What are the key decision-making organs of a target company and what approval rights do shareholders have?

Mergers & Acquisitions (2nd edition)

Hong Kong Small Flag Hong Kong

Please refer to the relevant Offshore Chapter for the key decision-making organs of a target company and the approval rights of shareholders in the respective offshore jurisdiction.

Austria Small Flag Austria

In limited liability companies, which is the dominant corporate form in Austria, shareholders typically have a very strong position and the shareholders' meeting is the ultimate decision-making body of the company. While the managing directors are responsible for the management and the representation of the company, the shareholders have the right to issue instructions to the managing directors and typically have the right to approve or veto important matters regarding transactions as set forth in the articles of association. Asset deals typically will require the approval of the shareholders. Share deals in private M&A transactions do not require the approval of the target company, though for companies with multiple shareholders the articles of association may provide that the company itself has to approve the transaction.

If certain thresholds are exceeded (e.g., more than 300 employees) a supervisory board needs to be established in limited liability companies.

In joint stock corporations, the decision-making process is different. Under the Stock Corporations Act, shareholders are not entitled to issue instructions to the board of directors, which generally acts independently. The board of directors is appointed and supervised by a supervisory board, which in turn is appointed by the general assembly of the shareholders. In private M&A transactions where the target is a stock corporation, the articles of association can foresee that an approval of the target for the transfer of the shares is required.

Mergers and other reorganisations, spin-offs or transformations require the approval of the shareholders.

United Kingdom Small Flag United Kingdom

In both public and private M&A transactions, the board of directors of the target company is the key decision making body and the directors must have regard to their fiduciary duties and act in the best interests of the company and its shareholders as a whole. In public M&A transactions, the Code sets out a number of requirements in relation to the responsibilities and conduct of the target company’s directors. All directors, not just the executive directors are responsible for the target company’s compliance with the Code and if the target board have delegated the day-to-day conduct of an offer to a committee or small number of directors, the board must make sure it is in a position effectively to monitor the target company’s compliance with the Code. All target directors are required to take responsibility for the documents published in connection with a takeover bid, except for any separate opinion of the employee representatives of the target company or the trustees of the target company’s pension scheme.

Shareholders in a public M&A transaction will either be given the opportunity to vote on whether to sanction a scheme of arrangement or will have the opportunity to decide whether to accept a takeover offer in respect of their shares. Significant shareholders may also be consulted by the target board shortly before a deal is announced (provided the shareholders in question have agreed to become “insiders”) in the context of the board determining whether or not to recommend a bid.

Where the transaction in question is of a particular size (broadly speaking, if the deal is 25% or more of the size of the listed company), under the UK Listing Rules, the listed bidder will need to obtain the approval of its shareholders to any such transaction. Similarly, if the transaction is with a related party, the listed bidder will need to obtain the approval of its shareholders to the proposed transaction.

In a private M&A transaction, selling shareholders will ultimately decide whether to sell their shares or not. In terms of approval rights, there may be specific shareholder approval rights contained in a company’s articles of association and/or in a shareholders’ agreement which may be triggered by a particular transaction contemplated by a private UK company. Absent this, and if the transaction is not one that the UK legislation specifically requires shareholder approval (for example, the sale to or purchase from a director of the company of a substantial asset which does require shareholder approval), specific shareholder approval in a private M&A transaction is not typically required.

Bulgaria Small Flag Bulgaria

Key decision-making organs vary, depending on the type of company:

  1. limited liability company – ongoing business decisions are taken by the manager(s). If two or more managers are appointed, they will not constitute a collective management body. The general meeting of the shareholders or the sole owner, as the case may be, is the superior management body of the limited liability company. The general meeting of shareholders/the sole owner is statutorily vested with the resolution of issues of higher importance, such as changes in the company’s articles of association, approval of annual financial statements, decrease/increase of capital, appointment of manager(s), disposal or acquisition of real estate, etc.
  2. joint-stock company – decision-making organs may take the form of a board of directors (in a one-tier management system) or a management board and supervisory board (in a two-tier management system). The board of directors, respectively the management board with the approval of the supervisory board, can appoint one or more of its members as legal representatives of the company. In any case, the general meeting of shareholders/sole owner is vested with the powers to approve certain decisions of significant importance for the company, including resolution on changes in the company’s articles of association, reorganization of the company, decrease/increase of capital, appointment of board members, issuance of debentures, etc.

Colombia Small Flag Colombia

The key decision-making organs of a target company in Colombia are the shareholders general assembly and the board of directors, depending on the type of entities participating in the transaction, the structure applicable to the transaction and the provisions set forth in the applicable by-laws.

In a stock deal, usually non-selling shareholders will need to waive their right of first refusal or right of first offer, if applicable. In asset deals, depending on the corporate authorization rules included in the target company’s bylaws, the shareholders general assembly (and sometimes board of directors) would have to approve the transfer of the relevant assets. It is worth setting forth that in Colombia, there are two principal ways to undertake a transfer of assets: (1) By the transfer of a commercial unit or ongoing concern (a “Commercial Establishment”), which consists of a group of assets that are destined by an entity to form a separate commercial unit, registered as such before the Chamber of Commerce; certain special procedures and rules will apply to this kind of transfer (including rules regarding liability between the transferee and transferor); and (2) By transfer of the individual assets, not organized nor registered as a Commercial Establishment before the Chamber of Commerce.

