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
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]
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
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.
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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
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Korea Sang Hyuk Park and Gene (Gene-Oh) Kim Kim & Chang 199 Kuwait Ibrahim Sattout and John Cunha ASAR – Al Ruwayeh & Partners 204
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
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
Russia Anton Klyachin and Igor Kuznets Salomon Partners
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
Getting the Deal Through – Mergers & Acquisitions 2012
Slovenia Odvetniki Šelih & partnerji, op, doo
Slovenia Nataša Pipan Nahtigal and Jera Majzelj Odvetniki Šelih & partnerji, op, doo
1 Types of transaction How may businesses combine?
Joint-stock companies and limited liability companies may in principle combine through one or a combination of the following techniques: share deals, asset deals, corporate reorganisations and contractual cooperation models. In relation to acquisitions of 25 per cent or more of voting rights in public companies and certain other types of joint-stock companies, one has to consider the takeover legislation. Squeeze-out of the minority shareholders is possible if a majority shareholder holds in excess of 90 per cent of a joint-stock company’s shares. The following basic corporate reorganisations are possible under Slovenian corporate law: • mergers, which can occur either through absorption or through consolidation; • demergers (splits), which can occur either through a transfer of assets and liabilities of an entity to newly established or preexisting entities; through a transfer of all or individual assets and liabilities of an entity to newly established or pre-existing entities; or through a transfer of individual assets and liabilities of an entity to newly established or pre-existing entities; • transfers of assets to the Republic of Slovenia or a Slovenian municipality; • changes of legal form; and • inclusion, which is possible if a joint-stock company is the holder of 95 per cent or more of the shares in another joint-stock company. Various contractual cooperation models such as enterprise agreements (including profit-transfer agreements, profit-pooling agreements, management agreements, plant lease agreements), joint ventures, franchising agreements and similar are also possible. 2 Statutes and regulations What are the main laws and regulations governing business combinations?
In addition to the applicable EU legislation, the following national laws and their implementing regulations are the principal pieces of legislation that need to be considered in relation to business combinations in Slovenia: • Companies Act (the Companies Act); • Takeovers Act (the Takeovers Act); • Financial Instruments Market Act (the FIMA); • Book Entry Securities Act; • Court Register Act; • Prevention of the Restriction of Competition Act; • Public-Private Partnership Act; • Corporate Income Tax Act (the CITA); • Value Added Tax Act; • Real Property Transaction Tax Act;
• • • • • • • • • • • •
Tax Procedure Act; Auditing Act; Employment Relationship Act; Worker Participation in Management Act; Act Regulating Employees Participation in Decision-Making in Cross-Border Mergers of Limited Liability Companies; Participation of Workers in Management of the European Public Limited-Liability Company Act (SE); Code of Obligations; Law of Property Code; Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act; Supportive Environment for Entrepreneurship Act; Venture Capital Companies Act; and Prevention of Money-Laundering and Terrorist Financing Act.
Depending upon the activities of the companies involved, one should also consider sector-specific legislation, such as the Banking Act, the Investment Funds and Management Companies Act, the Media Act, the Insurance Act, the Financial Conglomerates Act, the Energy Act, or similar legislation. 3 Governing law What law typically governs the transaction agreements?
Transaction agreements in relation to corporate reorganisations are typically governed by Slovenian law, and have to be governed by Slovenian law as far as the corporate aspects are concerned. Provided that they involve a foreign element, share deals and asset deals may be (and often are) governed by laws other than Slovenian, such as the law of the selling or the acquiring entity, or a ‘neutral’ third country law. A public tender offer will require a prospectus containing information provided for in the Takeovers Act and its implementing regulations. 4 Filings and fees 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?
