Mergers & Acquisitions

® Mergers & Acquisitions in 68 jurisdictions worldwide Contributing editor: Casey Cogut 2012 Published by Getting the Deal Through in association wi...
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Mergers & Acquisitions in 68 jurisdictions worldwide Contributing editor: Casey Cogut

2012 Published by Getting the Deal Through in association with: Aabø-Evensen & Co Advokatfirma Æ´LEX Arfidea Kadri Sahetapy-Engel Tisnadisastra (AKSET) ASAR – Al Ruwayeh & Partners Baião, Castro & Associados | BCS Advogados Bersay & Associés Biedecki bizconsult law LLC Bonn & Schmitt Bowman Gilfillan Boyanov & Co Carey y Cía Casahierro Abogados Colibri Law Firm Corpus Legal Practitioners Debarliev, Dameski & Kelesoska Attorneys at Law Divjak, Topi´c & Bahtijarevi´c Law Firm ELIG Attorneys-at-Law Estudio Trevisán Abogados Ferrere Abogados Freshfields Bruckhaus Deringer LLP Gilbert + Tobin Gleiss Lutz Grata law firm Harneys Aristodemou Loizides Yiolitis LLC Headrick Rizik Alvarez & Fernández Hoet Peláez Castillo & Duque Homburger Hoxha, Memi & Hoxha Iason Skouzos & Partners JA Treviño Abogados Jade & Fountain PRC Lawyers Kettani Law Firm Khaitan & Co Kim & Chang Kimathi & Partners, Corporate Attorneys Law Office of Mohanned bin Saud Al-Rasheed in association with Baker Botts LLP LAWIN LAWIN Lideika, Petrauskas, Vali¯unas ir partneriai Lloreda Camacho & Co Madrona Hong Mazzuco Brandão Advogados Mares, Danilescu & Asociatii MJM Limited Nagashima Ohno & Tsunematsu NautaDutilh Nielsen Nørager Law Firm LLP Odvetniki Šelih & partnerji, op, doo Pérez-Llorca RIAA LAW Salomon Partners Schönherr Setterwalls Advokatbyrå Simont Braun Simpson Thacher & Bartlett LLP Slaughter and May Stankovic & Partners Stikeman Elliott LLP Thanathip & Partners Legal Counsellors Limited Ughi e Nunziante – Studio Legale Walker Kontos Advocates Walkers Weil, Gotshal & Manges Wong Beh & Toh WongPartnership LLP Young Conaway Stargatt & Taylor, LLP

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Mergers & Acquisitions 2012

Global Overview Casey Cogut and Sean Rodgers Simpson Thacher & Bartlett LLP 4

Contributing editor Casey Cogut Simpson Thacher & Bartlett LLP

Albania Shpati Hoxha Hoxha, Memi & Hoxha 8

Business development managers Alan Lee George Ingledew Robyn Hetherington Dan White Marketing managers Ellie Notley Alice Hazard Marketing assistants William Bentley Zosia Demkowicz Admin assistant Megan Friedman Marketing manager (subscriptions) Rachel Nurse [email protected] GettingTheDealThrough.com

European Overview Stephen Hewes and Richard Thexton Freshfields Bruckhaus Deringer LLP 6

Argentina Pablo Trevisán, Laura Bierzychudek and Walter Beveraggi Estudio Trevisán Abogados 15 Australia Neil Pathak, David Clee and Alex Kauye Gilbert + Tobin 21 Austria Christian Herbst Schönherr 28 Belgium Sandrine Hirsch and Vanessa Marquette Simont Braun 35 Bermuda Peter Martin and Andrew Martin MJM Limited

