358 10 Exit of Shareholders
During the bid, the board of the offeree company is prohibited from taking any
action which may result in the frustration of the bid, unless the board has obtained
the prior authorisation of shareholders in general meeting for this purpose. In par-
ticular, the board may not issue any shares which may result in a lasting impedi-
ment to the offeror’s acquiring control of the offeree company.^128 The notice pe-
riod for calling the general meeting of shareholders for those purposes must be
longer than two weeks.^129
Many capital transactions such as the issue of new shares, derogation from
shareholders’ pre-emptive rights, and share buybacks would require the consent of
shareholders also under the Second Company Law Directive.
During the bid, the board of the offeree company may not implement its own
previous decisions, if they do not form part of the normal course of the company’s
business and if their implementation may result in the frustration of the bid. The
board may implement such a decision with the consent of shareholders.^130
However, there are many things that the offeree company’s board can do. The
company is not prevented from carrying on business as usual. In its opinion, the
board can recommend to shareholders either the rejection or the acceptance of the
bid. The board is not prohibited from taking measures which are not likely to frus-
trate the bid. Neither is the board prohibited from seeking alternative bids (the
“white knight” defence). Furthermore, the board is not restricted from implement-
ing previous decisions taken by the general meeting. If a decision is authorised by
the general meeting in advance, it does not matter that it may result in the frustra-
tion of the bid.^131
The break-through rule. In principle, the break-through rule and the squeeze-
out right could make it easier for a bidder that has obtained a large block of shares
to obtain control of the company.
In practice, however, there is no “level playing field” in Europe as far as the
break-through rule is concerned, because the Directive on takeover bids makes the
break-through rule optional for Member States.^132
If adopted by the Member State, the break-through rule will “break through”
many structural takeover defences. This means that multiple-vote securities carry
only one vote each at the general meeting of shareholders which decides on any
defensive measures in accordance with the Directive.^133 If the offeror holds 75%
or more of the capital carrying voting rights, multiple voting rights and voting re-
strictions do not prevent the offeror from changing the board and amending the ar-
ticles of association at the first general meeting following the bid. On the other
hand, a shareholder that controls more than 25% of the company can block the
change of those structural takeover defences.
(^128) Article 9(2) of Directive 2004/25/EC (Directive on takeover bids).
(^129) Article 9(4) of Directive 2004/25/EC (Directive on takeover bids).
(^130) Article 9(3) of Directive 2004/25/EC (Directive on takeover bids).
(^131) Article 9(2) of Directive 2004/25/EC (Directive on takeover bids).
(^132) Article 12 of Directive 2004/25/EC (Directive on takeover bids).
(^133) Article 11 of Directive 2004/25/EC (Directive on takeover bids).