The Takeovers Act applies to the following companies: • public companies, namely, issuers of securities listed on an organised market in the Republic of Slovenia or another EU member state; and • joint-stock companies the shares of which are not traded on the regulated market and have (on the last day of the preceding year) at least 250 shareholders or total capital of not less than E4 million (according to the latest annual report of the issuer). If the target is subject to the Takeovers Act, a takeover bid for the acquisition of the remaining shares shall be made by the acquirer Getting the Deal Through – Mergers & Acquisitions 2012
Odvetniki Šelih & partnerji, op, doo achieving (alone or together with persons acting in concert with the acquirer) the takeover threshold of a 25 per cent share of voting rights therein. A new takeover bid shall be made by the acquirer after having acquired an additional 10 per cent share of voting rights in such a target (additional takeover threshold), up to when the acquirer through a successful takeover bid acquires at least 75 per cent of the target’s shares with voting rights. The Takeovers Act contains certain exemptions, among others a special exemption applicable to banks achieving the takeover threshold or additional takeover threshold by collection of collateral that encumbered the respective securities. Such banks have to make the takeover bid after two years following the acquisition of the respective securities, but may not exercise their voting rights if they have acquired the respective securities by collection of collateral. If a takeover is mandatory, the Securities Market Agency (hereinafter the SMA) needs to approve the offer and the prospectus in advance, and several notification, publication and other formalities need to be completed prior to and during the takeover process. There are fees to be paid to the SMA and the Central Securities Clearing Corporation (hereinafter the KDD). When business shares in limited liability companies are acquired, the acquisition must be registered with the competent commercial register. Acquisition of shares does not require a registration with the commercial register, but book-entry registered shares are transferable through registration with the KDD. Mergers, demergers and other corporate reorganisations (including corporate reorganisations relating to Societas Europaea), as well as certain enterprise agreements also need to be registered with the commercial register in order to become fully effective. Registration in the commercial register is free of charge, but notary fees for registration need to be paid (applications with the commercial register can be delivered only through authorised bodies, and mergers and demergers need to be registered via public notaries). Notary fees may also be payable as agreements on transfer of business shares in limited liability companies; corporate reorganisation agreements and some other agreements require the form of a notarial deed or signatures of the parties’ representatives need to be notarised. Transfer of real estate requires registration in the land register. Notary fees and court fees need to be paid in this respect, and the transaction may be subject to the real property transaction tax. Other than the above, contractual transfers of assets generally do not need to be registered with the authorities. If the business combination represents a notifiable concentration and is not subject to review by the European Commission pursuant to the EC Merger Regulation, it has to be notified to the Competition Protection Office. Concentrations are notifiable if the following threshold is achieved: • the aggregate annual turnover on the Slovenian market of the enterprises participating in the concentration (together with other members of their groups) exceeded E35 million in the last business year; and • the aggregate annual turnover on the Slovenian market of the acquired enterprise (together with other members of its group) exceeded E1 million in the last business year, or, in the case of the creation of a joint enterprise, the aggregate annual turnover on the Slovenian market of at least two enterprises participating in the concentration (together with other members of their groups) exceeded E1 million in the last business year. Also if the above threshold is not met, the Competition Protection Office has the right to require a notification if the enterprises participating in the concentration (together with other members of their groups) achieve more than a 60 per cent market share in the Slovenian market, and the Competition Protection Office has to be informed of the transaction to be given the opportunity to require a notification. Fees are payable to the Competition Protection Office www.gettingthedealthrough.com
Slovenia if a notification is filed. A transaction may not be implemented without the required Competition Protection Office approval, unless the Competition Protection Office allows implementation or if one of the limited exceptions applies. As far as the substantive merger control issues are concerned, it should be noted that the Competition Protection Office has started enforcing the de facto control concept more vigorously. Finally, there are sector-specific rules that require further filings, and these filings are usually associated with administrative fees. 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 transaction structure and the legal form of the entities involved will influence the scope and the content of the information to be disclosed. The FIMA and its implementing regulations contain detailed rules on periodic and per event disclosures required to be made by public companies. One important category of information that needs to be disclosed by public companies comprises inside information. Important binding developments concerning foreseen business combinations generally represent inside information and do, as such, have to be published and disclosed to the SMA. Disclosure may be postponed under certain conditions to protect the respective public company’s legitimate interests, but such postponement is upon the public company’s own risk, and the SMA has to be informed thereof. If a takeover is required or voluntarily made, the acquirer has to inform the SMA, the management of the target and the Competition Protection Office of its intention to make a takeover offer, and publish such intention on the same day. This obligation has to be fulfilled at the latest within three business days after the takeover threshold is reached. The management of the target has the duty to inform the SMA within two business days following the publication of the takeover intention of any potential agreements or negotiations with the acquirer, or of the absence of such agreements and negotiations. Various disclosures are then required in the prospectus – which has to be published – and also during the takeover process (mostly to the SMA). These include disclosures by various persons including the acquirer, the target and the management and supervisory bodies of the acquirer and the target. Various disclosures to shareholders are mandatory in the case of corporate reorganisations and squeeze-outs. Business combinations that are subject to approval of shareholders’ meetings (mergers, demergers, transfers of at least 25 per cent of the company’s assets, change of the legal form) shall be made public by way of convocation of the shareholders’ meeting and through the prior submission of prescribed documents (such as a merger contract, annual reports, reports of the management board, the supervisory board and the auditor) to the commercial register, thereby enabling review by the shareholders. After completion of the business combination, it shall be made public by way of its registration with the commercial register. Thereby certain documents on business combinations and squeeze-outs (such as related agreements and resolution of the shareholders’ meetings) will ultimately also become publicly accessible as most documents as filed with the commercial register can be publicly accessed, some even online. 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?