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Bolivia Carlos Pinto-Meyer and Cristian Bustos Ferrere Abogados 48 Brazil Maria PQ Brandão Teixeira Madrona Hong Mazzuco Brandão Advogados 52 Bulgaria Yordan Naydenov, Angel Angelov and Nevena Kostadinova Boyanov & Co 58 Canada Richard E Clark and Curtis A Cusinato Stikeman Elliott LLP 66 Merger Control in Canada Susan M Hutton Stikeman Elliott LLP 71 Cayman Islands Rob Jackson and Ramesh Maharaj Walkers 74

Assistant editor Adam Myers

Chile Pablo Iacobelli and Cristián Eyzaguirre Carey y Cía 79

Editorial assistant Lydia Gerges

China Lawrence Guo, Henry Xiao and Sophie Sha Jade & Fountain PRC Lawyers 84

Senior production editor Jonathan Cowie

Colombia Enrique Álvarez, Santiago Gutiérrez and Tomás Calderón Lloreda Camacho & Co 90

Chief subeditor Jonathan Allen

Croatia Damir Topi´c and Mate Lovri´c Divjak, Topi´c & Bahtijarevi´c Law Firm 97 Cyprus Nancy Erotocritou Harneys Aristodemou Loizides Yiolitis LLC 101

Subeditors Martin Forrest Caroline Rawson

Denmark Thomas Weisbjerg, Jakob Mosegaard Larsen and Martin Rudbæk Nielsen

Editor-in-chief Callum Campbell

Dominican Republic Roberto Rizik Cabral, Sarah De León and Claudia Taveras

Publisher Richard Davey Mergers & Acquisitions 2012 Published by Law Business Research Ltd 87 Lancaster Road London, W11 1QQ, UK Tel: +44 20 7908 1188 Fax: +44 20 7229 6910 © Law Business Research Ltd 2012 No photocopying: copyright licences do not apply. ISSN 1471-1230 The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a lawyer–client relationship. The publishers and authors accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of May 2012, be advised that this is a developing area.

Printed and distributed by Encompass Print Solutions Tel: 0844 2480 112

Nielsen Nørager Law Firm LLP 106

Headrick Rizik Alvarez & Fernández 112 England & Wales Michael Corbett Slaughter and May 117 France Sandrine de Sousa and Yves Ardaillou Bersay & Associés 127 Georgia Revaz Javelidze and Eka Siradze Colibri Law Firm 133 Germany Gerhard Wegen and Christian Cascante Gleiss Lutz 138 Ghana Kimathi Kuenyehia, Sr, Atsu Agbemabiase and Kafui Baeta Kimathi & Partners, Corporate Attorneys 146 Greece Theodoros Skouzos and Georgia Tsoulou Iason Skouzos & Partners 152 Hungary David Dederick, László Nagy and Eszter Katona Weil, Gotshal & Manges 158 India Rabindra Jhunjhunwala and Bharat Anand Khaitan & Co 164 Indonesia Johannes C Sahetapy-Engel and Kartika Putri Wohon Arfidea Kadri Sahetapy-Engel Tisnadisastra (AKSET) 171 Italy Fiorella Federica Alvino Ughi e Nunziante – Studio Legale 178 Japan Ryuji Sakai, Kayo Takigawa and Yushi Hegawa Nagashima Ohno & Tsunematsu 183 Kazakhstan Artem Timoshenko and Aliya Zhumabek Colibri Law Firm 189 Kenya Michael Kontos, Jitin Mediratta and David Wayumba Walker Kontos Advocates 194

Law Business Research

Korea Sang Hyuk Park and Gene (Gene-Oh) Kim Kim & Chang 199 Kuwait Ibrahim Sattout and John Cunha ASAR – Al Ruwayeh & Partners 204

CONTENTS

Kyrgyzstan Zhanyl Abdrakhmanova and Kerim Begaliev Colibri Law Firm 209 Latvia Raimonds Slaidin¸s˘ and Krista Zarina LAWIN 214 ˇioˇcys LAWIN Lideika, Petrauskas, Vali¯unas ir partneriai 219 Lithuania Robertas C Luxembourg Alex Schmitt, Chantal Keereman and Philipp Mössner Bonn & Schmitt

