This country-specific Q&A provides an overview to M&A laws and regulations that may occur in Greece.
This Q&A is part of the global guide to Mergers & Acquisitions. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/mergers-acquisitions-3rd-edition/
What are the key rules/laws relevant to M&A and who are the key regulatory authorities?
Provisions affecting mergers and acquisitions are spread in an impressive number of laws.
On 13 June 2018, Law 4548/2018 on the reform of the law on public limited companies (sociétés anonymes) was published in the Government Gazette; this law came into force on 1 January 2019 (hereinafter “Law 4548/2018”). It entirely replaces the old codified Law 2190/1920, except for the chapters dedicated to mergers, reverse mergers and transformations of Greek sociétés anonymes (SAs), (and certain other provisions). The chapter on mergers, etc. is expected to be replaced by a new regulatory framework on corporate mergers, already introduced to Parliament for discussion and voting as of 11 February 2019 by the Minister of Economy and Development. The Draft bill “On Corporate Transformations,” (hereinafter “Draft Law”), on which the public consultation was concluded already as of 25 October 2018, relaxes a number of restrictions in the field of corporate transformations by allowing, for example, different forms of companies to merge and all kinds of corporations and not just sociétés anonymes to be split, while also establishing a clearer legislative framework in relation to the transformation of partnerships companies to sociétés anonymes.
Law 3777/2009, implementing the cross-border merger Directive 2005/56/EC is also relevant, while Law 3461/2006 transposing Directive 2004/25/EC and Law 3556/2007 transposing the Transparency Directive 2004/109/EC in relation to information obligations in cases of acquisition of significant holdings in listed companies also apply to listed companies, along with Law 4443/2016 on market abuse. Further laws regulating special types of companies also contain specific M&A provisions, such as Law 4072/2012 on private limited companies (PCs), Law 3190/1955 on limited liability companies and Law 2515/1997 on mergers between credit institutions.
Law 3959/2011 regulates competition law aspects related to concentrations and applies in conjunction with the EC Merger Regulation 139/2004. The laws offering tax neutrality to transactions are of significant importance, as they have facilitated numerous M&As and corporate transformations in Greece. Tax incentives are principally provided by Legislative Decree 1297/1972, Law 2166/1993 and Law 4172/2013 (the Income Tax Code). Certain tax benefits and motives will remain in force even after the Draft Law comes into force, if ever. All other provisions of the aforementioned Laws will be abolished by the Draft Law after it comes into force, especially as regards the conditions, the process of transformation and the results thereof.
Greece does not have a specialised M&A market regulator. Specific issues regarding takeover bids are regulated by the Hellenic Capital Market Commission (HCMC), while concentration matters are dealt by the Hellenic Competition Commission. For transactions in regulated markets, such as financial institutions including insurance companies, or licensed entities as, e.g. in the energy sector, the sector-specific authorities are also in charge.
What is the current state of the market?
Contrary to 2017, 2018 has been quite active in several market sectors. In addition, as Greek banks are pressured under the country’s restructuring programmes to divest the non-performing-loans (NPL) portfolios as well as the assets they have accumulated by seizing assets of distressed debtors, they are now accelerating the sale of tranches of such portfolios which may include distressed businesses and real estate assets and may be diversified by healthy loans as well in order to become attractive to purchasers. The banks’ institutional tools to this effect have improved and there is an increased mobility in this sector.
Which market sectors have been particularly active recently?
2018 was a very active year for the energy, hotel, food, fish, cosmetics, metallurgy, IT, telecoms and retail sectors.
