17.4 Takeover Defences and the Interests of the Firm 499should never be “neutral”, and it is simply wrong to assume that the board of the
target has a duty to remain passive in front of a takeover bid under the Directive
on takeover bids (see above).
Community law. In Commission v Netherlands,^47 the eighth ruling in the series
of golden shares judgments, the ECJ indicated that the organs of the company
should be concerned about what is in the company’s interests (rather than other in-
terests).^48 The ECJ also identified a price mechanism that can make legal rules and
administrative practices that override this principle incompatible with the provi-
sions of the EC Treaty on the free movement of capital.^49
According to the ECJ, national measures can be regarded as restrictions on the free move-
ment of capital “if they are likely to prevent or limit the acquisition of shares in the under-
takings concerned or to deter investors of other Member States from investing in their capi-
tal”.^50
The ECJ said that the possible refusal by the Netherlands State (a controlling share-
holder by virtue of a special share) to approve an important decision, proposed by the or-
gans of the company concerned as being in the company’s interests, is capable of depress-
ing the stock market value of the shares of the company. This can reduce the attractiveness
of an investment in the company’s shares.^51 When the proposed transaction is a control
transaction, the existence of a special share may have a negative influence on direct invest-
ments (by making questions of merger, demerger and dissolution depend on the prior ap-
proval of the Netherlands State).^52 Generally, if the existence of a special share makes in-
vestments in the company’s shares less attractive, it will also have a deterrent effect on
portfolio investments.^53 The ECJ thus distinguished between direct investments and portfo-
lio investments^54 and held that both are relevant.
In the light of Commission v Netherlands, legal rules and administrative provisions that
enable a shareholder “to pursue interests which do not coincide with the economic interests
of the company concerned might discourage direct or portfolio investments in that com-
pany”^55 and amount to a restriction on the free movement of capital under Article 56(1) of
the EC Treaty, unless those restrictive effects are either too uncertain or too indirect to con-
stitute an obstacle to the free movement of capital.^56
On the other hand, the ECJ did not distinguish between the pursuing of interests
which coincide with the economic interests of the company (such as the long-term
survival of the firm) and actions that increase share price (such as short-term ac-
(^47) Joined Cases C-282/04 and C-283/04 Commission v Netherlands [2006] ECR I-9141.
Generally, see Looijestijn-Clearie A, All That Glitters Is Not Gold: European Court of
Justice. Strikes Down Golden Shares in Two Dutch Companies, EBOLR 2007 pp 429–
453.
(^48) Commission v Netherlands, ibid, paragraph 27.
(^49) Article 56(1) of the EC Treaty.
(^50) Commission v Netherlands, paragraph 20.
(^51) Commission v Netherlands, paragraph 27.
(^52) Commission v Netherlands, paragraph 26.
(^53) Commission v Netherlands, paragraph 27.
(^54) Commission v Netherlands, paragraph 19.
(^55) Commission v Netherlands, paragraph 28.
(^56) Commission v Netherlands, paragraph 29.