The Board Neutrality and Breakthrough Rules in Europe - A Case for Reform

Abstract

The Board Neutrality and Breakthrough rules as found in the European Takeover Bids Directive were intended to be cornerstones of a harmonised European takeover regime. However, both lost a great deal of significance after being rendered optional, due to a late-stage political compromise.

This thesis undertakes an economic assessment in order to ascertain whether the current rules represent an optimal solution for European companies. This is married with a historical evaluation in an attempt to consider reforms which are both economically positive and politically viable. The evidence produced favours suggestions that the Board Neutrality rule should remain optional, while altering the 'opt-out' system. However there is little economic justification for the European Breakthrough rule as it currently stands.