Acting in concert and the mandatory bid rules

Across the EU, implementation of the Takeover Directive means that, in certain situations, the conduct of shareholders as regards the company in which they are invested can result in their being deemed to be acting in concert and their holdings in securities of that company being aggregated. Depending on the laws of the relevant member state, if this aggregate holding is in excess of a certain threshold, or any of the affected shareholders acquires securities which result in the aggregate holding becoming equal to or exceeding such a threshold, this can result in those shareholders having to make a cash bid for the securities not already owned by them (the mandatory bid rule).

Conflict with corporate governance

However, principles of good corporate governance often rely on shareholders co-operating with each other to engage with companies in which they invest. The fact that such co-operation could result in shareholders being deemed to be acting in concert can therefore be off-putting, as shareholders fear that a mandatory offer could arise as an unintended consequence of such action.

ESMA's White List

For this reason, ESMA has published a Public Statement which includes a “White List” of activities in which shareholders may wish to engage in order to exercise good corporate governance over the companies in which they have invested. If shareholders co-operate to engage in any activity on the White List, in so far as that activity is available to them under national company law, that co-operation, in and of itself, will not lead to those shareholders being regarded as persons acting in concert and thus being at risk of having to make a mandatory bid.

That said, individual cases of co-operation between shareholders and the consequences of such co-operation must be determined on their own particular facts. National competent authorities will have regard to the White List when determining whether shareholders are persons acting in concert under national takeover rules, but will also take into account all other relevant factors in making their decisions.

Board appointments excluded

The White List may be viewed here, from which it will be evident that matters relating to the appointment of members of the board of a company are noticeable by their absence. This is because co-operation by shareholders in relation to the appointment of board members can be particularly sensitive in the context of the application of mandatory bid rules due to the fact that the co-operating shareholders may as a result be in a position to control the operational management of the company. Different approaches are adopted in different member states towards determining whether shareholders who co-operate in relation to board appointments are persons acting in concert. To some extent these differences depend on national company law and the prevailing shareholding structures. As a result of these differences, the White List does not include any activity relating to co-operation in relation to board appointments. However, it does include guidance as to the facts that national competent authorities may wish to consider in relation to such matters.

The UK position

In the UK, the Takeover Panel published Practice Statement 26 (shareholder activism) in September 2009. In essence, the statement explains that, provided shareholders are not coming together with a view to gaining control of the board, co-operation between them will not, of itself, lead to a conclusion that they are acting in concert. Practice Statement 26, is therefore consistent with the principles set out ESMA's new guidance. Practice Statement 26 is available from the Panel's website or by clicking here.


The ESMA guidance acknowledges that many member states will have sufficient experience and existing guidance to deal with the matters raised in its statement. However, for those member states with less experience, the guidance will help to harmonise the approach taken in respect of shareholder co-operation across the EU and should give comfort to investors who wish to engage with each other on corporate governance type issues.