Bid to protect small shareholders’ rights

Date: 30/11/1995

By Fiona McHugh

THE power of big companies to trample over the rights of small shareholders in takeover battles will be curbed if a draft directive due to be adopted by the European Commission next month becomes law.

The 13th company law directive, making a come-back after years of delay, calls on member states to make sure that minority shareholders' rights are protected during takeover battles.

But the latest version of the directive, to be considered by the Commission on 13 December, is a shadow of former versions - leaving national governments to decide how to bring order into takeover procedures instead of imposing tough EU rules.

An earlier version included a provision forcing predator firms to make bids public once they built up a 30&percent; stake in target companies, giving all shareholders an equal chance to sell at the best possible price. It also contained a clause calling for worker participation on company boards. Both prompted protests from ministers, forcing a return to the drawing board.

The new draft allows takeovers to be policed by national bodies and says shareholders may challenge company acquisitions, but only after they have been completed.

The latest proposal is unlikely to meet with the same opposition as its predecessors, but neither is it likely to be as effective, sources say.