There are various examples of transactions. Motor Oil, the Greek heavyweight oil company which has been diversifying within the energy, the media and the financial sector, embarked upon a barrage of acquisitions, including the majority share capital of Alpha TV Channel for € 33 million, of the Investment Bank of Greece, CPB Asset Management and Laiki Factors and Forfaiters S.A. for € 73,5 million and of the energy trading and retail company, NRG. The banking group of Eurobank acquired Piraeus Bank Bulgaria for € 75 million, while the Mytilineos Group acquired the aluminum company OP.AL.ME SA for € 20 million and the shares that grant it the entire ownership of the natural gas company M & M SA. Motodynamics participated in an increase in the share capital of Lion Rental SA (representative in Greece of the German Sixt car rental company) with € 15 million, acquiring 80.5% of the company, with 19.5% remaining in the Theocharakis family. Briq Properties acquired the Mr & Mrs White Paros hotel on the island of Paros for € 3,5 milion and OPAP acquired the 36,75% of the company TCB Holdings Ltd ("TCB") for € 50 million.
HRADF, the public Hellenic Republic Asset Development Fund, divested its shareholding in the listed telecoms incumbent, Cosmote. A new round of mergers and acquisitions in Greece's important coastal shipping sector is apparently on the horizon, following the acquisition of Hellenic Seaways by the Attica Group for € 152,5 million, which was finalised in the summer of 2018. In the food sector, the Competition Committee approved the acquisition by "DIAMANTIS MASOUTIS SOCIETE ANONYME - SUPER MARKET" of the sole control over the super market chain "PROMITHEFTIKI TROFIMON SA".
What is more, ATE Investment paid €12.5 million for the acquisition of Frigoglass Jebel Ali, a subsidiary of Frigoglass, which is active in the packaging of glassware products. Olympia Group acquired 80% of Metis Cyberspace Technology, a company specializing in the fields of maritime electronic engineering and IoT (Internet Of Things) for the amount of € 4 million. In a further acquisition, Sarantis Group has further strengthened its position on the international business scene, making the third acquisition from the beginning of the year and the 7th overall for the 2017-2018 financial years with the purchase of Ergopack for € 20 million. In September 2018 the MIG shareholders approved the transfer of their entire stake in Hygeia Group (70.38%) to Hellenic Healthcare for € 204,4 million, a company controlled by the fund CVC Capital Partners, which now controls five private hospitals in Greece.
What do you believe will be the three most significant factors influencing M&A activity over the next 2 years?
The official exit of Greece from the financial restructuring programs in August 2018 it is expected to result in the stabilisation of the country’s economy and lead to more business confidence and investments. This remains to be confirmed by the markets, which do seem to need time and tangible indicators to steadily endorse the positive trend and for that trend to be reflected in the Athens Exchange.
The progressive reduction of the tax rate on company revenues starting 2019 is expected to have a positive impact on business economy. The amended Income Tax Code gradually reduced the tax rate for business profits gained by legal entities, from the current 29% to 25% for income earned in the tax year 2022 and onwards. The rate shall be reduced by one percentage point per year, starting with the income for the tax year 2019, for which the tax rate is set at 28%.
In addition, the draft law on Corporate Transformations simplifies the process of mergers and acquisitions. The draft codifies the scattered legislation on corporate transformations and enables all legal forms of companies to merge, divide and convert into another legal form, for which there have been drawbacks and ambiguities under the current laws. The draft law resolves the issue of irregular M&As, i.e. amalgamations between different kinds of legal entities, and introduces significant flexibility in the conversion, merger and splitting or de-merger processes.
Further, under the new company law 4548/2018, companies have the right to identify their shareholders, which may have a further positive impact on the M&A activity in Greece. Specifically, Law 4548/2018 abolishes the right of SAs to issue shares to the bearer and as a consequence all shares must be registered; any shares issued to the bearer which exist on the date of adoption of Law 4548/2018 must be registered as of January 1st 2020 at the latest.
Furthermore, Law 4548/2018 facilitates the exercise of shareholders' rights both domestically and in other EU Member States, and this is expected to result in more inbound and domestic investments. For example, according to Law 4548/2018, the sign-off of shareholders’ resolutions can be done by exchange of e-mails or by any other electronic means. The new law further introduces a number of transparency measures, which, together with the trend of corporate governance processes being adopted even by non-listed companies (for which it is not compulsory), improve the reliability of the market participants.
