Mergers & Acquisitions in 61 jurisdictions worldwide Contributing editor: Casey Cogut
2010 Published by Getting the Deal Through in association with: Aabø-Evensen & Co Advokatfirma Æ´LEX Arendt & Medernach Baião, Castro & Associados | BCS Advogados Bersay & Associés Bianchi Rubino-Sammartano & Associati Biedecki Biedecki Olejnik Bizconsult Law LLC Bowman Gilfillan Inc Brandao Teixeira, Ricardo e Foz Advogados Carey y Cía Cheok Advocates & Solicitors Corpus Legal Practitioners Coulson Harney Debarliev Dameski & Kelesoska Attorneys at law ELIG Estudio Trevisán Abogados Freshfields Bruckhaus Deringer LLP Gleiss Lutz Goodrich, Riquelme y Asociados Grata Law Firm Harneys Headrick Rizik Alvarez & Fernandez Herzog, Fox & Neeman Hoet Peláez Castillo & Duque Abogados Homburger AG Iason Skouzos & Partners Karanovic´ & Nikolic´ Kim & Chang LAWIN Law Office of Mohanned bin Saud Al-Rasheed in association with Baker Botts LLP Lideika, Petrauskas, Valiunas ir partneriai LAWIN Lloreda Camacho & Co Abogados Mallesons Stephen Jaques McMillan LLP Nagashima Ohno & Tsunematsu NautaDutilh Navarro Abogados Nielsen Nørager Nishith Desai Associates Odvetniki Šelih & partnerji, op, dno Pérez-Llorca PricewaterhouseCoopers Legal Salomon Partners Sayenko Kharenko Schönherr Setterwalls Advokatbyrå Siegler Law Office / Weil, Gotshal & Manges Simont Braun Simpson Thacher & Bartlett LLP Slaughter and May Thanathip & Partners Vlasova Mikhel & Partners Voicu & Filipescu Wolf Theiss WongPartnership LLP Wu & Partners, Attorneys-at-Law Žuric´ i Partneri
Mergers & Acquisitions 2010 Contributing editor: Casey Cogut Simpson Thacher & Bartlett LLP Business development manager Joseph Samuel Marketing managers Alan Lee George Ingledew Robyn Hetherington Dan White Tamzin Mahmoud Ellie Notley Subscriptions manager Nadine Radcliffe Subscriptions@ GettingTheDealThrough.com Assistant editor Adam Myers Editorial assistant Nina Nowak Senior production editor Jonathan Cowie Chief subeditor Jonathan Allen Senior subeditor Kathryn Smuland Subeditors Ariana Frampton Charlotte Stretch Editor-in-chief Callum Campbell Publisher Richard Davey Mergers & Acquisitions 2010 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 2010 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 2010, be advised that this is a developing area.
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Global Oveview Casey Cogut and Sean Rodgers Simpson Thacher & Bartlett LLP iii European Overview Stephen Hewes and Richard Thexton Freshfields Bruckhaus Deringer LLP v Argentina Pablo Trevisán, Claudia Delgado and Laura Bierzychudek Estudio Trevisán Abogados 1 Australia Jason Watts and Nigel Hunt Mallesons Stephen Jaques 7 Austria Christian Herbst Schönherr 15 Belarus Tatiana Emelianova and Andrej Ermolenko Vlasova Mikhel & Partners 21 Belgium Sandrine Hirsch and Vanessa Marquette Simont Braun 26 Brazil Maria P Q Brandão Teixeira Brandao Teixeira, Ricardo e Foz Advogados 32 Brunei Robin Cheok Van Kee Cheok Advocates & Solicitors 38 Bulgaria Kaloyan Todorov Wolf Theiss 44 Canada Sean Farrell and Robert McDermott McMillan LLP 49 Chile Pablo Iacobelli and Cristián Eyzaguirre Carey y Cía 54 China Martyn Huckerby, Sharon Wong and Erik Leyssens Mallesons Stephen Jaques 59 Colombia Enrique Álvarez Posada and Santiago Gutiérrez Borda Lloreda Camacho & Co Abogados 66 Croatia Bojan Fras and Dinka Kovac ˇevic´ Žuric´ i Partneri 72 Cyprus Pavlos Aristodemou and Nancy Charalambous Harneys 78 Czech Republic Paul Sestak and Michal Pravda Wolf Theiss 82 Denmark Thomas Weisbjerg, Jakob Mosegaard Larsen and Martin Rudbæk Nielsen Nielsen Nørager 87 Dominican