Notifications on substantial shareholdings are required in companies covered by the Takeovers Act (see question 4 above) if the following thresholds of total voting rights are reached, exceeded or fall
Slovenia Odvetniki Šelih & partnerji, op, doo below: 5, 10, 15, 20, 25 per cent, one-third, 50 and 75 per cent. Such notifications are required irrespective of whether the large shareholding was acquired or disposed of through a transaction, or was the result of a corporate restructuring or any other activities of the respective issuer. Notifications have to be made within the prescribed short time periods, to the management of the target and to the SMA. The target’s management has to publish the notifications received. Members of management and supervisory bodies have to notify any change in their share of voting rights in the company in which they serve, even if none of the above-mentioned thresholds are thereby reached, exceeded or fallen below. In addition to shareholders, there are several other categories of persons that have to report their substantial interests (for example persons entitled to exercise voting rights and entities controlling direct shareholders). One also has to carefully consider the applicable aggregation rules. Among others, notification duties also apply to holders of share put options and buyers who have entered into futures contracts concerning shares in companies covered by the Takeovers Act. Several exemptions to disclosure or aggregation apply if certain conditions are fulfilled. There are for example exemptions applicable to custodians, parent undertakings of investment firms and market makers. With respect to companies not covered by the Takeovers Act, notifications are due from companies (including partnerships, but not individuals), irrespective of their registered office. They have to notify their shareholding exceeding 25 per cent or 50 per cent in another company with share capital having its registered office in Slovenia, and not covered by the Takeovers Act, as well as the fact that such thresholds are no longer exceeded. Such notification has to be made to the management of the target – which has to publish it – and the acquirer may not exercise its voting rights until the notification is made. There are no fees associated with such notification. 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?
Members of the management and supervisory bodies must act with the diligence of a conscientious and fair manager in performing their tasks, and have to protect the company’s business secrets. They shall be jointly and severally liable to the company for damages caused by a violation of their duties, unless they demonstrate that they have fulfilled their duties fairly and conscientiously, or unless the act that caused damage to the company was based on a lawful resolution passed by the shareholders’ meeting (the latter does not exempt damage liability in certain situations involving self-dealing). Management board members shall not be relieved of their damage liability if the respective action was approved by the supervisory board. The company may waive the compensation claims or set them off only after the expiry of three years after the claims arose, provided the approval of the shareholders’ meeting is obtained and minority shareholders holding at least one-tenth of the subscribed capital do not object in writing. Compensation claims of the company against members of the management and supervisory bodies may also be pursued by creditors of the company if the company is unable to repay its debts towards them. Persons who use their influence on the company (including the majority shareholders) to induce a member of the management or supervisory body, the procurator or a proxy to act in a manner that causes damage to the company or its shareholders, must reimburse the company for the resulting damage. Shareholders shall be reimbursed for damage if they suffered damage in addition to the damage that was caused to the company.