What are the key means of effecting the acquisition of a publicly traded company?
Stocks of publicly traded companies are acquired freely, unless the potential acquirer initiates a takeover bid, thus triggering the application of Law 3461/2006, as recently amended by Law 4514/2018. Said law enables potential buyers of publicly traded companies to issue bids on a voluntary or mandatory basis to acquire stocks of Greek publicly traded companies.
Under a voluntary bid, the buyer must acquire all offered stocks, unless it has designated a maximum acceptable amount of stocks. A public bid is mandatory for: a) any person acquiring, directly or indirectly, on its own account or through or in concert with third parties acting on its behalf or in concert with it, stocks representing voting rights in excess of 1/3 of the total voting rights, b) any person holding more than 1/3 but less than ½ of the total voting rights and c) any person acquiring stocks that represent more than 3% of the voting rights of the target company within six months. In these cases, the acquirer must address within twenty (20) days (οr within thirty (30) days, when a valuation report is required for the calculation of the minimum cash consideration - see below question 18) from the date of acquisition a mandatory and unconditional bid for the total outstanding shares of the target company.
These thresholds, which are calculated on the basis of the voting rights that the offeror, or any other party acting on its behalf or in concert with it, acquires or holds, also include any voting rights that are acquired or held by such persons on the basis of an agreement, a right of pledge or usufruct, a safekeeping or administration arrangement, provided that the beneficiaries are entitled to exercise such rights at their discretion. Any public bid must be notified to the Hellenic Capital Markets Commission (HCMC) immediately after the decision to launch such a bid is taken, and prior to any other public announcement, together with a draft information document.
What information relating to a target company will be publicly available and to what extent is a target company obliged to disclose diligence related information to a potential acquirer?
All Greek companies are registered in the General Commercial Registry of the Ministry of Commerce (GEMI). Both financial and legal corporate information is publicly available, including its corporate structure and its annual financial reports.
Furthermore, information on potential target companies may be acquired from their websites and from the website of the Athens Exchange, if they are listed; from their annual financial statements; the annual reports of the BoD; the articles of association; from reports filed with supervisory and regulatory authorities, from market and sector reports, etc. The Cadastre and the local Land Registries keep the real estate ownership records, while undertakings operating in regulated markets are registered in the sector specific registers.
The amount of the diligence-related information that shall be disclosed to a potential acquirer depends on the transaction specifics and to the extent of liability the seller is prepared to take. According to the Greek Civil Code, during the stage of negotiations relating to any type of transaction, the parties are obliged to act in good faith, and are thus prohibited to provide incomplete or misleading information.
To what level of detail is due diligence customarily undertaken?
A typical buyer will arrange for legal, accounting and tax due diligence exercises before deciding on an acquisition, depending on the acquirer’s risk profile. In the course of the due diligence exercise the interested acquirer may gain access to the financial and legal books and records of the target and information regarding third parties, such as key client contracts (sometimes redacted), commercial contracts, financial contracts, assets and real estate property, pending or threatened litigation, environmental licenses, intellectual property, insurance and internal auditors’ reports, et.al. Such information shall be restricted in terms of confidentiality and third party rights including data protection rights for individuals.
As a matter of practice, the scope of the research is usually limited at the first stage, where the potential acquirer receives information by reviewing published data related to the target company. In the following stage, a more detailed due diligence review may be allowed for those acquirers, which have submitted an offer. Finally, the preferred acquirer may be granted the opportunity to perform an update due diligence before signing the transaction agreements. The detail and extent of vendor’s and purchaser’s protection clauses, reps and warranties are a matter of negotiation.
Vendor’s due diligence reports are prepared in a number of deals to accelerate the process, while reliance letters may be negotiated between the potential acquirer and the report issuer.