Republic Roberto Rizik, Sarah De León Perelló and Claudia Taveras Headrick Rizik Alvarez & Fernandez 92 England & Wales Simon Robinson Slaughter and May 97 France Sandrine de Sousa and Yves Ardaillou Bersay & Associés 105 Germany Gerhard Wegen and Christian Cascante Gleiss Lutz 111 Greece Evgenia Stamatelou-Mavromichali Iason Skouzos & Partners 119 Hong Kong Larry Kwok and Cally Fang Mallesons Stephen Jaques 125 Hungary David Dederick, László Nagy and Eszter Katona Siegler Law Office / Weil, Gotshal & Manges 130 India Kartik Ganapathy Nishith Desai Associates 135 Israel Alan Sacks and Daniel Lipman Lowbeer Herzog, Fox & Neeman 142 Italy M auro Rubino-Sammartano and Robert Rudek in cooperation with Simone Rizzi and Marina Rubini Bianchi Rubino-Sammartano & Associati 147 Japan Ryuji Sakai, Kayo Takigawa and Yushi Hegawa Nagashima Ohno & Tsunematsu 154 Kenya Richard Harney and Haanee Khan Coulson Harney 159 Korea Sang Hyuk Park and Gene Oh Kim Kim & Chang 164 Latvia Raymond Slaidins and Kristine Meija LAWIN 168 Lithuania Rolandas Valiu¯nas and Vita Daukšaite˙ Lideika, Petrauskas, Valiunas ir partneriai LAWIN 173 Luxembourg Guy Harles and Saskia Konsbruck Arendt & Medernach 180 Macedonia Emilija Kelesoska Sholjakovska and Elena Miceva Debarliev Dameski & Kelesoska Attorneys at law 187 Mexico Jorge A Sánchez-Dávila Goodrich, Riquelme y Asociados 193 Montenegro Ivan Nonkovic´ and Patrick Callinan Karanovic´ & Nikolic´ 199 Netherlands Willem Calkoen and Martin Grablowitz NautaDutilh 205 Nigeria Theophilus I Emuwa and Chinyerugo Ugoji Æ´LEX 211 Norway Ole K Aabø-Evensen Aabø-Evensen & Co Advokatfirma 216 Poland Ludomir Biedecki and Radoslaw Biedecki Biedecki Biedecki Olejnik 223 Portugal V ictor de Castro Nunes, Maria José Andrade Campos and Cláudia de Meneses Baião, Castro & Associados | BCS Advogados 229 Romania Georgiana Badescu Voicu & Filipescu 235 Russia Anton Klyachin and Igor Kuznets Salomon Partners 240 Saudi Arabia B abul Parikh and Rabie Masri Law Office of Mohanned bin Saud Al-Rasheed in association with Baker Botts LLP 244 Serbia Predrag Milovanovic PricewaterhouseCoopers Legal 250 Singapore Wai King Ng WongPartnership LLP 255 Slovenia Natasa Pipan Nahtigal and Bostjan Kavsek Odvetniki Šelih & partnerji, op, dno 263 South Africa Ezra Davids and David Yuill Bowman Gilfillan Inc 269 Spain Vicente Conde Pérez-Llorca 274 Sweden A nders Söderlind, Carl-Johan Bune, Anders Holmgren, Mattias Bergström and Ola Grahn Setterwalls Advokatbyrå 280 Switzerland Claude Lambert, Dieter Gericke, Dieter Grünblatt and Gerald Brei Homburger AG 285 Taiwan Jerry Chen Wu & Partners, Attorneys-at-Law 292 Thailand Thanathip Pichedvanichok and Chawaluck Sivayathorn Thanathip & Partners 298 Turkey Tunç Lokmanhekim ELIG 303 Ukraine Vladimir Sayenko Sayenko Kharenko 310 United Arab Emirates Patrick Ko, Omar Momany and Mohammad Tbaishat Freshfields Bruckhaus Deringer LLP 317 United States Casey Cogut and Sean Rodgers Simpson Thacher & Bartlett LLP 322 Uruguay Alfredo Navarro Castex and Alfredo Héctor Navarro Navarro Abogados 327 Uzbekistan Bobir Karimov and Ravshan Rakhmanov Grata Law Firm 331 Venezuela Jorge Acedo P and José Alberto Ramírez L Hoet Peláez Castillo & Duque Abogados 336 Vietnam Phong Le, Hanh Tran, Hai Ha and Huyen Nguyen Bizconsult Law LLC 340 Zambia C harles Siamutwa, Sharon Sakuwaha, Namakuzu Shandavu and David Chakoleka Corpus Legal Practitioners 346 Appendix: International merger control David E Vann Jr and Ellen L Frye Simpson Thacher & Bartlett LLP 351
Czech Republic Paul Sestak and Michal Pravda Wolf Theiss
Types of transaction How may businesses combine?
