The US Poison Pill from a Dutch Perspective
After an intensive debate that lasted for nearly 15 years, the final text of the 13th EU Directive on takeover bids (the “Directive”) was finally adopted on 21 April 2004. The final version of the Directive is clearly the result of a compromise between the different views in the various Member States. One of the most important issues on which a compromise was reached was whether or not the board of directors of a public company should be allowed to take defensive measures against hostile takeovers. The main rule of the Directive, also known as the neutrality rule, states that once a takeover bid is announced, the target board may not take frustrating action without approval of the general meeting of shareholders, to be given after the announcement of the bid. As a compromise however, the Directive provides Member States with an opt-out possibility with respect to this rule. This means that in implementing the Directive, Member States can decide not to make the neutrality rule mandatory for their national public companies. As this compromise was in large part a result of a lobby by, among others, the Netherlands, against a mandatory neutrality rule, it is not surprising that the Netherlands will probably make use of this opt-out possibility in the implementation of the Directive. An important argument for the necessity of the opt-out possibility was the comparison with the situation in the US. It is argued that boards of directors in the US have a broad authority to take defensive measures. If the boards of European companies would be forced to adhere to the neutrality rule, there would not be a level playing field with the US. This would, among other things, seriously harm the competitiveness of the European economy. In this light, it is interesting to study the defensive measures that exist in the US. Probably the most effective and well-known defensive measure at the disposal of boards in the US is the so-called poison pill. In this article, I analyze how typical American poison pills work and what issues this type of defensive measure would encounter under Dutch law. I then describe one of the defensive measures available in the Netherlands after which I make some final remarks.