Response to consultation on joint Guidelines for the prudential assessment of acquisitions of qualifying holdings
Go back
From a legal perspective, however, the multiplication criterion generates false positives": it assumes that a minority shareholder in entity A has a real influence and management powers on the target company C - through a minority stake in the entity B. But, the majority principle in both A and B forces all minorities to be irrelevant.
With reference to the example on page 17 (see Explanatory box), the 12 percent of share capital does not represent the actual stake in terms of the exercise of power and, by applying the multiplication criterion, an irrelevant person turns out to be a “qualifying holder” (i.e. a “false positive”).
Therefore, by widening the notification requirements over its effective scope (which should be to map the power and not the capital) the multiplication criterion frustrates the ratio of the regulation.
From an operational perspective, the criterion - that pushes to consider the investments in all “rings” of a corporate “chain” - greatly increases proposed acquirers’ costs and obligations, with no clear benefit. In this respect, the Policy Options 2’s benefits example on page 47 (see note 9) shows that no trace of benefits could appear when the control criterion already applies and multiplication approach does not operate (but costs do).
Moreover, when the multiplication criterion operates on all sets of sub-consolidated basis (direct or indirect acquirer can be located anywhere in the "chain"), a possibly large number of “results” can be obtained, thus increasing complexity and uncertainty in managing the exercise. Unfortunately, the simple examples reported in the consultative document do not offer any supporting algorithm.
Additionally, once the minimum threshold (10%) has been reached, the multiplication criterion entails the risk of notifying a large number of small amount proposed acquisitions - without a real change in the "influence" on the target company. The communication of those micro-acquisition have to go up through the chain (until the person required to notify has been reached) and represents itself a relevant additional administrative burden.
Therefore, with a view to harmonizing rules while increasing certainty of action of the supervised entities, ABI prefers the application of the control criterion, which sectoral Directives and Regulations already consider appropriate."
Question 3. Which approach identified above do you consider to be the most appropriate, Option A or Option B? Please explain your answer.
When the control criterion does not recognise proposed acquirers as qualifying holding, the multiplication criterion intervenes to focus on the economic nature of the acquisition.From a legal perspective, however, the multiplication criterion generates false positives": it assumes that a minority shareholder in entity A has a real influence and management powers on the target company C - through a minority stake in the entity B. But, the majority principle in both A and B forces all minorities to be irrelevant.
With reference to the example on page 17 (see Explanatory box), the 12 percent of share capital does not represent the actual stake in terms of the exercise of power and, by applying the multiplication criterion, an irrelevant person turns out to be a “qualifying holder” (i.e. a “false positive”).
Therefore, by widening the notification requirements over its effective scope (which should be to map the power and not the capital) the multiplication criterion frustrates the ratio of the regulation.
From an operational perspective, the criterion - that pushes to consider the investments in all “rings” of a corporate “chain” - greatly increases proposed acquirers’ costs and obligations, with no clear benefit. In this respect, the Policy Options 2’s benefits example on page 47 (see note 9) shows that no trace of benefits could appear when the control criterion already applies and multiplication approach does not operate (but costs do).
Moreover, when the multiplication criterion operates on all sets of sub-consolidated basis (direct or indirect acquirer can be located anywhere in the "chain"), a possibly large number of “results” can be obtained, thus increasing complexity and uncertainty in managing the exercise. Unfortunately, the simple examples reported in the consultative document do not offer any supporting algorithm.
Additionally, once the minimum threshold (10%) has been reached, the multiplication criterion entails the risk of notifying a large number of small amount proposed acquisitions - without a real change in the "influence" on the target company. The communication of those micro-acquisition have to go up through the chain (until the person required to notify has been reached) and represents itself a relevant additional administrative burden.
Therefore, with a view to harmonizing rules while increasing certainty of action of the supervised entities, ABI prefers the application of the control criterion, which sectoral Directives and Regulations already consider appropriate."