REGULATION OF MANDATORY TAKEOVER BIDS IN THE EMERGING COUNTRIES Presented by Vytautas Šenavičius PhD candidate in Law Lithuania

Mandatory takeover bid  Directive 2004/25/EC): if a natural or legal person acquires a specified percentage of voting rights in the company (the issuer), which gives him a certain degree of control of the company (the issuer), this person must make the offer and implement a mandatory takeover bid.  The shareholders must have a right to sell their shares for the fair price.

 An important “role” in creation/modernization of capital market framework;  Legal certainty attracts foreign investors;  Comprehensive protection of persons and entities beyond takeover;  The main aim – protection of minor shareholders in case of the change of control.

 Most researchers analyse the mandatory bid regulation only in well developed countries (e.g. United Kingdom, USA, Australia, and Germany) and raise the problems that could be encountered in there.  However, there are a number of other practical and theoretical regulation problems pertaining to takeovers that appear in less developed countries and could be applicable when creating the modern capital market regulation. Lack of MTB research in emerging countries

Main obstacles of efficient regulation within emerging countries  Discussions regarding fair (equitable) price – common issue within EU. Leads to further discussions.  The role of supervisory institution – active participation & same treatment.  Effective regulation of sanctions.

 Scientific discussion - what the aim of having the right or being obliged to make the bid is: 1) “More costly and consequently discourages the bids”. 2) Shareholder’s protection mechanism should ensure that the minor shareholders have received the fair offer.  Solution for emerging country - clear expression that the main aim of mandatory bid is to protect minor shareholders rights.

Crucial role as the main competence is in the said institution; Active in legislation and it’s implementation – broad powers; Initiative in protection of shareholder’s rights (e.g. protection of public interest);

 Lithuania’s example - the major shareholder may without difficulties abuse his rights and reject to make the bid for years.  =Leads to the uncertainty and distrust of investors.  Solution - stricter sanctions, e.g. suspension of all the major shareholders rights, high administrative sanctions, etc.  The effective sanction regime would ensure that the rejection to make the mandatory takeover bid is disadvantageous.