What are the key rules/laws relevant to M&A and who are the key regulatory authorities?
Mergers & Acquisitions (2nd edition)
Hong Kong is a key financial hub, more generally for the wider Asia-Pacific region and specifically for investments into and out of China. Offshore companies are involved in a significant number of Chinese and other Asian corporate structures and in cross-border corporate transactions. Cayman, BVI and Bermuda are the most popular offshore jurisdictions for these purposes.
The primary sources of M&A law and regulation involving an Offshore Entity are the respective company or partnership legislation and the common law of the relevant jurisdiction where the Offshore Entity is domiciled. Specifically:
(a) for Cayman Islands entities: (i) Companies Law (2016 Revision) – for Cayman Islands companies; (ii) Limited Liability Companies Law, 2016 – for Cayman Islands limited liability companies; (iii) Exempted Limited Partnership Law, 2014 – for Cayman Islands exempted limited partnerships and (iv) other legislation particularly if the entity is regulated as a matter of Cayman law.
(b) for Bermuda entities: (i) Companies Act 1981 (as amended) – for Bermuda companies; (ii) Limited Liability Companies Act 2016 – for Bermuda limited liability companies; (iii) Exempted Partnerships Act 1992 (as amended) – for Bermuda partnerships, and (iv) other legislation particularly if the entity is regulated as a matter of Bermuda law.
(c) for BVI entities: (i) the BVI Business Companies Act 2004 (as amended) – for BVI companies; (ii) the Partnership Act, 1996 and the Limited Partnership Act, 2017 – for BVI partnerships, and (iii) other legislation particularly if the entity is regulated as a matter of BVI law.
In Hong Kong, companies incorporated in the Cayman Islands and Bermuda as exempted companies are widely used as the listing vehicle for corporate groups listed on the Stock Exchange of Hong Kong Limited (the “SEHK”), whereas companies incorporated in the BVI are often utilized as private holding companies. As a consequence, a listing on the SEHK subjects the listing vehicle (the “Offshore Listing Vehicle”) to the listing rules of the SEHK (the “Listing Rules”). Further, as required by the Listing Rules, the provisions of the Codes on Takeovers and Mergers and Share Repurchases (the “Takeover Code”) will be required to be complied with in cases of takeovers, mergers, share buy-backs and acquisitions involving a public company under the Takeover Code, which includes an Offshore Listing Vehicle, as well as certain unlisted companies with a significant number of Hong Kong shareholders.
Other legislation of Hong Kong, such as the Banking Ordinance, the Insurance Ordinance and the Securities and Futures Ordinance, may be applicable for companies in the relevant areas.
Austrian law does not have one specific law regulating all issues on the acquisitions of companies, but rather various different statutes apply, depending on the specific type and form of an acquisition.
In particular, the following laws are relevant:
- Cartel Act (Kartellgesetz)
- Commercial Code (Unternehmensgesetzbuch)
- Commercial Register Act (Firmenbuchgesetz)
- Corporate Transformation Act (Umwandlungsgesetz)
- Demerger Act (Spaltungsgesetz)
- EC Merger Control Regulation (EG-Fusionskontrollverordnung)
- Employment Contract Adaptation Act (Arbeitsvertragsrechts-Anpassungsgesetz)
- EU Cross-Border Merger Act (EU Verschmelzungsgesetz)
- Federal Fiscal Code (Bundesabgabenordung)
- Foreign Trade Act (Außenwirtschaftsgesetz)
- General Civil Code (Allgemeines Bürgerliches Gesetzbuch)
- Joint Stock Corporations Act (Aktiengesetz)
- Income Tax Act (Einkommenssteuergesetz)
- Limited Liability Companies Act (Gesetz über Gesellschaften mit beschränkter Haftung)
- Minority Shareholder Squeeze-Out Act (Gesellschafterausschlussgesetz)
- Real Estate Transfer Tax Act (Grunderwerbssteuergesetz)
- Reorganisation Tax Act (Umgründungssteuergesetz)
- Stamp Duty Act (Gebührengesetz)
- Stock Exchange Act (Börsegesetz)
- Takeover Act (Übernahmegesetz)
- Rules regarding specific regulated industries (e.g., Banking Act (Bankwesengesetz), Insurance Supervisory Act (Versicherungsaufsichtsgesetz))
For asset deals, in particular the provisions of Article 1409 of the General Civil Code and Article 38 of the Commercial Code are pertinent. Article 1409 of the General Civil Code provides that a purchaser generally is jointly and severally liable with the seller towards the seller’s creditors for any liabilities of the acquired business having their origin prior to the acquisition. The purchaser’s liability is limited to the current net asset value of the acquired assets and applies in case the purchaser knew or should have known at the time of the purchase of the pre-existing liabilities. Article 1409 of the General Civil Code is mandatory law and cannot be waived or amended by contract. Liability can be reduced if the purchase price payable by the buyer is used to pay off the debts of the business sold.
In addition to Article 1409 of the General Civil Code also Article 38 of the Commercial Code contains special liability provisions for asset deals. Even if the buyer is not liable under the General Civil Code because, for example, the purchase price was used to pay off the debts of the business sold, the buyer still might be liable under the Commercial Code. Article 38 of the Commercial Code provides that a legal entity which acquires and continues a commercial business is liable for all debts the former owner incurred in the course of business conduct, meaning even those which are not contractually agreed to be taken over by the buyer. Unlike liability under Article 1409 of the General Civil Code, liability under the Commercial Code is not limited to the value of the acquired assets. Nevertheless, under Article 38 of the Commercial Code the seller and the buyer can agree to limit liability of the seller, such limitation of liability, however, being only valid if a timely notification to the commercial register is submitted or otherwise made public.
In addition, there are successor liability provisions under the Federal Fiscal Code, the General Social Insurance Act (Allgemeines Sozialversicherungsgesetz) and the Employment Contract Adaptation Act.
Regarding the transfer of shares in Austrian limited liability companies (Gesellschaft mit beschränkter Haftung), the Limited Liability Companies Act requires that the transfer be executed in the form of a notarial deed. Therefore, the involvement of an Austrian notary public or a notary public subject to a comparable regime (e.g., a German notary) is necessary.
A key regulatory authority with regard to M&A transactions is the Federal Competition Authority (Bundeswettbewerbsbehörde), which is competent for the clearance of mergers if the transaction volume does not exceed the thresholds of the EC Merger Control Regulation, but exceeds the thresholds under Austrian competition law. A transaction has to be notified to the Federal Competition Authority under Austrian competition law if the following conditions are met and no exception applies: (i) the combined worldwide aggregate turnover of all participating undertakings in the year prior to the transaction was more than EUR 300 million; (ii) the combined domestic aggregate turnover of all participating undertakings in the year prior to the transaction was more than EUR 30 million; and (iii) the worldwide turnover of at least two participating undertakings each was more than EUR 5 million in the year prior to the transaction. The main exception is the following: The transaction does not need to be notified if (i) only one independent undertaking has a domestic turnover of over EUR 5 million, and (ii) the other participating undertakings' combined worldwide aggregate turnover in the year prior to the transaction does not exceed EUR 30 million. Transactions closing after November 2017 which meet the following, newly introduced conditions, also need to be notified to the Federal Competition Authority: (i) the combined worldwide aggregate turnover of all participating undertakings in the year prior to the transaction was more than EUR 300 million; (ii) the combined domestic aggregate turnover of all participating undertakings in the year prior to the transaction was more than EUR 15 million; (iii) the value of the consideration for the transaction is more than EUR 200 million; and (iv) the target company has significant operations in Austria. Special rules on turnover calculation exist for the banking, insurance and media sectors. A further relevant authority regarding cartels and merger control is the Cartel Court (Kartellgericht).
Other relevant authorities are the Commercial Register Courts (Firmenbuchgerichte), which register and publish transactions and reorganisations in the Austrian commercial register, and the Financial Market Authority (Finanzmarktaufsicht), which reviews banking acquisitions.
Public M&A transactions regarding listed joint stock corporations (Aktiengesellschaft) are also subject to the supervision of the Austrian Takeover Commission (Übernahmekommission), which monitors compliance with the Austrian takeover regulations and decides on all matters related to the Takeover Act.
The Companies Act 2006 and the common law of contract provide the basis for the sale and purchase of companies and other corporate entities in the United Kingdom. For public company takeovers in the United Kingdom, the City Code on Takeovers and Mergers (the “Code”) will apply. The Code is a set of principles and rules with statutory force, administered by the UK Panel on Takeovers and Mergers (the “Panel”) which provides an orderly framework within which takeovers are conducted. The Code is designed principally to ensure that shareholders in a target company to which the Code relates are treated fairly and equally and are not denied an opportunity to decide on the merits of a takeover. The Code covers companies and Societas Europaea which have their registered offices in the United Kingdom, the Channel Islands or the Isle of Man if any of their securities are admitted to trading on a regulated market in the United Kingdom or a multilateral trading facility in the United Kingdom (for example, AIM) or on any stock exchange in the Channel Islands or the Isle of Man. Offers for public companies who have their registered offices in the United Kingdom, the Channel Islands or the Isle of Man but which do not have securities admitted to trading on a regulated market or multilateral trading facility are also covered if the Panel considers them resident in the United Kingdom, the Channel Islands or the Isle of Man. Private limited companies who were public companies covered by the Code in the prior ten years may also be subject to the Code.
