Are there circumstances where a buyer may have to make a mandatory or compulsory offer for a target company?
Mergers & Acquisitions (2nd edition)
Acquisitions that result in a change of control of an Offshore Listing Vehicle trigger a mandatory general offer to all shareholders of the Offshore Listing Vehicle pursuant to the Takeover Code, notwithstanding that such general offer requirement may be waived by the Hong Kong Securities and Futures Commission.
Please refer to the relevant Offshore Chapter for detail regarding each offshore jurisdiction.
If a controlling shareholding of more than 30% in a listed joint stock corporation is directly or indirectly acquired, a mandatory offer needs to be submitted to the remaining shareholders. Mandatory offers are subject to minimum pricing rules, cannot be made conditional (except for legal conditions such as regulatory approvals) and cannot foresee a withdrawal right.
Holding up to 30% of the shares does not trigger a mandatory offer but a shareholding between 26% and 30% needs to be reported to the Takeover Commission and in principle voting rights exceeding 26% are suspended.
In a private M&A transaction there are no requirements to make a mandatory offer unless such an obligation is contained in the articles of association of the target company or a shareholders’ agreement.
In public M&A transactions, where a person (including persons acting in concert with it) acquires (whether in one or a series of transactions) interests in shares of a target company carrying voting rights in excess of 30%, or where a person (including persons acting in concert with it) who holds interests in shares of a target company carrying more than 30% but not more than 50% of the voting rights acquires an interest in any other shares of the target company that increases its percentage of the voting rights, that person must make an offer to acquire all of the shares of the target company.
The consideration for such an offer must be in cash (or accompanied by a full cash alternative) at the highest price paid for the shares by the mandatory bidder in the previous 12 months. The only permitted condition for such a mandatory offer is that the bidder receive acceptances to its offer from shareholders holding shares carrying more than 50% of the voting rights of the target company.
The acquisition of a public company gives rise to the mandatory submission of a tender offer by the buyer, where the buyer acquires more than (i) one third (only where no single shareholder holds a majority of the voting power), (ii) half or (iii) two thirds of the voting power in the general shareholders’ meeting of a publically traded company.
The shareholders of a private company may have agreed to certain arrangements, such as tag along, drag along rights and put/call options or similar mechanisms. Such restrictions and obligations relating to share transfer are often used; however, they are valid only between the parties and are not easily enforceable. If case of default the non-defaulting party would have only contractual rights/ penalty claims against the defaulting party but no specific performance is available under Bulgarian law.
As provided above, under the securities applicable law, any person or group of persons which can be considered as one single beneficiary can only become beneficiary of a participation of more than 25% in the voting capital of a listed company by means of a tender offer (Oferta Pública de Adquisición - OPA).
Beneficiaries of listed companies which already hold more than 25% of the company’s voting capital can only increase their participation in a percentage exceeding 5% by means of an OPA.
There is such obligation where a person who, alone or in concert, exceeds (even unintentionally) the 30% threshold of the shares or voting rights in the target.
A mandatory offer is also required when a person who already holds between 30% and 50% of the target, increases its shareholding in the target by over one percent of the total capital or voting rights within 12 months.
Exemptions to mandatory offer requirements may be granted by the AMF in some limited circumstances.
If a buyer acquires more than 20% of a code company, it must then make a full takeover offer (except where the acquisition of shares has been approved by shareholders for the purposes of the Takeovers Code or in certain other limited circumstances).
A mandatory offer must be made to acquire 100% of the share capital of a company, if a person acquired or wishes to acquire – whether directly or through related parties – 1/3 or more of the issued share capital or voting rights of a publicly listed company or a private company that has previously undertaken a public subscription.
The Cayman Islands do not have a law or regulation requiring an acquirer to make a mandatory or compulsory offer for a target company.
Under Art. 106 of the Consolidated Financial Act, anyone who, subsequent to the purchase of shares (or as a result of the attribution of further voting rights on the same shares) comes to hold a shareholding (or to have voting rights) greater than 25% of the share capital (30% in small- to mid-sized companies), must launch a public offer for the purchase of all the ordinary shares admitted to trading on a regulated market. The offer must not be launched if the shareholding is held owing to a prior tender offer for 100% of the share capital.