What are the key decision-making organs of a target company and what approval rights do shareholders have?
The key decision-making organs of SAs are the Board of Directors (BoD) and the General Assembly (GA). The BoD represents the company and decides about any type of action relating to the management of the company, the handling of its assets and the implementation of its goals. The GA is exclusively competent for issues such as the amendment of the company’s articles, election the BoD, profit distribution, increase or reduction of the share capital, and the merger, division, modification, revival, extension or resolution of the company. Each share category decides separately too. Approval/first refusal/veto rights may be contained in the articles of the company. The ambit of the statutory formations that can be agreed in the articles has been expanded through the recently passed reformed company law.
What are the duties of the directors and controlling shareholders of a target company?
Directors must manage the affairs of the company lawfully and in line with their duty of care, without abusing any of their rights. They must also refrain from any action that could impinge upon the interests of the company and cannot engage in activities that relate to the company’s goals for their own interests, nor acquire stakes at competing partnerships other than with the company’s permission.
Directors of listed companies are subject to specialized corporate governance rules and are required to pursue the long-term value and the general interest of the company. In the event of a public bid, they must allow shareholders to evaluate its merits and are at the same time prohibited from pursuing their own interests, if these are not aligned with those of the company. More specifically, the BoD of a target listed company is only entitled to seek alternative bids. It is prohibited to act in any way that could result in the public bid being withdrawn or cancelled, if the consensus of the GA has not been obtained first.
Directors and shareholders of listed companies are also subject to the EU harmonized market abuse rules.
Do employees/other stakeholders have any specific approval, consultation or other rights?
The Greek company law has not endorsed the two tier system. However the employment laws provide that employees of private companies that employ more than a specific number of persons, as the case may be, have the right to be informed prior to the transfer of the company about the date of the transfer, its background, eventual financial, legal and social consequences, as well as the planned actions that relate to employees; equally, such information shall be made available in a timely fashion.
The opinion of the BoD in relation to the bid must be distributed to the employee representatives, who subsequently may submit and annex their reply. Similarly, there is a right to be informed in relation to the outcome of the takeover bid. If the administration of the transferred company intends to take action relating to the status of the employees, these have the right to participate in consultations with the managers of the company, in order to reach an agreement.
The creditors of a merging SA are entitled to financial guarantees if the financial status of the merging companies renders such guarantees necessary. Furthermore, creditors owning convertible bonds in at least one of the merging companies have a specific approval right over the merger. Equally, creditors of merging PCs can object to the merger or request to be granted sufficient securities.
To what degree is conditionality an accepted market feature on acquisitions?
Shares are transferred pursuant to the general Civil Code provisions on tangible moveable objects. As such, their transfer and acquisition can be made subject to certain conditions; in that case, destruction or deterioration prior to the fulfillment of the conditions is at the transferor’s risk. By contrast, public takeover bids for listed companies cannot be made conditional upon any type of prerequisites other than those which are included in the information document and relate to regulatory licensing / approval or to the issuing of new shares that will be provided as consideration.
What steps can an acquirer of a target company take to secure deal exclusivity?
A preliminary agreement may be concluded at the start of the negotiations, containing an exclusivity clause next to a confidentiality undertaking.
What other deal protection and costs coverage mechanisms are most frequently used by acquirers?
Common deal protection mechanisms include letters of credit, letters of guarantee, or escrow accounts for gradual payment of the price, which serve as a guarantee for the protection of transactions and especially for the payment of the purchase price. Break-up fees are not common but are enforceable in principle; the contractual structure for the legal basis of break-up fees is critical for their enforceability. Limitations based on general principles of law (e.g., fault or the abusive exercise of rights) will apply. Furthermore, in order to mitigate the risk of not receiving the necessary approvals for the transaction, the parties usually define the granting of the relevant approvals as a condition precedent for closing. Each party carries its own transaction costs.
Which forms of consideration are most commonly used?