Furthermore, the Companies Act provides a special damage liability of a dominant company (and also liability of the management of a dominant and of a dependent company) applicable when a dominant company induces a dependent company to carry out a legal transaction that is detrimental to it, or to do something or not do something to its own detriment, without actually compensating for the loss by the end of the financial year or without providing the right to benefits determined for compensation. In the case of a merger or demerger (split), damage liability of members of the management and supervisory bodies of the merged company can be invoked only through an ad hoc representative that files the lawsuit on behalf of all shareholders and creditors. The damage claim is statute-barred for five years after publication of the fact that the merger is entered into the commercial register. 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 corporate reorganisation requires a resolution of the shareholders’ meeting approving the reorganisation with a majority of at least three-quarters of the represented share capital (the articles of association may determine another voting majority for the valid adoption of such resolutions). Audit of various documents by an authorised auditor is required in the case of mergers, demergers and squeezeout procedures, and in such cases minority shareholders may usually also apply for judicial review (appraisal) of the exchange ratio or the offered payment (indemnification). Enterprise agreements (including profit-transfer agreements, profit-pooling agreements, and management agreements) shall also be approved by a majority of at least three-quarters of the share capital represented at the shareholders’ meeting. Such agreements usually have to include the amount of compensation due to outside shareholders, and the amount of severance payment when the outside shareholders decide to sell their shares to the dominant company. If not otherwise determined in the respective articles of association, business cooperation agreements do not require any shareholders’ meeting approval, but shareholders only have the right to be informed on important agreements of such type within the scope of information rights concerning the company’s affairs. Shareholders’ meetings also have to approve asset deals if such transfers concern at least 25 per cent of all assets of the company. Holders of business shares in limited liability companies have statutory pre-emption rights. Other than that, shareholders of the target do not usually have any approval rights in share deals, except if so provided in the target’s foundation documents. The adequacy of the offered takeover consideration has to be audited unless the target is a public company. 9 Hostile transactions What are the special considerations for unsolicited transactions?
The Takeovers Act contains rules on actions of a target’s management and supervisory bodies that may – in the period from the date of the takeover intention until the publication of the takeover result – only be taken following a shareholders’ meeting consent. By way of example, such actions include share capital increases, transactions outside the ordinary course of business, acquisitions of treasury stock, and generally all actions that may result in the frustration of the bid (opt-in pursuant to article 9 of the EC Takeover Directive). Companies subject to the Takeovers Act may opt out from these requirements in their articles of association. To do so, they have to follow the required procedure, achieve the prescribed majorities at the shareholders’ meeting and inform the SMA. With respect to the breakthrough, Slovenia selected to opt out of article 11 of the EC Takeover Directive, and opt in concerning Getting the Deal Through – Mergers & Acquisitions 2012
Odvetniki Šelih & partnerji, op, doo article 12 of the EC Takeover Directive. The SMA keeps a record of all resolution of the shareholders’ meetings on breakthrough and on reciprocity. Otherwise the general rules of the Takeovers Act apply equally to friendly and hostile takeover bids. 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?
Letters of intent are often entered into in share and asset deals, and these usually contain provisions granting time-limited exclusivity to one prospective contractual party. Pre-contractual liability may also exist if a party negotiated without having the intention of reaching an agreement, or abolished such intention without a grounded reason. Break-up and reverse break-up fees are generally allowed in binding agreements, provided that the principle of equal treatment of shareholders and the financial assistance prohibition are respected. Such fees would likely be considered to represent contractual penalties under Slovenian law, which has several important consequences, only some of which may be contractually altered. Defence mechanisms that may be used by target companies against unsolicited takeover offers are described in question 9 above. Competitive tender offers are permissible. As regards financial assistance, targets are prohibited from assuring advance payments or loans to third parties to acquire their shares. Also, when a company involved in a merger holds more than 25 per cent of shares of any other company involved in the merger, and has pledged or offered to pledge these shares as security for a loan or a similar legal transaction aimed at assuring funds for acquisition of these shares, approvals of a specified majority of each company’s creditors and employees are required for the validity of the merger contract. Finally, there are restrictions in the takeover context: at the time of prospectus approval, the acquirer has to prove to the SMA that it has not – for the payment of securities to which the takeover offer relates – granted or committed to grant, in any manner, directly or indirectly, a pledge or other security over such securities or other form of property of the target not owned by the acquirer. Should financing of the transaction by a Slovenian bank be required, one should also note that securities over shares, business shares or call options that shall be acquired through a tender offer and direct or indirect bank financing or refinancing, are – pursuant to the Banking Act – not an appropriate type of security for the purposes of minimising the bank’s credit risk. 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?
Except for antitrust reasons and in certain regulated sectors (see question 16) and directly or indirectly state-owned companies, government agencies may not influence or restrict the completion of business combinations on legal grounds.
Slovenia 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?