Under the Act on Transformations of Companies and Cooperatives (the Act on Transformations), the following forms of business combinations are possible: merger, demerger, or transfer of assets and liabilities to a shareholder. A merger may occur through amalgamation, namely the transfer of one or more companies into another existing company, or through a consolidation, namely the transfer of one or more companies into a new company created as a result of the consolidation. A demerger, that is, a company’s division into two or more companies, may generally occur with or without winding-up and liquidation of the divided company. Businesses may also combine in the form of purchase of shares in a joint-stock company, participation interests in a limited liability company or purchase of company assets. Such purchase may also occur as a result of a takeover bid. If as a result of the takeover bid a shareholder acquires at least 90 per cent of the share capital and voting rights in the target company, it is obliged to make an additional bid to the remaining minority shareholders. On the other hand, if a shareholder attains at least 90 per cent of shares of voting rights in the target company, it has the option to squeeze out the minority shareholders for consideration approved by the Czech National Bank (CNB). 2
Statutes and regulations What are the main laws and regulations governing business combinations?
The provisions of business combinations are contained in the following statutes: • the Act on Transformations; • the Act on Takeover Bids (the Takeover Act); • the Commercial Code; • the Securities Act; • the Act on the Conduct of Business in Capital Market (the Capital Market Act); • the Act on Protection of Economic Competition (the Competition Act); • the Insolvency Act; and • the Civil Code. 3
Governing law What law typically governs the transaction agreements?
The terms of a merger, a demerger, or a transfer of assets and liabilities to a shareholder are governed by the Act on Transformations and the Commercial Code, which prescribe the mandatory terms and conditions of the transaction agreements. For listed shares, the Takeover Act applies and regulates both voluntary and mandatory bids. The squeeze-out rules and the general framework of a public bid made to shareholders are part of the Commercial Code.
The terms of a purchase of shares are usually set out in a share purchase agreement which is regulated by the Commercial Code, the Securities Act and in some instances by the Takeover Act. The terms of a purchase of participation interest in a limited liability company are set out in a participation-interest transfer agreement governed by the Commercial Code. 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?