Other cases can also trigger a mandatory tender offer:
- indirect acquisition of control: a public tender offer on all outstanding shares of a certain company is mandatory when a threshold of 30% interest is achieved through the purchase of shares of another listed company which, in turn, has an interest in the first one; and
- the creep-in rule: a public tender offer is mandatory when an investor that already holds 30%–50% of the share capital of a company purchases the that company’s shares for an amount superior to 5% within 12 months.
A bidder must make a mandatory offer in cash, or with a cash alternative, where it (or its concert parties) acquires shares resulting in:
(i) A holding of 30%+ of the voting rights in target; or
(ii) An increase in its voting rights by more than 0.05% in the target in any 12-month period where it holds 30% to 50% of the voting rights (unless bidder is a single holder with over 50% of the voting rights).
Yes. Brazilian law ensures tag along rights to minority voting shareholders in the event of transfer of “control” by imposing on the purchaser the obligation to proceed with a tender offer for the acquisition of all outstanding voting shares of the company. Under Law No 6,404/76 (Brazilian Corporations law), “control” means the possession, directly, of the power to direct the voting rights of the majority of voting shares at a general shareholders’ meeting and the right to elect the majority of the company’s officers and directors, whether through the ownership of voting securities, by contract or otherwise, which means that the controlling shareholder must hold individually 50% +1 of the voting shares of the company at a general shareholder’s meeting.
For public companies listed on B3 S.A. – Brasil, Bolsa, Balcão (“B3”), “control” (in addition to the above definition of “control”) means the actual and effective power to direct the company’s activities and to establish the guidelines for the operation of its management bodies, directly or indirectly, in fact or in law. Presumption of control will exist where one or more persons are under common control or bound by a shareholders’ agreement that holds enough shares to ensure an absolute majority of votes accorded to the shareholders present at the company’s previous three general meetings, even if they do not hold the number of shares that actually provide them with an absolute majority of the voting stock.
Brazilian listed companies may include in their corporate documents poison pills, tender offer requirements or other protections that have to be considered prior to the acquisition of any shareholding. Please note that the companies are free to establish its poison pill’s threshold under its constitutional documents and there is no legislation on this matter.
The bylaws of the company may extend such tag along rights to transactions that do not qualify as a transfer of control (but rather qualify as an acquisition of a certain percentage of outstanding stock i.e. in most cases around 20%, including preference shares. The bylaws of a company may also state a premium for the acquisition of a certain percentage of outstanding stock).
Finally, there is also the The Brazilian Takeover Panel (“CAF”) which is a private panel composed of eleven (11) financial and capital markets experts. In this specific case, companies willing to adhere will be expected to formally and publicly submit themselves to the CAF.
CAF establishes a new type of tender offer: the Material Ownership Tender Offer (“MOT”). In case of MOT, the adherent company chooses a percentage from 20% up to 30% of the shares of voting stock as an automatic trigger to obligate the person who reached the material ownership to carry out the tender offer for all other shares and securities convertible into shares issued by the adherent company. The Tender Offer price must at least equal to the highest buy price the acquirer may have paid for voting share in the market within the period of 12 months preceding the date of the tender offer trigger or other criterion determined by CAF, under exceptional circumstances and acting upon request.
Pursuant to the provisions of the Public Takeover Law, where a person, as a result of their acquisition or the acquisition by persons acting in concert with them, holds securities of a company which, when added to any existing holdings of those securities and the holdings of those securities of persons acting in concert with them, directly or indirectly give them a percentage of thirty per cent (30%) or more of existing voting rights in that company at the date of the acquisition, then such a person is required to make a bid at the earliest opportunity to all the holders of those securities for all their holdings at an equitable price.
It must be noted, however, that in case the acquirer already holds more than fifty per cent (50%) of the voting rights of a company, the further acquisition of securities does not create an obligation to make a mandatory bid, provided the Commission grants an exception pursuant to the provisions of the law.