The Code is made up of 6 general principles and 38 rules and the spirit, as well as the language, of the Code is required to be observed.
The other UK legislation that is likely to be relevant for an M&A transaction is the Financial Services and Markets Act 2000 (which provides an overarching framework for financial services legislation and regulation in the UK and covers public offers of securities, listing and invitations to enter into securities transactions), the Criminal Justice Act 1993 (which along with the Market Abuse Regulation covers restrictions on insider dealing and provisions to prevent market abuse in relation to the securities of publicly traded companies) and the Financial Services Act 2012.
The Listing Rules and the Prospectus Rules could also be relevant where a listed bidder is seeking to offer its securities as consideration in an acquisition and will regulate the information that the bidder will need to prepare and provide in connection with an offer of those securities. In addition, depending on the size of the transaction in question, the Listing Rules may require certain approvals to be sought and provided (e.g. shareholder consent).
If the M&A transaction gives rise to a merger situation that requires investigation, the Enterprise Act 2002 could apply, as could the EU Merger Control regime or applicable merger control regimes in other relevant jurisdictions.
The primary rules for M&A transactions are laid out by the Commercial Act, which governs transfers of shares, quota, going concern, etc. The law also regulates mergers, de-mergers, spin-offs and reorganizations. Contracts, which typically facilitate M&A transactions, are governed by the Obligations and Contracts Act, which provides the general civil law rules for validity, performance, default, provision of security, etc. Corporate post-transactional registration requirements are regulated by the Commercial Register Act, which mandates certain changes of ownership (e.g. in a limited liability company, a solely owned joint-stock company) to be registered with the Bulgarian Commercial Register. Acquisition of shares in a public company is also subject to the rules of the Public Offering of Securities Act. Transactions of considerable economic significance fall within the scope of the Competition Protection Act and are subject to notification to and approval by the Competition Protection Commission.
In addition to the legislative framework, laid out above, transactions involving the acquisition of companies in certain regulated sectors, such as credit institutions, insurance undertakings, pension funds, investment undertakings, financial institutions, etc. must also conform to the special legislation with regards to regulatory permissions and approvals, as necessary (e.g. the Credit Institutions Act, Markets of Financial Instruments Act, Insurance Code, Social Security Code, etc. would apply). Employment law aspects are regulated by the Labour Code, which sets out employment safeguarding rules, notification and protective mechanisms for employees in certain cases, such as takeovers, going concern transfers, reorganizations and in other significant changes.
A number of other rules may apply depending on the nature of the transaction, as well as the specifics of the sector (to name a few: the Energy Act, the Foods Act, the Environmental Protection Act, Companies with Special Purposes Act, Privatization and Post-Privatization Act etc.).
There is no specific unified or single legal statute that regulates all aspects of mergers and acquisitions of companies in Colombia, but rather a combination of rules that must be considered when entering into a transaction.
The application of the specific rules will depend to a major extent on the specific structure of the transaction (i.e. share purchase, asset purchase, merger or spin off) and on the characteristics of the target company.
Some of the most relevant rules include:
- The Code of Commerce (Código de Comercio), which contains specific rules on pre-contractual liability, commercial offers and formation of commercial contracts, as well as the commercial regime applicable to the different type of companies (including but not limited to the corporate requirements for the transfer of shares or assignment of certain assets and contracts);
- Law 222 of 1995, which contains relevant rules concerning spin-offs, appraisal remedies and D&O liability.
- The Civil Code (Código Civil), which contains general rules on contracts and serves as a secondary source to interpret commercial agreements;
- Law 1258 of 2008, which regulates the so-called simplified stock corporations (sociedad por acciones simplifcada), the most common type of company incorporated in Colombia;
- The Tax Code (Estatuto Tributario), which provides the tax implications arising from the sale of share or assets or a corporate reorganization;
- Securities law provisions, mainly the Organic Statute of the Financial System (Estatuto Orgánico del Sistema Financiero), Law 964 of 2005and Decree 2555 of 2010, which must be considered in transactions involving financial entities and listed or publicly held companies;
- Law 1340 of 2009, which provides the rules for antitrust control over company integrations and mergers and acquisitions; and
- Foreign exchange provisions, mainly Law 9 of 1991, Decree 1069 of 2015, External Resolution 8 of 2000 and External Regulatory Circular Letter DCIN-83 issued by the Colombian Central Bank (Banco de la República).
- Law 226 of 1995 regarding privatization of state owned entities.
As to the key regulatory authorities, it is worth to mention that, as a general rule, a merger or acquisition requires the approval of the competent corporate bodies of the entities participating in the respective transaction but does not require any general regulatory approval. Notwithstanding the above, there are some exceptions which will depend greatly on the nature of the target company and if it is a privately or publicly held company, including:
- In specific cases laid out in External Memorandum n.º 100-5 of 2015, the Superintendence of Corporations (Superintendencia de Sociedades) must approve the merger of companies under its supervision;
- A clearance from the antitrust authority, the Superintendence of Industry and Commerce (Superintendencia de Industria y Comercio), is necessary for deals exceeding certain thresholds (i.e., combined gross assets and/or operational turnover of the undertakings during the previous year) and (ii) engage in the same economic activity or participate in the same value chain;
- The Superintendence of Finance (Superintendencia Financiera de Colombia- SFC) must approve (i) any acquisition or transfer of more than 10% of the equity of a financial institution; (ii) the transactions involving the transfer of substantially all of the assets and liabilities of such companies; (iii) the assignment of assets, liabilities and agreements of such companies; (iv) and the launching of a tender offer (Oferta Pública de Adquisición - OPA) in case of acquisition of a publicly traded company;
- Finally, depending on the relevant industry, some other regulatory authorities must provide its authorization to the corresponding transactions. For example, the authorization from the Superintendence of Health (Superintendencia Nacional de Salud) might be required for the acquisition of a shareholding interest in a health provider.
The key M&A legal provisions can essentially be found in the French Civil Code (Code civil), Commercial Code and Monetary and Financial Code (Code monétaire et financier).
Spawned by the Napoleonic codification, the French Civil Code still sets out the basic principles of contract law and company law. The contract law reform of 10 February 2016 directly affects the practice, particularly in so far as it enshrines a general duty of information based on good faith, which refers to any information (other than an estimate of the value of the benefit) that a party knows is material to the consent of the other party when the contract is formed. Non-compliance with this rule of public policy may incur the defaulting party’s liability or the cancellation of the contract (Article 1112-1). Henceforth, the judge may alter the contract in the event of unforeseeable circumstances making the contract’s execution excessively onerous for one of the parties (Article 1195).
Dispositions of the French Commercial Code and Monetary and Financial Code, beyond the general principles, detail the specific set of rules relevant to commercial companies for the different types of legal structures.
In addition to these standard sources, European Union law has acquired a central place, particularly, through the assertion of the freedom of establishment principle by the Court of Justice as well as by the directive on cross-border mergers of limited liability companies or the takeover directive for example. Furthermore, through its growing regulatory power, the Financial Markets Regulator (Autorité des Marchés Financiers or AMF) has increased its clout: it is the French supervisory authority for public offers and its general regulation frames market practices. The French Competition Authority (Autorité de la concurrence or FCA) and the French Ministry of the Economy play also an important role in M&A transactions.
The key laws relevant to M&A in New Zealand are:
- the Companies Act 1993 – which regulates the administration and operation of New Zealand companies;
- the Takeovers Code – to the extent that the transaction involves the direct or indirect acquisition of shares in a ‘code companies’ (any New Zealand company that is listed, or that has more than 50 shareholders and more than 50 shareholdings);
- the NZX Listing Rules – where the target or another party is listed on the NZX stock exchange;
- the Financial Markets Conduct Act 2013 – which regulates the offer of financial products (including equity securities);
- the Overseas Investment Act 2005 and associated regulations – to the extent that the value assets or business being acquired exceed NZ$100m or constitute sensitive parcels of land; and
- the Commerce Act 1986 – to the extent that the transaction may give rise to competition or anti-trust issues.
The key regulators in New Zealand are:
- for matters governed by the Companies Act or the Financial Reporting Act, the Companies Office;
- for listed company matters, the operator of the New Zealand stock exchange, NZX Limited;
- for takeovers, the Takeovers Panel;
- for any offer of financial products (including any offer of shares or others securities in connection with an acquisition), the Financial Markets Authority (FMA);
- for Overseas Investment Act matters, the Overseas Investment Office (OIO); and
- for anti trust/competition law issues, the Commerce Commission.
M&A transactions are regulated in Egypt by diverse legislations. Key rules pertaining to M&A can be found under the Egyptian Companies Law no.159 of 1981 and its Executive Regulations, as amended (“Companies Law”), the Capital Market Law no. 95 of 1992 and its Executive Regulations, as amended (‘Capital Market Law’) and the Egyptian Exchange (“EGX”) Listing Rules, as amended.