Corporate and securities filings
The effectiveness of business combinations is generally subject to registration in the Commercial Register. Under the Capital Market Act, if an individual or a legal entity that directly or indirectly acquires shares of a listed company, which results in the shareholder’s having voting rights exceeding a threshold of 3 per cent (if the share capital of the issuer is higher than 100 million koruna), 5 per cent, 10 per cent, 15 per cent, 20 per cent, 25 per cent, 30 per cent, 40 per cent, 50 per cent or 75 per cent, it must inform the CNB and the issuer in writing within four business days from the moment at which it became or should have become aware of triggering these thresholds. There is an irrefutable legal presumption that the shareholder was aware of this fact within two business days from its occurrence. A similar notification obligation applies to a shareholder whose shareholding drops below any of these thresholds. Anti-monopoly filing
A business combination of two or more competitors will require a notice to and approval from the Czech Antimonopoly Office if: • the total domestic Czech turnover of each of at least two involved competitors from the sale of goods, services or both is at least 250 million koruna in the financial year preceding the combination and the combined total Czech turnover of the involved competitors from the sale of goods, services or both is at least 1.5 billion koruna in the financial year preceding the combination; or • the total domestic Czech turnover of one of the competitors from the sale of goods or services (or both) is at least 1.5 billion koruna in the financial year preceding the combination and the total worldwide turnover of the other competitor from the sale of goods or services (or both) is at least 1.5 billion koruna in the financial year preceding the combination. If these thresholds are met, the combination is subject to approval by the Czech Antimonopoly Office. Within 30 days after filing the application for approval of the combination, the Antimonopoly Office must issue a statement to the effect that: • the combination is not subject to approval;
Getting the Deal Through – Mergers & Acquisitions 2010
• the combination will not restrict or eliminate competition and, therefore, it is approved; or • the procedure before the Antimonopoly Office will be continued due to a serious concern as to the material distortion of economic competition. If the third point applies, the Antimonopoly Office is obliged to issue its decision within five months of the filing of the application. Otherwise the combination is considered approved. A simplified fast-track procedure is available when: • none of the concentrating undertakings is active on the same relevant market, or their joint share on such market is lower than 15 per cent and at the same time none of the concentrating undertakings is active on a market vertically linked to the relevant market where any of the other concentrating undertakings is active, or their joint share on each such market is lower than 25 per cent; or • a competitor acquires sole control over a joint venture where he participated in a joint control so far. The period for the decision of the Antimonopoly Office in the simplified procedure is 20 days and only a simplified resolution with no reasoning is issued. However, should the Antimonopoly Office determine that it needs more information to assess the impact of the concentration, it will notify this to the participants and a standard clearance procedure as described above will apply. According to the Competition Act in general, a concentration of undertakings cannot be implemented prior to the submission of the clearance application or prior to the effective decision of the Antimonopoly Office. However, there is an exemption for takeovers of a target company whose equity securities are publicly traded. Under this exemption, a takeover can be implemented prior to the submission of the application or prior to the effective decision of the Antimonopoly Office, provided that the application to the Antimonopoly Office is submitted immediately after the takeover and that the voting rights attached to these securities are not exercised. Fees
Under Czech law, there are no stamp taxes or other similar duties. The Commercial Registry fees range between 1,000 koruna and 5,000 koruna for a single registration. The application for the approval of the Czech Antimonopoly Office is subject to a fee of 100,000 koruna. Certain agreements required in connection with business combinations must be prepared in the form of a notarial deed or must have signatures of the parties notarised. Notaries in the Czech Republic charge fixed fees that are relatively low, compared with the value of the transaction. 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?
In the case of a merger or a demerger, the board of directors is obliged to: file with the collection of instruments of the Commercial Register at least one month before the date of the shareholders’ general meeting approving the merger (or the demerger) the terms of the merger (or demerger) in the form of a transformation project; and publish a notice on filing of such transformation project. Furthermore, the board of directors of the companies involved in the business combination must publish a notice advising creditors of their right to require provision of sufficient security if the recoverability of their claims deteriorates as a result of the transaction. In the case of a public takeover bid, the content of the public takeover bid must be published by the shareholder submitting such public takeover bid.
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?
A shareholder reaching or exceeding 5 per cent (or 3 per cent, if registered share capital of the target company exceeds 100 million koruna) of the voting rights in a public company, whether acting alone or together with other parties, must notify the target public company and the Czech National Bank. The notification duty arises again if it reaches 10, 15, 20, 25, 30, 40, 50 or 75 per cent of voting rights and if the shareholder’s share of voting rights falls below any abovementioned limit. The reporting duty has to be fulfilled within four business days after the person has become aware (or could have become aware) of this fact. There is an irrefutable legal presumption that the shareholder was aware of this fact within two business days from its occurrence. The issuer must report on acquisition or disposal of its own shares resulting in a shareholding exceeding 5 per cent or 10 per cent (or also 3 per cent, if the share capital of the issuer is higher than 100 million koruna) or in a drop of its shareholding below these limits. 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?
