Dutch legislation on public takeover bids
The Dutch government recently introduced a bill regulating public takeover bids. Since 1970 public takeover bids have been subject to the Merger Code (SER Fusie Gedragsregels). However the Merger Code is basically a voluntary compliance code and is not based on any provision in the law. The Dutch security regulator, Stichting Toezicht Effectenverkeer (STE), also presently has no supervisory powers with regard to public takeover bids. The system has worked reasonably well until now, mainly due to the fact that public takeover bids were a relatively rare phenomenon, averaging 17 bids per year. This has changed over the past year with a marked increase in cross-border public takeover bids.
The text of the proposed new legislation is largely identical to that of the present Merger Code. The law will apply to takeover bids on shares listed on a stock exchange in the Netherlands and shares that are regularly traded in the Netherlands but not listed. It is irrelevant whether the bidder is a Dutch or foreign corporation, entity or person. Under the new rules the STE will have supervisory powers with regard to public takeover bids.
In the event of a takeover bid on shares that are also listed outside the Netherlands, Dutch takeover rules will apply in addition to those of other jurisdictions where the shares are listed. The STE will, however, have the power to grant an exemption from Dutch takeover rules if, in the STE's opinion, the takeover rules in the other jurisdiction provide sufficient protection to Dutch investors.
Some complex issues, related to electronic trading systems and bids published on the internet as well as implementation of the 13th EU Directive on company law concerning takeover bids, have not been addressed at this stage, but may be resolved by subsequent rulemaking.
Unfortunately the draft law does not resolve, or even address, the total lack of clarity in the Netherlands with respect to the application of insider trading rules in the public takeover bid process.
The government has said that it wants the new law to come into effect by October 1 2000, which seems fairly ambitious. Public takeover bids announced before the date of enactment will remain subject to the present Merger Code, provided the bid is made within six months after the new law is enacted.
Violation of the new rules will be a criminal offence and the STE will also have the power to impose civil penalties for non-compliance. In view of the substantial economic interests that may be involved, the new law interestingly provides for no limitation on the amount of civil penalties the STE can impose.Reinout de Waal
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