10.3 Third Party as a Source of Remuneration 365reached agreement on the terms of a recommended higher cash offer to be made
by BidCo for the entire issued and to be issued share capital of Scottish & New-
castle. The offer was implemented by way of a court-sanctioned scheme of ar-
rangement under section 425 of the Companies Act 2006. Under the scheme, each
Scottish & Newcastle share was cancelled and new Scottish & Newcastle shares
were issued fully paid to BidCo. In consideration for the cancellation of their
shares, Scottish & Newcastle shareholders received cash.
10.3.4 Privatisation
Community Law
Privatisations are a particular form of exit. Privatisations are, to some extent, in-
fluenced by Community law. First, a functioning market economy and the capac-
ity to cope with competitive pressure and market forces within the EU belong to
the membership conditions of the EU (the “Copenhagen criteria”). One of the
ways for applicants to ensure compliance with the membership conditions has
been to privatise state-owned companies. Second, Community law can give incen-
tives to privatise national commercial monopolies. Third, EU competition law can
encourage Member States to separate the control of infrastructure from the provi-
sion of services. Fourth, the Commission has encouraged privatisations at a politi-
cal level as a means to establish a more competitive internal market. Fifth, privati-
sations are subject to state-aid controls, the prohibition of discrimation on the
basis of nationality, the freedom of establishment and capital movements, and the
prohibition of golden shares.
No obligation to privatise. However, the main rule is that Community law does
not require privatisations as such. Privatisations are within the sole discretion of
Member States. It has explicitly been stated in the EC Treaty that the Treaty “shall
in no way prejudice the rules in Member States governing the system of property
ownership”.^158
Copenhagen criteria. The Treaty on European Union sets out the core member-
ship conditions (Article 49 of the Maastricht Treaty).^159 They include respecting
the principles of liberty, democracy, respect for human rights and fundamental
freedoms, and the rule of law.^160 Article 49 of the 1992 Maastricht Treaty was
clarified at a meeting of the European Council in Copenhagen in June 1993. By
the time they join, new members must have a functioning market economy and the
capacity to cope with competitive pressure and market forces within the Union,
among other things. Whereas old Member States already had a market economy in
place, former socialist countries applying for membership have privatised much of
their economy by the time they have joined.
Privatisation of national commercial monopolies. Article 31(1) of the EC
Treaty provides that “Member States shall adjust any State monopolies of a com-
(^158) Article 295 of the EC Treaty.
(^159) Article 49 of the Treaty on European Union.
(^160) Article 6(1) of the Treaty on European Union.