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– 191 – Transcripts of One Share, One Vote Session Paper: Koen Geens and Carl Clottens Respondent: José M. Garrido Garcia (University of Castilla-La Mancha) Chair: Peter Montagnon (Association of British Insurers) Rapporteur: Deborah Janssens (K.U.Leuven) A. Abstract Dispersed versus concentrated ownership in the EU? The group first focused on the speakers’ proposition that, by introducing the mandatory bid rule (MBR) in the Thirteenth Company Law Directive, the EU “chose clearly for a dispersed shareholder structure”. The respondent and the intervening speakers seemed to agree that no such conscious decision was taken at EU level. Rather, minority protection was the EU rationale for the introduction of the MBR. The group also seemed to agree that the speakers’ proposition needed to be nuanced in that the MBR had the effect of freezing concentrated ownership existing at the time of its introduction (potential acquirers of the stake being deterred by the threat of the MB), but probably did increase the obstacle to acquiring controlling stakes after its introduction, thus favouring dispersed ownership. Regardless of whether or not there was a conscious or unconscious EU decision to favour dispersed ownership, the question is whether or not the EU is heading in this direction. Generally, the group’s sense was that this was the case, for a variety of reasons including the fact that the EU needed to increase the size of its companies to remain competitive (assuming that bigger companies need more capital from a variety of investors). For the time being, however, the EU legislators have to cater for both systems (dispersed and concentrated ownership) and draft “one-size fits all” legislation, which is challenging. One share, one vote (1S1V). A narrow majority seemed to support the introduction of a 1S1V system, but it is widely acknowledged that there is no political support, certainly not in the light of the financial crisis which drives politicians to favour concentrated (national) ownership. Opponents of the 1S1V system pointed to the importance of rewarding long-term investors, certainly in times of crisis and short selling, but the group seemed to agree that the distinction between long-term and short-term investors was difficult to draw, exacerbated by the fact that a historic investor would not necessarily (commit to) stay on in the long term, and that both types of investors were important in the market. In this connection, the group also stressed the importance of tackling the issue of pyramids, but there was insufficient time to explore this – 192 – topic in further depth. Workshop members seemed to agree that what cannot be achieved by positive (or negative) harmonisation will likely be remedied by the market itself (as experienced in Germany and the UK). In times of crisis or restructuring, minority shareholders may impose 1S1V conditions for investing more capital. There may be a growing consensus towards neutral, or even nonneutral , disclosure of control-enhancing mechanisms (CEMs) and deviations from the 1S1V principle. 1S1V is, intuitively and implicitly, a way to promote further internal market integration. B. Response to paper by José M. Garrido Garcia This is a very controversial topic indeed and I am afraid that my position is also going to be very controversial and very provocative. The basic aim of my contribution is twofold. I will first discuss the unfortunate 1S1V proposal by the European Commission and then I will add some thoughts on what the proportionality principle, in my opinion, really means. I will conclude with what lies ahead in the future. Let me begin with the history of the initiative. The Winter Group purposely left proportionality out of the Company Law Action Plan. The experience with the Takeover Directive (particularly the optional breakthrough rule) had shown that, politically, Europe was unwilling to advance further on the principle of proportionality. Even the Takeover Directive’s breakthrough rule is not a full implementation of the proportionality principle, because if one is able to retain 25% of the capital of the company one is able to block the breakthrough. The breakthrough rule is therefore a type of “diminished proportionality”. For these reasons, the prevalent idea of the high-level group was that the one share/one vote principle was not ripe. But Commissioner Bolkenstein had a different idea and thought that it was important to give a signal and include this principle in his study and, later, to everyone’s surprise, Commissioner McCreevy announced that “the shareholder is king” and that he would investigate the possibility of introducing the proportionality principle. I believe...

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