Any type of consideration can be provided for shares in private companies, while the most common form chosen is cash (in the form of bank transfers). Escrowed amounts may be agreed in view of a verification of R&Ws exercise. As far as listed companies are concerned, the acquirer may offer securities, shares, cash, or a combination thereof. In relation to mandatory takeover bids, shareholders of a target company can opt for a cash-for-shares consideration.
At what ownership levels by an acquiror is public disclosure required (whether acquiring a target company as a whole or a minority stake)?
There are no public disclosure requirements in the case of the acquisition of shares in private companies. With respect to public, listed companies, disclosure must be made for transparency purposes once there is knowledge on the deal, while disclosure can be delayed subject to prior communications with the HCMC, and provided that legitimate interests related to the acquisition are protected, if all relevant delay requirements under the MAR are met, i.e. (a) immediate disclosure is likely to prejudice the legitimate interests of the issuer; (b) delay of disclosure is not likely to mislead the public; (c) the issuer is able to ensure the confidentiality of that information.
Furthermore, any person submitting a public bid (whether voluntary or mandatory) must inform both the HCMC and the target’s BoD in writing before any public announcement. A person acquiring or disposing shares in a listed company to which voting rights are attached must notify the issuer and the HCMC if such proportion reaches or exceeds the thresholds of 5%, 10%, 15%, 20%, 25%, 33.3%, 50% or 66.6%. The same obligation applies to certain cases of acquisition, disposal and exercise of major proportions of voting rights, as well as to the acquisition or disposal of financial instruments.
At what stage of negotiation is public disclosure required or customary?
In addition to disclosures under Q.15, persons involved in a takeover of a listed company are only allowed to disclose confidential information if such disclosure can be considered appropriate under their respective duty of care. Confidential information is defined as including any unpublished information of a precise nature relating to one or more issuers and financial means and which could potentially affect the price of such means. Similarly, such disclosure needs to be precise and true, or else it can result in market distortion and imposition of criminal and administrative charges.
Is there any maximum time period for negotiations or due diligence?
No maximum time period for negotiations or due diligence between interested parties is provided in relation to private companies. Parties should however refrain from unjustifiably prolonging negotiations, pursuant to the general good faith obligation imposed by the Greek Civil Code. A time limit can be agreed inter partes, after the expiration of which negotiations are either deemed as failed or can be renewed. In case of listed companies, the acceptance of bid must take place within 4 to 8 weeks from the date that the offer document was published.
Are there any circumstances where a minimum price may be set for the shares in a target company?
In relation to a mandatory bid initiated for a listed company, the acquirer is obliged to offer a fair consideration in cash, which should be neither less than the average market value of the shares during the six (6) months prior to the bid, nor than the maximum price at which the acquirer had purchased shares during the twelve month period prior to the bid.
As a measure to further ensure the rights of the minority shareholders of the target company, the Greek Law 4514/2018, which harmonised MiFID II, introduced the obligation for the offeror to prepare a valuation report with respect to the targeted shares, if specific conditions are met. In such cases, the minimum cash consideration will be determined by taking into account both the market value and the valuation, as the minimum price per targeted share will be the higher of the two.
Is it possible for target companies to provide financial assistance?
SAs are prohibited to advance money, issue loans and grant guarantees to potential acquirers of their shares, unless such transactions are completed under the responsibility of the BoD in usual commercial terms, approved in advance by the GA with an increased quorum and majority, and the financial assistance granted does not result in equity being lower than a specific threshold. The same applies for financial assistance provided by subsidiary companies to third parties aiming to acquire shares of the parent company. However, transactions conducted by credit or financial institutions in the ordinary course of business are excluded from this rule.
Which governing law is customarily used on acquisitions?
The law of the share purchase agreement may be agreed by the parties subject to eventual choice of law restrictions. Rights in rem over Greek assets are governed by the law of the situs of the asset.
What public-facing documentation must a buyer produce in connection with the acquisition of a listed company?