Concerned key regulatory authorities are:
- The EGX;
- The Financial Regulatory Authority (“FRA”); and
- The General Authority for Investment and Free Zones (“GAFI”).
Acquisitions involving transfer of shares of joint stock companies and quotas of limited liability companies are the most common acquisition structures in Egypt.
Transfer of Unlisted Shares
Any transfer of shares of a joint stock company must take place through the EGX, whether the shares are listed or not. A licensed broker should be appointed to effect the shares’ transfer in accordance with the transfer procedures set out by the EGX and the FRA.
Any transaction exceeding EGP 20,000,000 (twenty million Egyptian Pounds) must be pre-approved by the EGX Pricing Committee which convenes on a weekly basis to study and resolve on each envisaged transaction.
In 2016, the EGX has issued a decree regarding transfer of unlisted shares requiring consideration to be deposited with a bank regulated by the Central Bank of Egypt if the value of the transaction exceeds EGP 100,000 or if the transfer involves a foreign party. The competent committee at the EGX may, at its discretion, provide for exceptions in this respect.
Another relevant development relates to capital gains tax which currently applies on transfer of quotas and unlisted shares at a rate of 22.5% on the net realized capital gain. Such net profits are calculated based on the difference between the acquisition price and the disposal price of such shares/quotas (whether through sale, swap or any other form of disposal).
Transfer of listed shares
In respect of listed shares of a joint stock company, the Capital Market Law provides that a person may acquire up to 1/3 of the share capital or voting rights of a listed company through open market transactions.
In case of exceeding the threshold of 1/3 of the share capital, whether through acquiring listed shares, or shares in a company that has previously offered its shares to public subscription, the acquirer is obliged to submit a mandatory tender offer to acquire 100% of the issued share capital of the target company.
Transfer of Quotas
Quotas of limited liability companies may be transferred through official or unofficial transfer agreements as prescribed under the memorandum of association of the company, with no involvement of the EGX. An official transfer agreement will require notarization with the Notary Public and such notarization will be subject to ad valorem fee. Quota-holders of a limited liability company enjoy a statutory right of first refusal on any quotas subject to transfer.
Moreover, although there is no general merger control regime there are sectorial laws that have adopted M&A control regime such as:
i) Requiring the prior approval of FRA for: transferring or acquiring any micro-finance portfolio, or merger of a company carrying our mortgage activities with another company of the same activity; or to own by any means 10% or more of any company carrying out insurance and reinsurance activities;
ii) Requiring the prior approval of the Central Bank of Egypt to own 10% or more of the share capital of any bank in Egypt;
iii) the written approval of the Ministry of Health and Population is required prior to any type of legal disposal of any private hospital or drug factory; and
iv) Prior approval of the National Communication Regulatory Authority is required to carry out any transfer of license, merger, and change of shareholders structure to companies carrying out telecommunication activities.
There is also a post-notification requirement imposed by the Egyptian Competition Law where a notification must be served to the Egyptian Competition Authority (ECA) upon acquiring, assets, usufruct rights, shares or joint management of two or more persons. ECA post transaction notification is required in case that the combined annual turnover of the concerned parties in Egypt exceeds EGP 100,000,000 according to their latest financial statements.
Sources of Regulation
The primary sources of regulation of Cayman Islands M&A are (i) the Companies Law (2016 Revision) (the “Companies Law”), (ii) the Limited Liability Companies Law, 2016 (the “LLC Law”), and (iii) the common law.
- mergers, amalgamations and reconstructions by way of a scheme of arrangement are available for complex mergers (usually in the context of a restructuring) if approved by the requisite majorities of shareholders and creditors and by an order of the Cayman Islands court under section 86 or 87 of the Companies Law or section 42 or 43 of the LLC Law (as applicable); and
- section 88 of the Companies Law and section 44 of the LLC Law provide a limited minority squeeze-out procedure which may be used in connection with a contractual acquisition of equity.
Different Rules for Different Types of Company
Except to the extent described below with respect to companies listed on the Cayman Islands Stock Exchange (the “CSX”), there are not different rules for different types of company.
The Cayman Islands does not have a prescriptive set of legal principles specifically applicable to ‘take-overs’, ‘going private’ or other acquisition transactions (unlike certain other jurisdictions such as, for example, Delaware). Rather, broad common law and fiduciary principles will apply.
While there is no specific Cayman Islands statute or regulation concerning the conduct of M&A transactions, where the target’s equity securities are listed on the CSX, the CSX Code on Takeovers and Mergers and Rules Governing Substantial Acquisitions of Shares (the “Code”) will apply. The Code exists principally to ensure fair and equal treatment of all shareholders.
There are change-of-control rules applicable to entities in regulated sectors, including those regulated by the Cayman Islands Monetary Authority under the Banks and Trust Companies Law (2013 Revision), the Insurance Law, 2010 (as amended) or, with respect to mutual fund administrators, the Mutual Funds Law (2015 Revision). In addition, ownership and control restrictions apply to certain entities regulated by the Information & Communications Technology Authority Law (2016 Revision).
The key corporate laws governing M&A are primarily: (i) the Italian Civil Code (Royal Decree No. 262/1942) for privately held companies; and (ii) the Consolidated Financial Act (Legislative Decree No. 58/1998, Testo Unico della Finanza), which is the main law governing the financial sector and was approved in 1998 to provide a coherent and complete set of rules in line with EU law and that deals with, among other things, M&A transactions of publicly traded companies.
Publicly traded companies are subject to the supervisory authority of Consob (Commissione Nazionale per le Società e la Borsa), which has the duty to, among other things, monitor takeover bids on listed companies with registered offices in Italy and companies admitted to trading on Italian regulated markets.
The M&A market is also regulated by antitrust regulation, primarily Law No. 287/1990, which constitutes the basis of Italian antitrust law. Indeed, if an acquisition or merger among a plurality of companies results in a concentration of undertakings, exceeding certain thresholds (i.e., aggregate turnover exceeding EUR 492 million and aggregate domestic turnover of each of at least two of the merging companies exceeding EUR 30 million), the Italian Antitrust Authority (AGCM – Autorità Garante della Concorrenza e del Mercato) evaluates whether the entity resulting from the concentration is capable of creating undue competition distortion. M&A transactions are also subject to EU antitrust rules if they meet other thresholds (two exist, under EU Council Regulation No. 139/2004: the first requires, e.g., a combined worldwide turnover of all the merging firms of over EUR 5,000 million and an EU-wide turnover for each of at least two of the companies of over EUR 250 million).
The Italian government has special “golden powers”, which allow it to intervene to protect companies that operate in strategic areas (e.g. defence, national security, energy, transport and communications). These powers are governed by Law Decree No. 21/2012, which regulates the exceptional circumstances likely to cause serious and irreparable harm to the fundamental interests of the State (such as reasons of public security and defence) that entitle the government to exercise the “golden powers”. The decree requires that the government be notified of every transaction (including M&A transactions) that affect the functioning or ownership of strategic assets.
In such cases, the government can impose conditions on the transaction and veto shareholders’ meetings and board of directors’ resolutions or turn down purchases of shares that would lead to a voting interest capable of affecting national security interests.
The primary laws that govern M&A transactions include:
- The Irish Takeover Panel Act 1997, the Irish Takeover Panel Act 1997 Takeover Rules 2013 (the Rules), the Substantial Acquisition Rules (SARs) and the European Communities (Takeover Bids) Regulations (Takeover Regulations) , together regulate the M&A activity relating to public companies. The provisions of the Act, Rules and Takeover Regulations are enforced by the Irish Takeover Panel (Panel).
- The Companies Act 2014 (Companies Act) governs various aspects of both private and public M&A activity.
- The Competition Acts 2002 to 2014 require certain M&A transactions be reported to the Competition and Consumer Protection Commission for approval.
- The European Union (Market Abuse) Regulations 2016 imposes obligations on companies which securities are listed on regulated markets.
- The Irish Listing Rules (Listing Rules) apply if the company is listed on the Irish Stock Exchange.
Any Brazilian M&A Agreement is subject to civil law. The Civil Code (Law No. 10.406/01) is hence the key M&A law applicable in the country (the “Brazilian Civil Code”). The Brazilian corporation law (Law No. 6.404/76) is also of key importance (the “Brazilian Corporation Law”) and applies in most of the agreements of the country, as sizeable and relevant M&A involve corporations in the large majority of cases. A combination of skills related to the interpretation and the application of the Brazilian Civil Code and the Brazilian Corporations Law is thus indispensable for a Brazilian M&A lawyer.
M&A involving publicly held companies (which in Brazil may be listed (traded) or not) requires knowledge about the capital markets law (Law No. 6385/76) and the regulations issued by the Brazilian securities and exchange commission (Comissão de Valores Mobiliários - “CVM”). As in any relatively developed capital markets, in Brazil there are several types and layers of regulation issued by the CVM that may be applicable depending on the structure of the deal. The instructions that affect the majority of the deals of listed companies, however, are those applicable to the disclosure of relevant acts or facts to the market (CVM Instruction No. 358/02) and the several different types of mandatory tender offers which may result from M&A transactions (CVM Instruction No. 361/02).