Finally, in case of mergers, the approval by the shareholders general assembly is mandatory.

France Small Flag France

Where the transaction is structured as a sale and purchase of shares, the role of the corporate bodies of the target are in practice limited.

Conversely, where the deal is structured as a merger or a share capital increase, the shareholders’ meeting of the target company, play an important role.

Finally, where an public offer is filed, the target’s board must provide a reasoned opinion on the offer, such opinion being made public in the offer documentation.

New Zealand Small Flag New Zealand

The key decision making groups for any New Zealand incorporated company are the board of directors and, in relation to a limited scope of significant transactions, the shareholders.

In the event of a sale of a majority of the assets and business of a target company, shareholder approvals would be required:

  • from 75% of the shareholders entitled to vote and voting on the transaction – where the transaction constitutes a “major transaction" the Companies Act; and
  • if the target company is listed, from at least 50% of the shareholders entitled to vote and voting on the transaction – under the material transaction thresholds of the Listing Rules.

Egypt Small Flag Egypt

Key decision-making organs are the General Assembly and the board of directors. The board is usually vested with the widest powers to manage and operate the company in accordance with the parameters determined by the shareholders. However, as per applicable laws the board may not resolve any decision or undertake any action that is specifically granted to the General Assembly. Resolutions pertaining to, inter alia, amending the articles of association of the company, its merger or liquidation should be resolved by the Extra- Ordinary General Assembly, while the Ordinary General Assembly is competent to, inter alia, approve the annual accounts, profit distributions and appointment of the company’s auditor.

Cayman Islands Small Flag Cayman Islands

Target Board
The directors of a company or the manager(s)/managing member(s) of an LLC (as applicable) (the “Board”) will be integral in consummating a merger or acquisition, whether by merger, scheme of arrangement or equity acquisition.

In the context of a merger, the Board will be required to approve the terms of the transaction on behalf of the company. For a scheme of arrangement, the company must consent to the scheme which will involve the consent of the Board. It is traditional that the transfer of shares in a Cayman Islands company (other than a listed company) is subject to the consent of the Board. As such, the Board will generally be able to control an equity acquisition.

However, the directors of a company will, in making decisions on a proposed takeover, need to act consistently with their fiduciary duties, including (i) by acting bona fide in the best interests of the company (meaning the shareholders of the company as whole), and (ii) by not allowing their personal interests to conflict with their duties to the company. Directors of a company have a strict duty to avoid a conflict of interest. However, the constitutional documents of a Company will almost invariably contain provisions which relax this duty, usually by allowing directors to vote in connection with transactions in which they are interested provided they make appropriate disclosures (albeit such provisions do not modify the directors’ overriding duty to act bona fide in the best interests of the company).

In relation to an LLC, the default position under the LLC Law is that, subject to any express provisions in the LLC agreement, the manager(s)/managing member(s) of an LLC will not owe any duty (fiduciary or otherwise) to the LLC other than the duty to act in good faith, including when making decisions on a proposed takeover.

It is common for the Board of a listed company to elect to establish an independent committee of uninterested members to consider takeover offers. While this may assist from a risk-management perspective, it does not provide the same ‘safe harbour’ or ‘roadmap’ protection which it may offer in other jurisdictions.

Shareholder Approval
Absent any special thresholds or consent required by the constitutional documents of a company and the consents discussed above, shareholder approval of two-thirds of those attending and voting at the relevant meeting is required for a merger.

A scheme of arrangement will require the approval of each of the relevant class(es) of members whose rights are to be subject to the scheme - majorities which must be achieved for approval of each class of members are the same as those applicable to creditors.

Italy Small Flag Italy

If the transaction is structured as a sale and purchase of shares, the target company’s corporate bodies play a substantially limited and passive role. Specifically, directors tend to be impartial, especially in view of a change of control that might affect the composition of the management body. Corporate bodies do not have approval rights unless the by-laws of the target company (if non listed) so provide.

In mergers and equity contributions, boards of directors and shareholders play a more active role.

With regard to mergers, the boards of directors of each company involved must draft a merger plan setting out the terms of the merger and fundamental information (such as the new by-laws) of the resulting company and the exchange ratio. Furthermore, approval by resolution of an extraordinary shareholders’ meeting is required.

If the transaction is structured as or involves an equity contribution in kind of a going concern, the capital increase requires approval by resolution of an extraordinary shareholders’ meeting. Furthermore, directors are entrusted with certain duties, such as to re-evaluate the court-appointed expert’s estimate of the value of the assets.

Ireland Small Flag Ireland

The key decision-making body of a company is its board of directors. Although the board typically delegates day-to-day operations to management, it is nonetheless ultimately responsible for the management of the company, and it is expected to supervise managers and exercise oversight in order to fulfil its fiduciary duties. This authority translates to the M&A context where the board is the primary initial decision-maker of the target with respect to a potential transaction.