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Macedonia Emilija Kelesoska Sholjakovska and Elena Miceva Debarliev, Dameski & Kelesoska Attorneys at Law 232 Malaysia Wong Tat Chung Wong Beh & Toh 238 Mexico Daniel I Puente Medina and Mauricio Garza Bulnes JA Treviño Abogados 244 Morocco Nadia Kettani Kettani Law Firm 249 Netherlands Willem Calkoen and Martin Grablowitz NautaDutilh 255 Nigeria Theophilus Emuwa, Chinyerugo Ugoji and Ayoyinka Ayeni Æ´LEX 261 Norway Ole K Aabø-Evensen Aabø-Evensen & Co Advokatfirma 267 Pakistan Bilal Shaukat, Mayhar Kazi and Mahum S Shere RIAA LAW 277 Peru Percy Castle and Carlos Carrasco Casahierro Abogados 283 Poland Ludomir Biedecki and Radosław Biedecki Biedecki 289 Portugal Victor de Castro Nunes, Maria José Andrade Campos and Cláudia de Meneses Baião, Castro & Associados | BCS Advogados 296 Romania Simona Mares and Lucian Danilescu Mares, Danilescu & Asociatii

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Russia Anton Klyachin and Igor Kuznets Salomon Partners

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Saudi Arabia Babul Parikh and O Ali Anekwe Law Office of Mohanned bin Saud Al-Rasheed in association with Baker Botts LLP 314 Serbia Nenad Stankovic, Dusan Vukadin and Sara Pendjer Stankovic & Partners 321 Singapore Ng Wai King and Chan Sing Yee WongPartnership LLP 328 Slovenia Nataša Pipan Nahtigal and Jera Majzelj Odvetniki Šelih & partnerji, op, doo 336 South Africa Ezra Davids and David Yuill Bowman Gilfillan 343 Spain Vicente Conde Pérez-Llorca 349 Sweden Anders Söderlind, Anders Holmgren and Ola Grahn Setterwalls Advokatbyrå 356 Switzerland Claude Lambert, Dieter Gericke, Dieter Grünblatt and Gerald Brei Homburger 362 Tajikistan Denis Bagrov and Shirinbek Milikbekov Colibri Law Firm 370 Thailand Thanathip Pichedvanichok and Issariya Vimonrat Thanathip & Partners Legal Counsellors Limited 374 Turkey Salih Tunç Lokmanhekim and Saniye Simge Eren ELIG Attorneys-at-Law 379 United Arab Emirates Patrick Ko and Omar Momany Freshfields Bruckhaus Deringer LLP 387 United States Casey Cogut and Sean Rodgers Simpson Thacher & Bartlett LLP 393 United States, Delaware Rolin P Bissell and Elena C Norman Young Conaway Stargatt & Taylor, LLP 398 Uzbekistan Babur Karimov and Nodir Yuldashev Grata law firm 403 Venezuela Jorge Acedo Hoet Peláez Castillo & Duque 409 Vietnam Tuan Nguyen, Phong Le, Hanh Bich, Huyen Nguyen, Hai Ha and Thuy Huynh bizconsult law LLC 413 Zambia Sharon Sakuwaha, Lupiya Simusokwe and Robin Msoni Corpus Legal Practitioners 420 Appendix: International Merger Control David E Vann Jr and Ellen L Frye Simpson Thacher & Bartlett LLP 425

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Luxembourg

Luxembourg Alex Schmitt, Chantal Keereman and Philipp Mössner Bonn & Schmitt

1 Types of transaction

4 Filings and fees

How may businesses combine?

Business combinations can be roughly divided into (i) the purchasing of shares, (ii) the purchasing of a business or part of a business, (iii) legal mergers, or (iv) public offers for shares. 2 Statutes and regulations What are the main laws and regulations governing business combinations?

