Acting in Concert in EU Company Law: How Safe Harbours can Reduce Interference with the Exercise of Shareholder Rights

Abstract

The legal notion of “acting in concert” is used in the Transparency and Acquisitions Directives to widen the scope of notification requirements, and in the Takeover Bids directive to stretch the subjective boundaries of the mandatory bid rule. If these definitions are not adequately selective, they could interfere with the exercise of shareholder rights and lead to a sub-optimal level of management monitoring in listed companies. Over-reaching regulation of acting in concert, in other words, would harm the very shareholders it is designed to protect, potentially hindering monitoring of management and reducing enterprise value. This risk arises from the fact that both acting in concert to sidestep legal obligations and exercising shareholder rights to discipline the management depend on shareholder cooperation. This article examines ways in which these interferences might be reduced. In order to do so, it separately analyses different EU legal notions of acting in concert that can be found in the Transparency, Acquisitions and Takeover Bids Directives and their respective transposition by member states. It argues that these definitions need to be clarified, and that this should be done by (i) reconciling existing umbrella notions of acting in concert, and (ii) adding a list of safe-harbour provisions at the EU level that outline a number of cases in which shareholder cooperation does not amount to “acting in concert”. ESMA has recently issued a statement on the subject; however, this does not seem to be the best course of action to take, as it does not reconcile existing notions of concert, and, given its lack of binding force, ultimately aggravates the complexities of the conundrum of acting in concert.