A takeover offer must be accepted by shareholders representing more than 50% of the voting rights in the target, although a higher threshold will usually be specified by a bidder. A scheme of arrangement requires the approval of a majority in number representing at least 75% in value of the shareholders or class of shareholders present and voting at the relevant shareholder meeting, together with the approval of the High Court.

Brazil Small Flag Brazil

Unlike in the US and in the UK, Brazilian companies and corporations usually have a very clear and visible controlling shareholders. So, as far as “pure” M&A deals are concerned (e.g., those involving a disposal of control or a relevant part of the capital stock by a controlling or a relevant shareholder), the approval rights of shareholders are very limited. Brazilian regulation however establishes mandatory tender offers (“MTO”) which are triggered in several cases, the most visible and important of which is the MTO caused by a disposal of the controlling stake of a listed company. In this case, minority shareholders would be entitled to sell their shares to the new controlling shareholder for at least 80% of the value paid to the party disposing of the controlling stake (this percentage however usually moves all the way up to 100%, depending on the corporate governance level where the company is listed at the local stock exchange). Also, several bylaws contain poison pills which push the value of an M&A up by increasing the cost of acquisition of control to a new buyer.

Cyprus Small Flag Cyprus

The two decision-making organs of a target company are the company’s shareholders and board of directors. Although the ultimate decision is vested with the shareholders who will accept or reject a bid, the views of the board of directors on a bid are still of vital importance given that the views of the board of directors usually affect in practice the decision of the shareholders.

In the case of a private M&A transaction, the respective boards of directors will discuss, negotiate and approve the terms of the merger and subsequently present them to the shareholders and creditors of the merging companies for their approval.

In the case of an acquisition, the board of directors of the target company may reject a bid made, on a confidential basis and not announce the bid and/or its rejection to the shareholders. It must be noted, however, that as of the date that the directors take notice of a bid, they cannot take several actions unless authorised by the shareholders in a general meeting.

Norway Small Flag Norway

The key decision making organs of a target company is in most situations, the chief executive officer (CEO)/the management team, the board of directors, and the shareholders meeting (the general meeting). Some Norwegian companies may also have appointed a corporate assembly. Such corporate assembly must be appointed in private (AS) and public (ASA) companies with more than 200-employees unless the company has entered into an agreement with the majority of employees or the trade unions agreeing otherwise.

The board of directors of both AS-companies and ASA-companies has an overall management function and a supervisory function over the company and the CEO. The board is, unless otherwise provided in the articles of association, or if the company is obliged to have a corporate assembly, elected by the company's shareholders (please note however, that in companies with 30 employees or more there are rules of employees' appointment of board members). If a corporate assembly is required (see above), the board must instead be elected by such corporate assembly, while the majority of the corporate assembly is elected by the shareholders.

The shareholders execute their shareholding rights through the general meeting. A merger will be subject to approval from the general meeting. However, note that statutory mergers cannot be carried out without the board’s consent, as it is the board’s responsibility to prepare the merger and present it for the shareholders’ approval at the general meeting.

If an acquisition is effected using a voluntary tender offer, the approval rights of the shareholders will normally depend exclusively on the level of required acceptances set out by the bidder. A bidder seeking to obtain control over the target’s board will, require more than 50 per cent of the votes on the target’s general assembly. To amend a target’s articles of association requires at least two-thirds of the votes and the capital. To effect a squeeze-out requires more than 90 % of the votes and share capital on the target’s general meeting. Most takeover offers will include an acceptance condition of more than 90 per cent of the shares, a condition that can be waived by the bidder.

The articles of association and a shareholders’ agreement may also contain provisions that give existing shareholders approval rights over a planned acquisition of shares or assets in the target company. A sale of the shares in a Norwegian target company, may under certain circumstances require the consent from more than 2/3rd of the shareholders in such target’s parent company, if such parent has no other activity and/or holds no other assets than the shares in the target company. Asset transactions, especially if a substantial part of the target company’s business is disposed of, may also require the approval of the general meeting of the target company.

Myanmar Small Flag Myanmar

The key decision-making organs are the general meeting and board of directors.

In terms of approval rights, as noted in question 5, 75 per cent of shareholders must approve a scheme of arrangement. In addition, under the MCL, the directors of a public company, a subsidiary of a public company or (if its constitution provides) a private company, cannot sell or dispose of such company’s main undertaking without the consent of the company in a general meeting.

Greece Small Flag Greece

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 to amend the company’s articles, elect the BoD, distribute profit, increase or reduce the share capital, and to initiate a 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.

Germany Small Flag Germany

a) German Stock Corporation
The German stock corporation has a two-tier corporate structure consisting of the management board (Vorstand) and the supervisory board (Aufsichtsrat). Fundamental corporate decisions are made by the general meeting (Hauptversammlung). The members of the management board assume responsibility for the day-to-day management and representation of the company. The supervisory board reviews and controls the work of the management board and reports to the general meeting. As opposed to the German limited liability company, the members of the management board are not bound by the instructions issued by the general meeting, but are obliged to act in the best interest of the company.

