19.10 Public Takeover Offers 543should adopt, by concerted exercise of the voting rights they hold, a lasting common policy
towards the management of the company in question.^157
Acting on behalf of another party. When a party (A) acts on behalf of another
party (B), the actions of A can be attributed to B as well. Furthermore, the exemp-
tions applicable to B can be extended to cover the actions of A.
For example, a party who possesses inside information is prohibited from using
that information “by acquiring or disposing of ... for the account of a third party,
either directly or indirectly, financial instruments to which that information re-
lates”.^158 The main rule is that it does not matter whether A acts for its own ac-
count or on behalf of B. However, where B has made plans to launch a public
takeover bid, B can benefit from the bidder exemption and buy shares before an-
nouncing the bid (see above). Where A acts on behalf of B, even A can indirectly
benefit from the bidder exemption.
In contrast, where A does not act for the account of B but in another capacity,
similar purchases can fall within the scope of the prohibition regardless of whether
B benefits from any exemption or not. This can be illustrated by the prohibition of
“warehousing”. Warehousing means that a potential bidder tips a small group of
related investors about its intention to bid for a specific target company based on
the understanding that they will tender their holding to the bidder once the bid is
made public. This group thus “warehouses” the shares for the bidder in exchange
for the takeover premium. In the US, the practice of warehousing is prohibited un-
der Rule 14e-3(a) of the SEC.^159
19.10 Public Takeover Offers........................................................................
As its name implies, the Directive on takeover bids applies to public takeover of-
fers. The Directive regulates the international jurisdiction of supervisory authori-
ties and questions of governing law,^160 sets out general principles,^161 and regulates
many detailed duties.
The general principles have been listed in Article 3(1) of the Directive: “For the purpose of
implementing this Directive, Member States shall ensure that the following principles are
complied with: (a) all holders of the securities of an offeree company of the same class
must be afforded equivalent treatment; moreover, if a person acquires control of a com-
pany, the other holders of securities must be protected; (b) the holders of the securities of an
(^157) DTR 5.2.1 R.
(^158) Article 2(1) of Directive 2003/6/EC (Directive on market abuse).
(^159) See Goshen Z, Parchomovsky G, On Insider Trading, Markets, and ‘Negative’ Property
Rights in Information (September 2000). Fordham Law & Economics Research Paper
No 06. Davies PL, The Take-over Bidder Exemption and the Policy of Disclosure. In:
Hopt KJ, Wymeersch E, European Insider Dealing - Law and Practice. Butterworths,
London (1991) p 254.
(^160) Article 4 of Directive 2004/25/EC (Directive on takeover bids).
(^161) Article 3(1) of Directive 2004/25/EC (Directive on takeover bids).