What is the Takeover Directive?

The Takeover Directive is a legislative action passed by the European Parliament in 2004 to create a legal framework for takeovers. Known formally as 2004/25/EC on takeover bids, the directive is an example of legislation passed in the European Union with the goal of making a set of common laws applicable across EU members, creating harmonization between legal systems, as well as setting clear standards and boundaries for companies and individuals working to comply with the law. Like other directives, it must be implemented on an individual basis by each EU member and member nations can implement directives in a variety of ways.

Drafting the Takeover Directive took over a decade and included substantial political wrangling as EU members argued over the purpose of the directive and the wording of the language. Intended to create a simple set of legal guidelines for takeovers, it was meant to streamline the takeover process, making it easier for companies to handle takeovers while also protecting the interests of shareholders and employees. Uneven and sometimes contradictory laws in individual member nations made takeovers challenging, which was viewed as an inhibition to doing business in the European Union.

Under the Takeover Directive, individual member nations are supposed to create a regulatory framework for takeovers, including appointing supervisory agencies to review and approve proposed takeovers. The directive also mandates equal treatment of shareholders, states that bids must be conducted in a timeframe long enough to allow people to reach informed decisions, and requires companies offering to make takeovers to provide projections on how they will affect employment. Each member nation is expected to use the Takeover Directive in establishing their own laws for handling takeovers.

After the passage of the Takeover Directive, some critics accused it of including protectionist language and of actually hindering takeovers, rather than facilitating them. Others felt that the legislation did not go far enough in terms of clarity and protections for people involved in takeovers. The conflict between these sides is illustrative of the results of the compromise negotiations used in developing the directive.

Many European Union members had difficulty implementing this piece of legislation. Implementation proposals have varied in scope and nature as the individual governments of member nations work to implement the directive. In some cases, reorganizations and reforms have been needed within a nation's financial regulatory system to meet the terms of the directive and this has required substantial negotiation and discussion.