The Brazilian Central Bank (Banco Central do Brasil - “BCB”) is the most important regulatory authority for cross-border M&A, essentially because its regulations apply to all. Although there is no direct personal interaction between the parties of an M&A transaction with BCB officials, it is very important that they have in mind the requirements related to the registration of foreign capital in Brazil. To make a long story short, with very few exceptions there is not prior approval for the investment in Brazil, but all monies invested in the market must be registered through the central bank electronic registration system (which is a simple and straightforward procedure). There are several types of registration. An investment may be subject to higher capital gains taxes depending on the type of registration at the time of investment, conversion and disinvestment.
Finally, the Brazilian antitrust authority (“CADE”) is obviously key in an M&A involving concentration. A few years ago the Brazilian antitrust clearance system moved from post-deal to pre-deal, so it is now very important in a Brazilian M&A to be familiar with the CADE precedents both because this authority is very strict in blocking undue concentration (last year alone the a large merger in the oil distribution market and another in the education sector were blocked) and to build a contract that at the same time preserves the value of the merged company after signing and until closing and is in line with regulations.
The main legal framework for M&A transactions (both for private and public companies) in Cyprus is provided by English common law principles as well as by statutory provisions, primarily, the Cyprus Companies Law, Cap 113 as subsequently amended (the “Companies Law”) and the Control of Concentrations between Enterprises Law of 2014 (Law 83(Ι)/2014) (the “Concentrations Law”).
In particular, the Companies Law regulates the procedure to be followed in mergers, schemes of arrangement and amalgamations which in principle entails obtaining the approval from the shareholders and creditors of the merging companies as well as the sanctioning of the transaction by the competent Court.
Furthermore, M&A transactions involving Cyprus public companies and companies listed in the Cyprus Stock Exchange are also regulated by the following rules/laws:
- The Public Takeover for the Acquisition of Shares in a Company and Related Matters Law, Law 41(I)/ 2007 (the “Public Takeover Law”);
- The Securities and Cyprus Stock Exchange Law of 1993 (as amended) (the “Stock Exchange Law”);
- The Transparency Requirements (Securities Admitted to Trading on a Regulated Market) Law of 2007;
- The Insider Dealing and Market Manipulation (Market Abuse) Law of 2005; and
- The Cyprus Corporate Governance Code.
The key regulatory authorities designated to regulate M&A in Cyprus are the Cyprus Securities and Exchange Commission (the “CYSEC”) and the Commission for the Protection of Competition (the “CPC”).
It must, however, be noted that, subject to their industry sector and business activities, both private and public companies may also be subject to regulatory controls during M&A from industry specific regulatory authorities and regulatory regimes (i.e. in case the target company is a credit institution, M&A authorisations may be required from the Central Bank of Cyprus).
The key corporate specific legislation governing M&A in the Norwegian market is primarily the Private Limited Liability Companies Act (1997) (the "LLCA"), the Public Limited Liability Companies Act (1997) (the "PLLCA") and the Partnership Act (1985). Further, public companies whose securities are listed on the Oslo Stock Exchange or another regulated market in Norway are also subject to the Securities Trading Act (2007) (the "STA"), the Securities Trading Regulation (2007), the Stock Exchange Act (the "SEA"), the Stock Exchange Regulation (the "SER").
In addition to the above-mentioned corporate framework, business transactions will on a case by case basis be supplemented by various and more general provisions found in, inter alia, the Contract Act (1918) (which applies to almost any contract), the Sales of Goods Act (1988), the Income Tax Act (1999) and the Accounting Act (1998) (both pertaining to transactional tax considerations) and the Working Environment Act (2005). Further, the Competition Act (2004) provides regulations on, and the procedure to intervene against, anti-competitive concentrations. Companies that are active in the Norwegian market (generally in larger transactions) must also consider and abide by the merger control provisions set out in the EEA Agreement.
The primary regulators governing the M&A activity in Norway are the Financial Supervisory Authority (Finanstilsynet) (FSAN), the Norwegian Competition Authority (the "NCA"), the Ministry of Finance, the Ministry of Justice and the Ministry of Trade, Industry and Fishery.
The main laws governing business combinations are the Myanmar Companies Act 1914 (MCA), the 2016 Myanmar Investment Law (MIL) and the 2015 Competition Law.
The MCA is expected to be replaced in 2018 by the Myanmar Companies Law, which was passed on 6 December 2017 (MCL). While enacted, the MCL will not enter into force until the issue of an implementing notification by the President of Myanmar, expected to be after the implementation of a computerised companies’ registry. Other matters required to fully implement the MCL include development of regulations and similar instruments, such as the model constitution to be used by companies to develop their company constitution. The MCL will modernise the MCA once it enters into force (for example, improving companies’ ability to manage their capital structure) and remove some barriers to foreign investment.
Importantly, companies incorporated under the MCA (and in future, the MCL) are classified as either a “foreign company” or a “Myanmar company”. This distinction is important as there are a number of legal and practical restrictions to foreign companies doing business in Myanmar. For example, in relation to mergers and acquisitions in sectors involving significant land use (such as agriculture or construction) the 1987 Transfer of Immoveable Property Restriction Law (TIPRL) prohibits the transfer of immoveable property to, or its acquisition or lease for more than one year by, a foreign company. However, while under the MCA, a Myanmar company was defined as a company with no foreign shareholding, under the MCL up to 35 per cent foreign shareholding will be permitted in such a company.
The MCL also abolishes the requirement for foreign companies to obtain a permit to trade, required under section 27A(3) of the MCA for a foreign company to carry on business in Myanmar, and which in practice, was only very rarely given for foreign companies intending to engage in trading activities.
The companies’ registrar, the Directorate of Investment and Company Administration (Dica), has committed to implement the MCL by 1 August 2018, which appears optimistic as we understand that work on the new computerised registry only began after the MCL was enacted on 6 December 2017. However, for the purposes of this guide, we have assumed the MCL will be implemented in line with Dica’s timeline and focused on the applicable requirements of the MCL rather than the MCA.
Foreign investment regulations
The MIL, which was passed on 18 October 2016, also simplified and deregulated the investment regime in Myanmar. It combined the previous local and foreign investment laws into one law and provided for a streamlined investment approval process. Generally, a permit will be required under the MIL from the Myanmar Investment Commission (MIC), which administers the MIL, for large-scale projects, including investments that are strategically important, capital intensive, have a large potential impact on the environment or local community, use state-owned land and other designated investments. MIC approval will also be required for the direct or indirect acquisition of a majority of shares or controlling interest in a company with an MIC permit or endorsement (discussed below).
In terms of the restrictions under the TIPRL noted above, the MIL permits foreign investors with an approval under the MIL to lease land for an initial term of up to 50 years (with two extensions of 10 years each). Such approval under the MIL may be in the form of an MIC permit or endorsement, which was intended to be a streamlined approval, together with a land rights authorisation. In practice, MIC endorsements have not proved to be a streamlined approval process and MIC generally requests detailed documentation as part of endorsement applications, based on the application process for MIC permits.
MIC issued the 2017 Myanmar Investment Rules (MIR) on 30 March 2017 setting out the process of obtaining approval under the MIL, and Notification No 15/2017 titled List of Restricted Investment Activities in relation to section 42 of the MIL (Negative List) on 10 April 2017, setting out the types of investments that are restricted to foreign investment, require approval of a Myanmar government ministry or may only be made through a joint venture with a Myanmar company. While the Negative List was intended to be a comprehensive list of all such restrictions, it has not proved to be so in practice, and legal advice should be obtained on the specific restrictions applicable to particular mergers and acquisitions.
Myanmar’s Competition Law (Law No. 9/2015) entered into force on 24 February 2017. This law prohibits collaborations that ‘intend to raise extremely the dominance over the market’, or lessen competition in a limited market; or would result in a market share above the prescribed amount.
Business combinations prohibited under the Competition Law may be exempt in certain circumstances, including if the acquired business is at risk of insolvency or if it will promote exports, technology transfer or productivity. As a new law, it is not yet clear how its requirements will be applied in practice. As of 15 January 2018, no regulations had been issued under the Competition Law and the competition law regulator had not yet been formed.
Myanmar passed the Securities and Exchange Law in 2013 (SEL) and established the Yangon Stock Exchange (YSX) pursuant to that law in 2015. However, the YSX is still developing as a stock exchange and as of 15 January 2018, there were only four listed companies in Myanmar, with a fifth company, TMH Telecom Public Co. Ltd., approved to list on 26 January 2018. Under Instruction 1/2016 of the Securities and Exchange Commission of Myanmar (SECM), foreign companies cannot trade on the YSX. Many issues will need to be resolved before foreign investment is permitted in companies listed on the YSX.
As summarised above, the key regulatory authorities applicable to mergers and acquisitions are Dica, MIC, YSX and SECM.
