Implementation of the Takeover Directive in Sweden
- Sweden
- 09/05/2006
- Roschier, Attorneys Ltd. - Sweden
The approach to public takeover regulation in Sweden, prior to the implementation of the Takeover Directive (Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids) (the “Takeover Directive”), was self-regulatory and influenced by the UK Takeover Code. The self-regulation has been largely preserved in connection with the implementation of the Takeover Directive into Swedish law.
Prior to the implementation of the Takeover Directive, the Swedish rules on takeovers were issued by the Swedish Industry and Commerce Stock Exchange Committee (Sw. Näringslivets Börskommitté), a private, self-regulatory body financed by the Swedish business community (the “old Takeover Rules”). The old Takeover Rules contained, apart from rules on the terms, conditions and procedures for takeover bids, certain rules on the duty to provide information to the target shareholders and the market. Another private, self-regulatory body, the Swedish Securities Council (Sw. Aktiemarknadsnämnden), issued statements as to what constitutes good market practice in connection with public bids. The Swedish Securities Council was responsible for both the interpretation of the old Takeover Rules and for deciding whether exemptions may be granted. The old Takeover Rules where not statutory, but in practice compliance was compulsory. A bidder who would not comply with the old Takeover Rules would lose goodwill and be publicly censured by the financial community as a whole. In addition, the old Takeover Rules required bidders to state in the offer announcement that the old Takeover Rules and the Securities Council’s interpretation thereof were applicable to the offer, whereby a contractual obligation on the bidder, vis-à-vis the target shareholders, to comply with the old Takeover Rules was created. The listing agreements with the Swedish stock exchanges and other authorized market places incorporated by reference the old Takeover Rules.
Predominantly, the Swedish implementation of the Takeover Directive consists of a new outline and editorial changes of existing rules. The material rules remain largely unchanged. Following the implementation of the Takeover Directive, the Swedish takeover regulation consists of a combination of self-regulation and legislation, fulfilling the Takeover Directive’s requirement that takeover rules must be rooted in law.
The relevant Swedish regulation now mainly consists of the Takeover Act (Sw. Lag (2006:451) om offentliga uppköpserbjudanden på aktiemarknaden ) (the “Act”), which entered into force on 1 July 2006, and of a statutory obligations in the Securities Exchange and Clearing Operations Act (Sw. Lagen (1992:543) om börs- och clearingverksamhet ) for the stock exchange or market place to adopt takeover rules which are in compliance with the Takeover Directive. It is of importance to point out that the Act states that a public offer can only be made by a company that has undertaken to comply with the rules adopted by the stock exchange or market place on which the target company’s shares are listed. A contractual obligation is created between the stock exchange or market and the bidder, even though the latter’s shares are not listed in Sweden. The target company is bound to the same rules through its listing agreement. The Act contains, for example, rules on non-frustration and mandatory bids, which were previously to be found in the old Takeover Rules. The Act also introduces novelties such as a duty to inform employee representatives regarding takeover bids and the possibility for a company to, in its articles of association, insert a provision on breakthrough, that is, a provision which facilitates takeover by prescribing that restrictions on the transfer of securities or on voting rights provided for in the articles of association are not to have effect in a takeover situation. Furthermore, the Act states that the Swedish Financial Supervisory Authority (Sw. Finansinspektionen ) is to supervise compliance with the Act. It may also impose fines amounting to a maximum of 100 million SEK in cases of non-compliance.
The rules of the Swedish stock exchanges and market places are essentially modified versions of the Takeover Rules issued by the Swedish Industry and Commerce Stock Exchange Committee, revised in order to conform to the requirements of the Takeover Directive. Some minor changes to the old Takeover Rules may be noted, for example regarding the time limit for drawing up and making public an offer document. Also, the sections setting out the contents of the offer document have been made denser and the rules relating to the actions of the target board have been moved to the listing agreement.
Both the Swedish Financial Supervisory Authority and stock exchanges and other authorized market places have delegated powers to the Swedish Securities Council, which remains in charge of interpretation of takeover rules and of granting exemptions to those rules. The statements issued by the Securities Council in relation to the old Takeover Rules will still be relevant.
The new regulation entered into force on 1 July 2006. However, it was first applied to the offer for the shares in WM-data AB (publ) which was launched on 21 August 2006 by LogicaCMG plc. The reason for this was that the old Takeover Rules were applicable to offers announced before 1 July 2006 regardless of when the offer document was made public.