A person planning to launch or required to submit a bid must notify the bid to the HCMC and to the target’s BoD, and then proceed to a public announcement with details on the offeree and the offeror, the offeror’s advisor, the securities subject to the takeover bid, the maximum number of securities that the offeror undertakes (in case of a voluntary takeover bid) or is required (in case of a mandatory takeover bid) to acquire, the percentage of the share capital of the target that are subject to the takeover bid and the percentage of the total securities of the same class.
Within three days after its approval by the HCMC, the information document shall be posted on the offeror’s website and on that of its consultant, as well as on the target’s registered and branch offices Credit institutions or investment firms authorized by the offeror shall also carry the information document.
Revised populations shall be made in the event of a revised offer. Finally, the results of the bid shall be made public by the offeror within two days from the expiration of the time period of acceptance and shall be also communicated to the representatives of the employees.
What formalities are required in order to document a transfer of shares, including any local transfer taxes or duties?
Listed shares are transferred via the Athens Exchange Depositary. As far as non-listed companies are concerned, Law 4548/2018 brought by a significant change, providing that SAs issue only registered shares. If the titles are electronic and not physical, specific registrations must be made in the electronic register of the company, while contracting parties have no longer the obligation to sign the electronic register. Where the register is not kept electronically, the parties must register the transfer in the shareholders’ ledger and sign it, as otherwise the transfer will only be valid and binding between the parties but not vis a vis the company. Physical registered shares are physically transferred and endorsed in writing at the back of the title; alternatively, they may be destroyed and replaced by new shares bearing the name of the acquirer.
Are hostile acquisitions a common feature?
Hostile takeovers are not common in Greece; however the relevant regulatory framework is in place.
What protections do directors of a target company have against a hostile approach?
Defense mechanisms prior to the submission of a public bid are legally possible and can rely on the company’s articles. Such defenses would include calling upon callable shares, or converting bonds to shares or preferred shares to common voting shares, or relying on an employee call option program to change shareholders control; or agreeing large bonuses in favor of directors. This makes the acquisition more expensive, and less appealing to the acquiring company.
However, after a takeover bid has been submitted, the directors are bound by their fiduciary duty and can only take defense measures already approved by the GA. The law endorses the principles of Directive 2004/25 in accepting the prevalence of the shareholders vis a vis the BoD in cases of takeover bids. To be noted that any share transfer or voting restrictions in the articles and in eventual shareholders agreements are deactivated during the period of acceptance. Apart from that, the BoD shall draft a public document setting out its justified opinion on the bid, which is submitted to the HCMC and distributed to the shareholders along with an underlying financial advisors’ report.
Are there circumstances where a buyer may have to make a mandatory or compulsory offer for a target company?
Please see section 5.
If an acquirer does not obtain full control of a target company, what rights do minority shareholders enjoy?
Law 4548/2018 has not brought any significant amendments in this field. It vests minority shareholders with a number of specific rights. As far as M&As are concerned, persons retaining a shareholding of 2% of the share capital may apply to Court and request that a faulty General Assembly decision be withdrawn. Minority shareholders of a company taken over by a majority shareholder that maintains 95% of the share capital can effect a forced acquisition of their shares by the majority shareholder. One or more minority shareholders are able to request that their shares are taken over by the company following a resolution on the transfer of the company’s seat.
Shareholders of publicly traded companies that after a takeover bid are controlled by a majority shareholder holding more than 90% of the share capital, have the right to have their shares bought by the majority shareholder at a price equal to that of the takeover bid.
Is a mechanism available to compulsorily acquire minority stakes?
Under Law 4548/2018, a majority shareholder that maintains 95% or more of the share capital has the right to enable the acquisition of the remaining share capital. A squeeze-out right is available to majority shareholders who, following a takeover bid, hold 90% or more in a listed company, for a consideration equal to that of the takeover bid. No significant amendment has been brought by the new company law.