Provisions affecting mergers and acquisitions are spread in an impressive number of laws. The basic legal framework is included in the corporate codified Law 2190/1920 having an entire chapter dedicated to mergers, reverse mergers and transformations of Greek societés anonymes (SAs). Law 3777/2009 implementing the cross-border merger Directive 2005/56/EC is relevant, while Law 3461/2006 transposing Directive 2004/25/EC and Law 3556/2007 transposing the Transparency Directive 2004/109/EC in relation to information obligations in case of the acquisition of significant holdings in listed companies also apply to listed companies, along with Law 4443/2016 on market abuse. Further laws regulating special types of companies also contain specific M&A provisions, such as Law 4072/2012 on private limited companies (PCs), Law 3190/1955 on limited liability companies (Ltds) and Law 2515/1997 on mergers between credit institutions.
Law 3959/2011 regulates competition law aspects related to concentrations and applies in conjunction with the EC Merger Regulation 139/2004. The laws offering tax neutrality to transactions are of significant importance, as they have facilitated numerous M&As and corporate transformations in Greece. Tax incentives are principally provided by Legislative Decree 1297/1972, Law 2166/1993 and Law 4172/2013 (the Income Tax Code).
Greece does not have a specialised M&A market regulator. Specific issues regarding takeover bids are regulated by the Hellenic Capital Market Commission (HCMC), while concentration matters are dealt by the Hellenic Competition Commission. For transactions in regulated market areas, such as financial institutions including insurance companies, or licensed entities as, e.g. in the energy sector, the sector-specific authorities are also in charge.
1.1 Private M&A Transactions
a) Key rules/laws
In Germany, most private transactions are implemented by share deals using share purchase agreements. As the main corporate entities commonly involved in private acquisitions are limited liability companies (“GmbH”) and limited partnerships (“KG”), the key German laws governing private M&A Deals are the Limited Liability Company Act, the Commercial Code and the German Civil Code.
b) Key regulators
The German Federal Cartel Office (“FCO”) has jurisdiction to review certain transactions that meet the statutory thresholds set out in the German Act Against Restraints of Competition (“ARC”, Gesetz gegen Wettbewerbsbeschränkungen, GWB), provided that they are not subject to review by the EU Commission.
• EU Commission jurisdiction
The EU Commission has exclusive jurisdiction if a transaction results in a concentration having an EU dimension as specified by the Regulation (EC) No.139/2004 on the control of concentrations between undertakings (“EU Merger Regulation”). A transaction that is notified before the EU Commission generally precludes filings at a Member State level (so-called “one stop shop”), though exceptions may apply.
Mergers or transactions that bring about an acquisition or a change of control require merger notification with the EU Commission if the revenues of the companies involved in the transaction (i.e., “undertakings concerned”) exceed the primary or secondary statutory turnover thresholds set out in the EU Merger Regulation. Typically, transactions between companies with high revenues are subject to merger review by the EU Commission.
The primary thresholds include instances where, (a) the combined aggregate worldwide turnover of all undertakings concerned exceeds EUR 5 billion in the past financial year, and (b) each of at least two of the undertakings concerned has an EU-wide turnover exceeding EUR 250 million in the past financial year.
The secondary thresholds are more complex and require that, in respect of the past financial year (a) the combined aggregate worldwide turnover of all undertakings concerned exceeds EUR 2.5 billion; (b) each of at least two of the undertakings concerned has an EU-wide turnover exceeding EUR 100 million; (c) in each of at least three EU Member States, the combined aggregate turnover of all undertakings concerned exceeds EUR 100 million; and (d) in at least three of these same Member States, each of at least two of the undertakings concerned has turnover exceeding EUR 25 million.
There are exceptions from notifying the EU Commission if each of the undertakings concerned has more than two-thirds of its EU-wide turnover in one and the same Member State.
• Jurisdiction by the FCO
Where a transaction does not fall within the exclusive jurisdiction of the EU Commission, it may require clearance by the FCO if it constitutes a reportable concentration, and if the primary or the alternative statutory thresholds set out in the ARC are met.
In Germany, a concentration is reportable if it leads to the acquisition of the majority of the assets, 25% or 50% of the shares, or acquisition of control or of a “competitively significant influence” in another company.
A reportable concentration must be filed with the FCO if the primary thresholds are met, i.e., in the past financial year, (a) the combined worldwide turnover of the undertakings concerned exceeds EUR 500 million; (b) at least one of the undertakings concerned has turnover in Germany exceeding EUR 25 million; and (c) one other undertaking concerned has turnover in Germany exceeding EUR 5 million.
Under the alternative thresholds, if (a) and (b) above are met but neither the target nor any other undertaking concerned meets the EUR 5 million threshold then a transaction is only subject to merger notification in Germany if the value of the transaction is more than EUR 400 million, and the target company has “significant activity” in Germany. For the latter criterion, the present activity of the target company (i.e., not the last business year’s activity) is determinative.
The criteria “transaction value” and “significant activity” have recently been introduced into the ARC in June 2017 by its Ninth Amendment, and it is expected that the FCO will provide some guidance shortly. Until then, the explanatory memorandum to the Ninth Amendment provides background information.
• Transaction Value
According to the explanatory memorandum, the transaction value consists of the value of liabilities assumed by the purchaser and the purchase price-including all monetary payments, tangible and intangible assets, securities, voting rights, compensation for non-compete agreements and payments that depend on the occurrence of a certain condition typically contained in “earn out” clauses.
Transaction valuations may be more difficult in complex M&A transactions because the price may fluctuate based on performance and other factors, and the price may not be set until closing. The FCO will accept any method to calculate the purchase price as long as that method is a recognized valuation practice.
• Significant Activity
The Amendment’s explanatory memorandum offers little guidance in defining “significant activity”. The criterion must be assessed on a case-by-case basis. Factors to be considered include: whether customers are located in Germany; whether customers use the relevant products or services in the country; the maturity of the product or service; whether the market is fully monetized (e.g., free apps are not fully monetized); and whether there is a customer base (which can include a certain number of “monthly active users” in case of an app). Merely marginal operations in Germany do not constitute a “significant activity”.
For a “significant activity” to arise, no actual revenue needs to be generated. In other words, the target company can offer its users or customers free products and services. Furthermore, the explanatory memorandum states that R&D activities also count as “being active”. This could apply, for example, to pharmaceutical or technology start-up companies.
Federal Ministry for Economic Affairs and Energy Foreign ownership restrictions
Under the Foreign Trade Act (Außenwirtschaftsgesetz) and the Foreign Trade Ordinance (Außenwirtschaftsverordnung), the Federal Ministry for Economic Affairs and Energy (“MET”). (Bundesministerium für Wirtschaft und Energie, BMWi) has the authority to review foreign investments in order to safeguard the public order or national security of Germany.
Given the recent increasing number of non-European investors interested or successfully acquiring stakes in German hi-tech companies (such as Midea's takeover of German robot manufacturer Kuka), in July 2017, an amendment to the German Foreign Trade and Payments Ordinance was adopted to tighten control by the MET over acquisitions of domestic companies by foreign investors.
Depending on the business sector in which the target company is active, an acquisition of a direct or indirect stake of at least 25% of the voting rights in a German company by a non-German investor may be subject to sector-specific examinations (e.g., for sectors such as weaponry, armored military vehicles and certain security-related IT products).
Acquisitions of a direct or indirect stake of at least 25% of the voting rights in a German company by non-EU and non-EFTA buyers may require cross-sectorial examinations (e.g., for industries such as energy, telecommunications, water, and other critical infrastructure, including certain IT functions, databases and software).
Both sector-specific and cross-sectorial examinations may be prohibited by the MET on grounds of public order or security concerns. If the transaction involves a company active in one of the above mentioned sectors and industries, mandatory reporting obligations of the transaction apply. In case of cross-sectorial examinations, the MET may also initiate an investigation within three months from the date on which the MET became aware of the transaction, which may delay the closing of an M&A transaction.
Hence, a careful case-by-case analysis is required in order to determine whether an application should be made with the MET. This ensures swift implementation of the envisaged transaction.
1.2 Listed Company Takeovers and Tender Offers (“Public Takeovers”)
In Germany, the acquisition of a listed entity is regulated. A public takeover and related tender offer are not merely a matter of negotiations between a buyer and a seller. The regulatory regime provided by the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz or WpÜG, the “German Takeover Act”) must be observed.
The vast majority of potential German targets for public takeovers are organized as stock corporations (Aktiengesellschaft). There are also a few listed German companies which are organized in the legal form of a “partnership limited by shares” (Kommanditgesellschaft auf Aktien) or a European public company (Societas Europea, SE).
a) Key rules/laws
Shares of a listed company can be acquired directly by a privately negotiated acquisition from certain shareholders or via the stock exchange (both subject to mandatory offer thresholds, see below) or by public takeover (or a combination).
Public tender offers targeted at a German company admitted for trading on an organized market in Germany are mainly governed by the German Takeover Act, which does not only regulate so-called takeover offers, (i.e., offers targeted at the acquisition of control), but also regulates any other publicly made offers for the acquisition of shares in listed companies. The Takeover Act is supplemented by a number of ordinances, most importantly the Takeover Act Offer Ordinance (WpÜG-Angebotsverordnung), inter alia, setting out requirements for the content of the offer document and the pricing rules.