A takeover offer may only contain conditions expressly allowed by the Takeovers Act. Acquirers may condition the success of their takeover offers upon a certain acceptance threshold, and such threshold may generally be lowered during the takeover process, provided that some timing restrictions are respected. Other voluntary conditions are not allowed. Certain conditions are mandatory. Most importantly, if any approval or consent is required for the acquisition of securities subject to the takeover offer, the offer has to contain a condition subsequent, pursuant to which it shall be revoked if such approval or consent is denied or not issued until the expiry of the period for acceptance of the offer. Financing may not be conditional. Further, a guarantee issued by an EU member state bank shall be obtained for the entire takeover consideration, or, alternatively, the entire takeover consideration shall be deposited prior to the takeover process. 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?
If a buyer needs to obtain financing, typically the transaction documents do not explicitly describe the financing, but have to be adjusted to enable the financing. Such adjustments may involve addition or modification of provisions regarding permissible assignments of rights and obligations, provisions regarding permissible disclosure of documents to the financing provider (as an exception to the business secrecy requirement), provisions regarding the permissibility of creating encumbrances on the subject matter of the transaction, modifications of reps and warranties concerning the financial stability of the buyer, etc. Also, financing providers may require inclusion of specific provisions into the transaction documents. The following provisions of Slovenian legislation are of particular importance when the financing structure is developed. As regards financial assistance, targets are prohibited from assuring advance payments or loans to third parties to acquire their shares. Also, when a company involved in a merger holds more than 25 per cent of the shares of any other company involved in the merger, and has pledged or offered to pledge these shares as security for a loan or a similar legal transaction aimed at assuring funds for acquisition of these shares, approvals of a specified majority of each company’s creditors and employees are required for the validity of the merger contract. Pursuant to the Takeovers Act, at the time of prospectus approval, the acquirer has to prove to the SMA that it has not – for the payment of securities to which the takeover offer relates – granted or committed to grant, in any manner, directly or indirectly, a pledge or other security over such securities or other form of property of the target not owned by the acquirer. Should financing of the transaction by a Slovenian bank be required, one should also note that securities over shares, business shares or call options that shall be acquired through a tender offer and direct or indirect bank financing or refinancing, are – pursuant to the Banking Act – not an appropriate type of security for the purposes of minimising the bank’s credit risk. In addition to consenting to the adjustments of contractual documentation in response to the requirements of the buyer’s financing (as described in the first paragraph), the seller will typically assist in the buyer’s financing by extending the terms for the payment of the agreed price. A seller’s loan to the buyer (either secured or nonsecured) and other forms of assistance (for example, guarantees or pledges) are also possible, but not common.
Slovenia Odvetniki Šelih & partnerji, op, doo 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?
In a situation where a single shareholder holds shares in a joint-stock company representing at least 90 per cent of the share capital, such major shareholder has the right to propose to the shareholders’ meeting of such company to adopt a decision on transfer of shares of the other shareholders to the major shareholder, in exchange for payment of an adequate indemnification in cash. The indemnification shall be determined by the major shareholder, taking account of the assets and profits of the company at the time of the shareholders’ meeting. Special rules apply to indemnification if the squeeze-out is performed within three months following a successful takeover offer. Before the shareholders’ meeting is convoked: • a bank has to agree to be jointly and severally liable for payment of the indemnification; • the major shareholder has to prepare a special report; • the indemnification generally has to be audited by one or more auditors appointed by the competent court upon proposal of the major shareholder; and • proposal of the shareholders’ meeting decision has to be prepared, as well as copies of annual reports of the company for the past three business years. All the above-mentioned documents have to be available to the minority shareholders once the agenda of the shareholders’ meeting is published. The period between the convocation and the shareholders’ meeting has to be at least one month. After the shareholders’ meeting resolves, by at least 90 per cent majority, that the shares of minority shareholders be transferred to the majority shareholder for payment of adequate cash indemnification, this resolution has to be registered with the competent court after the expiry of a certain period. If there are no procedural mistakes, minority shareholders may generally not challenge the resolution of the shareholders’ meeting, but may initiate a special court procedure challenging the amount of the indemnification (appraisal right). Such court procedure does not delay the squeeze-out process. Shares of minority shareholders are automatically transferred to the majority shareholder upon registration with the competent court, and a procedure with the KDD then has to be carried out to transfer such shares to the account of the major shareholder. The aggregate duration of a squeeze-out procedure, together with the necessary time for preparation of documents, is around seven months. The procedure may be delayed if minority shareholders challenge the resolution of the shareholders’ meeting for procedural flaws. In a situation in which a squeeze-out would be possible, each minority shareholder has the right to request to be sold out. 15 Cross-border transactions How are cross-border transactions structured? Do specific laws and regulations apply to cross-border transactions?