The general meeting’s rights mainly concern fundamental decisions such as changes to the articles of association, measures to reduce or increase the registered share capital and such. It may be important nevertheless, because the offer is often subject to the condition of an acceptance rate of at least 75% of the shares in order to subsequently approve a domination agreement or a profit and loss transfer agreement. Also, for any reorganization (such as statutory mergers or demergers) and the disposal of all, or nearly all, of the company’s assets’ the approval of 75% of the votes of share capital is required. Additionally, the German Federal Court (under the “Holzmüller doctrine” as amended by the “Gelatine” decision) extended the general meeting’s rights and approval rights to cases in which the most significant percentage of the company’s assets are transferred and installed the 75% threshold for such cases. Even though these rules for “unwritten competencies” of the general meeting would arguably be not applicable to an M&A situation, they still may play a role in the structuring measure taken prior to the transaction.

b) German Limited Liability Company
The corporate bodies of a GmbH consist of the managing director(s), the shareholders’ meeting, and, on a voluntary basis, the supervisory board and/or the advisory board (Beirat). The shareholders’ meeting is the highest corporate body for determining the objectives and purpose of the company. All basic decisions regarding the company are reserved for their decision. The decisions concern the constitution and existence of the company (the amendment of the articles or the liquidation of the company) as well as the operation of the company’s business (e.g., the appointment and removal of managing directors and members of the supervisory board and the binding instruction of managing directors regarding all matters affecting the company, including even day-to-day management issues). Thus, due to their power to instruct the managing directors, the ability of the shareholders of a GmbH to guide and influence the policy and management of the company is considerably stronger and much more direct than that of shareholders in a German stock corporation.

The managing directors are responsible for the day-to-day business of the company and representation of the company. Managing directors are subject to, and obliged to follow, the instructions of the shareholders’ meeting.

If a supervisory board has been created by the shareholders, it supervises the managing directors without engaging in management activities. An advisory board is usually created to provide expert knowledge and advice to the company.

Belgium Small Flag Belgium

The board of directors has general decision-making power with the exception of those items explicitly requiring a decision of the shareholders’ meeting.

Depending on the nature of the M&A transaction and from a target company’s perspective, the decision-making powers can lie with:

  • the shareholders’ meeting of the target;
  • the individual shareholders of the target;
  • the board of directors of the target.

Transactions taking place in application of a procedure laid down in the Belgian Companies’ Code (such as mergers, demergers, a transfer of a universality of goods) will typically require a decision of the shareholders’ meeting.

In share deals, including public offers, it is up to the individual shareholders of the target to decide whether to sell their shares. There might, however, be certain transfer restrictions pursuant to which the prior approval of the target’s shareholders’ meeting is required. Also, the board of directors of a target may influence the deal by deciding to frustrate a public bid and take action accordingly (see in this regard below – question 24).

Cherry-picking asset deals through an asset purchase agreement may occur by means of a decision of the board of directors. It, however, occurs in practice that transactions exceeding a certain threshold require the prior consent of the shareholders’ meeting.

Vietnam Small Flag Vietnam

8.1 There are three key corporate forms under Vietnam law. All Vietnam-domiciled companies (with isolated exceptions) exist under one of these three corporate forms. These three corporate forms include:

  1. joint stock companies (also referred to as “shareholding companies”) (JSCs);
  2. limited liability companies with one member (LLC1s); and
  3. limited liability companies with two or more members (LLC2s).

8.2 All public companies take the corporate form of a JSC, but there are also JSCs which are not public companies. In the case of all JSCs (whether public or private):

  1. the ultimate decision-making body is the General Meeting of Shareholders, which:

    (a) consists of all of the holders of issued and paid-up ordinary or other voting shares;

    (b) retains exclusive decision-making authority in relation to the most fundamentally important aspects of the ownership, structure, and corporate and business affairs of the JSC; and

    (c) in most cases requires a 51% affirmative vote to pass ordinary resolutions and a 65% affirmative vote to pass special resolutions.

  2. the General Meeting of Shareholders elects a governance body, which:

    (a) is referred to as the “Board of Management”;

    (b) is akin to the governance body referred to in most jurisdictions worldwide as the “Board of Directors”;

    (c) retains exclusive decision-making authority in relation to many key aspects of the corporate and business affairs of the JSC;

    (d) in most cases, requires a bare majority affirmative vote of >50% in in order to pass any resolution, with the Chairman normally having a casting vote in the event of a deadlocked vote;

    (e) is chaired by a Chairman elected by the Board of Management (who performs important functions not only in relation to the operations of the Board of Management but also in relation to the convening and administration of meetings of the General Meeting of Shareholders); and

    (f) is answerable to the superior decision-making authority of the General Meeting of Shareholders,

  3. the Board of Management appoints a “General Director”, who is:

    (a) the most senior executive managerial officer of the JSC;

    (b) akin to the office referred to in most jurisdictions worldwide as the “Chief Executive Officer”;

