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

Mergers & Acquisitions (2nd edition)

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.

Updated: February 14, 2018