Global Public MA Guide PDF

GLOBAL PUBLIC
M&A GUIDE
3rd Edition
TRANSACTIONAL
POWERHOUSE
IMPORTANT DISCLAIMER: All of the information included in this guide is for informational purposes
only and may not reflect the most current legal and regulatory developments. This information is not
offered as legal or any other advice on any particular matter, whether it be legal, procedural or
otherwise. It is not intended to be a substitute for reference to (and compliance with) the detailed
provisions of applicable laws, rules, regulations or forms. Similarly, it does not address any aspects of
the laws of jurisdictions outside the specific jurisdictions described, to which a company may be
subject. All summaries of the laws, regulation and practice of public M&A are subject to change and,
unless otherwise noted, are current only as of 1 March 2020.
Baker McKenzie, the editor and the contributing authors expressly disclaim any and all liability to any
person in respect of the consequences of anything done or permitted to be done or omitted to be
done wholly or partly in reliance upon the whole or any part of the contents herein. No client or other
reader should act or refrain from acting on the basis of any matter contained in this guide without first
seeking the appropriate legal or other professional advice on the particular facts and circumstances.
Baker & McKenzie International is a global law firm with member law firms around the world. In
accordance with the common terminology used in professional service organizations, reference to a
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notice in some jurisdictions. Prior results do not guarantee a similar outcome.
References in this guide to “Baker McKenzie” include Baker & McKenzie International and its member
law firms, including Baker & McKenzie LLP. This guide does not create any attorney-client
relationship between you and Baker McKenzie.
© 2020 Baker McKenzie

www.bakermckenzie.com
All rights reserved.
Global Public M&A Guide
Editor’s Note
We are pleased to present the 3rd edition of Baker McKenzie’s Global Public M&A Guide. Drawing on
our unparalleled experience in all aspects of both domestic and cross-border transactional work, this
guide is intended to provide an overview of some of the key legal considerations associated with
public M&A transactions in 42 jurisdictions across the globe.
This guide is a product of numerous contributions from various practitioners around the world, to all of
whom we would like to extend our profound thanks for their time, care and expertise.
Mark Bell, Editor in Chief
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Foreword
Public M&A transactions can ordinarily be complex and labyrinthine - becoming even more intricate as
they begin to span multiple jurisdictions and legal regimes. At Baker McKenzie we are a transactional
powerhouse with extensive experience of leading public deals across multiple borders and legal
frameworks. We have the market knowledge, legal expertise and creativity needed to successfully
execute complex and high profile transactions.
While there are many factors to consider, we would like to share what we believe are a few of the key
areas of focus for any companies contemplating a public M&A deal. These issues usually appear in all
transactions and can be considered across any jurisdiction, industry or deal.
• Don’t take unnecessary chances. Public M&A deals, particularly those with a cross-border
element, are risky propositions. Maximize your chances for a timely and successful closing by
adopting best practices in deal structuring and techniques.
• Understand local requirements. The local laws and regulations that apply to your
counterparty in the deal must be taken into account. Our updated guide now also includes
details of restrictions on foreign investments.
• Assemble a trusted team. You will likely need a full team of experienced experts in whom
you have confidence, including lawyers, accountants and bankers. On the legal side, ensure
you not only know the corporate team but also the lead partners responsible for tax,
employment, antitrust/competition, compliance/sanctions and any other areas that are
especially important to your company.
• Remember the end goal. The deal is typically not an end in itself but rather a means to
achieve important business objectives. Thus, the deal does not really end at closing; instead,
its true value comes from a smooth and efficient business integration. Working with your team
of advisers, plan for this integration from Day One.
Rather than a comprehensive piece, the focus of this guide is primarily on the practice of conducting a
takeover of a publicly listed company with summaries of the general legal framework, takeover
practices and tactics across jurisdictions and general considerations associated with a public M&A
transaction. Of course, all transactions will come with their own unique factors and requirements; but
we believe our readers should find this a valuable resource for general education and reference.
Michael DeFranco, Chair, Global M&A Practice Group

