Contributed By CHSH Cerha Hempel Spiegelfeld Hlawati
Under the Austrian Takeover Act, no distinction is made between friendly and hostile takeovers. Thus, both forms are allowed and the same rules apply to each. Nonetheless, friendly takeovers prevail in practice. Either way, one of the general principles of the Act requires the management board and the supervisory board of the target company to remain neutral in the interests of the shareholders and not in any way to prevent the shareholders from taking a decision on the proposed takeover or seek to influence the decision of the shareholders.
In the event of a takeover offer, the administrative bodies of the target company, ie, the management board and the supervisory board under Austrian corporate law, must not take any measures which would likely deprive shareholders of the opportunity to make a free and informed decision about the offer. No measures must be taken that frustrate the outcome of the offer from the moment the bidder's intention to launch an offer becomes known (ie, the moment the target company becomes aware) until publication of the results of the offer, and in the event that the offer is a success, until implementation of the offer. However, measures that could frustrate the outcome of the (hostile) takeover are permissible if the target company's shareholders' meeting explicitly approves such concrete measure. The Takeover Act mentions the issue of securities that could prevent the bidder from acquiring control of the target company. Pursuant to the Act, the administrative bodies of the target company are also free to seek out competing bidders ('white knights') without obtaining the consent of the shareholders' meeting.
If an intention to make an offer has not yet been announced, the management board may take defensive measures in the form of preventive measures against hostile takeovers, such as the introduction of an upper limit on voting rights or long-term contracts with members of the management board, provided that standards under applicable Austrian stock corporation law are met. Defensive measures taken after the bidder's intention to make an offer has been announced require the approval of the shareholders' meeting and may inter alia consist of the inclusion of change of control clauses in certain contracts, the issue of securities, the purchase or disposal of own shares, the disposal of important assets of the company, or significant changes concerning the company's finance structure.
The Takeover Act does not provide specific duties for administrative bodies when enacting defensive measures, but based on the rules of general Austrian stock corporation law, preventive measures taken by the management board must be in the interest of the target company. However, should preventive measures be based on a resolution adopted by the shareholders' meeting, such rules of general Austrian stock corporation law do not apply.
Since an automatic rejection of a takeover offer will in most cases not be in the interest of the company, a baseless rejection of a takeover offer is not permitted. After the offer document has been published, the management board (and the supervisory board) of the target company must prepare a statement regarding the takeover offer, encompassing an economic assessment of the offer price and a recommendation to the shareholders of the target company. The management board is at liberty to explain in its statement why a takeover offer should not be accepted and it ought to underscore its position by putting forward a counterplan for the future direction of the company and its corporate policy.