In the case of a merger or a demerger of a joint-stock company, the transformation project, specified financial statements of all companies involved in the merger (or the demerger), reports issued by the boards of directors of the involved companies explaining the intended business combination (both legally and economically) and the report prepared by the certified court’s expert must be available to the shareholders no later than one month prior to the shareholders’ general meeting approving such business combination. The reports are not required if all of the shareholders waive their right to obtain them. For limited liability companies, this information must be sent to all shareholders no later than two weeks prior to the general meeting. An appraisal of the assets and liabilities of the dissolved companies must generally be prepared by a court-appointed expert and made available to shareholders at the involved companies’ registered offices. In addition, the board of directors of the companies involved in the business combination must publish a notice advising creditors of their right to require provision of sufficient security if the recoverability of their claims is at stake as a result of the transaction. In the case of a public takeover bid, directors and members of the supervisory board of the target company must issue their opinion to the shareholders as to whether the launched public takeover bid is advantageous to them or not. The directors and members of the supervisory board of the target company are obliged to act in the interests of all its shareholders, as well as in the interests of its employees and creditors. In the case of a squeeze-out of the minority shareholders, the company must inform the shareholders about the amount of the consideration for the squeezed-out shares and the approval of the Czech National Bank of the squeeze-out. Upon acquiring 30 per cent of the voting rights (provided that such interest represents a controlling interest), the acquiring shareholder is required, within 30 days, to launch an unconditional public takeover bid with respect to all of the company shares. The public takeover bid is subject to the prior consent of the Czech National Bank. The offer price may not be lower than the premium price, that is, the highest price for which the bidder or other parties acting in concert with him purchased any of the company shares within preceding 12 months, and, if the offer price cannot be so determined, it may not be lower than the six-month weighted average market price.
czech republic The Czech National Bank may require that the bidder delivers, within a prescribed period, a court expert’s opinion certifying the equitability of the offer price. If the bidder acquires more than 90 per cent of the voting rights as a result of the unconditional and unlimited public takeover bid, it shall be obliged to launch, within 30 days, an additional public takeover bid with respect to all remaining company shares. 8
Approval and appraisal rights What approval rights do shareholders have over business combinations? Do shareholders have appraisal or similar rights in business combinations?
Most types of the available business combinations are subject to approval by the shareholders of the involved companies. Any merger must be pre-approved by 75 per cent of the votes cast by attending shareholders, unless the articles of association of the company require a greater majority. Sale of the company’s business or a distinct part thereof must be approved by a two-thirds majority vote of attending shareholders. Any squeeze-out of the minority shareholders must be pre-approved by a majority of 90 per cent of the votes of all company shareholders. The minority shareholders of the target company may file a court action to declare the invalidity of any resolution of the shareholders’ general meeting should such a resolution violate applicable Czech law or the target company’s articles of association. Such action must be filed within three months from the date of the challenged shareholders’ general meeting. The assets and liabilities of the dissolved company must generally be appraised by a court-appointed expert (for consolidation, this applies to both dissolved companies in any event; for amalgamation, this applies to the dissolved company if as a result of the merger, the shareholders of the dissolved company will acquire shares in the surviving company or if the existing contributions of the shareholders of the surviving limited liability company will be increased and the assets of the dissolved company are the source of this increase). Moreover, in case of a merger the minority shareholders have the right to claim an additional cash payment from the surviving entity if the exchange share ratio is not adequate. In the case of a squeeze-out of minority shareholders, the minority shareholders have the right to claim a court review of compensation for the shares paid by the majority shareholder. Furthermore, similar rules apply to public takeover bids. 9 Hostile transactions What are the special considerations for unsolicited transactions?
Generally, an unsolicited investor may attempt to purchase the company shares through a public takeover bid. Any public takeover bid must be conducted in accordance with the detailed rules specified in the Commercial Code and the Takeover Act. If the public takeover bid relates to listed shares, it must be pre-approved by the Czech National Bank. Immediately upon communication to the target company of the investor’s intention to launch a public takeover bid, the company’s directors and members of the supervisory board must generally refrain from any action that may frustrate the takeover bid. The board of directors of the target company must, within five business days, prepare their respective opinions as to whether the public takeover bid is advantageous to the shareholders. 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 thirdparty bidders?
