The Common Position of the European Council regarding a new directive of June 19 2000 on takeover bids in company law excludes public offers by an offeree company to the holders of its own securities from the application of the directive. Previous proposals for a takeover directive, however, did not provide for an exception for the buyback of shares.
Under the Common Position, a "takeover bid" and "bid" mean "a public offer (other than by the offeree company itself) made to the holders of the securities of a company to acquire all or part of such shares". Accordingly, the directive does not provide for particular rules for public takeover bids (such as information requirements and the protection of all stakeholders) in the event that a company intends to redeem or purchase its own shares.
The Austrian Joint-Stock Companies Act (Aktiengesetz) contains particular provisions applicable to the buyback by a company of its own shares, reflecting the regulations under the Second EC Company Directive. Among other obligations, the provisions require the company to publish the resolution of the general meeting (Hauptversammlung) that authorizes the management board (Vorstand) to buy back shares representing up to 10% of the subscribed capital. Equal treatment of the shareholders is met if the company purchases its own shares on the stock exchange, or by public offer.
The Austrian Takeover Commission (Übernahmekommision) has held that the Takeover Code (Übernahmegesetz) is applicable to the buyback of shares listed on an Austrian stock exchange if the shares are purchased by public tender offer. A company announcing a plan to redeem or purchase its own shares must comply, not only with the requirements of the Joint-Stock Companies Act, but also with the rules set out in the Takeover Code. The company must file an offering circular with the Takeover Commission and independent advice must be obtained to verify and confirm the completeness of the offer. Some of the rules stipulated in the Takeover Code are based on the assumption that the offeree and target are different entities. These provisions are, of course, not applicable in a buyback situation.
It has to be noted that the Austrian Takeover Code does not contain a definition of "public offer". Since the company purchasing its own shares must publish the resolution of the general meeting, it may be argued that such an offer constitutes a public offer. Certain criteria have been used to determine whether an offer is to be considered public. However, no general rule exists and a final assessment must be made on a case-by-case basis.
Peter Huber and Otto Dietrich
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