Koen Vanhaerents, Chair, Global Capital Markets Practice Group
A Note about COVID-19
As the current edition of the guide was being readied for publication, the world continues to grapple
with the COVID-19 pandemic and the resulting significant decline in economic activity. Some
industries have been impacted more severely than others - notably travel and transportation, tourism
and hospitality, and retail businesses -- and M&A transaction activity has clearly decreased as a
result.
While it is too early to assess the long-term effects of COVID-19, it can be expected that the
pandemic will affect both presently pending transactions and the M&A process going forward. Some
pending deals have been abandoned and, in others, parties are examining the agreements and
analysing, among other issues, whether the pandemic constitutes a force majeure justifying non-
performance (although force majeure provisions are relatively rare in M&A agreements), whether the
pandemic has created a material adverse effect (MAE) at a target company justifying termination by
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the buyer or constituted an MAE that the target company omitted to disclose in the agreement (unlike
force majeure clauses, MAE provisions are standard in M&A agreements but were rarely explicitly
included as carve-outs from MAE definitions prior to the COVID-19 outbreak), and whether, in
transactions having a time period between signing and closing to enable, for example, shareholder
approval (as is invariably the case in public company acquisitions), actions taken by target companies
in response to the pandemic, e.g., closing facilities and laying off or furloughing significant portions of
the work force, constitute non-compliance with obligations to operate the target’s business “in the
ordinary course” during that period.
As M&A activity continues despite the pandemic (albeit at reduced levels), buyers, targets and their
advisors can be expected to re-examine and negotiate the language of these and other provisions,
e.g., carve-outs from a target company’s representations and warranties and the language of the
applicable disclosure schedules, particularly those relating to health issues and government actions
affecting the target, to address the myriad unknown problems arising from the rapidly evolving
COVID-19 situation. Readers should consult the Baker McKenzie attorney with whom they regularly
deal for the latest developments in these issues.
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Table of Contents
Argentina ........................................................................................................................ 1
Australia ........................................................................................................................ 10
Austria ........................................................................................................................... 40
Belgium ......................................................................................................................... 51
Brazil ............................................................................................................................. 77
Canada ......................................................................................................................... 95
Chile ............................................................................................................................111
Colombia .....................................................................................................................127
Czech Republic ..........................................................................................................140
Denmark .....................................................................................................................155
Egypt ...........................................................................................................................168
France .........................................................................................................................186
Germany .....................................................................................................................210
Hong Kong ..................................................................................................................229
Hungary ......................................................................................................................246
Indonesia ....................................................................................................................259
Italy..............................................................................................................................272
Japan ..........................................................................................................................292
Kazakhstan .................................................................................................................312
Luxembourg ................................................................................................................321
Malaysia ......................................................................................................................337
Mexico.........................................................................................................................353
The Netherlands .........................................................................................................370
People’s Republic of China ........................................................................................ 381
Peru.............................................................................................................................392
Philippines ..................................................................................................................411
Poland .........................................................................................................................429
Russia .........................................................................................................................447
Saudi Arabia ...............................................................................................................466
Singapore ...................................................................................................................476
South Africa ................................................................................................................499
Spain ...........................................................................................................................514
Sweden .......................................................................................................................537
Switzerland .................................................................................................................551
Taiwan ........................................................................................................................570
Thailand ......................................................................................................................582
Turkey .........................................................................................................................598
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Ukraine........................................................................................................................615
United Kingdom ..........................................................................................................632
United States ..............................................................................................................654
Venezuela ...................................................................................................................700
Vietnam .......................................................................................................................710
Baker McKenzie Offices and Associated Firms ........................................................ 726
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Argentina
1 Overview
Argentina is currently facing a debt restructuring process and an economic crisis. If the government
successfully conducts the debt restructuring process, the Argentine market for public companies is
expected to grow in size. The local market is under the control and supervision of the National
Securities Commission (Comisión Nacional de Valores, the “CNV”).
2 General Legal Framework

2.1 Main legal framework
The main rules and principles of Argentine law relating to public M&A can be found in:
• The Civil and Commercial Code
• Commercial Companies Law No. 19,550
• Capital Markets Law No. 26,831 (the “Capital Markets Law”) as amended by Law No. 27,440
The regulatory authority for public M&A is the CNV. The CNV issued General Resolution No.
622/2013/CNV (the “Securities Resolution”), as amended.
The Securities Resolution, together with the Capital Markets Law, contain the main rules on public
takeover bids in Argentina.
2.2 Other rules and principles

While the aforementioned legislation contains the main legal framework for public takeover bids in
Argentina, there are a number of additional rules and principles that are to be taken into account
when preparing or conducting a public takeover bid, such as:
(a) The rules relating to transparency and market manipulation under the Criminal Code.
(b) The general rules on the supervision and control of the financial markets.
(c) The rules issued from time to time by the CNV.
(d) The rules and regulations regarding merger control, including but not limited to the Antitrust
Law No. 27,442 and the specific resolutions issued by the Argentine Antitrust Authority. These
rules and regulations are not further discussed herein.
2.3 Supervision and enforcement by the CNV

