Hostile takeovers are currently a hot topic in the Netherlands, thanks to the attention recently attracted by PostNL, Unilever and AkzoNobel. There are some who argue that the existing range of protective measures, such as the creation of a foundation holding preference shares, do not always allow enough time for careful decision making. Minister of Economic Affairs Kamp has called for additional legislation which, in the event of an unsolicited bid for a listed company's shares, gives its management board and supervisory board members more time and room to fully assess the effect of the takeover on all stakeholders. The minister's aim is to better safeguard the long-term interests of Dutch companies. In a letter to the Dutch Parliament dated 20 May 2017, Minister Kamp set out four possible forms which such new legislation could take.
First and main variant: prolonging the management board's response time
If one or more shareholders of a listed company intend to request that an item be put on the agenda which may result in a change in the company's strategy, the management board can currently demand a period of up to 180 days in which to respond. Examples of such agenda items are the dismissal of one or several management board or supervisory board members and the sale of a business division. The 180-day period is called the response time (or time-out) and is provided for in the Dutch Corporate Governance Code, not in statutory law. Minister Kamp is considering prolonging this period to a maximum of a year and incorporating it in statutory law, possibly also for unlisted companies. According to his letter, invoking the response time would remain optional and there would be no statutory requirements regarding how it is used.
Kamp strongly prefers this option because it would offer protection not only against takeovers (whether hostile or friendly) but also against shareholder activism. In addition, it would not be limited to listed companies. When drawing up such legislation, however, attention would have to be given to its compatibility with EU law, such as the free movement of capital and freedom of establishment rules.
The three other variants for protecting companies
In the letter to Parliament Minister Kamp discusses three other options:
- The second option is a substantial increase in the minimum percentage of shares that must by law be tendered before a takeover bid may be declared unconditional, making hostile takeover bids more difficult. The current minimum is 50%+1. By making it possible for the threshold to be lowered with the consent of the target company's management boards, friendly takeovers would be spared. This option is preferred by the Dutch corporate governance forum Eumedion, which represents large Dutch institutional investors: it recommends increasing the percentage to 95%. Eumedion, however, believes legislative changes are not per se necessary.
- A third option is to relax the statutory rules on the issuance of preference shares, for example by requiring a two-thirds majority vote of the shareholders to reject a supervisory board proposal to grant a right to acquire preference shares. Here too, the issue of compatibility with EU rules would have to be addressed.
- The last option would also involve the introduction of a time-out for the management board, but in this case a minimum period for responding to the offering memorandum of a predatory bidder. The time-out would apply only to listed companies.
Strengthening the power of insitutional investors
In addition, Minister Kamp wants to encourage Dutch institutional investors to acquire larger stakes in Dutch companies, thus making the country's listed companies less of an easy prey for foreign bidders with deep pockets. Kamp has said that he will consult institutional investors to find out whether they experience any barriers to participation in Dutch companies and, if so, whether and how these can be eliminated. A public call such as this could, however, be contrary to the free movement of capital; the Court of Justice of the European Union rendered a judgment to this effect against Ireland for running a "Buy Irish" campaign.
Legislation to protect companies of vital importance for national security
Another proposed measure is a draft bill (on which a consultation was held during the period February/March 2017) to give the Minister of Economic Affairs the power to prohibit the acquisition of control over a party in the telecommunications sector, or terminate the exercise of such control, in order to prevent telecom companies that are of vital importance for national security from falling into the wrong hands. This variant, too, will have to be assessed in relation to EU law.
Involvement of Enterprise Chamber - judgment regarding AkzoNobel takeover bid
On 29 May 2017, the Enterprise Chamber of the Amsterdam Court of Appeal denied requests by a number of AkzoNobel shareholders for the imposition of provisional measures. These shareholders argued that the company was required to negotiate with a potential hostile bidder. To compel AkzoNobel to negotiate, the shareholders sought to have the supervisory board chairman replaced via an extraordinary shareholders meeting. According to the Enterprise Chamber, however, there is no general rule of law requiring a company to conduct substantive discussions with potential hostile bidders.
On 1 June 2017 the lower house of the Dutch Parliament held a round-table discussion with experts and stakeholders to explore various ways of protecting Dutch companies. During this discussion representatives from academia, the business world and civic organisations expressed their views on the desirability or undesirability of a statutory time-out. Irrespective of the standpoint taken on this question, virtually all participants argued in favour of a greater and far-reaching responsibility of pension funds as shareholders in Dutch companies.