    (c) responsible for managing the day-to-day business operations of the JSC; and

    (d) answerable to the superior decision-making authority of the Board of Management, and

  4. the General Meeting of Shareholders in most cases elects a separate and distinct “Inspection Committee” (also referred to as the “Board of Supervisors”), which:

    (a) was until recently a compulsory body but is now capable of being opted out of, pursuant to special resolutions of the General Meeting of Shareholders (subject to certain specified conditions);

    (b) is responsible for supervising and reporting to the General Meeting of Shareholders in relation to the operations of the Board of Management, the General Director, and the other managerial officers and/or employees of the JSC;

    (c) is broadly akin to the concept of an Audit Committee in many other jurisdictions worldwide;

    (d) has broad powers to require the provision by the Board of Management, the General Director, or other managerial officers and/or employees of the JSC, of information and documents; and

    (e) is answerable only to the General Meeting of Shareholders.

8.3 In the context of JSCs, amongst other exclusive decision-making powers of the General Meeting of Shareholders:

  1. whether the JSC is public or private, the capital structure of the JSC cannot be changed, new shares of any class cannot be authorised for issuance, and no dilutive issuance of shares or convertible instruments may be implemented, without special resolution approval by the General Meeting of Shareholders (usually ≥65% affirmative vote); and
  2. in relation to public JSCs (and depending upon the express provisions of the charter of the relevant public JSC), the requirement for certain acquisitions to be implemented by way of a Mandatory Public Offer can only be waived by ordinary resolution approval of the General Meeting of Shareholders (usually a ≥51% affirmative vote).

8.4 Vietnam-domiciled companies having only one member (shareholder) can exist only in the form of an LLC1. In relation to LLC1s:

  1. there is no separate owner’s decision-making body (such as a General Meeting of Shareholders) and governance body (such as a Board of Management);
  2. the sole member (owner) of the LLC1 (the Owner) must choose to have the LLC1 governed either by:

    (a) a sole Chairman (also referred to as the sole “President”), appointed by the Owner as its “authorised representative” to:

    (I) represent the Owner in respect of its 100% equity interest in the LLC1; and

    (II) make decisions for and on behalf of the Owner, or

    (b) a “Member’s Council”, consisting of two or more “authorised representatives” of the Owner, appointed by the Owner to:

    (I) represent the Owner’s 100% equity interest in the LLC1 in equal proportions or in such other proportions as may be allocated by the Owner; and

    (II) make decisions for and on behalf of the Owner,

  3. the sole Chairman or Member’s Council (as applicable):

    (a) operates, in effect, as an owner’s body (such as a General Meeting of Shareholders) and a governance body (such as a Board of Management), rolled into one; and

    (b) retains exclusive decision-making power in relation to most of the key aspects of the ownership, governance, and corporate and business affairs of the LLC1 (with very limited exceptions which are reserved for resolutions of the Owner itself),

  4. the sole Chairman or Member’s Council (as applicable) appoints a General Director, who is:

    (a) the most senior executive managerial officer of the LLC1;

    (b) akin to the office referred to in most jurisdictions worldwide as the “Chief Executive Officer”;

    (c) responsible for managing the day-to-day business operations of the LLC1; and

    (d) answerable to the superior decision-making authority of the sole Chairman or Member’s Council (as applicable), and

  5. the Owner appoints one or more Inspectors (who, where there is more than one Inspector, form an Inspection Committee), being:

    (a) responsible for supervising and reporting to the Owner in relation to the operations of the sole Chairman or Member’s Council (as applicable), the General Director, and the other managerial officers and/or employees of the LLC1;

    (b) broadly akin to the concept of an Audit Committee in many other jurisdictions worldwide;

    (c) in possession of broad powers to require the provision by the sole Chairman or Member’s Council (as applicable), the General Director, or other managerial officers and/or employees of the JSC, of information and documents; and

    (d) is answerable only to the Owner.

8.5 In the context of LLC1s, no changes in the capital structure of the LLC1 can occur without the approval of the sole Chairman or the Member’s Council (as applicable) and/or resolutions of the Owner itself (depending upon the charter of the LLC1) and this includes any transfer of the whole or any part of the contributed charter capital of the LLC1.

8.6 In order for any part of the contributed charter capital of any LLC1 to be transferred by the Owner to any transferee, it is firstly necessary for the corporate form of the LLC1 to be converted into that of a JSC (which require a minimum of three shareholders) or an LLC2. This cannot occur without the approval of the sole Chairman or the Member’s Council (as applicable) and/or resolutions of the Owner itself (depending upon the charter of the LLC1).

8.7 In addition, in practical terms, no part of the contributed charter capital of any LLC1 can be transferred without the approval of the relevant provincial or municipal corporate licensing authority (being, in most cases, the relevant provincial or municipal Department of Planning and Investment (the DPI)).

