19.3 Toehold, Creeping Takeover, Major Holdings 527for disclosing this information to the public. The notification to the issuer must be
effected as soon as possible, but not later than four trading days.^44
The main rule is that the thresholds are 5%, 10%, 15%, 20%, 25%, 30%, 50%
and 75% of voting rights.^45 There are some exceptions.^46 Member States may also
use a threshold of one-third instead of the 30% threshold, and a threshold of two-
thirds instead of the 75% threshold.^47 What is more important is that the home
Member State of an issuer may make the shareholder subject to requirements more
stringent than those laid down in the Transparency Directive.^48 For example, the
lowest threshold is 3% both under German^49 and English law, and the UK Listing
Rules lay down a very strict disclosure regime for UK issuers.^50
There are also rules designed to prevent circumvention of the disclosure obliga-
tion. For example, using a third party (acting in concert, see below) or obtaining
rights other than title to the shares are covered by the Directive.^51 The use of
shares as collateral or the use of an option right to acquire already issued shares
can thus trigger a disclosure obligation. For example, a disclosure obligation can
be triggered even where the size of the block owned by a party has been reduced
by using a securities lending agreement.^52
Constraints on exit. The toehold strategy means that the prospective acquirer
ends up owning a substantial block of shares. However, the toehold strategy does
not guarantee success. The prospective acquirer can lose the takeover contest, or
the planned acquisition can fail for other reasons. Where no party succeeds in tak-
ing over the target, the pricing of target shares can change again and be deter-
mined not on the basis of the private benefits of a controlling shareholder (higher
price) but on the basis of the distributions that the target company is expected to
make to non-controlling shareholders in the long term (lower price).
If the prospective acquirer fails to obtain control, it may want to sell target
shares at a profit. However, this can be constrained by laws.
First, those shares cannot, in practice, be sold to the target company. Share buy-
backs are generally constrained by: restrictions on the distribution of assets to
shareholders and the amount of distributable assets;^53 provisions on corporate de-
(^44) Article 12(2) of Directive 2004/109/EC (Transparency Directive).
(^45) Article 9(1) of Directive 2004/109/EC (Transparency Directive). For the issuer’s own
shares, see Article 14(1).
(^46) For exceptions, see Article 9(4) (clearing and settlement), Article 9(5) (market makers),
Article 9(6) credit institutions and investment firms), Article 11 (members of the
ESCB), and Article 12 (certain group situations).
(^47) Article 9(3) of Directive 2004/109/EC (Transparency Directive).
(^48) Article 3(1) of Directive 2004/109/EC (Transparency Directive). See also Article
3(2)(b).
(^49) § 21(1) WpHG.
(^50) DTR 5.1.2 R.
(^51) Articles 10 and 13(1) of Directive 2004/109/EC (Transparency Directive).
(^52) For Danish law, see § 4 of Bekendtgørelse om storaktionærer, nr 1225 of 22 October
2007.
(^53) Article 15 of Directive 77/91/EEC (Second Company Law Directive).