The Law of Corporate Finance: General Principles and EU Law: Volume III: Funding, Exit, Takeovers

270 5 Equity and Shareholders’ Capital

Table 5.2 Protection of Shareholders in a Merger

Protection of shareholders in the

surviving entity

Protection of sharehold-

ers in the entity that will

cease to exist

Disclosure of in-

formation ex ante

(General duties of listed companies

to disclose information.)

Disclosure of draft terms of merger.

Disclosure of other information to

the general meeting.

(General duties of listed

companies to disclose in-

formation.)

Disclosure of draft terms

of merger.

Disclosure of other in-

formation to the general

meeting.

Specific constraints

on price ex ante

No issue at a price lower than

nominal value or accountable par

value.^672

Limited rights to a cash

consideration

Decision rights The merger will be decided on by

the general meeting.

The general meeting will decide on

the issuing of new shares (the board

may have been authorised to decide

on it).

The general meeting may have to

decide on the waiving of pre-

emption rights (the Second Com-

pany Law Directive does not re-

quire it here).

The general meeting may have to

decide on the amendment of articles

of association.

The merger will be de-

cided on by the general

meeting.

Right to contest

resolutions ex post

Very limited opportunities to undo

the merger.

Very limited opportunities

to undo the merger.

Other remedies ex

post

Use of remedies that generally ap-

ply to the actions of board mem-

bers.

Review by the court of

the value of shares.

Consideration in cash.

Share exchange offers. As regards share exchange offers, the offeror’s sharehold-
ers are again protected by the European legal capital regime. According to the
Second Company Law Directive, existing shareholders have pre-emptive rights.^673
The general meeting decides on the withdrawal of shareholders’ pre-emptive
rights^674 and on any increase in authorised capital.^675 Alternatively, the general
meeting can authorise the board to decide on those questions.^676

(^672) Article 8(1) of Directive 77/91/EEC (Second Company Law Directive).
(^673) Article 29(1) of Directive 77/91/EEC (Second Company Law Directive).
(^674) Article 29(4) of Directive 77/91/EEC (Second Company Law Directive).
(^675) Article 25(1) of Directive 77/91/EEC (Second Company Law Directive).
(^676) Articles 25(2) and 29(5) of Directive 77/91/EEC (Second Company Law Directive).