Pursuant to the STA, any person or legal entity, that directly, indirectly, or through consolidation of ownership (following one or more voluntary offers), acquires shares representing more than one-third of the voting rights of a Norwegian company listed on a regulated market, is required to make an unconditional offer of the remaining shares in such company. This obligation to issue such mandatory offer is repeated when the shareholdings exceeds 40% of the voting rights and 50 % of the voting rights, however, such repeated offer is not mandatory when the thresholds are passed in connection with the original mandatory offer. The same rules will apply to acquisitions of the relevant number of shares in a foreign domiciled company listed in Norway but not in its home country. Certain exceptions apply, and the most practical being when shares are acquired as consideration in mergers or demergers.
Consolidation rules apply for shares held by certain affiliates and closely related parties. Hence, the combined holdings of both the acquirer or disposer and such a party’s close associates are relevant when deciding if any disclosure obligations have been triggered.
Some derivative arrangements (total return swaps) may also be considered as controlling votes in relation to the mandatory offer rules, and could under certain circumstances trigger a mandatory offer obligation, even though the bidder owns less than one third of the shares. Acquisitions of more than 50% of the voting rights in a company owning more than 1/3rd of the shares in a company whose shares are listed on a Norwegian regulated market, could also trigger an obligation to issue a mandatory offer, if such owner company’s principal business consists of holding shares in such listed company.
A shareholder exceeding the above mentioned thresholds may sell a portion of its shares to avoid the obligation of a mandatory offer. Such sale must be made within four weeks after the mandatory offer obligation was triggered, and must include all shares exceeding one-third of the shares, or thresholds in the repeated offer.
In addition to the above mentioned rules for companies listed on a regulated market, there are rules on compulsory acquisition for limited liability companies in general. A shareholder who becomes the owner of 90% or more of the total number of issued shares in Norwegian limited company, as well as 90% or more of the total voting rights, is obliged to acquire the remaining shares in the company if a minority shareholder so requests. Please see question 27 for further information of the statutory rules in this respect.
Please see section 5.
The acquisition of control (i.e., at least 30% of the voting rights in the target), whether by a privately negotiated share transaction with one or several major shareholders or by purchasing target shares on the stock exchange, triggers the obligation of the purchaser to publish the acquisition of control and to launch a mandatory tender offer.
The following voting rights attached to the target’s shares are attributable to the bidder:
- held by a direct or indirect subsidiary;
- which belong to a third party and are held “for the account” of the bidder;
- which the bidder has assigned as security to a third party, unless such third party is authorized to exercise the voting rights arising from such shares and states its intention of exercising the relevant voting rights at his own discretion;
- in which the bidder has a usufruct;
- in respect of which the bidder can demand transfer of title;
- which are entrusted to the bidder if it may exercise the voting rights at its own discretion in the absence of specific instructions from the shareholder;
- from which the bidder may exercise the voting rights by agreement, which temporarily transfers the voting rights without the underlying shares for consideration;
- which are held by the bidder as collateral, provided the bidder holds the voting rights and declares its intention to exercise such voting rights; and
- held by a person that is acting in concert with the bidder or one of its subsidiaries, where shareholders, by written agreement or informally, agree on the exercise of voting rights in shareholder meetings of the target or where shareholders cooperate in another manner with the objective of influencing the business strategy of the target.
The acquisition of a certain percentage of securities carrying voting rights of a publicly traded company or the holding company thereof, may give rise to a mandatory public offer in the following scenarios:
- when a person, as a result of its acquisition or the acquisition by a person acting in concert, holds more than 30% of the securities carrying voting rights of a publicly traded company;
- when , as a result of an acquisition, a person directly or indirectly acquires control of a holding company;
- when persons acting in concert, as a result of an acquisition of securities by one of those persons, exceed the threshold of 50 % of the voting securities of a holding company, holding more than 30% of the securities carrying voting rights of a publicly traded company;
- when persons acting in concert acquire more than 50 % of the voting securities of a person who directly or indirectly exercises legal control over the holding company, holding more than 30% of the securities carrying voting rights of a publicly traded company.
There are additional requirements to launch a mandatory public offer for persons acting in concert.