8.8 In relation to LLC2s:

  1. there is no separate owner’s decision-making body (such as a General Meeting of Shareholders) and governance body (such as a Board of Management);
  2. the LLC2 is governed by a “Members’ Council”, consisting of:

    (a) all of the members (Owners) being natural persons; and

    (b) in relation to each Owner being a company or other non-natural legal entity, one or more “authorised representatives” of that Owner, appointed by that Owner to represent specified proportions of that Owner’s equity ownership interest in the contributed charter capital of the LLC2, for the purposes of sitting on the Members’ Council and voting the charter capital percentages allocated to them,

  3. the Members’ Council:

    (a) operates, in effect, as an owner’s body (such as a General Meeting of Shareholders) and a governance body (such as a Board of Management), rolled into one; and

    (b) retains exclusive decision-making power in relation to all of the key aspects of the ownership, governance, and corporate and business affairs of the LLC2,

  4. the Members’ Council appoints a General Director, who is:

    (a) the most senior executive managerial officer of the LLC2;

    (b) akin to the office referred to in most jurisdictions worldwide as the “Chief Executive Officer”;

    (c) responsible for managing the day-to-day business operations of the LLC2; and

    (d) answerable to the superior decision-making authority of the Members’ Council,

  5. where there are more than 11 Owners, the Owners must appoint an Inspection Committee, but where there are 11 or less Owners, the appointment of an Inspection Committee is optional;
  6. where an Inspection Committee is appointed, that Inspection Committee:

    (a) must consist of two or more Inspectors;

    (b) is responsible for supervising and reporting to the Owner in relation to the operations of the Members’ Council, the General Director, and the other managerial officers and/or employees of the LLC2;

    (c) broadly akin to the concept of an Audit Committee in many other jurisdictions worldwide;

    (d) in possession of broad powers to require the provision by the Members’ Council, the General Director, or other managerial officers and/or employees of the LLC2, of information and documents; and

    (e) is answerable only to the Owners.

  7. 8.9 In the context of the Members’ Council of an LLC2:

    1. voting power is dictated by the percentage of the contributed charter capital (in the case of Owners being natural persons) held by each respective Owner or (in the case of Owners being companies or other non-natural legal entities) the “authorised representatives” of each respective Owner having been appointed by that Owner to sit on the Members’ Council;
    2. ordinary resolutions in most cases require an affirmative vote representative of ≥65% of the contributed charter capital of the LLC2, in order to be passed (depending upon the provisions of the charter of the LLC2); and
    3. special resolutions in most cases require an affirmative vote representative of ≥75% of the contributed charter capital of the LLC2, in order to be passed (depending upon the provisions of the charter of the LLC2).

    8.10 In relation to LLC2s:

    1. no changes to the charter capital (that is, any increase or decrease of the registered charter capital) of the LLC2 may be made without special resolution approval of the Members’ Council;
    2. Owners enjoy pro rata pre-emptive rights to participate in any charter capital increases and are thus protected from dilution;
    3. Owners enjoy pro rata pre-emptive rights in relation to any proposed sale by any Owner of the whole or any part of its contributed charter capital (provided that the other Owners are given due and proper opportunity to exercise their pre-emptive rights, transfers of contributed charter capital do not require any further internal corporate approvals unless specified otherwise in the express provisions of the charter of the relevant LLC2); and
    4. no part of the contributed charter capital of the LLC2 may be transferred without the approval of the relevant provincial or municipal corporate licensing authority (in most cases, the DPI).

    8.11 Although the voting percentage thresholds outlined above in this Section 8 are common and reflect the prevailing norms, the charter of any JSC (whether public or private), LLC1, or LLC2 must always be checked in order to verify the specific requirements for the passing of resolutions by the relevant shareholders’ or members’ body.

Switzerland Small Flag Switzerland

The key decision-making body of a target company is the board of directors.

In a friendly transaction the board of directors of the target negotiates with the bidder the terms of the contemplated tender offer. If the negotiations are successful, the company and the bidder typically enter into a transaction agreement in which, among others, the board agrees to support and recommend the offer to its shareholders for acceptance.

In an asset deal, it is the board of directors that approves the sale or purchase of the assets or business. However, the sale of all (or substantially all) assets of a company would be outside the board's authority and would have to be approved by the general meeting of shareholders. The same holds true if in connection with a transaction the articles of incorporation of the company need to be amended (e.g., because new shares are issued, or the corporate purpose is changed).

Statutory mergers of and de-mergers by the company under the Swiss Merger Act require the approval of the general meeting of shareholders.

Russia Small Flag Russia

Key decision making organs, depending on the form of the target company, are:

  1. In a non-public company, a general meeting of participants (shareholders) of the company acts as the managing body with ultimate authority, including a number of issues expressly reserved to it by law, such as reorganisations (including mergers) or introduction of changes to the company’s charter. Other issues typically reserved for the general meeting (unless delegated to the board of directors, an optional body) include approval of major and interested party transactions, thresholds for which are set in the law and the charter of the company. Additional approvals can be required by the charter of the company. Everyday business is managed by a chief executive body, which may now consist of one or several persons, acting together or independently from each other. Optionally, a board of directors and/or a management board may be formed as, accordingly, supervisory or collective management authority.
  2. In a public joint-stock company, the scope of issues reserved to the competence of a general shareholders’ meeting’s is set forth in the law and cannot be changed or delegated to the board of director/ management board. The list of reserved matters includes, among others, decisions on reorganisation, changes in the company’s charter, approval of major and interested party transactions. No additional requirements related to sales of shares can be set in the charter of a public joint-stock company. Everyday business is managed by a chief executive body, plus a company should form a board of directors as supervisory authority and may form a collective management body (management board).

