17.2 In Whose Interests Shall Board Members Act? 495the offer” during a certain period of time. However, the WpÜG does not really
prohibit those actions, because § 33(1) WpÜG sets out that those actions can be
taken with the consent of the supervisory board. § 33(2) WpÜG provides how they
can be taken with the consent of the general meeting. The company can opt out of
§ 33 WpÜG in its articles of association, in which case a slightly stricter statutory
regime under § 33a WpÜG will apply.
It is not the purpose of the Directive to hinder the company when it carries on its normal
business activities. Exceptional rules on the internal decision-making of the company apply
only to actions of an exceptional nature.^27
The Directive explicitly sets out that the board may seek alternative bids (the White
Knight defence) without the consent of the general meeting.^28
During a certain period of time, the general meeting may have a special controlling
function and a veto right. Apart from seeking alternative bids, the board may not take any
action which may result in the frustration of the bid, unless it obtains the prior authorisation
of the general meeting. With the consent of the general meeting, even other ways to frus-
trate the bid are thus permitted.^29 This makes possible to combine the duty of the board to
“act in the interests of the company as a whole” and the right of shareholders to “decide on
the merits of the bid” in two ways, namely by authorising takeover defences (usually) by a
simple majority or by selling shares individually.^30 The transparency of the board’s actions
is increased through provisions on the duty to disclose a document setting out its opinion.^31
On the other hand, those legal constraints are optional. The Directive does not require
Member States to adopt provisions on the frustration of the bid so long as companies within
those Member States are allowed to opt in to them on a company-by-company basis.^32
In addition, Member States are allowed to enact legislation exempting target companies
from those rules in the event of bids by companies that are not themselves subject to them.
If applied, this exemption can be used to the detriment of bidders from other Member States
that refuse to adopt the frustration rules and to the detriment of US and other non-European
bidders.^33 The result of this “reciprocity clause” is that companies from a takeover-friendly
country can more easily be taken over by domestic companies than by companies from a
country which allows greater board activism. There are doubts about the legal basis of this
exemption. It is an established rule of Community law that any discrimination against a
company from another Member State is prohibited.^34
(^27) Recital 16 and Article 3(1)(f) of Directive 2004/25/EC (Directive on takeover bids).
(^28) Article 9(2) of Directive 2004/25/EC (Directive on takeover bids).
(^29) Articles 9(2) abd 9(3) of Directive 2004/25/EC (Directive on takeover bids).
(^30) See Article 3(1)(c) of Directive 2004/25/EC (Directive on takeover bids).
(^31) Article 9(5) of Directive 2004/25/EC (Directive on takeover bids).
(^32) Articles 12(1) and 12(2) of Directive 2004/25/EC (Directive on takeover bids).
(^33) Article 12(3) of Directive 2004/25/EC (Directive on takeover bids).
(^34) Siems MM, SEVIC: Beyond Cross-Border Mergers, EBOLR 2007 p 316: “As a result,
in order to be in conformity with the freedom of establishment, a rule would have to re-
quire that the takeover-friendly law is applicable unless the company opts out of it.”