Yes. Please refer to our analysis above in response to Question No. 24.
A bidder is required to make a mandatory offer if such bidder (alone or in concert with others) directly or indirectly exceeds 33⅓% of the voting rights of the target company. However, an issuer may adopt a higher threshold of up to 49% (opting-up) or may opt-out from the tender duty regime entirely by including a respective clause in its articles of association. Approximately one quarter of all SIX-listed issuers have adopted a full opting-out.
Pursuant to Federal law ‘On joint-stock companies,’ the person that acquires more than 30%, 50% or 75% of shares of a public joint-stock company (taking into account the shares already owned by the acquirer and its affiliates) has to make a tender offer to other shareholders of the company to buy out their remaining shares of the same category.
The person that acquires more than 95% of shares of a public joint-stock company as a result of the above mandatory tender offer or a voluntary offer, is obliged to buy out the remaining shares of the company (and has the right to compel such buy-out).
Yes – in line with EU directives
Under the Commercial Companies Law, where an acquisition is approved by the shareholders of the target, the remaining minority shareholders may be required to acquire their shares at the offered price or at a price determined by a valuer undertaking a formal valuation.
The QFMA Mergers & Acquisitions Rules requires a person who wants to acquire 75 percent or more of the shares to notify the authority and he may submit a mandatory offer to buy the remaining shares of the company (Article 34).
Neither federal law nor Delaware law requires shareholders that have obtained significant stakes in companies to make mandatory or compulsory offers for the remaining outstanding shares. However, some states have combined aspects of control share acquisition and fair price statutes and adopted so-called “control share cash-out” provisions in their corporation laws. These statutes require that, unless the organizational documents of a corporation provide otherwise, if a shareholder obtains a certain level of voting power, other shareholders can demand that such shareholder purchase their shares at a fair price.
With respect to publicly listed companies, where the holdings of a shareholder (either alone or together with a close related party), as a consequence of a purchase of shares, reaches 30 per cent of the total voting rights in a publicly listed company, the shareholder is obliged to launch a mandatory offer to acquire the remaining securities in the company. However, the obligation to launch a mandatory offer is not triggered if the threshold has been exceeded as a result of a voluntary offer made for all shares and securities in the company. Further, a shareholder who becomes subject to the requirement to launch a mandatory offer may apply for a dispensation from the Swedish Securities Council. Such dispensation may be approved if there are specific reasons (e.g. dispensation has been approved in several cases where the threshold has been exceeded as a result of a subscription of shares in a rights issue). A dispensation by the Swedish Securities Council may be made subject to conditions.
Mandatory or compulsory offers are required only if the target company is a “public company” – i.e., it has a class of equity securities listed on an exchange, or it has assets in excess of Php50 Million and has 200 or more holders each holding at least 100 shares of a class of its equity securities.
A mandatory or compulsory offer is required if: (a) the buyer, alone or with others acting in concert intends to acquire 35% of the outstanding voting shares or such outstanding voting shares that are sufficient to gain control of the board in a public company in one or more transactions within a period of 12 months; (b) the acquisition would result in ownership of over 50% of the total outstanding equity securities of a public company.
Pursuant to Rule 9 of the Takeover Code (where applicable), a mandatory offer to acquire all of the target’s share capital must be made when the bidder (or parties acting in concert) either:
- acquires an interest that results in the bidder holding a stake of 30% of more of the voting rights of the company. This includes any interest acquired through derivatives; or
- is interested in shares which in the aggregate carry not less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of such voting rights, and the bidder (or any person acting in concert with it) acquires an interest in any other voting shares of the company.
