Cash-Settled Derivatives as a Takeover Instrument and the Reform of the EU Transparency Directive

Cash-Settled Derivatives (CSDs) have not been included in the calculation of crossing of thresholds according to the European Union (EU) Transparency Directive of 2004. However, the use of this type of financial instrument as a powerful takeover instrument has been widespread in Europe since 2005. CSDs have been used in Europe in the context of hostile takeovers or even outside the context of a takeover. The article presents major cases which occurred in Switzerland, Germany, France, Italy and the UK. As a consequence some jurisdictions (Switzerland, UK, Germany) decided to include CSDs in the calculation of the participation for the declaration of thresholds. These regimes are presented in detail. Some countries, such as Italy and France, adopted alternative approaches, which are also presented. However, in the scope of the revision of the Transparency directive, this article argues in favor of an EU wide approach to CSDs, rather than having Member States adopting various regimes, which are very complex. The article also argues in favor of maximum harmonization, in order to provide legal certainty in the single market