NETHERLANDS Law and Practice Contributed by: Maarten de Boorder, Samuel Garcia Nelen, Jelmer Kalisvaart and Bas Vletter, Greenberg Traurig, LLP
impossible to successfully complete a public takeover without the support of the target company’s boards. A hostile takeover is generally complicated because the bidder will not be able to conduct due diligence investigations based on information provided by the target, it will be more difficult to prepare and obtain antitrust and regulatory clearances, and securing acquisition financing can also be problematic. Moreo - ver, most major Dutch-listed companies have defen - sive structures in place that can be enacted against hostile takeovers. Because of these reasons, many bidders drop out in the face of resistance in the pre - liminary phase. 9.2 Directors’ Use of Defensive Measures In the Netherlands, it is generally allowed to use defensive measures to block or impede an unsolic - ited takeover offer or to protect the company against shareholder activism. According to Dutch case law, the use of defensive measures against a hostile threat is permitted so long as this (i) is necessary to pro - tect the interests of the company, its business and the interests of its stakeholders and (ii) constitutes an adequate and proportionate response to the threat at hand. Often, defensive measures are not exercised by the target company’s directors but by an independent foundation (see 9.3 Common Defensive Measures) . 9.3 Common Defensive Measures There are many different defensive measures that can be used in the Netherlands. The most common is a call option on preference shares, under which an independent foundation has the right to acquire newly issued preference shares with voting rights in the capi - tal of the target, with the exclusion of any pre-emptive rights of ordinary shareholders. The foundation can trigger the option if the test in 9.2 Directors’ Use of Defensive Measures is met, and, as a result of this, the voting rights of existing shareholders can become diluted by up to 50%. Under statutory law, the foun - dation would be excluded from the mandatory offer threshold for a period of two years. An independent foundation can also hold all shares of the target as of the IPO and issue listed deposi - tary receipts of shares (DRs) to investors as part of the IPO. As a result, investors hold non-voting DRs
but would be authorised by the foundation to vote on general meetings and exercise all other shareholder rights based on a proxy. Their voting authorisation would only be withheld in case of a threat by a hostile bidder or activist shareholder. This is a less used, but still quite uncontroversial measure. Even if structural defences like the ones above are not available, target boards could opt to enact various ad hoc measures. For example, the target company could find a friendly bidder (a “white knight”), issue a minority stake to a friendly party (a “white squire”), or it could consider asset sales or acquisitions (eg, purchase of a company, sale of a “crown jewel” or placing a subsidiary in a joint venture). Based on Dutch corporate law, the management board of a listed company can, with the approval of the supervisory board, invoke a cooling-off period of a maximum of 250 days in case of a hostile tender offer or an activist shareholder trying to dismiss or appoint target directors. During this cooling-off period, the power of the general meeting to appoint, suspend or dismiss directors, as well as to amend provisions of the articles of association that relate to the same, will be suspended. This cannot legally block a tender offer, but can make it practically impossible for sharehold - ers to change the position of the boards. The Dutch Corporate Governance Code provides for a similar response time of 180 days. The response time can be invoked in the event of a request to place a mat - ter on the agenda of a general meeting that may lead to a change in the company’s strategy. It is doubtful whether the response time would be binding on share - holders, which is why the 250-day cooling-off period was enacted in law. It is up to the courts to rule on any undesirable concurrence of the cooling-off period and other protective measures. 9.4 Directors’ Duties The management board, under the supervision of the supervisory board, decides whether to cooperate with and support a public offer. In doing so, it makes an independent assessment. Shareholders have no right to prior consultation. The general fiduciary duties of directors (see 8.1 Principal Directors’ Duties ) do not change in a takeover context. Also, when assessing a takeover proposal, it remains the duty of the manage -
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