In Luxembourg, business combinations that fall into the above categories (i) through (iii) are, first and foremost, subject to the provisions of the Law of 10 August 1915 on commercial companies, as amended, (the Company Law). Takeover bids, which fall into the above category (iv), are predominantly governed by the provisions of the Law of 19 May 2006 implementing Directive 2004/25/EC of the European Parliament and the Council of 21 April 2004 on takeover bids (the Takeover Law). Business combinations can be further governed by the following main laws and regulations: • the Law of 5 April 1993 on the financial sector, as amended; • the Law of 10 July 2005 on the prospectus for securities; • the Law of 9 May 2006 on market abuse, as amended; • the Law of 11 January 2008 on transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, as amended (the Transparency Law); • the Law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings, as amended; • the Law of 24 May 2011 on the exercise of certain rights of shareholders in general meetings of listed companies; • the Civil Code; • the rules and regulations of the Luxembourg Stock Exchange; • circulars of the Luxembourg financial sector supervisory authority, the Financial Supervisory Committee (the CSSF); and • further laws and regulations in relation to tax, labour law and the domiciliation of companies. 3 Governing law What law typically governs the transaction agreements?

In principal, the law applicable to the target company or target asset also governs the transaction agreements. However, depending on the nationality of the parties and interests involved in a multi-jurisdictional business combination, the parties often take advantage of the freedom to subject the transaction agreements to a law other than Luxembourg law.

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Which government or stock exchange filings are necessary in connection with a business combination? Are there stamp taxes or other government fees in connection with completing a business combination?

Generally, a business combination may require administrative filings and publications, such as: • registration with the Luxembourg Trade and Companies Register (the RCSL); • notifications to the CSSF and/or the Luxembourg Stock Exchange; • storage of information with the Luxembourg Stock Exchange in its capacity as the officially appointed mechanism under the Transparency Law; • declarations to the Direct Tax Administration; • declarations to the Joint Centre for Social Security; and • registrations with the relevant professional chambers. In case of a transfer of shares in a Luxembourg company, only the acquisition or disposal of shares in a private limited company (société à responsabilité limitée) requires a filing with the RCSL and publication of the amount of shares transferred and the identity of the transferee. For mergers, the common merger agreement and the minutes of the extraordinary general meeting of the company located in Luxembourg have to be filed with the RCSL. It is also necessary to publish the common merger agreement and the minutes of the extraordinary general meeting approving the merger in the Luxembourg official gazette. In the context of a takeover, the bidder must draw up an offer document to be submitted to the CSSF within 10 working days from the day the bid was made public. In business combinations involving listed companies, the Luxembourg Stock Exchange requires the communication to it in advance of events affecting those securities that are admitted to trading at the Luxembourg Stock Exchange and of other information useful for the protection of investors. A business combination that affects the securities of an issuer the shares of which are admitted to trading on a regulated market and for which Luxembourg is the home member state can trigger notification requirements of the shareholders and the issuer to the CSSF. Notification requirements of shareholders in relation to the acquisition or disposal of major holdings pursuant to the Transparency Law are set out in more detail in question 6. Moreover, an issuer will have to disclose to the public, file with the CSSF and store with the Luxembourg OAM the total number of voting rights and capital at the end of a calendar month if the business combination impacted the total issued capital and voting rights. An issuer would also be subject to notification requirements in a case of an acquisition of its own shares or required to inform the CSSF and the regulated market

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Luxembourg Bonn & Schmitt to which its shares are admitted to trading if its articles of incorporation are to be modified. Further filings with the CSSF and disclosures to the public can be necessary under the provisions of the Market Abuse Law. For example, persons discharging managerial responsibilities with an issuer having its registered office in Luxembourg and the securities of which are admitted to a regulated market shall declare to the CSSF and the issuer the existence of transactions conducted on their own account within five working days of a transaction’s execution date (director’s dealings). As a principle, no stamp taxes or transfer duties are payable for the transfer of shares in Luxembourg. 5 Information to be disclosed What information needs to be made public in a business combination? Does this depend on what type of structure is used?

