Target directors have an ambiguous role in corporate takeovers. On the one hand, once a bid is imminent, they are significantly involved spending most of their time in responding to the bid and advising the shareholders whose interests the directors must primarily represent. On the other hand, they face various potential conflicts of interests as takeovers can have significant personal and professional implications on them.
This essay critically assesses the role of directors in relation to takeovers of public companies. Their corporate powers are constrained by a range of rules in the Takeover Code . However, takeover regulation leaves significant room for board discretion which is therefore subject to common law and general company law. As we will see, the target directors only have an advisory role vis-à-vis the shareholders, with the latter taking the ultimate decision on acceptance of the takeover bid.
The essay is structured as follows. Section 2 starts by introducing the context of takeovers of public companies followed by a brief summary of common motives for takeovers in section 3. Special emphasis is placed on the effects of the theory of the market for control on directors which at various points had an influence on the takeover regulation. Section 4 then deals with the allocation of the acceptance-decision on a takeover bid to the shareholders. In order not to interfere with this right by taking defensive measures which could frustrate a takeover bid, the Takeover Code has imposed a strict ‘no frustration rule’ on target directors. This is covered by section 5. Reference will also be made to the respective directors’ (fiduciary) duties under common law and company law. Subsequently, section 6 critically discusses the advisory role of the target directors when recommending a takeover offer to the shareholders, the various conflicts of interest to which they are exposed and how the takeover regulations attempt to solve them. Although the takeover regime mainly focuses on the role of target directors, section 7 outlines some of the constraints which the directors of the bidder are subject to when launching a takeover bid. Section 8 concludes.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Takeovers of Public Companies
- General
- Takeover Offer
- Motives for Takeovers
- General
- Corporate Control as a Value Generating and Disciplining Tool
- Allocation of the Acceptance-Decision on a Takeover Bid
- Anti-Takeover Defences and the 'No Frustration Rule'
- Post-Bid Defensive Measures
- Pre-Bid Defensive Measures
- Directors' Duty to Promote the Success of a Company
- Directors' Duty to Exercise Powers for Proper Purposes
- Directors' Power to Allot Shares
- 'Poison Pill'
- Target Board's Advisory Role: Recommendation and Promotion of an Offer
- Information Standards of Care
- Independent Advice and Divergence of Views
- Conflicted Directors and the Role of Non-Executive Directors
- Disclosure of Directors' Agreements and Interests
- Compensation for Loss of Office
- Competing Bids
- Target Directors' Duty to Auction and to Recommend the Highest Bid?
- Binding the Target Board to Recommend a Specific Bid by Contract
- The Role of the Bidder Directors
- Shareholder Approval in Premium Listed Companies
- Directors' Duties in Taking a Takeover Decision
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This essay critically assesses the role of directors in relation to takeovers of public companies. It explores how the Takeover Code constrains directors’ corporate powers and how board discretion is subject to common law and general company law. The essay examines the target directors’ ambiguous role in takeovers, considering their responsibilities towards shareholders and the potential conflicts of interest they face.
- Directors' duties and responsibilities in takeovers
- The role of the Takeover Code in regulating director conduct
- The conflict of interest between directors' personal and professional interests and their fiduciary duties to shareholders
- The impact of the 'no frustration rule' on target directors' ability to defend against takeover bids
- The advisory role of target directors in recommending a takeover offer to shareholders
Zusammenfassung der Kapitel (Chapter Summaries)
The essay begins by introducing the context of takeovers of public companies and outlining the common motives behind these transactions. Section 2 discusses the various ways in which control transactions can be effected, including acquisition of assets, shares, and mergers. Section 3 examines the theory of the market for control and its impact on directors’ duties. Section 4 delves into the allocation of the acceptance-decision on a takeover bid to the shareholders. Section 5 explores the 'no frustration rule' and its implications for target directors who may be considering defensive measures against a takeover bid. Section 6 critically discusses the target directors’ advisory role in recommending a takeover offer to shareholders, addressing conflicts of interest and their management within the regulatory framework. While the primary focus is on target directors, Section 7 outlines the constraints imposed on bidder directors when launching a takeover bid.
Schlüsselwörter (Keywords)
This essay focuses on the role of directors in relation to takeovers of public companies. Key concepts include the Takeover Code, directors' duties, fiduciary responsibilities, conflicts of interest, defensive measures, shareholder interests, and the 'no frustration rule'.
- Quote paper
- Ass. Jur. Thomas Böhm (Author), 2019, A critical assessment of the role of directors in relation to takeovers of public companies, Munich, GRIN Verlag, https://www.grin.com/document/490101