Before the board of directors of the target company becomes aware of the launch of a public takeover bid, it may use the following meas-
Wolf Theiss ures, for example, to prevent any hostile takeover: to limit in the target company’s articles of association the number of voting rights held by any single shareholder, or by any single shareholder and its controlled subsidiaries; and to increase the majority of votes required for the adoption of certain fundamental decisions by the shareholders at the general meeting. Once a takeover bid has been announced, and until it has been concluded: the bidder may not acquire or sell target shares, other than through the takeover bid (with certain exceptions stipulated by the Takeover Act). Furthermore, the bidder may not acquire or sell options for target shares. Finally, it may not enter into any future agreements for sale of target shares. These prohibitions also apply to all persons acting in concert with the bidder. The target may not, inter alia, adopt any measures that could cause its shareholders not to be able to decide on the bid in their own discretion and with adequate knowledge of the matter; or take any action that could frustrate or complicate the bid, except when this is approved at a general meeting during the period of time when the bid is binding, the target company is fulfilling its statutory obligations or it is a matter of usual course of business. 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?
For completion of a squeeze-out of minority shareholders, an approval of the fairness of the consideration offered for their shares by the Czech National Bank is required. For mandatory public takeover bids concerning listed securities, consent of the Czech National Bank with publication of the bid must be obtained. The bidder must submit to the Czech National Bank the draft bid within 15 business days after triggering the obligation to launch a bid. The Czech National Bank may, upon the bidder’s request, extend this period by up to 30 business days. A mandatory bid must be launched within 30 days after the acquisition which triggered such obligation. 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?
Conditions to voluntary bids are generally not prohibited. The Takeover Act expressly allows a condition of minimum acceptance – the bid may be conditioned on receipt of a minimum total number of shares from tendering shareholders. A ‘partial voluntary bid’ is also allowed if the bidder purchases the pro rata number of shares from persons who accepted the bid and who offered shares in excess of the number of shares the bidder offered to purchase. Mandatory bids must not be subject to conditions. 13 Financing If a buyer needs to obtain financing for a transaction, how is this dealt with in the transaction documents?
Effective as of 20 July 2009, rules for financial assistance (provision of advance payments, loans or other monetary contributions or security for the purposes of acquisition of shares of the providing entity) have been relaxed. Under the previous regime, such financial assistance was generally prohibited with no exemptions. Currently, financial assistance is allowed if regulated by the articles of the granting company and subject to following conditions: • it is provided under arms-length’ terms; • the board has verified the creditworthiness of the entity to receive the financial assistance; Getting the Deal Through – Mergers & Acquisitions 2010
• the provision of the financial assistance is approved in advance at the general meeting by a two-thirds majority of all votes on the basis of a report of the board; • the board prepares a written reasoning report, including: benefits and risks for the company; terms of the financial assistance and price for which the recipient of the financial assistance will acquire the shares; results of the verification of the creditworthiness of the recipient of the financial assistance; and a reasoning why the grant of the financial assistance is beneficial for the company; • the price for which the shares of the company granting the financial assistance are acquired is fair; • the grant of the financial assistance will not cause reduction of own funds below the registered share capital, increased by funds not distributable to shareholders and reduced by the amount of the still unpaid share capital; • the company creates a special reserve fund in the amount of the granted financial assistance; and • the grant of the financial assistance will not immediately cause insolvency of the granting company. 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 is available to a majority shareholder holding at least 90 per cent of the shares or 90 per cent of voting rights of a Czech joint-stock company (both listed and unlisted). This shareholder has the right to request the board of directors to call a shareholders’ meeting to decide on the squeeze-out of the minority shareholders. After the shareholders pass the decision on the squeeze-out, the board of directors files an application to register the squeeze-out decision with the Commercial Register. The forced transfer of the shares becomes effective one month from the publication of the registration court’s notice that the squeezeout decision has been registered. The majority shareholder must pay the minority shareholders fair compensation for their shares, which must be supported by an expert opinion or by other reasoning of the amount of consideration. For listed shares, prior consent of the Czech National Bank with the reasoning of the amount of consideration is required. 15 Cross-border transactions How are cross-border transactions structured? Do specific laws and regulations apply to cross-border transactions?
