The Enterprise Chamber has ruled that a company’s response to an unsolicited takeover proposal falls within the board’s authority to determine the company’s strategy. The board does not have to consult with shareholders first, but remains accountable to shareholders for the company’s actions. The ruling sets out important viewpoints for board conduct and other aspects of corporate governance in takeover situations.
Akzo Nobel N.V. recently received three unsolicited takeover proposals from PPG Industries, Inc. The AkzoNobel management and supervisory boards have unanimously rejected these proposals, in each case after an extensive and careful decision-making process. On 1 June 2017 PPG announced the withdrawal of its takeover proposal for AkzoNobel.
In response to the proposals by PPG, activist hedge fund Elliott International, L.P. demanded from AkzoNobel that it enter into discussions with PPG. After AkzoNobel rejected PPG’s third proposal, Elliott filed a petition with the Enterprise Chamber in Amsterdam requesting a corporate inquiry into AkzoNobel’s conduct and policies, and certain interim measures, including an extraordinary general meeting to vote on the dismissal of the chairman of AkzoNobel’s supervisory board.
Corporate governance in takeover situations
In its judgment of 29 May 2017, the Enterprise Chamber denied the requests by Elliott and others to order interim measures, as it did not see sufficient reason to order any such measures. The Enterprise Chamber will rule on the request for a corporate inquiry at a later date.
The ruling by the Enterprise Chamber sets out important viewpoints for corporate governance in takeover situations.
Authority and accountability of the board
Duty to negotiate
Relationship with shareholders
With this ruling, the Enterprise Chamber confirmed that it is the exclusive authority of the boards of a Dutch company to determine the response to an unsolicited takeover proposal. The boards do not have a duty to consult with shareholders prior to responding to an unsolicited takeover proposal. In such a situation, the boards need to carefully take into account the interests of all stakeholders of the company and they remain accountable to shareholders on the position taken in response to an unsolicited takeover proposal.
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