Alexandros L. Seretakis (Trinity College (Dublin)) has posted Squeeze-outs in the EU: Article 15 of the Takeover Directive and Minority Shareholder Protection (European Company Case Law) on SSRN. Here is the abstract:
This article examines the squeeze-out mechanism in the European Union, with particular focus on Article 15 of the Takeover Directive and its implications for minority shareholder protection. Squeeze-outs allow controlling shareholders to compulsorily acquire the shares of minority shareholders following a successful takeover bid, typically in the context of going-private transactions. While such mechanisms address collective action problems in takeover bids—most notably the free-rider and holdup problems—they also raise significant concerns regarding the protection of minority shareholders’ property rights. The article analyses the regulatory framework established by the Takeover Directive and critically evaluates the presumption that the takeover bid price or the market price of shares constitutes a fair squeeze-out price. It argues that this reliance is problematic because share prices during takeover periods often reflect the probability of the transaction’s completion rather than the fundamental value of the company. Consequently, minority shareholders may be forced to exit at prices that do not accurately capture the intrinsic value of their shares. It concludes that a more nuanced approach to determining the fairness of squeeze-out compensation is necessary to better balance takeover efficiency with adequate protection for minority shareholders. Finally, the study explores alternative mechanisms for eliminating minority shareholders, such as schemes of arrangement and delistings, and considers their implications for corporate governance and investor protection. It argues that a major drawback of the squeeze-out regime introduced by the Takeover Directive is that bidders are able to freeze-out minority shareholders by using these alternative mechanisms, which impose weaker constraints on bidders and offer less protection for minority shareholders.
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