Because of a failure to harmonize the regime of takeover defenses, the European Directive on Takeover Bids (DTB) has created broad dissatisfaction. In fact, two key features of the DTB, the board neutrality rule and the break-through rule (BTR), are not mandatory, but can be opted out by Member States. Since both rules were considered chief devices for increasing takeover activity, as they aim to neutralize the most significant anti-takeover defenses, the fact that their adoption will rely upon local choices by national legislatures puts into serious question whether the ultimate outcome of the DTB will be that of promoting a vibrant and efficient pan-European market for corporate control. Optionality is not alone in thwarting harmonization in the field of takeover defenses, as the European legislature has also introduced a reciprocity feature, according to which Member States can decide whether to relax the prohibitions and restrictions arising out of the board neutrality rule and/or the BTR in the event a bid is made by a company which is not subject to the same prohibitions and restrictions.
Although the DTB failed the goal of promoting a strong takeover market by limiting the availability of defensive tactics, both the optionality and the reciprocity features will represent an intriguing test of how Member States will address the underlying policy choices and, where they chose to opt out of the board neutrality rule and/or the BTR, of how companies will react to the possibility of deciding to opt into the pro-takeover EC default regime. The paper argues that optionality: (i) may very well be a sound approach with regard to the BTR, as its beneficial impact is still highly debated, and (ii) represents an acceptable compromise for the gradual implementation of the board neutrality rule. Quite plausibly, at this stage, an abrupt introduction of a mandatory board neutrality rule would have generated, at least in some Member States, a backlash in both national politics and corporate practice. The paper also stresses that reciprocity does not represent a sound policy to govern the regime of takeover defenses.