The type of information to be made public largely depends on the type of structure used and whether the parties are listed companies or not. Business combinations in relation to privately held companies do not usually require any information to be disclosed save in a case of a transfer of shares in a private limited company (société à responsabilité limitée) which requires the publication of the amount of shares transferred and the full identity of the transferee in the Luxembourg official gazette. Also, if the business combination resulted in a modification of the articles of incorporation of a Luxembourg company, these amendments would have to be filed with the RCSL and published in the official gazette. Moreover, all mergers, divisions and similar operations will require, in particular due to the corporate resolutions and actions that must to be taken, among others, filings with the RCSL and publications in the Luxembourg official gazette. With respect to business combinations that relate to companies, the securities of which are admitted to trading on a stock exchange market, disclosure requirements pursuant to the Market Abuse Law, the Transparency Law (only in case of admission of the securities to a regulated market) and the rules and regulations of the Luxembourg Stock Exchange may apply (see question 4). In connection with a takeover bid, the offeror is obliged to disclose, among others, information such as: • the decision to launch an offer; • the approved offer document; • information in case of an extension of the offering period; • information on a squeeze-out/sell-out; and • forms of acceptance. Moreover, the offeror and the offeree company must publish a document containing its opinion and the reasons for the bid to the representatives of the employees or the employees themselves.

7 Duties of directors and controlling shareholders What duties do the directors or managers of a company owe to the company’s shareholders, creditors and other stakeholders in connection with a business combination? Do controlling shareholders have similar duties?

Directors or managers of a Luxembourg company have duties based on their mandates as a principle, and they might be held liable for management defaults or violation of the Company Law or the articles of incorporation of their company. On such basis they should take any necessary or useful action to perform the business combination within the limits of the law, the company’s corporate object and according to the company’s articles of incorporation. In addition, directors or managers are under a general principle to act competently and in good faith. They also have to act in the company’s corporate interest (ie, comprising the employees, the assets of the company and third parties’ interest like creditors). As a result, the directors or managers should act in the best interests of the company on a case-by-case basis in the context of the contemplated business combination and act as a careful manager or director would act, undertaking all the necessary steps and acts required in the context of business combinations, notably in the context of operations involving numerous actions to perform such as a takeover for shares or cross-border merger. 8 Approval and appraisal rights What approval rights do shareholders have over business combinations? Do shareholders have appraisal or similar rights in business combinations?

Any transfer of shares in a private limited company (société à responsabilité limitée) to a third party is subject to the approval given in a general meeting of shareholders representing at least three-quarters of the corporate capital. Shares in a public limited company (société anonyme) can be freely transferred except if the articles of incorporation of such company provide for a limitation of the right to transfer the shares. The approval of an extraordinary general meeting of shareholders is also required in case a business combination entails a capital increase. In the context of a national merger and cross-border merger, the general meeting of shareholders of the absorbed company and the general meeting of shareholders of the absorbing company should usually approve the merger. However, in national and cross-border mergers there are generally no appraisal rights and there is no cash alternative for objecting shareholders. The Company Law does not provide for specific rights of minority shareholders to block a national and cross-border merger. 9 Hostile transactions

6 Disclosure of substantial shareholdings What are the disclosure requirements for owners of large shareholdings in a company? Are the requirements affected if the company is a party to a business combination?

Notification of substantial shareholdings must be notified by the shareholder who acquires or disposes of shares, including depositary receipts representing shares, which are admitted to trading on a regulated market and for which Luxembourg is the home member state and to which voting rights are attached, to the issuer concerning the proportion of the voting rights whenever that proportion reaches, exceeds, or falls below the thresholds of 5, 10, 15, 20, 25, 33.33, 50 and 66.66 per cent in accordance with article 8 of the Transparency Law. The shareholder shall at the same time notify the CSSF. The voting rights shall be calculated on the basis of all the shares, including depositary receipts representing shares, to which voting rights are attached, even if the exercise thereof is suspended.

