The Takeovers Directive Is An Ineffective Piece Of Legislation Essay

The Takeovers Directive Is An Ineffective Piece Of Legislation Designed To Create An Unachievable Single Market For Takeover Activity - Essay Example More specifically, in the UK, a takeover refers to the purchase of a public company whose shares are listed on a stock exchange, contrary to the acquisition of a private business. The three main types of takeovers are friendly takeovers, hostile takeovers and reverse takeovers. A friendly takeover refers to the acquisition of a company, which has been approved by the management. In normal cases, a bidder notifies a company board of directors prior to making an offer for the target company. If the board concurs that accepting the offer would serve the interests of shareholders better than rejecting the offer, then it recommends that the shareholders accept the offer2. The friendly type of takeover is rather common in private companies in which the shareholders are usually the board of directors. In these cases, chances are always high that should shareholders accept a takeover offer, then the board is usually of the same opinion. If not, the board is always under the shareholders†™ orders accept the bid. It is noteworthy that this scenario is rather irrelevant to the UK’s idea of takeovers, which only regards a takeover as acquisition of a public company. The second type of takeover is the hostile takeover in which a bidder acquires a company despite the unwillingness of the company’s management. ... Usually, on being established, certain larger private companies would want to float themselves in stock exchanges without the expenses and time resources involved in initial public offers. In the UK, for instance, a reverse takeover refers to a one-year acquisition of a company, which causes fundamental changes in its business and board voting or control. Finally, backflip takeovers are takeovers in which the acquiring company becomes a subsidiary of the purchased company and is mostly seen when a larger but unknown company acquires a well-known struggling company. A business concept that has been closely associated with takeovers, especially in the European Union is corporate governance. Corporate governance refers to the set of rules, processes and practices that a company uses for control and direction. In essence, in entails the weighing and balancing of the various interests of stakeholders such as management, customers, suppliers, financiers, government, shareholders and the co mmunity. Corporate governance thus covers every aspect of management, including action plans, internal controls, performance measurement and corporate disclosure. In the modern business environment, it does not pay for a company to be merely profitable; more should be done to attain a high level of corporate governance or good corporate citizenship using good corporate practices, environmental awareness and ethical and professional conduct among other strategies. Excellent takeover policies, regulation and legislation are some of the mechanisms by which the EU Commission and Member States have applied to improve corporate governance. For instance, the EU Takeover Directive of 2004 was adopted with the