Structural Takeover Defences, Control................................................
Structural defences and control enhancing mechanisms are pre-bid takeover de-
fences which act as barriers to the acquisition of shares in the target^12 or barriers to
exertion of control at the general meeting.^13 They are very widespread in Europe.
Most of them have already been discussed in Volume I in the context of block-
holding.
(^9) See Becker D, Verhaltenspflichten des Vorstands der Zielgesellschaft bei feindlichen
Übernahmen, ZHR 165 (2001) pp 281–282; Maier-Reimer G, Verhaltenspflichten des
Vorstands der Zielgesellschaft bei feindlichen Übernahmen, ZHR 165 (2001) p 265.
(^10) Article 9(2) of Directive 2004/25/EC (Directive on takeover bids).
(^11) Article 9(3) of Directive 2004/25/EC (Directive on takeover bids).
(^12) The Report of the High Level Group of Company Law Experts identified the following
barriers to the acquisition of shares in the target: ownership caps; “golden shares”; re-
strictions to the transferability of shares (applicable to non-listed shares; listed shares
may be subject to limitations in shareholders’ agreements); lack of access to the underly-
ing shares (where depository receipts are traded instead of underlying shares); the dilu-
tion of the shares acquired by the bidder or potential bidder (poison pills, certain classes
of poison debt); and the reduction of available shares by means of: acquisition of own
shares, cross-shareholdings, or pyramiding.
(^13) The Report of the High Level Group of Company Law Experts identified the following
barriers to the exertion of control at the general meeting. The use of: voting caps; shares
with double or multiple voting rights; shares with limited or non-existent voting rights;
participation rights carrying no votes; time-lapse voting schemes; discriminatory quo-
rum requirements; irrevocable proxies; binding voting agreements or voting trusts; su-
permajorities; and “golden shares”.