Cross-border transactions are not subject to any special laws and regulations, except for cross-border mergers, which are regulated by the Companies Act in accordance with the 10th EU Directive on Cross-Border Mergers. Slovenian entities may merge with at least one non-Slovenian EU entity and vice versa. The respective provisions of the Companies Act contain a detailed set of provisions (in line with the Directive) regulating procedural and substantive aspects of such cross-border transactions. The most important documents to be prepared in this respect are common draft terms, the management report, the independent expert’s report and the pre-merger certificate.
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?
Various notification requirements and waiting periods apply with respect to takeover bids. Among others, a takeover bid has to be launched within a period from 10 to 30 days after the intention to perform a takeover bid is published; and the takeover offer has to be valid between 28 and 60 days. Waiting periods and registration requirements are also common in corporate reorganisations. If a shareholders’ meeting of a jointstock company is required to approve certain types of corporate reorganisations, it has to be convened and convocation published at least 30 days in advance, and also certain documents (for example, the merger contract, annual reports, reports of the management board, the supervisory board and the auditor) have to be available for review from the day of the published convocation of the shareholders’ meeting. In some cases, registration with the commercial register may not be applied for before the expiry of a certain period following the shareholders’ meeting. If not excluded in the respective foundation documents, shareholders in limited liability companies have pre-emption rights. Otherwise, there are no general waiting or notification periods in share and asset deals. However, such periods can exist on the basis of foundation documents of the companies involved, tax considerations, or industries in which the companies operate. 17 Sector-specific rules Are companies in specific industries subject to additional regulations and statutes?
Companies in specific industries are subject to specific regulations that generally require approval of a supervisory body for the acquisition of a certain percentage of voting rights, or share capital, or both, for a shareholders’ agreement or similar. Such regulated industries include, among others, banking, insurance, media, brokerage, gaming and energy. The period required to obtain such approvals is usually strictly regulated and may be substantial. 18 Tax issues What are the basic tax issues involved in business combinations?
In addition to VAT, corporate income tax considerations (including tax withholdings, goodwill depreciation, thin capitalisation, group taxation and treatment of financing costs) are usually the most relevant when structuring a business combination. The CITA contains special rules on taxation of certain types of business combinations (transfer of assets, shareholding swaps, mergers and demergers). Directive 90/434/EEC, as amended, is transposed into the CITA. 19 Labour and employee benefits What is the basic regulatory framework governing labour and employee benefits in a business combination?
Labour and employment-related benefits are usually determined in collective agreements, employer’s general acts and employment contracts. The contractual and other rights and obligations deriving from the employment relationship as of the day of transfer, shall be transferred from the employer-transferor to the employer-transferee if any change of the employer is carried out within the meaning of the Acquired Rights Directive (as implemented in Slovenia). The rights and obligations deriving from collective agreements applicable for the employer-transferor shall be generally assured by the employer-transferee for at least one year.
Getting the Deal Through – Mergers & Acquisitions 2012
Odvetniki Šelih & partnerji, op, doo
Slovenia 20 Restructuring, bankruptcy or receivership
Update and trends On 19 April 2012, the Slovenian government adopted a draft amendment to the Takeovers Act according to which the takeover threshold would be increased from the current 25 per cent to 33.3 per cent of voting rights in the target company. This proposal is also supported by the Slovenian Securities Market Agency. If adopted by the Slovenian National Assembly (namely, the Slovenian parliament). If supported by the government and the National Assembly, it is likely that there is time for the amendment to enter into force in 2012.