Romania Small Flag Romania

Depending on the type of target company, the key decision-making bodies are the shareholders meeting, the board of directors (one tier system), the supervisory council and the directorate (two tier system).

The powers of the shareholders meeting are usually set out in the articles of association. In principle, any material transactions require approval from the shareholders meeting, but the materiality thresholds may differ.

Qatar Small Flag Qatar

The shareholders’ meeting and the board are the approving organs.

United States Small Flag United States

The key decision-making body of a company is its board of directors. Although the board typically delegates running the day-to-day operations to management, it is nonetheless ultimately responsible for the management of the company, and directors are expected to supervise managers and exercise oversight in order to fulfill their fiduciary duties. This authority translates to the M&A context where the board is the primary initial decision-maker of the target with respect to a potential transaction. In negotiated acquisitions, the target’s board decides whether to approve a transaction in the first instance and, in the case of a public company, what recommendation to make to shareholders. In hostile transactions, although the hostile bidder typically makes an offer directly to shareholders, the target’s board must still make a recommendation to its shareholders. Moreover, in practice, hostile takeover attempts generally turn into a battle over the board of the target company, either by attempting to replace the directors with a friendly slate of directors that will negotiate with the hostile bidder, or by attempting to persuade the directors to change their minds.

Shareholders of a company elect its board of directors. Shareholders are also generally entitled to vote on any extraordinary transactions, such as selling all or substantially all the assets of the company, mergers and changes to organizational documents. A buyer’s shareholders generally do not have the right to vote on an acquisition unless the certificate of incorporation provides otherwise or under certain other circumstances, such as if there will be changes to the certificate of incorporation or a substantial amount of stock will be issued as consideration (typically 20% of more of the shares outstanding prior to issuance). In certain states (not including Delaware), the state corporation law does entitle a buyer’s shareholders to vote on significant acquisitions.

Sweden Small Flag Sweden

The key decision-making organs of a limited liability company are the Board of Directors and the shareholders’ meeting. The Board of Directors is in charge of the company and runs its business while certain issues, such as issuing of equity instruments and appointment of the board members require resolutions from the shareholders’ meeting. In a private Swedish share transfer transaction it is the shareholders of the target company that makes the transaction related decisions while the Board of Directors of the target company normally only is involved in the due diligence exercise. In an asset deal, the Board of Directors of the selling company will be the decision making body (although the final decision may sometimes be referred to a shareholders’ meeting if the assets sold are considered material to the selling company’s operations).

In furtherance of the above, a public takeover offer is by its nature directed towards the shareholders of the target company and each shareholder will have to decide whether to accept the offer. However, the Board of Directors is normally obliged to, inter alia, announce its opinion regarding the offer.

Philippines Small Flag Philippines

The key decision-making organ is the Board of Directors, which, by provision of law, exercises all corporate powers, conducts all corporate businesses, and controls all corporate properties. Even as the Board can, and typically does, delegate day-to-day management of the corporation to the corporate officers, the Board is expected to supervise the corporate officers in their conduct of corporate officers.

In some instances, the corporation may, through its by-laws, provide for the creation of an executive committee composed of not less than three members of the board, to be appointed by the board. The executive committee may act on such specific matters within the competence of the board, as may be delegated to it in the by-laws or on a majority vote of the board, subject to certain exceptions specified in the Corporation Code.

In respect of shareholder rights, the directors are elected by the shareholders. In terms of approving corporate acts, as general rule, board approval is sufficient to approve corporate acts and shareholder approval is not necessary. However, the ratification or concurrence of shareholders representing at 2/3 of the outstanding capital stock is necessary in respect of extraordinary corporate acts, such as amendment of the articles of incorporation, disposition of all or substantially all of the corporate assets, mergers and consolidations, and liquidation.

Guernsey Small Flag Guernsey

The shareholders of the target company (or the relevant requisite majority of shareholders) ultimately decide whether to approve the proposed acquisition/merger. Typically the board will deal with much of the negotiations and preparations in relation to a transaction, presenting the results to the shareholders for approval and execution where necessary.

Statutory squeeze out rights exist in Guernsey that allow for a decision approved by 90% of the shareholders to sell the entire issued share capital of a company to bind any remaining dissenting shareholders. This figure is reduced to 75% shareholder approval for a scheme of arrangement, however such a scheme requires the sanctioning of the Royal Court of Guernsey who will consider the rights and potential impacts on all of the shareholders and creditors of the company when deciding on whether to approve such a scheme.

Further details on the required shareholder majorities to approve an amalgamation or scheme of arrangement are set out at 5 above.