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What are the special considerations for unsolicited transactions?

Takeover bids in relation to a Luxembourg company whose shares are admitted to trading on a regulated market in Luxembourg, are governed by the Takeover Law and supervised by the CSSF. If the board of the target wants to block a hostile bid, it must obey one of the main principles of the Takeover Law (ie, that the board of the target must act in the interests of the company as a whole and must not deny the holders of securities the opportunity to decide on the merits of the bid). However, Luxembourg utilised the possibility under the takeover Directive 2004/25/EC to make antitakeover measures and the neutralisation of protection measures optional. Thus, for example, only if the general meeting of shareholders of the target company ‘opted-in’, its board may have to obtain prior authorisation of the shareholders at a general meeting before taking any defensive measures (save for seeking alternative bids).

Getting the Deal Through – Mergers & Acquisitions 2012

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The offeror, in particular in a hostile takeover, must be aware of the following main principles: • all holders of the same class of securities of the offeree company must be afforded equivalent treatment; • the holders of the securities of the offeree company must have sufficient time and information to reach a properly informed decision on the bid; • false markets must not be created in the securities of the offeree company, of the offeror company or of any company concerned in the bid; • an offeror must announce a bid only after ensuring that it can fulfil in full any cash consideration; and • an offeree company must not be hindered in the conduct of its affairs for longer than is reasonable by a takeover bid (maximum six months from the publication of the decision to make a takeover bid). 10 Break-up fees – frustration of additional bidders Which types of break-up and reverse break-up fees are allowed? What are the limitations on a company’s ability to protect deals from third-party bidders?

Break-up fees are legally and theoretically possible, but there has not been any development on doctrine or market price in Luxembourg yet. When considering entering into a break fee arrangement, this has to be discussed in the context of the doctrine of corporate interest, as it might turn out as an advantage or disadvantage for the target company. The arrangement of break-up fees is solely a matter of negotiation with and judgement by the target company’s board. 11 Government influence Other than through relevant competition regulations, or in specific industries in which business combinations are regulated, may government agencies influence or restrict the completion of business combinations, including for reasons of national security?

Generally, there are no specific rules or competences given to the Luxembourg authorities to influence or to restrict any business mergers. However, government influence could arise in the event of a business combination that concerns anti-money laundering or terroristic aspects. If the CSSF suspects a company is involved in anti-money laundering or terroristic issues, they have the power to oppose a business combination.

third party. Financial assistance includes advances of funds, guarantees, security, loans and any other financial assistance. 14 Minority squeeze-out May minority stockholders be squeezed out? If so, what steps must be taken and what is the time frame for the process?

The right to squeeze-out minority shareholders can currently only be exercised following a takeover bid pursuant to the Takeover Law. The offeror in a takeover holding at least 95 per cent of the capital carrying voting rights and 95 per cent of the voting rights of the target company, can require all remaining shareholders to sell to it the remaining securities at a fair price. Where the target issues several categories of securities, the squeeze-out right may only be exercised in relation to those securities where the 95 per cent thresholds have been met. The offeror must exercise its squeeze-out right within three months from the end of the offer acceptance period during which the holders of securities, to which the public offer has been addressed, have been able to decide to accept or refuse the offer. The offer acceptance period cannot be less than two weeks nor more than 10 weeks from the date of the publication of the offer document by the offeror, unless the 10-week period is extended further. The decision to squeeze-out must be disclosed as soon as it is taken by the offeror (ie, in case it is made at the same time as the takeover bid, it must be included in the published offer document). 15 Cross-border transactions How are cross-border transactions structured? Do specific laws and regulations apply to cross-border transactions?