The tender offer rules under the laws of Japan are very complicated, but unless any of the exemptions (e.g., exercise of stock options, transactions within a group, acquisition by a parent) apply, if the target company is a corporation or other entity that is obliged to submit an annual securities report, a tender offer is typically required in the following instances:
(i) a purchase of shares outside of any stock exchange market from more than ten (10) sellers within a sixty-one (61)–day period and where, as a result of such purchases, the shareholding ratio of the acquirer exceeds five percent (5%);
(ii) a purchase of shares outside of any stock exchange market where, as a result of such purchase, the shareholding ratio of the acquirer exceeds one-third (1/3); or
(iii) a purchase of shares in excess of ten percent (10%) of the total voting rights of the target company during a three (3)-month period by way of purchases of shares or by way of the acquisition of newly issued shares (but only if such acquisition is in excess of ten percent (10%), which includes purchases of more than five percent (5%) of the shares made outside of the stock exchange market or through off-hour trading), and where, as a result of such purchases, the shareholding ratio of the acquirer exceeds one-third (1/3).
If the acquirer seeks to acquire two-thirds (2/3) or more of the voting rights of the target company, the acquirer is not permitted to set an upper limit and is required to acquire all tendered securities.
Isle of Man
If the Takeover Code applies, Rule 9 specifies that a mandatory offer must be made where the bidder (and parties acting in concert):
- acquires shares carrying 30% or more of the voting rights of a target; or
- is interested in shares carrying not less than 30% but not more than 50% of the target's voting rights, and that person acquires an interest in any other voting shares in the target.
Pursuant to Rule 33 of the Securities (Takeover) Rules 2010, a mandatory offer must be made when the offeror:
- holds more than 30% of the rights attached to voting shares of a company and acquires or contracts to acquire additional voting shares of the company;
- acquires effective control of a company; or
- following a dealing in securities of a company, acquires the right to exercise or control the exercise of more than 50% of the rights attached to the voting shares of the company.
Section 102 of the Companies Act gives dissenting shareholders the ability to compel the acquirer to acquire their shares on the same terms as set out in the initial bid or on such other terms as the parties may agree or as the court deems fit upon application by either party. Where a purchaser makes an offer to acquire the shares of the company, and in pursuance of that offer has transferred to it more than 90% of the shares of the company, the purchaser must, within one month of the date of the transfer which caused it to exceed the 90% threshold, give notice of that fact to the holders of the remaining shares who have not consented to the scheme or contract. Any such holder may, within three months from receiving the notice from the purchaser that the purchaser has acquired 90% of the shares of the company, him/herself give notice compelling the purchaser to acquire his/her shares. Where a remaining shareholder gives such a notice, the purchaser is entitled and bound to acquire those shares on the same terms as set out in the scheme or contract or on other terms as may be agreed or as the court, on application by either party, thinks fit to order.
British Virgin Islands
The BVI does not have any laws or regulations requiring an acquirer to make a mandatory or compulsory offer for a target company.
Where the Takeover Code applies, a mandatory offer must be made when the bidder either:
- acquires an interest in shares which carry (when taken together with shares in which persons acting in concert with the bidder are interested) 30% of more of the voting rights of the company; or
- is, together with any person acting in concert with them, interested in shares which in the aggregate carry not less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of such voting rights, and the bidder (or any person acting in concert with them) acquires an interest in any other shares of the company which increases the percentage of shares carrying voting rights held by the bidder.
Turkey has a mandatory tender offer threshold for publicly traded companies. Under the CMB regulations, any direct or indirect acquisition of management control, either individually or by a group of individuals acting in concert, would trigger the mandatory tender offer requirement. In this respect, acquisition of 50% or more of a company’s share capital or voting rights would be deemed a change in management control. In addition, transfer of privileged shares granting the right to appoint or nominate a majority of the board of directors, regardless of the percentage acquired, will also be considered as a change in management control and would trigger the requirement to make an offer to the remaining shareholders.
In the event of a mandatory tender offer, the price payable for shares tendered must not be lower than the highest price paid by the acquirer for shares in the same class within the six-month period preceding the event triggering the mandatory tender offer. In cases where the six-month market price is not available, independent appraisal can be used to determine the price payable.
The application to the CMB regarding the mandatory tender offer must be made within six business days after the acquisition of shares or voting rights granting the acquirer control of the target company. Following this filing deadline, the actual tender process needs to be initiated within 45 business days of the triggering event and no later than six days following CMB approval of the mandatory tender offer filing.
The CMB regulations also provide limited cases where acquirers may be exempted from the mandatory tender offer requirement.