Public takeover bids are subject to the authorization, supervision and control of the CNV, which has a
number of legal tools that it can use to supervise and enforce compliance with the public takeover bid
rules, including but not limited to administrative fines and prohibiting the launch of a public offering
takeover bid. Criminal penalties could also be imposed by the courts in the case of non-compliance.
2.4 General principles

The following general principles apply to public takeovers in Argentina. These rules are based on the
Capital Markets Law and the Securities Resolution:
(a) all holders of the securities of a target company of the same class must be afforded
equivalent treatment. Moreover, if a person acquires control of a company, the other holders
of securities must be protected;
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(b) the holders of the securities of a target company must have sufficient time and information to
enable them to reach a properly informed decision on the bid. Where it advises the holders of
securities, the board of the offeree company must give its views on the effects of
implementation of the bid on employment, conditions of employment and the locations of the
company’s places of business;
(c) the board of a target company must act in the interests of the company as a whole and must
not deny the holders of securities the opportunity to decide on the merits of the bid;
(d) false markets must not be created in the securities of the target company, the offeror
company or any other company concerned by the bid in such a way that the rise or fall of the
prices of the securities becomes artificial and the normal functioning of the markets is
distorted;
(e) an offeror must announce a bid only after ensuring that they can fulfil any cash consideration
in full, if such is offered, and after taking all reasonable measures to secure the
implementation of any other type of consideration; and
(f) a target company must not be hindered in the conduct of its affairs for longer than is
reasonable by a bid for its securities.
2.5 Governmental prior approval - Foreign investments regulation

Foreign investments are not restricted in Argentina and are only subject to reporting upon completion.
However, in certain specific sensitive activities prior authorization may be required by the relevant
regulatory authority (applicable both to local and foreign investors).
The following could be considered sensitive activities:
(a) Financial entities: The acquisition of any participation in a local financial entity that is
capable of producing a change in the rating of the financial entity or that modifies the entity’s
shareholders group structure shall require prior authorization by the Argentine Central Bank.
(b) Telecommunication entities: The acquisition of a participation in a local telecommunication

company will be subject to the prior authorization of the local telecommunications authority
(ENACOM).
(c) License and/or concession agreements regarding public services: Such agreements
usually include a change of control provision. As a result, the acquisition of a participation in a
public company that has a concession for the provision of a public services, e.g., the provision
of electricity, water, gas, transportation, public health and hydrocarbons or other sources of
energy, will probably need to be previously approved by the relevant authority.
3 Before a Public Takeover Bid

3.1 Restrictions and careful planning
Argentine law contains a number of rules that already apply before a public takeover bid is
announced. These rules impose restrictions and hurdles in relation to prior stake building by a bidder,
announcements of a potential takeover bid by a bidder or a target company and prior due diligence by
a candidate bidder.
3.2 Insider dealing and market abuse

Before, during and after a takeover bid, the normal rules regarding insider dealing and market abuse
remain applicable. The rules include, amongst other things, that manipulation of the target’s stock
price is prohibited. In addition, the rules on the prohibition of insider trading prevent a bidder that has
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inside information regarding a target company (other than in relation to the actual takeover bid) from
launching a takeover bid.
3.3 Disclosures by the target company

The target company must continue to comply with the general rules regarding disclosure and
transparency. These rules include that a company must immediately announce all relevant
information. The facts surrounding the preparation of a public takeover bid may constitute inside
information. The board of the target company can delay the announcement if it believes that a
disclosure would not be in the legitimate interest of the company. This could, for instance, be the case
if the target’s board believes that an early disclosure would prejudice the negotiations regarding a bid.
A delay of the announcement, however, is only permitted provided that the non-disclosure does not
entail the risk of the public being misled, and that the company can keep the relevant information
confidential.
3.4 Announcements of a public takeover bid

A bidder that intends to announce a public takeover bid must first inform the CNV of its intention and
obtain the CNV’s authorization to make the announcement and launch the public takeover bid. In
addition, the bidder will at that time have to make the necessary filings for the actual launching of a
public takeover bid since, as soon as the public takeover bid is announced, it can normally no longer
be withdrawn (except in certain circumstances).
3.5 Due diligence

