Corporate takeovers and shareholder protection: UK takeover regulation in perspective.

This article examines the regulatory framework for shareholder protection during takeovers in the UK. It is aimed at ascertaining the extent that takeover regulations protect shareholders from company managements who may pursue objectives that are different from enhancing shareholder value. Pursuant to this, a narrative of the historical development of takeover regulation in the UK is provided to show why takeover regulation emerged. Using doctrinal legal analysis, the current takeover regulations; The EU Takeover Directive [2004] and The City Code on Takeovers and Mergers (as amended in 2011) are examined. It emerged that these regulations were developed to protect only the shareholders of acquired companies. While this represents an improvement towards shareholder protection, the essay argues that the regulations do not provide a complete protection to shareholders of target companies as managements may promote their own interests using pre-bid defences. Aspects of directors’ duties were examined to fill the regulatory gaps in this regard, but the duties appear not to provide any remedy to shareholders, since they do not specifically apply to takeovers. Further, in the absence of a specific regulation for protecting shareholders of acquiring companies, the derivative action procedure was examined as an alternative form of remedy. But since derivative actions are based on wrong done to a company, it is difficult for shareholders to rely on this. Thus, apart from strengthening the current takeover regulations that protect the shareholders of acquired companies, it is also imperative that a framework for protecting the shareholders of acquiring companies should be developed.