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Gomez, Fernando; Saez, María Isabel --- "The Enforcement of Management Passivity Duty in Take-over Law: Class Action or Government Action?" [2012] ELECD 313; in Backhaus, G. Jürgen; Cassone, Alberto; Ramello, B. Giovanni (eds), "The Law and Economics of Class Actions in Europe" (Edward Elgar Publishing, 2012)

Book Title: The Law and Economics of Class Actions in Europe

Editor(s): Backhaus, G. Jürgen; Cassone, Alberto; Ramello, B. Giovanni

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847208033

Section: Chapter 14

Section Title: The Enforcement of Management Passivity Duty in Take-over Law: Class Action or Government Action?

Author(s): Gomez, Fernando; Saez, María Isabel

Number of pages: 45

Extract:

14. The enforcement of management
passivity duty in take-over law: class
action or government action?*
Fernando Gomez and María Isabel Saez


1. INTRODUCTION
The behaviour of managers (in a broad sense, encompassing also the
Directors) towards a tender offer for the acquisition of a company is crucial
for the likelihood of success of the offer, and thus for shareholders' welfare.
The European Directive on Takeover Bids contains, following English Law
on this matter, a passivity rule ­ or duty of abstention ­ forcing managers to
abstain from actions that may influence the outcome of the tender offer,
exempting only those that can lead to higher-price offers. The rule, however,
does not appear to be straightforwardly desirable for many commentators,
and for many legal systems as well. For instance, US Law does not contain
such a rule, and among the European countries implementing the Directive,
several have made use of the opting-out provisions allowed in the Directive.
We think, however, that there are good reasons, both at the theoretical
and at the empirical level, supporting the efficiency of the passivity rule. In
fact, Section II of this chapter, besides characterizing the duty, provides
several economic rationales for the optimality of the passivity rule in
Takeover Law, particularly in the European context of mandatory and
competitive bids.
Our main focus, nevertheless, does not lie in the substantive efficiency
properties of the issue of enforcement. We think that a central point
missing in the debate on the passivity rule is precisely ...