As a principle, it is allowed in Luxembourg to perform cross-border mergers with foreign companies on the condition that it is not prohibited by the provisions of the applicable foreign law.  Luxembourg has implemented the European Directives relating to cross-border mergers, notably Directives 2005/56/EC and 2007/63/EC. Cross-border mergers are subject to the Company Law. On 3 August 2011, the Luxembourg parliament adopted a new law amending the Company Law completing the transposition of Directive 2009/109/EC concerning the reporting and documentation requirements in the event of mergers and divisions. A cross-border merger can be realised through a merger by absorption or a merger by incorporation of a new entity, a merger by migration to Luxembourg or by migration from Luxembourg to another jurisdiction or through an upstream merger or a reversed merger.

12 Conditional offers What conditions to a tender offer, exchange offer or other form of business combination are allowed? In a cash acquisition, may the financing be conditional?

In the context of a takeover, the offeror can impose certain conditions such as the acquisition of a certain threshold of capital and voting rights of the target or obtaining the approval of authorities. However, the financing cannot be conditional since the bid can be announced only after the offeror has ensured that it can fulfil in full any cash consideration, if offered. In other business combinations other than a takeover bid, it may occur that the financing can be conditional. 13 Financing If a buyer needs to obtain financing for a transaction, how is this dealt with in the transaction documents? What are the typical obligations of the seller to assist in the buyer’s financing?

Subject to limited exceptions, pursuant to article 49(6) of the Company Law, a public limited liability company may not provide financial assistance for the purpose of the acquisition of its shares by a www.gettingthedealthrough.com



16 Waiting or notification periods Other than as set forth in the competition laws, what are the relevant waiting or notification periods for completing business combinations?

As far as the Takeover Law applies, an offeror shall communicate the offer document to the CSSF for its approval, which shall be received by the CSSF within 10 working days from the day on which the bid has been made public. The CSSF notifies its approval to the offeror within 30 working days following the submission. However, if the document was incomplete or additional information is necessary, the time delay only runs from the date on which the offeror provides the requested information. The time period for the acceptance of a bid may not be less than two weeks and not more than 10 weeks from the date of publication of the offer document. However, the 10 weeks period may be extended under certain conditions. However, the target company shall not be hindered in the conduct of its affairs for longer than its reasonable by a takeover. The time period shall not exceed six months from the date when the decision to make the bid was made public.

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Update and trends Although Luxembourg is not uncoupled from global trends, it remains very popular with investment funds, private equity investors, family offices and multinational enterprises. Companies that are active in the financial sector appreciate the flexibility, competence, efficiency as well as the legal and political stability of Luxembourg. The ability to realise M&A and capital market transactions quickly is another major advantage for those who focus their finance activities in Luxembourg. A draft law, which aims to introduce new rules governing the squeeze-

For cross-border mergers, there is a one-month waiting period between the day of the publication of the common merger agreement in the Luxembourg official gazette and the date of the shareholders’ meeting approving the proposal to merge. 17 Sector-specific rules Are companies in specific industries subject to additional regulations and statutes?

Credit institutions, other professionals of the financial sector, insurance companies and investment funds are subject to specific regulations and specific approval rules by a supervisory authority. 18 Tax issues What are the basic tax issues involved in business combinations?

From a tax point of view there are three different main kinds of business combinations in Luxembourg (ie, merger, division and contribution of assets). Generally speaking the tax law facilitates such combinations by granting neutrality or exemption treatment in a wide array of cases. In respect of the shareholders of the transferor company, the exchange of shares should be considered as a sale followed by an acquisition (article 22(5) of the Luxembourg Income Tax Law (LITL)) and capital gains realised by the shareholders upon the sale are taxable. However, shareholders rewarded by new shares should be tax exempt from the realisation upon the transfer of the shares (rollover relief, under certain conditions) but they are tax liable upon disposal of shares received in exchange (article 22-bis LITL). In the context of mergers and divisions, any operation that results in the transfer of the entire assets and liabilities of a company to another person is treated as a liquidation for tax purposes and, thus, taxable at the level of the transferring company according to article 169 LITL. However, the profit arising from the transfer of assets and liabilities of a fully taxable Luxembourg company to another fully taxable Luxembourg company, should be tax exempt provided that the

