Is a mechanism available to compulsorily acquire minority stakes?
Mergers & Acquisitions (2nd edition)
Minority shareholders may under Norwegian law be subject to a squeeze-out. A majority shareholder or bidder that, directly or through subsidiaries, acquires shares in a company (both private (AS) and public (ASA)) that represent 90% or more of the total number of shares and votes can adopt a resolution by its own board of directors resolving to squeeze-out the remaining minority shareholders by a forced purchase at a redemption price. Each of the minority shareholders (holding less than 10%) has a corresponding right to demand that such majority shareholder (holding more than 90%) to acquire their minority shares. The rules and procedures for such compulsory acquisition procedure is set out in chapter 4 of the LLCA and the PLLCA.
Schemes approved by 75 per cent of shareholders (or creditors) are binding on all shareholders (or creditors) and either by the order sanctioning such scheme or a subsequent order, a court can make provision for the transfer of a company’s undertaking or its shares, pursuant to such scheme.
In addition, the approval of an offer to buy the shares of a public company by 75 per cent of shareholders within four months of such offer will give rise to a right on the part of the acquirer to compulsorily acquire the shares of dissenting shareholders upon notice within two months, subject to any objection proceedings.
Under Law 2190/1920, a majority shareholder that maintains 95% or more of the company’s capital has the right to enable the acquisition of the remaining share capital. A squeeze-out right is available to majority shareholders that, following a takeover bid, hold 90% or more in a listed company, for a consideration equal to the one contained in the takeover bid.
Squeeze-out mechanisms are available under German law following a successful acquisitions of shares in a company.
27.1 Takeover-related Squeeze-out
The takeover related squeeze-out option allows a bidder who acquires at least 95% of the target’s voting share capital to purchase the remaining voting shares within three months following the expiry of the acceptance period by filing an application to Frankfurt am Main District Court.
In this case, the consideration offered under the tender offer is deemed to constitute an appropriate cash compensation under the squeeze-out procedure, provided that the bidder has acquired shares constituting 90% or more of the registered share capital of the target as result of the tender offer. No formal shareholders’ meeting is required.
Corresponding to the takeover-related squeeze-out, the minority shareholders of the target have a put right if the above described conditions for a takeover-related squeeze-out are met. Practically, this results in an extension of the acceptance period by additional three months if the bidder acquired shares with a total value of at least 95% of the registered share capital of the target. Such procedure is uncommon as bidders usually fail to reach a shareholding of 95% after the offer.
27.2 Merger-related Squeeze-out
Under the German Reorganization Act (Umwandlungsgesetz), holders of shares equating to 90% of the share capital of the target may squeeze out the remaining minority shareholders in connection with an upstream merger (Verschmelzung) of the target into the controlling shareholder. The main requirements for such merger-related squeeze-out are that
- each of the companies, i.e., the target and the parent company, is either a German stock corporation, a partnership limited by shares (Kommanditgesellschaft auf Aktien) or a European public company (Societas Europea, SE); and
- the required squeeze-out resolution is made within three months following the signing of the merger agreement.
The squeeze-out compensation is based on the current value of the target pursuant to a formal fair market valuation of the target.
The resolution and the valuation may be challenged by minority shareholders.
27.3 Corporate Squeeze-out
The bidder may also utilize the traditional corporate squeeze-out procedure at any time following the bid if it owns at least 95% of the registered share capital of the target (including non-voting shares). However, this procedure requires a shareholders’ resolution.
The squeeze-out compensation is based on the current value of the company pursuant to a formal fair market valuation of the target and must be paid as cash compensation. The resolution and the valuation may be both challenged by minority shareholders and are subject to a lengthy judicial review, which usually delays the implementation of the squeeze-out.
First of all, there is a principle requirement to proceed with a mandatory public offer if a person or several persons acting in concert acquire(s), directly or indirectly, at least 30% of the securities with voting rights in a publicly traded company (see also above - question 25).
Further, minority shareholders of publicly traded companies can be squeezed out.
If a public offer has taken place, a bidder may force the remaining shareholder to the sell their securities with voting rights or giving access to voting rights and the remaining shareholders have sell-out rights (see above - question 26) when:
- the bidder owns a 95% interest in the capital of the target;
- the bidder holds 95% of the voting securities;
- if it concerns a voluntary offer, the bidder, as a result of the public offer, has acquired voting securities representing 90% of the capital of the target.
For purposes of determining the stake of the bidder in the target, the stake of persons acting in concert with the bidder is taken into account.
The securities are acquired at the bid price.
A majority shareholder further has the possibility to squeeze-out minority shareholders in the absence of a preliminary public offer. Such squeeze-out procedure can be initiated when a natural or legal person, together with persons acting in concert and the target company, holds 95 % of the voting securities of a publicly traded company and seeks to acquire the remaining securities with voting rights or which give access to voting rights of the target.
No. No such mechanism exists in Vietnam.
Upon completion of a tender offer, the bidder has basically to means to squeeze-out minority shareholders. Under FMIA, the bidder holding 98% of the voting rights of the target can apply for a court decision cancelling the remaining equity securities of the target against the same consideration as offered under the offer. The request must be made within three months of the offer's additional acceptance period. The proceedings are generally uncontroversial as minority shareholders' defense possibilities are very limited. In particular, minority shareholders cannot object to the price they obtain. In addition, the Swiss Merger Act allows an offeror to complete a squeeze-out merger if it holds 90% or more of the voting rights of the target. In such a case, minority shareholders can be forced to accept cash or any other merger consideration in exchange for their target shares. However, in case of a squeeze-out merger, minority shareholders have appraisal rights.
The person that acquires more than 95% of shares of a public joint-stock company or the person that was the sole shareholder of a reorganised (merged) company that became the holder of at least 95% of shares of the new public joint-stock company created as a result of such reorganisation, is entitled to demand buy-out of all the remaining shares of such public joint-stock company.
Squeeze-out rights are provided only for listed companies and only under strict conditions.
The authority can compel majority shareholders to acquire the shares owned by minority shareholders, as suggested in Article 38.