In12017 the European Union adopted amendments to the Shareholder Rights Directive enacted a decade earlier. Among the changes was a new Article 9c dealing with the topic of related party transactions (RPT). This paper analyses how that new provision has been implemented in a range of Member States and assesses its impact on the prior laws of those states.
Compared with the initial proposals of the European Commission, Article 9c as adopted was considerably watered down. Allegedly inspired by the related party provisions of the UK Listing Rules, those proposals mandated disclosure at the 1% level of significance (measured typically by the value of the company’s assets), accompanied by a fairness opinion, and approval by the independent shareholders (majority-of-the-minority (MOM)) at the 5% level). As enacted, MSS were given a choice of MOM or board approval and freedom to set the criterion for triggering the approval requirement. The same freedom as to trigger was accorded to the MSS in relation to disclosure and the requirement for a fairness opinion was dropped.
In consequence, MSS had a wide range of choices to make at the transposition stage. A major focus of this piece is an analysis of the choices actually made by the MSS (Part 3). This provides a basis for the assessment in Part 4 of the impact of Article 9c in moving the laws of the MSS towards a more demanding orientation. There are three main conclusions. First, the requirements of Article 9c for approval of RPT had limited impact. No MS which did not already have MOM adopted it in the transposition process. As for board approval, which was already widespread in the laws of the MSS, it is doubtful whether the transposition of the Article ensured the independence of the board members called upon to approve the transaction. Second, it is likely that the most important change required by the Article was public disclosure, even if shorn of the fairness opinion. The adverse impact of disclosure on the company’s share price is potentially capable of reducing the levels of wholly one-sided RPT. Public disclosure, although already required by the laws of some MSS, was not widespread.
Third, and more optimistic, there is evidence that the process of transposing Article 9c caused MSS to review their laws on RPT more generally and, in some MSS, this provided an opportunity for reformers to secure changes beyond those required by the Article itself. This might be termed the »catalysing« effect of transposition. The outcome in any particular MS turns on the balance of power between reformers and conservatives, but transposition gives reformers the opportunity to make a case which might otherwise not have been available to them.
Keywords: related party, approval, majority-of-the-minority, disclosure, materiality , Shareholder Rights Directive, harmonisation.
JEL classifications: H73, K22, Z18
.European Company Law Experts Group. The members of the group who contributed to this paper were: Paul Davies (Oxford & ECGI), Susan Emmenegger (Bern University), Guido Ferrarini (Genoa & ECGI), Klaus Hopt (Max Planck, Hamburg & ECGI), Adam Opalski (Warsaw), Alain Pietrancosta (Paris I & ECGI), Andrés Recalde (Autonomous University of Madrid), Markus Roth (Marburg & ECGI), Michael Schouten (Amsterdam), Rolf Skog (Gothenburg & ECGI), Martin Winner (Vienna University of Economics and Business), Eddy Wymeersch (Gent & ECGI).