19.2 Information Management: Secrecy v Disclosure 521Governing law. The governing law depends on the classification of the issue.
(a) Each participating company will be governed by the company law of the coun-
try of incorporation (Inspire Art, see Volume I). (b) The public law governing
trading is that of the home Member State of the regulated market.^6 The authority
competent to supervise a public takeover bid is usually that of the Member State in
which the offeree company’s securities are admitted to trading on a regulated
market.^7 (c) Another main rule is the principle of home country control of issuers.^8
(d) However, each Member State must apply the insider trading and market abuse
regime to actions carried out on its territory or, where the actions concern financial
instruments that are admitted to trading on a regulated market situated or operating
within its territory, abroad.^9
In England, limited-liability companies are governed by the Companies Act 2006. The City
Code on Takeovers and Mergers sets out the rules which regulate bids for companies incor-
porated in the UK where their shares have been admitted to trading on a regulated market in
the UK. It applies even to some other companies.^10 Since the implementation of the Direc-
tive on public takeover bids in May 2006, the City Code has statutory effect. The City Code
is enforced by the Panel on Takeovers and Mergers, subject to judicial review. The Panel
on Takeovers and Mergers is an independent body that has been designated as the supervi-
sory authority. Its statutory functions are set out in the Companies Act 2006.^11 Companies
with securities listed on the Official List of the London Stock Exchange must also comply
with the Listing Rules of the UK Listing Authority (the FSA acts as the UKLA). The UK
also has a comprehensive financial services framework, including the Financial Services
and Markets Act 2000 and the Criminal Justice Act 1993, which regulates investment ac-
tivities and prohibits insider dealing and market manipulation.
In Germany, public limited-liability companies are governed by the Aktiengesetz
(AktG). Public offers, public takeover bids and mandatory offers are governed by the Wert-
papierübernahmegesetz (Securities Acquisition and Takeover Act, WpÜG). The WpÜG is
enforced by the BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht).^12
19.2 Information Management: Secrecy v Disclosure.................................
In practice, the potential acquirer must maintain secrecy. If information about its
plans leaks out too early, the takeover may become more expensive as the price of
the target’s shares will then reflect the price that the market expects the offeror to
pay. On the other hand, a potential acquirer must plan the takeover internally and
take care of its internal decision-making. It will need advice, and it will have to
contact outsiders in order to arrange financing, organise a consortium, or negotiate
(^6) Articles 36(4) and 4(1)(20)(b) of Directive 2004/39/EC (MiFID).
(^7) Article 4(2) of Directive 2004/25/EC (Directive on takeover bids). For problems, see
Siems MM, SEVIC: Beyond Cross-Border Mergers, EBOLR 2007 p 316.
(^8) For prospectuses, see Article 13(1) of Directive 2003/71/EC (Prospectus Directive).
(^9) Article 10 of Directive 2003/6/EC (Directive on market abuse).
(^10) Introduction, section 3 of the City Code on Takeovers and Mergers.
(^11) Chapter 1 of Part 28 of the Companies Act 2006.
(^12) See § 4 WpÜG.