European Union: All Together Now? ESMA İssues Statement On Shareholder Cooperation Under The EU Takeovers Directive

Last Updated: November 25 2013
Article by Richard May

On 12 November 2013, the European Securities and Markets Authority (ESMA) issued a public statement1 on shareholder cooperation and acting in concert under the EU Takeovers Directive (2004/25/EC). The statement clarifies the circumstances in which shareholders may cooperate with each other without being regarded as "acting in concert".

The statement reflects the concern that collective shareholder action (i.e., shareholders jointly seeking to bring influence to bear on the board of a company) may be inhibited in some European jurisdictions by the perceived risk that doing so might result in those shareholders being regarded as acting in concert in relation to the company concerned with the result that they are required to launch a mandatory bid.

Helpfully, it sets out a "White List" of activities in which shareholders may cooperate. Insofar as those activities are permitted under national law, such cooperation will not, of itself, lead to those shareholders being regarded as acting in concert. It also provides guidance on how shareholders may cooperate in order to secure board member appointments without being regarded as acting in concert.


Under Article 2.1(d) of the Takeovers Directive, persons are treated as acting in concert if they:

"...cooperate with the [bidder] or the [target] company on the basis of an agreement, either express or tacit, either oral or written, aimed either at acquiring control of the [target] company or at frustrating the successful outcome of a bid".

Where, as a result of the acquisition by a person or by persons acting in concert with him, a person holds securities of a company which, when added to his and his concert parties' existing holdings, give him control of that company, that person is required to make an offer (a so-called "mandatory bid") for the company. In most EU Member States, including the UK, the percentage of voting rights that is regarded as conferring "control" for this purpose has been set at around 30%.

The statement follows the recent review by the European Commission of the application of the Takeovers Directive which highlighted the need for clarity in this area, given the desirability of encouraging collective shareholder engagement.2


The statement represents a useful, if modest, step towards ensuring that EU Member States adopt a common approach in relation to this issue. By so doing, it should facilitate collective shareholder engagement with EU listed companies.

More generally, however, it highlights that there continue to be significant differences between how some Member States:

  • define "control" and "concert party" for this purpose;
  • treat the effect of the establishment of a concert party; and
  • regard cooperation in relation to the appointment of board members.

It is interesting in this regard to compare the approach taken by ESMA with that taken by the UK Panel on Takeovers and Mergers. In September 2009, the Takeover Panel issued Practice Statement 26, in which, essentially, it confirmed that:

  • discussions between shareholders about possible issues which might be raised with a company's board, joint representations by shareholders to the board, and the agreement by shareholders to vote in the same way on a particular resolution at a general meeting, would not, of itself, result in the relevant shareholders being treated as a concert party; and that
  • a requirement to make a mandatory offer may only be triggered by shareholders if:

    • those shareholders requisition a general meeting to consider a "board control-seeking" resolution (or threaten to do so); and that
    • after an agreement or understanding is reached between the shareholders that such a resolution should be proposed (or threatened), those shareholders acquire interests in shares such that the shares in which they are interested together carry 30% or more of the voting rights in the company (or, if they are already interested in shares carrying 30% or more of the voting rights of the company, they acquire further interests in shares).3

In the United States, the U.S. Securities and Exchange Commission has also had to address similar issues. As early as 1992, the Commission amended its proxy rules to make clear that certain kinds of exchanges of views among shareholders did not amount to a regulated solicitation.4 More recently, these exemptions have been broadened to apply to electronic shareholder forums.5 While the Commission has not explicitly amended the "group" definition of beneficial ownership in Rule 13d-5 (which is the Commission's equivalent to "acting in concert"), it has made clear that shareholder communications that are not engaged in with the purpose or effect of changing or influencing control of the company will not cause participants to be deemed to constitute a group.6

ESMA Statement

The statement contains a White List of activities that shareholders can cooperate on without such cooperation resulting in them being presumed to be acting in concert. It also contains information on how shareholders may cooperate in order to secure board member appointments by setting out factors that relevant regulators may take into account when considering whether shareholders are acting in concert for this purpose.

White List

The White List comprises:

  • entering into discussions with each other about possible matters to be raised with the company's board;
  • making representations to the company's board about company policies, practices or particular actions that the company might consider taking;
  • other than in relation to the appointment of board members, exercising shareholders' statutory rights to:

    • add items to the agenda of a general meeting;
  • table draft resolutions for items included or to be included on the agenda of a general meeting; or
  • call a general meeting other than the annual general meeting;
  • other than in relation to a resolution for the appointment of board members and insofar as such a resolution is provided for under national company law, agreeing to vote the same way on a particular resolution put to a general meeting, in order, for example:

    • to approve or reject:
    • a proposal relating to directors' remuneration;
    • an acquisition or disposal of assets;
    • a reduction of capital and/or share buy-back;
    • a capital increase;
    • a dividend distribution;
    • the appointment, removal or remuneration of auditors;
    • the appointment of a special investigator;
    • the company's accounts; or
    • the company's policy in relation to the environment or any other matter relating to social responsibility or compliance with recognized standards or codes of conduct; or
  • to reject a related party transaction.

If shareholders cooperate to engage in an activity which is not included on the White List, that fact will not, of itself, mean that those shareholders will be regarded as persons acting in concert. Each case will be determined on its own particular facts.

Cooperation in relation to the appointment of members of the board of a company

The White List does not include any activities relating to cooperation on board appointments. This reflects the significant differences in the approach taken by different Member States in determining whether shareholders who cooperate in relation to such appointments should be treated as acting in concert. To some extent, these differences depend on national company law and the prevailing shareholding structures.

In this context, such cooperation might take the form of:

  • entering into an agreement or arrangement (informal or formal) to exercise their votes in the same way in order to support the appointment of one or more board members;
  • tabling a resolution to remove one or more board members and replace them with one or more new board members; or
  • tabling a resolution to appoint one or more additional board members.
  • The statement confirms that, in determining whether shareholders are acting in concert, regulators may have regard to, among other things:
  • the nature of the relationship between the shareholders and the proposed board member(s);
  • the number of proposed board members being voted for pursuant to a shareholders' voting agreement;
  • whether the shareholders have cooperated in relation to the appointment of board members on more than one occasion;
  • whether the shareholders are not simply voting together, but are also jointly proposing a resolution for the appointment of certain board members; and
  • whether the appointment of the proposed board member(s) will lead to a shift in the balance of power on the board.

Further information on how regulators in different Member States approach the issue of whether shareholder cooperation in relation to board appointments will lead to those shareholders being regarded as "acting in concert" is given in the statement.


1 .

2 European Commission Report to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the application of Directive 2004/25/EC on Takeover Bids (COM (2012) 347).


4 See Exchange Act Release 31326 (Oct. 22, 1992), amending, inter alia, Rule 14a-1 (definition of solicitation).

5 See Exchange Act Release 57172 (Jan. 18, 2008), amending Rule 14a-2 and adopting Rule 14a-17.

6 See, e.g., Exchange Act Release 39538 (Jan. 12, 1998).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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