In a last minute change to the German Takeover Bill, shareholders have lost their power to decide on how to deal with hostile takeover bids.
Under the amendment, board directors will be able to take defensive action against a hostile bid once they obtain the consent of the company's supervisory board. Originally, the bill stated that there should be no defensive measures unless they were authorised by the shareholders. Then, three months ago, an amendment was made which allowed shareholders to give consent 18 months in advance. But, now a majority vote by the supervisory board can overturn the action. Latham & Watkins partner Christoph von Teichman said that in large companies 50 per cent of the board is made up of workers. "This means that with just one management person on the side of the workers, the board can start organising all sorts of action," he said. In practice, the amendment will not make a huge difference, because corporate law in Germany is not favourable towards defensive measures. However, von Teichman said it will send a bad signal to the market and will make Germany less attractive to foreign investors. "It's a step backwards and I'm very distressed about it," he said. The changes come as a result of lobbying by a coalition of industries, including car manufacturers and chemical producers. The new law will come into effect on 1 January 2002.