In the takeover context, a number of other statutory rules may be of relevance, including certain provisions of the German Stock Corporation Act (Aktiengesetz), the German Securities Trading Act (Wertpapierhandelsgesetz) as well as the German Securities Prospectus Act (Wertpapierprospektgesetz). Finally, the rules and regulations of the respective Stock Exchange may generally be relevant.
b) Key regulators
The main regulatory players in the course of the tender offer process are the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) ("BaFin") and the respective Stock Exchange. However, their functions are mostly procedural in nature and provide regulatory oversight to ensure an orderly offer process complying with the requisite standards of disclosure. The BaFin has authority to enforce the rules by imposing instructions for specific behavior, and administrative fines of up to EUR 1 million. Furthermore, non-compliance with certain rules triggers legal consequences by operation of law. For example, failure to comply with the mandatory bid obligation results in the loss of shareholder rights (including voting rights) for the period that the violation is on-going, under the Securities Trading Act, the ban on voting rights may last even longer.
Other than regulations and approvals relating to the takeover process, dealing restrictions and disclosures, merger control filings may have to be made pursuant to the applicable merger control laws in the relevant countries.
The following regulation is typically relevant to M&A:
- the Belgian Companies’ Code for general principles of company law and laying down the procedures for (de)mergers;
- the Belgian Code of Economic Law, which contains rules on competition;
- public takeover bids are governed by the Act of 1 April 2007 and its executing Royal Decree of 27 April 2007;
- the Belgian Civil Code, which sets out the general principles of contract law.
There are mainly two key regulatory authorities:
- the Financial Services and Markets Authority (FSMA), which is the relevant regulatory authority in respect to public takeover bids;
- the Belgian Competition Authority is the competent administrative body in relation to competition law.
1.1 In relation to all types of Vietnam-domiciled target companies, M&A transactions in Vietnam are primarily regulated by:
- the Law on Enterprises (2014) and its implementing legislation (the Law on Enterprises), from a general corporate law perspective; and
- the Law on Investment (2014) and its implementing legislation (the Law on Investment), from a general investment law perspective.
1.2 In the context of listed and unlisted public companies, the Law on Securities (2013) and its implementing legislation (the Law on Securities) are of fundamental importance and in many cases apply in precedence to the Law on Enterprises and/or the Law on Investment.
1.3 Other industry sector-specific laws also contain specific provisions regulating M&A transactions occurring within the relevant industry sectors, which are also of fundamental importance. Key indicative examples include:
- the Law on Credit Institutions (2010) and its implementing legislation (the Law on Credit Institutions), in the context of the banking and finance sector; and
- the Law on Real Estate Business (2014) and its implementing legislation (the Law on Real Estate Business), in the context of the real estate sector.
1.4 International treaties of which Vietnam is a member are also crucial and must always be considered in relation to any Vietnam-based M&A transaction (albeit to a lesser extent in relation to listed or unlisted public target companies). Most important amongst these international treaties is the market access commitments made by Vietnam to the WTO upon accession in 2006 (the WTO Commitments). In many cases the WTO Commitments are the key source of foreign ownership restrictions and related market access rules.
1.5 It is also often necessary for parties to consider other broadly-applicable laws such as, for example, the Law on Competition (2004) and its implementing legislation (the Law on Competition) (from a merger control perspective).
1.6 The key (but not the only relevant) regulatory authorities in relation to Vietnam-based M&A transactions include:
- the Ministry of Planning and Investment (at central Government level) (the MPI) and the various relevant Departments of Planning and Investment (at municipal or provincial level) (the DPI);
- the Ministry of Industry and Trade (at central Government level) (the MOIT) and the various relevant Departments of Industry and Trade (at municipal or provincial level) (the DOIT), as well as the Vietnam Competition Authority (the VCA), which falls under the jurisdiction of the MOIT;
- the State Securities Commission (the SSC), in the case of listed or unlisted public target companies; and
- the State Bank of Vietnam (the SBV), which, amongst other important functions, regulates foreign exchange control in Vietnam (foreign exchange control laws being of fundamental importance in relation to any vendors or purchasers being foreign citizens or foreign-domiciled companies or other organisations).
The key source of law relevant to private M&A is the Swiss Code of Obligations. For companies listed on a Swiss stock exchange, the Financial Market Infrastructure Act ("FMIA") contains specific rules on public tender offers, the disclosure of shareholdings as well as insider dealing and market manipulation. The provisions of FMIA are specified in three implementing ordinances, the Financial Market Infrastructure Ordinance ("FMIO"), the Financial Market Infrastructure Ordinance by FINMA ("FMIO-FINMA") and the Takeover Ordinance by the Swiss Takeover Board ("TOO"). Companies listed on the SIX Swiss Exchange ("SIX") are also bound by, among others, the Listing Rules, the Directive on Ad hoc Publicity, the Directive on Management Transactions and the Directive on Delistings. Statutory mergers are governed by the Swiss Merger Act.
The supervising authority on public tender offers is the Swiss Takeover Board ("TOB"). The TOB issues binding decisions relating to any public tender offer. Decisions of the TOB can be appealed before the Swiss Financial Market Supervisory Authority FINMA ("FINMA"). Against FINMA's decisions an appeal can be lodged with the Federal Administrative Court.
Other key regulatory authorities include the Swiss Competition Commission ("COMCO"), which is the authority for merger filings, and FINMA, which supervises companies that are active in the financial sector (banks, insurance companies, funds). Approvals from other authorities may be required in transactions in sectors that require a permit or licence (e.g. telecommunications, gambling, radio broadcasting or aviation).
The main document regulating the M&A sector in Russia is the Civil Code of the Russian Federation (Part 1) dated 30 November 1994 No. 51-FZ, which has recently undergone substantial reform aimed, inter alia, at liberalisation of legal regulation of the M&A sector and, generally, corporate and contract law.
Depending on the form of the target Russian company, Federal law ‘On joint-stock companies’ or Federal law ‘On limited liability companies’ also will apply to a transaction in question.
An important part of M&A regulation is set forth in Federal law ‘On protection of competition' dated 26 July 2006 No. 135-FZ.
Specific M&A relevant provisions can be found in other laws and regulations, such as Federal law ‘On securities market’ dated 22 April 1996 No. 39-FZ and Federal law No. 57-FZ ‘On procedures for foreign investments in companies of strategic importance for national defence and state security’ dated 29 April 2008.
The Federal Antimonopoly Service of the Russian Federation (FAS) is responsible for control over compliance with antimonopoly legislation, legislation in the field of natural monopolies’ activity, legislation on foreign investments in Russia. FAS may also issue some decrees or regulations related to some procedural aspects of M&A transactions.
A wide range of powers is being exercised by the Central Bank of Russia starting 1 September 2013. Since that time, it has been responsible for adoption of regulations, control and supervision over all financial markets.
Key rules/laws: Civil Code, Companies Law No. 31/1990, Capital Markets Law No. 297/2004, Competition Law No. 21/1996
Key authorities: Commercial Registry Office, Competition Council (merger control), National Bank of Romania (banks and non-bank financial institutions), Financial Supervision Authority (capital markets, insurance, pensions)
The Qatar Financial Markets Authority (QFMA) and the Ministry of Economy and Commerce are the regulators in this regard. The Qatar Stock Exchange (QE) also administers listed companies. The key laws/regulations are comprised of:
(a) Law No. (8) of 2012 (QFMA Law);
(b) Law No 11 of 2015 (the Commercial Companies Law);
(c) The QFMA Mergers and Acquisition Rules; and
(d) The QE Rulebook.
In the U.S., both the federal government and state governments regulate matters relevant to M&A.
At the federal level, M&A activity is subject to the federal securities laws, principally the Securities Act of 1933 (the Securities Act) and the Securities Exchange Act of 1934 (the Exchange Act). The Securities and Exchange Commission (SEC) is the federal agency charged with enforcing the federal securities laws and has promulgated extensive rules and regulations under both the Securities Act and Exchange Act. The Securities Act governs the offer and sale of securities, and so potentially applies to any transaction in which securities are being purchased, sold or exchanged, including M&A transactions. The Exchange Act deals with, among other things, ongoing reporting obligations for public companies, tender offers, proxy statements and shareholder obligations to disclose ownership and transactions with respect to shares of public companies. All M&A transactions must also comply with the federal antitrust laws, which are enforced by the Antitrust Division of the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC). Acquisitions by non-U.S. entities are also potentially subject to review by the Committee on Foreign Investment in the U.S. (CFIUS).
