Balancing the Interests of Minority and Majority Shareholders: A Comparative Analysis of Squeeze-out and Sell-out Rights

Abstract

The squeeze-out right grants a majority shareholder the right to force the minority to sell their financial instruments to the majority shareholder. Its counterpart, the sell-out right, is the right of a minority shareholder to compel the majority shareholder to purchase the shares of theminority. Most European Member States had already incorporated a corporate squeeze-out right into their legal systems. The Takeover Directive introduced both rights after a takeover bid into the European Member States. This paper assesses the European and national legislation of Belgium, France, the Netherlands, the UK and Germany regarding both the ‘takeover’ squeeze-out and sell-out and the ‘corporate’ squeeze-out and sell-out rules. More precisely, the types of target companies, the thresholds which need to be met before these rights can be asserted, the financial instruments that can be squeezed or sold out, and the valuation methods used to calculate compensation for minority shareholders are dealt with. From a cross country analysis of these aspects, we conclude that, although the Takeover Directive aims at minimum harmonisation, its implementation into the Member States' legislations created several differences and layers of legislation. This has led to the undesirable result that the procedures for squeezing out or selling out vary between Member States, confronting minority shareholders with different levels of protection and majority shareholders with minorities that can hardly ever, or in some cases never, be frozen out.