Japan Small Flag Japan

The key decision-making organ of a target company is its board of directors. However, in relatively small transactions, a representative director, or an executive officer who is authorized by a representative director, may have the power to make decisions for the target company on such transactions.

Shareholder approval is required when a Japanese company desires to engage in or conduct certain transactions stipulated in its Articles of Incorporation or by law, e.g., a sale of a subsidiary, a business transfer or certain statutory corporate reorganizations such as a merger or a demerger (kaisha bunkatsu). Although, in each case, if the size of the transaction does not meet a certain threshold, shareholder approval may not be necessary.

Isle of Man Small Flag Isle of Man

In an asset sale, subject to the provisions of the target’s constitutional documents, the board of directors have legal power to act without shareholder consent, however in practice, the directors would seek the approval of the shareholders.

A scheme of arrangement requires the approval of a majority in number representing at least 75% in value of the shareholders or class of shareholders present and voting at the relevant shareholder meeting, together with the approval of the Court.

A takeover offer must be approved by the holders of not less than nine-tenths in value of the shares affected.

Mauritius Small Flag Mauritius

The shareholders of the target company decide whether or not to approve the proposed acquisition but depending on the method of acquisition, board approval and an order granted by the Supreme Court of Mauritius may also be necessary. Where an entity involved is licensed in Mauritius, the consent of the FSC will likely be required. The offeror may also need to notify the Competition Commission prior to the acquisition if the latter results in acquiring more than 30% of a market.

Bermuda Small Flag Bermuda

The key decision making organs of a target company are its board of directors. The Board of Directors as in other jurisdictions must comply and be mindful of their duties owed to the company when making any decisions.

All shareholders, whether or not they ordinarily have the right to vote, have the right to vote on a merger or amalgamation under the Companies Act. In addition, pursuant to the Companies Act, any shareholder who did not vote in favour of the amalgamation or merger and who is not satisfied that he/she has been offered fair value for the shares may within one month of the giving of the notice required under the Companies Act in respect of the merger or amalgamation apply to the courts in Bermuda to appraise the fair value of his/her shares. The Companies Act sets out this appeal process and what should occur in the event that the Court appraises the fair value of the shares of the target company.

British Virgin Islands Small Flag British Virgin Islands

The Board of Directors of the target company will be integral in consummating a merger or acquisition, whether by statutory merger, plan or scheme of arrangement, equity acquisition or asset acquisition.

In the context of a statutory merger, the directors will be required to approve the terms of the transaction. In the case of a plan or scheme of arrangement, the approval of the directors will be required. The standard position for a BVI company (other than a listed company) is that any transfer of shares is subject to the consent of the directors.

It is common for the directors of a listed company to elect to establish an independent committee of uninterested directors to consider takeover offers. Whilst this may assist from a risk-management perspective, it does not provide the same “safe harbour” or “roadmap” protection it may offer in other jurisdictions.

Member’s Approval

After the directors of each constituent company have approved the Plan of Merger by resolution, the Plan of Merger needs to be authorised by a resolution of each constituent company’s members. Where a constituent company has more than one class of shares outstanding and its memorandum and articles so provide (or if the Plan of Merger contains any provision that, if contained in a proposed amendment to the memorandum or articles, would entitle the class to vote on the proposed amendment as a class), the holders of each class will be entitled to vote on the Plan of Merger separately as a class.

If a meeting of members is to be held to obtain a resolution of members, then notice of the meeting, together with a copy of the Plan of Merger, must be provided to each member, whether or not he is entitled to vote on the merger.

If the written consent of members is sought, a copy of the Plan of Merger must be provided to each member, whether or not he is entitled to consent to the Plan of Merger.

As mentioned above, in the case of a merger of a parent company with one or more subsidiary companies, shareholder approval is not required.

Jersey Small Flag Jersey

The directors of a company will be integral in consummating a merger or acquisition, whether by way of merger, scheme of arrangement or share acquisition.

Scheme of Arrangement – a key condition is that the compromise or arrangement is approved by a majority in number representing 75% of the voting rights of the members (or value of creditors).

Merger – a merger agreement must be prepared which must be submitted for approval by a special resolution of each merging company.

Turkey Small Flag Turkey

There are two main types of companies in Turkey: (i) joint stock corporations (anonim şirket) and (ii) limited liability partnerships (limited şirket).

The key decision-making organs of a target joint stock corporation are the general assembly of shareholders and the board of directors. In a share transfer deal, approval from the target joint stock corporation’s shareholders is not sought. Also, in joint stock corporations, contractual arrangements that restrict transfer of shares such as call/put options, rights of first refusal, etc. are not enforceable at the company level, and are only contractually binding between the parties but not vis-à-vis third parties. However, depending on the content of the target company’s articles of association, approval from the board of directors may be denied.

The TCC gives the board of directors the right to withhold approval in the existence of certain just causes (e.g., economic independence of the company) which are specified under the company’s articles of association. In this context, the company may offer to purchase shares on the account of other shareholders, third persons, or the company itself.

In targets which are limited liability partnerships, M&A deals, including transfer of shares as well as assets, require the approval of shareholders.

Updated: April 10, 2018