In the U.S., corporations are incorporated under the laws of a particular state (rather than federal law). As a result, state law principally addresses matters such as the formation and dissolution of corporations, duties of boards of directors, mergers and other forms of business combinations, shareholder voting requirements, shareholder meetings and amendments to organizational documents. State law relevant to corporations consists of both the state corporation statutes enacted by state governments as well as common law arising out of judicial decisions. Though state laws relevant to corporations have many common elements across states, there are significant differences among them (particularly with respect to matters such as business combinations and the obligations of directors in connection with M&A activity). Because many major U.S. corporations are incorporated in Delaware, the Delaware General Corporation Law (DGCL) and the common law embodied in decisions of the Delaware courts are generally the most important and influential state corporation law. However, on key matters relevant to M&A activity, a number of states have diverged from Delaware and so it is necessary to consider the law of the state of incorporation of the relevant companies in connection with a transaction.
Companies in certain industries such as banking, power and utilities, insurance, airlines, media and telecommunications may also be covered by specific state and federal regulatory regimes.
The key laws relating to M&A in Sweden are the Swedish Companies Act setting out the rules for Swedish limited liability companies (the entity form used for the vast majority of enterprises) and the Swedish Competition Act. In addition thereto, legislation relating to contracts law, employees, securities and the relevant industry are naturally also of relevance (such as financial supervisory regulations for banks, insurance companies and other entities in the financial sector).
Further, with respect to transactions concerning a publicly listed company, the Swedish Stock Market (Takeover Bids) Act, the Swedish Financial Instruments Trading Act, the Swedish Securities Market Act and the Swedish Market Abuse Act constitute important legislation. In addition, the Swedish Takeover Rules set forth rules that must be complied with in the event of a takeover offer (it can be noted that the Takeover Rules also apply to mergers and quasi-mergers).
The Swedish Securities Council is one of the key regulatory authorities as concerns public deals. The Swedish Securities Council is a private body made up of representatives of various organisations with the main purpose of ensuring compliance with good practice on the Swedish securities market. Under the Swedish Takeover Rules, the Swedish Securities Council has been given the power to issue statements and rulings on points of interpretation and grant dispensation from compliance with the rules and, further, it is authorised to issue statements and rulings on matters arising under the Swedish Stock Market (Takeover Bids) Act. In addition to the Swedish Securities Council, the key regulatory authorities are the Swedish Financial Supervisory Authority, the Swedish Competition Authority and the Association for Generally Accepted Principles in the Securities Market.
M&A activity is governed primarily by the Corporation Code of the Philippines (Batas Pambansa Blg. 68). In M&A transactions where any of the parties is a “public company” (i.e., a corporation with a class of equity securities listed on an exchange, or a corporation with assets in excess of Php50 Million and which has 200 or more holders each holding at least hundred 100 shares of a class of its equity securities), the Securities Regulation Code (Republic Act No. 8799), and its Implementing Rules and Regulations, also becomes relevant (for example, the SRC sets out, among others, reporting obligations for public companies, tender offers, proxy statements and shareholder obligations to disclose ownership and transactions with respect to shares of public companies). The key regulatory authority is the Securities and Exchange Commission (SEC).
In case of high-value mergers and acquisitions, the Philippine Competition Act (Republic Act No. 10667) and its Implement Rules and Regulations may also become relevant as it provides for a merger control regime in respect of mergers and acquisitions which meet the thresholds provided under the implement rules. The Philippine Competition Commission is the regulatory body tasked with the implementation of this law.
In respect of the tax aspects of M&A activity, the principal law is the Tax Reform for Acceleration and Inclusion (Train) Law (Republic Act No. 10963).
If the M&A involves entities in regulated sectors, there may be special laws applicable to them. For example, in case of banks, the General Banking Law (Republic Act No. 8791) and the New Central Bank Act (Republic Act No. 7653); and in case of insurance companies, the Insurance Code.
The Companies (Guernsey) Law, 2008, as amended (Guernsey Companies Law) provides the legal framework for a Guernsey company’s operation in all areas, including any merger and acquisition (M&A) of the Guernsey company.
The UK Panel on Takeovers and Mergers (Takeovers Panel) regulates takeovers and mergers in Guernsey that fall within the ambit of the UK City Code on Takeovers and Mergers (Takeover Code). The Takeover Code will apply to a Guernsey company when either:
- the company’s securities are admitted to trading on a regulated market or multilateral trading facility (MTF) in the UK or on any stock exchange in the Channel Islands or the Isle of Man; or
- if the company has its place of central management and control in the UK, Channel Islands or Isle of Man and one or more of the following apply:
- any of its securities have been admitted to trading on a regulated market or MTF in the UK, Channel Islands or Isle of Man at any time in the last 10 years;
- dealings or prices for dealings have been published for a continuous period of at least 6 months in the previous 10 years;
- any of the company’s securities have been subject to a marketing arrangement as defined under UK Companies legislation at any time in the previous 10 years; and
- the company has publicly filed a prospectus with the Registrar of Companies or any other relevant authority in the UK, Channel Islands or Isle of Man at any time in the previous 10 years.
The Takeover Code does not apply to open-ended investment companies.
If the M&A involves a business which is regulated in Guernsey (this includes banks, insurance companies, investment businesses and trust and fiduciary businesses), the consent of the Guernsey Financial Services Commission (GFSC) will be required. Change of control notifications may also need to be made where a parent undertaking of a GFSC licensed entity is acquired or subject to a merger.
The Channel Islands Competition and Regulatory Authorities (CICRA) regulate any merger or acquisition which satisfies a turnover test relating to turnover arising in Guernsey and the Channel Islands.
The law with the most relevance to M&A in Japan is the Companies Act.
And, the following laws, rules and regulations are also important:
- The Financial Instrument and Exchange Act (the “FIEA”);
- The Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (the “Anti-Monopoly Act”); and
- The Foreign Exchange and Foreign Trade Act (the “FEFTA”).
In addition to these laws, rules and regulations, there are specialized laws that regulate certain specific business segments such as banking, insurance and broadcasting.
The Legal Affairs Bureau, one of the local organizations of the Ministry of Justice, is responsible for the commercial registry of companies. The Financial Services Agency and the Japan Fair Trade Commission are the key regulatory authorities in the enforcement of the FIEA and the Anti-Monopoly Act, respectively, and there are other competent authorities tasked with supervising specific business segments.
Publicly traded or listed companies are also subject to the supervision of the relevant stock exchange on which their shares are listed in compliance with the applicable rules and regulations of such stock exchange.
Isle of Man
In the Isle of Man a company may be incorporated under either the Isle of Man Companies Acts 1931-2004 (1931 Act) or the Isle of Man Companies Act 2006 (2006 Act). The Act under which a company is incorporated will provide the legal framework for its operation in all areas including any merger and acquisition (M&A).
The United Kingdom (UK) City Code on Takeovers and Mergers (Takeover Code) extends to the Isle of Man and applies in relation to certain Isle of Man listed companies. The Takeover Code will apply to acompany which has its registered office in the Isle of Man in the following situations:
(a) if the company has its securities admitted to a regulated market or multilateral trading facility (i.e. AIM) in the UK or on any stock exchange in the Channel Islands (CI) or Isle of Man;
(b) where the company is a public or private company and is considered by the Panel on Takeovers and Mergers (who administer the Takeover Code) to have their place of central management and control in the UK, CI or Isle of Man (the Residency Test).
In situations where the Residency Test is met, a further set of requirements would then need to be satisfied in order for the Takeover Code to apply if the company was a private company. The requirements are:
i. that the company’s securities have been admitted to trading on a regulated market or a multilateral trading facility in the UK or on any stock exchange in the CI or the Isle of Man at any time during the 10 years prior to the relevant date; or
ii. dealings and/or prices at which persons were willing to deal, in any of the company’s securities have been published on a regular basis for a continuous period of at least six months in the 10 years prior to the relevant date; or
iii. any of the company’s securities have been subject to a marketing arrangement (as described under the Companies Act 2006 (of Parliament);
iv. they have filed a prospectus for the offer, admission to trading or issue of securities with the registrar of companies or any other relevant authority in the UK, the CI or the Isle of Man at any time during the 10 years prior to the relevant date.
As companies incorporated under the 2006 Act cannot be classified as public or private in the same way as under most other companies legislation, the Takeover Code treats these as private companies. A company incorporated under the 2006 Act will only be treated as being subject to the Takeover Code when the above criteria set out at paragraph i – iv above apply.
Mergers and acquisitions are governed principally by the Companies Act 2001, Securities Act 2005 and the Competition Act 2007.
The institution and regulatory bodies regulating mergers and acquisitions are Registrar of Companies (ROC), the Financial Services Commission (FSC) and the Competition Commission.
The Companies Act 1981, as amended (Companies Act) is the principal piece of legislation governing companies in Bermuda and under which most companies in Bermuda are incorporated by registration. The provisions by which business combinations (either by merger, amalgamation or, in some instances scheme of arrangement) are effected in Bermuda are contained in the Companies Act. Provisions concerning the compulsory acquisition in connection with a share acquisition or business acquisition are also contained in the Companies Act. If the entity is a regulated entity and either registered under the Insurance Act 1978, as amended (Insurance Act) or the Investment Business Act 2003, as amended (Investment Business Act), these two acts may also be relevant to the transaction.