The employer-transferor and the employer-transferee shall inform the trade unions (or, if no trade unions are established, all employees) in advance, and the employer-transferee shall, not later than 15 days before the transfer, consult with the trade unions about the legal, economic and social consequences of the transfer and the envisaged measures for the employees. In addition, the employees may exercise their influence on the business matters of the employer with their right to participate in management either through the works council or employee representatives. Representation via the works council (in companies with more than 20 employees) or workers’ representative mainly involves exercising the employees’ right to be informed and their right of joint consultations on the corporate status matters of the employer. The works council has also the right to co-decide certain matters. Employee nominees are appointed to the competent bodies of the employer. In the case of a two-tier management system, the works council may appoint members to the supervisory board (their number shall be determined by the articles of association, but may not be less than one-third and not more than half of all members), and in companies employing more than 500 employees also nominate an employees’ director to the management board. In the case of a one-tier management system, the employees may participate in management with their representatives in the board of directors (their number shall be determined by the articles of association, but has to be at least one and may not be lower than one member per each three members), and in companies employing more than 500 employees also with their nominee for an executive director of the employer.
Nataša Pipan Nahtigal Jera Majzelj
What are the special considerations for business combinations involving a target company that is in bankruptcy or receivership or engaged in a similar restructuring?
Concerning acquisitions prior to commencement of bankruptcy, it should be noted that the bankruptcy administrator may challenge the bankruptcy debtor’s legal actions if performed to the detriment of other creditors within a period of one year before the bankruptcy proposal, and provided that the opposite party knew of the bad financial or economic position of the bankruptcy debtor. It shall be presumed that such knowledge exists if the challenged action took place within three months before the bankruptcy proposal. As a consequence of successful challenging, the opposite party would need to return to the bankruptcy estate anything that was transferred to it, and it may – provided that it duly reported its claim – request the payment of its claims pari passu with other creditors. If neither of the parties fully fulfilled its contractual obligations before commencement of bankruptcy proceedings, the bankruptcy administrator may (subject to approval of the bankruptcy court) decide to withdraw from the contract or fulfil it as if the bankruptcy proceedings would not have been commenced. During the bankruptcy proceedings, the bankruptcy administrator is authorised to sell the bankruptcy debtor’s assets in order to (partly) repay the creditors, and certain secured creditors are allowed to sell the bankruptcy debtor’s assets that represent security for their claims. The bankruptcy administrator and such secured creditors need to carry out the sale of assets in accordance with the detailed rules contained in the legislation and the resolution of the bankruptcy court. Generally, the allowed methods of sale of the bankruptcy estate are public action, direct sale and direct negotiations with potential purchasers. It is also possible to sell all assets of the bankruptcy debtor – except for the liabilities that remain with the bankruptcy estate – together, as a business unit. Such a method is used if it results in a better purchase price for the sold assets. 21 Anti-corruption and sanctions What are the anti-corruption and economic sanctions considerations in connection with business combinations?
Slovenia adopted the Prevention of Money-Laundering and Terrorist Financing Act (transposing Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money-laundering and terrorist financing) that contains various measures, competent bodies and procedures for the detection and prevention of money-laundering and terrorist financing.
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Slovenia Odvetniki Šelih & partnerji, op, doo The Slovenian parliament also enacted the Integrity and Prevention of Corruption Act that defines the term ‘corruption’ as including any activity that is contrary to the duty of official or responsible persons in the public or private sectors, as well as the activities of persons instigating any violations or persons who can take advantage of the violation through directly or indirectly promised, offered or given or required, accepted or expected benefit for themselves or for another person. Public sector entities and certain state owned companies are obliged to include a special anti-corruption clause in accordance with the Integrity and Prevention of Corruption Act into any contract concluded for the value of over E10,000. The concept of corruption under the Integrity and Prevention of Corruption Act is broader than the concept of corruption that is recognised as a criminal offence (for example, bribery). A special
commission for the prevention of corruption operates under the Integrity and Prevention of Corruption Act, and is authorised to – and frequently does – publish its non-binding opinions, views, recommendations and explanation covering the scope of this law. If a certain act or omission committed in connection with business combinations represents a corrupt act as a criminal offence, the perpetrator being an individual can be penalised with imprisonment or a monetary fine or both, and criminal sanctions may also be imposed on legal entities pursuant to the Liability of Legal Persons for Criminal Offences Act. Furthermore, a transaction (business combination) induced by an act of corruption could be nullified (and an innocent party suffering damage could also seek recovery of damages).
Getting the Deal Through – Mergers & Acquisitions 2012
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Mergers & Acquisitions 2012 ISSN 1471-1230