Alex Schmitt Chantal Keereman Philipp Mössner

out and sell-out procedures in relation to companies having their registered office in Luxembourg, where all or part of their shares are or have been admitted to listing and trading on a regulated market in one or several member states, is currently being discussed at the Luxembourg Chamber of Deputies. The draft law does not purport to be applicable to takeover bids made in accordance with Directive 2004/25/EC.

receiving company issues shares to the shareholders of the transferring company or the shares held by the receiving entity in the transferring company are cancelled. A shareholder transferring his entire participation is viewed as liquidating the investment held before the cancellation (ie, the participated company is partially liquidated). Note that no dividend withholding tax applies in cases of full or partial liquidation of Luxembourg companies. In relation to the contribution of assets, there should be a taxneutral exchange for the transferor if the contribution is at book value and to the extent that the contributed assets comprise a business unit or an autonomous part of business and the transferor and the transferee are resident companies fully taxable or the transferee is located within the EU/EEA. The Luxembourg Income Tax Law contains also a favourable tax regime for cross-border mergers and divisions. 19 Labour and employee benefits What is the basic regulatory framework governing labour and employee benefits in a business combination?

The rights and responsibilities of employers and employees are primarily governed by the Luxembourg Civil Code and the Labour Code. In case of a transfer of an undertaking or business or part of an undertaking or business located in Luxembourg as a result of a business combination, article L 127 et seq of the Labour Code applies. The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer are transferred to the transferee. Thus, the Labour Code effects an automatic transfer of the employment contracts which bind the transferor, the transferee and the employees. Luxembourg legislation does not provide for any right of objection by which an employee may prevent the transfer of his or her employment. An employee refusing the transfer is generally considered by the court as a resigning employee. On the other hand, the transfer itself cannot constitute grounds for dismissal by the transferor or the transferee.

[email protected] [email protected] [email protected]

22-24, rives de Clausen Tel: +352 27 855 2165 Luxembourg Fax: +352 27 855 855 www.bonnschmitt.net

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20 Restructuring, bankruptcy or receivership What are the special considerations for business combinations involving a target company that is in bankruptcy or receivership or engaged in a similar restructuring?

The Company Law allows the merger with a company incorporated in Luxembourg subject to restructuring or bankruptcy. This provision applies when the company subject to restructuring or bankruptcy is incorporated in Luxembourg and the absorbing company is a foreign company. However, the Luxembourg legal provisions do not exclude the application of this provision to a foreign company which is subject to restructuring or bankruptcy if the foreign laws are not opposed. The entering into a business combination with a company subject to insolvency or bankruptcy in Luxembourg during its suspect period, defined as starting at the date of its cessation of payment until the date of the judgment, should be closely analysed as it could be challenged regarding the definition of the cessation of payment.

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21 Anti-corruption and sanctions What are the anti-corruption and economic sanctions considerations in connection with business combinations?

Companies and persons operating in Luxembourg, particularly those operating in the financial sector, are subject to the provisions of the Criminal Code and the Law of 12 November 2004 concerning the fight against money laundering and terrorism. To further strengthen the means for the fight against corruption, Luxemburg legislation recently implemented a new law on 13 February 2011, which amended the Labour Code, the Criminal Code and other laws. Corruption can be penalised by a prison sentence and a fine of up to e250,000 depending on the function of the convict. In case of takeovers, an administrative sanction in the form of a fine between e125 and e12,500 can be imposed in the case of an infringement of the Takeover Law, which is likely to breach the general principles set out in article 3(a) to (e) of the Takeover Law. Further, the omission of notifications or provision of information to the CSSF or to the representatives of the employees, can in certain cases result even in criminal sanctions.

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