Under the Act on Transformations (which implements, inter alia, EU Directive No. 2005/56/EC on cross-border mergers of limited liability companies), it is possible to perform a merger between entities organised and existing under the laws of any of the member states of the European Union. Upon the merger, the registered office of the merged entity may be located in any of the member states of the European Union. The Act on Transformations and its implementing regulations also specify the particular steps and documents of the cross-border merger. Cross-border transactions may be subject to a foreign-exchange notification obligation. Additional restrictions apply to certain regulated industries (for example, the arms’ trade). 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?
Most types of available business combinations require the consent of the shareholders of the companies involved before their conclusion. Convening the shareholders’ general meeting normally
Update and trends Mergers and acquisitions activity is still affected by the credit crisis. The ongoing transactions are mostly distressed, triggered by the sellers’ need to restructure their assets. There has not been any significant impact of the credit crisis on the regulatory or statutory framework, due to the stability of the banking sector, and no need to implement state aid packages. A draft new act on business corporations is currently being considered by the Parliament, but will have no material impact for business combinations.
takes 30 days. One month before the general meeting deciding on the business combination, the deposit of the transformation project with the commercial registry and publication of notification of such deposit is required. The Czech National Bank shall issue its decision on a request for approval of the resolution of the general meeting concerning the squeeze-out of minority shareholders or its decision on a request for an approval of the terms of a mandatory takeover bid involving listed securities, respectively, within 15 business days. If the Czech National Bank fails to issue its decision with respect to the mandatory public takeover bid in the given period, it is deemed that the Czech National Bank approved the terms of the bid. Moreover, the conclusion of certain types of business combinations is conditional upon their registration in the commercial registry. The registration procedure of business combinations is limited to 15 business days. The squeeze-out of minority shareholders becomes effective one month following publication of the registration of the relevant decision of the general meeting in the commercial registry. 17 Sector-specific rules Are companies in specific industries subject to additional regulations and statutes?
For certain specific industries (for example, banking, insurance and investment firms), the acquisition of a qualified participation in the target company is subject to the prior approval of the Czech National Bank. 18 Tax issues What are the basic tax issues involved in business combinations?
Corporate income tax is currently 19 per cent. Corporate income tax applies to all Czech-based entities, irrespective of their ownership, except for general partnerships and a general partner’s share of profit in a limited partnership. The Czech Republic has double taxation treaties with many countries, including most European countries. Most of the double taxation treaties entered into between the Czech Republic and western countries are based on the OECD model treaty. In addition to corporate income tax, there are certain other taxes which may be relevant in a considered business combination (for example value added tax or real property transfer tax). 19 Labour and employee benefits What is the basic regulatory framework governing labour and employee benefits in a business combination?
Generally, the terms of the labour relationships remain unaffected by a business combination. The obligations of the original employer are transferred directly to the new employer. The employees of a target are not entitled to claim any additional benefits in connection with the transaction.
czech republic The bidder and the board of the target must inform employee representatives of the takeover bid without delay and the board of the target must draw up an opinion of the bid in which they state whether the bid complies with the interests of the target company and its employees. Furthermore, the employees of joint-stock companies may influence the business combination through their representatives on the supervisory board of the company. If a joint-stock company has more than 50 employees, at least one-third (and at most one-half) of the supervisory board members are to be elected by the employees.
Wolf Theiss 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 target company in bankruptcy may be merged with a third party subject to the approval of its creditors. Also, assets of a bankrupt entity can be sold by the insolvency trustee at a public auction. Instead of the sale of the individual assets, the insolvency administrator may, with the court’s approval, sell the whole business of the bankrupt entity.
Paul Sestak Michal Pravda
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Getting the Deal Through – Mergers & Acquisitions 2010
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Mergers & Acquisitions 2010 ISSN 1471-1230
Mergers and acquisitions activity is still affected by the credit crisis. The ongoing transactions are mostly distressed, triggered by the s...
Published on Mar 31, 2011
Mergers and acquisitions activity is still affected by the credit crisis. The ongoing transactions are mostly distressed, triggered by the s...