The regulatory authority responsible for registering a merger or amalgamation pursuant to the Companies Act is the Bermuda Registrar of Companies (RoC). In addition, the Bermuda Monetary Authority (BMA) may also: (i) be required to give permission from an exchange control perspective in the event there is an issue or transfer of shares in connection with the M&A transaction, unless a general permission already exists; and/or (ii) if such target is a BMA regulated and registered entity, be required to either be notified of or provide its approval to the change of control of the target.
British Virgin Islands
Sources of Regulation
The primary source of law relevant to M&A in the British Virgin Islands (BVI) is the BVI Business Companies Act 2004, as amended (the Act).
The Act permits mergers between:
- BVI companies incorporated and registered under the Act; and
- a BVI company or companies incorporated under the Act and a foreign company or companies (assuming this is permissible under the applicable foreign law).
In the case of a merger between a parent and one or more of its subsidiaries, a simplified procedure is available under the Act.
The Act also permits mergers through plan of arrangement or scheme of arrangement and provides for a minority squeeze-out procedure.
There are change of control rules applicable to entities regulated by the British Virgin Islands Financial Services Commission under the relevant financial services legislation, including the Banks and Trust Companies Act, 1990 and the Insurance Act, 2008.
The key laws governing M&A in Jersey are:
- Part 18 (Takeovers), Part 18A (Compromises and Arrangements) and Part 18B (Mergers) of the Companies (Jersey) Law 1991;
- The UK City Code on Takeovers and Mergers (Takeover Code);
- The Competition (Jersey) Law 2005.
The key regulatory authorities are:
The UK Takeover Panel (Panel) has been appointed by the Companies (Appointment of Takeovers and Mergers Panel) (Jersey) Order 2009, made under Article 2 of the Companies (Takeovers and Mergers Panel) (Jersey) Law 2008, to carry out certain regulatory functions in relation to takeovers and mergers under Jersey law that fall within the ambit of the Takeover Code. The Takeover Code applies to offers for companies, other than open-ended investment companies, registered (and having their registered office) in the UK, the Channel Islands or the Isle of Man, where those companies have any of their securities admitted to trading on a regulated market in the UK or on any stock exchange in the Channel Islands or the Isle of Man. The Takeover Code also applies to offers for public companies and, in certain limited circumstances (relating to previous listings, marketing arrangements and issue of prospectuses), private companies, which have their registered offices in Jersey and which are considered by the Panel to have their place of central management and control in the UK, Channel Islands or Isle of Man.
The prior approval of the Channel Islands Competition and Regulatory Authorities will be required where the share of supply or purchase of one or more parties to a merger in any product or service exceeds relevant thresholds as set out in the Competition (Mergers and Acquisitions) (Jersey) Order 2010.
The consent of the Jersey Financial Services Commission will be required if the merger or acquisition involves entities carrying on a regulated activity in Jersey (which includes banking, insurance, funds, trust or fiduciary business) or if variation is needed of a consent issued to the target company pursuant to the Control of Borrowing (Jersey) Order 1958.
The Turkish Commercial Code (the “TCC”) contains the key set of rules applicable to all companies as the main source of Turkish company and commercial enterprise law, the Turkish Code of Obligations sets the fundamental principles for Turkish contract law, and the Capital Markets Code (the “CMC”) and secondary regulations (i.e., communiqués) issued by the Capital Markets Board of Turkey (the “CMB”) are applicable only to publicly held companies and the exceptional category of companies that are deemed public by operation of the law (i.e., without having offered its shares to the public in an IPO).
M&A transactions that exceed certain turnover and/or market share thresholds are also subject to the approval of the Turkish Competition Authority as per the Code on the Protection of Competition.
In addition, further regulatory scrutiny may kick in depending on whether the acquirer or the target is publicly held or participates in a regulated sector such as banking, energy, civil aviation, telecommunications, etc. For publicly held companies in particular, the CMB has broad supervisory and regulatory powers. Other regulatory authorities, such as the Energy Market Regulatory Authority for energy companies, the Banking Regulatory and Supervisory Authority for banks and financial institutions, or the Undersecreteriat of Treasury for insurance companies are the key regulatory authorities for regulated actors.
The principal legislation governing M&A in Nigeria is the Investments and Securities Act No. 29 of 2007 (“ISA”). M&A transactions are regulated primarily by the ISA and the Rules and Regulations issued by the Securities and Exchange Commission (“SEC Rules”) and where any of the entities is listed on a securities exchange, the Exchange Rules will apply i.e. the listing rules of the Nigerian Stock Exchange (“NSE Listing Rules”).
The Companies and Allied Matters Act (“CAMA”), Cap. C20, Laws of the Federation of Nigeria (“LFN”), 2004 and the regulations made pursuant to it – the Company Rules 2012 (as amended) – also govern various aspects of M&A transactions. The Stamp Duties Act also regulates the application of stamp duties to some types of M&A deals as well as transaction documents. The Securities and Exchange Commission (“SEC” or “Commission”) is the apex regulatory authority in the Nigerian capital market. All mergers and acquisition that fall within the thresholds specified in the ISA and or the SEC Rules, require the prior approval of the SEC.
In addition, there are industry-specific regulators, statutes and regulations in sectors such as banking, insurance, telecommunications, power and oil & gas that also impact M&A transactions.
- Where the transaction is a merger, an order will be obtained from the Federal High Court (“FHC”) to convene a shareholders’ meeting of the merging entities and another order will be obtained sanctioning the merger following the receipt of all other regulatory and shareholders’ approval.
- Where any of the parties to an M&A deal is listed on the Nigerian Stock Exchange (“The NSE”), certain disclosure obligations imposed by The NSE will also apply.
Key rules and laws Legal provisions applicable to all forms of M&A transactions are included in Act V of 2013 on the Civil Code (Civil Code) containing the general rules of Hungarian civil law, the Hungarian law of contract as well as general and specific rules applicable to all forms of legal entities including companies. Besides the above, the Civil Code also contains high level, generally applicable rules on the transformation, merger and demerger of companies making it the fundamental source of law relating to M&A transactions.
More specific legal provisions applicable to transformations, mergers and demergers of companies are set forth in a separate piece of legislation, Act No. CLXXVI of 2013 on the Transformation, Merger and Demerger of Certain Legal Persons (Transformation Act). Among others, the Transformation Act contains the prerequisites of transformations, mergers and demergers, the procedures to be followed in case of transformations, mergers and demergers, as well as the transparency, reporting and audit requirements applicable to these sorts of corporate transactions. The Transformation Act prescribes specific rules for companies limited by shares, especially in respect of audit and management reports.
Specific corporate changes resulting from mergers and acquisitions are registered in Hungary by the competent court of registration. The relevant procedure (including documentation and publication requirements) is regulated by Act V of 2006 on Public Company Information, Company Registration and Voluntary Liquidation (Company Procedures Act).In addition to the Civil Code,the Transformation Act and the Company Procedures Act, Act CXL of 2007 on Cross-Border Mergers of Limited Liability Companies (Cross-Border Mergers Act) applies in cases where at least one of the the companies participating in a merger is not domiciled in Hungary but in another member state of the European Union. The Cross-Border Mergers Act serves the implementation of Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005.
Act CXX of 2001 on the Capital Market (Capital Market Act) contains essential rules on issuing and offering securities. The provisions of the Capital Market Act may be relevant if the company concerned with the transaction is a company limited by shares. In respect of publicly traded companies, the Capital Market Act sets forth specific provisions for the acquisition of participations in public companies limited by shares, in particular reporting obligations, IPOs and minimum offer prices. Public purchase offers and M&A activity relating to public companies is controlled and approved by the Hungarian National Bank since 2013. Act CXXXIX of 2013 sets out the scope of activity and the procedural rules applied by the Hungarian National Bank.
Detailed rules on disclosure and publication obligations of publicly traded companies can be found in Decree 24/2008 (VIII.15.) of the Minister of Finance and the Stock Exchange Rules published by the Budapest Stock Exchange contain further detailed provisions to be observed by publicly traded companies.
Besides the above acts and laws, a significant part of foreign investments in Hungary are also protected by way of bilateral investment treaties (BIT). BITs grant basic rights to foreign investors in compliance with international standards, and enable foreign investors to seek remedy before international forums if their right to fair and equitable treatment should be violated.
Key regulatory authorities The main authority supervising the legal compliance of M&A transactions is the court of registration having competence for registering certain corporate changes resulting from the transaction. In addition, special rules apply to mergers and acquisitions of companies engaged in regulated industries such as the energy, media and financial sectors. The acquisition or transformation of such companies may require the prior approval of the competent regulatory bodies, setting further preconditions and documentation requirements for carrying out a successful transaction. Competent authorities for the mentioned sectors include the Hungarian Energy and Public Utility Regulatory Authority, the National Media and Infocommunications Authority and the Hungarian National Bank, respectively.Irrespective of the industry or sector concerned, mergers and acquisitions reaching a certain market threshold shall be reported to, or approved by, the Hungarian Competition Authority (GVH). The reporting obligations and the rules of approval are set forth in Act LVII of 1996 on the Prohibition of Unfair Trading Practices and Unfair Competition (Competition Act).