The CNV public takeover bid rules do not contain specific rules regarding the question of whether or
not a prior due diligence can be organized, nor how such due diligence is to be organized.
4 Effecting a Takeover
There are three main forms of takeover bids in Argentina:
• a voluntary takeover bid, in which a bidder voluntarily makes an offer for voting securities
issued by the target company (and securities issued by the company conferring the right to
acquire voting securities of the target company);
• a mandatory takeover bid, which a bidder is required to make if the intention is to acquire a
control participation in the public company; and
• a squeeze-out bid, in which a shareholder who already holds 95% of the voting securities can
squeeze out the remaining holders of voting securities. This can be combined with a voluntary
or mandatory takeover bid.
A bidder that intends to launch a takeover bid must include certain specific information in its
notification to the CNV, including but not limited to the draft prospectus and proof of the funds needed
to pay the purchase price. As regards the mandatory takeover bid, the Capital Markets Law provides
that the takeover bid shall be mandatory only in those cases in which 50% or more of voting rights of
a listed company are acquired, or a participation of less than 50% is reached but the purchaser acts a
controller, for example, in a concerted action in the case of shareholder agreements that allow for the
appointment of directors or to resolve key matters relating to the operation of the company.
4.1 Voluntary public takeover bid

• The bidder is free to make the takeover bid subject to merger control clearance, prior approval
by the CNV and certain other conditions precedent, such as a minimum acceptance level.
• The bidder is, in principle, free to determine the price and form of consideration offered to the
target shareholders (absent any pre-existing controlling interest in the target):
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o The offered price may be paid in cash, securities or a combination of both.
o There is no minimum price for a voluntary takeover bid, but the legal rules provide
that the terms of the takeover bid, including the price, must be such that they could be
reasonably expected to allow the takeover bid to succeed. In addition, the Securities
Resolution provides for certain requirements to be complied with in connection with
the price, e.g., the need to obtain two independent opinions on the price included.
o If there are different categories of securities, different prices per category can only be
due to the characteristics of such categories.
o There can be no price difference within the same category of securities.
4.2 Mandatory public takeover bid

• A mandatory takeover bid is triggered as soon as a person or group of persons acting in
concert (or persons acting for their account), as a result of an acquisition of voting securities,
intend to directly or indirectly hold 50% or more of voting stocks of a listed company, or hold a
participation of less than 50% but the purchaser acts as a controller.
• The main exceptions to the takeover bid obligation include, among others, the following:
o the controlling participation has been reached after a voluntary bid made to all
holders of securities
o acquisitions made by financial trusts
o acquisitions made under an expropriation law
o acquisitions in which all the shareholders of the public company have unanimously
agreed to sell the shares
o acquisitions made as a consequence of a reorganization of economic sectors

required by the government
• The offered price shall be the highest price of the following:
a) The highest price that the offeror or individuals acting on behalf of or jointly with the
offeror would have paid or agreed for the securities subject to the offer within 12
months prior to the start date of the takeover bid (non-significant volume acquisitions
in relative terms will not be considered, provided they have been made at the quoted
price, in which case the higher price paid for the remaining acquisitions in the period
referenced shall be considered).
b) The average price of the securities subject to the offer during the semester
immediately prior to the date of the announcement of the operation by which the
change in the controlling participation is agreed.
• The consideration offered shall consist of cash.
• The CNV has the power to allow or require an amendment of the price, including if it appears
that, apart from the consideration offered, special direct or indirect advantages are granted to
certain transferors of the securities.
4.3 Follow-on squeeze-out and sell-out right

• Follow-on squeeze-out – a bidder will be able to squeeze out the residual minority
shareholders at the end of the takeover bid if it holds, alone or in concert with others, 95% of
the voting securities of the target.
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• Sell-out right if the bidder is not itself launching a squeeze- out – minority shareholders also
have a sell-out right if, at the end of the takeover bid (or of its reopening), the bidder holds,
alone or in concert with others, 95% of the voting securities of the target.
5 Timeline
As a general rule, the takeover bid process for a mandatory public takeover bid is similar to the
process that applies to a voluntary public takeover bid, with certain exceptions. The table below
contains a summarized overview of the main steps of a typical voluntary public takeover bid process
under Argentine law.
Step
1. Preparatory stage:
• Preparation of the bid by the bidder (study, due diligence, financing and draft
prospectus).
• The bidder approaches the target and/or its key shareholders.
• Negotiations with the target and/or its key shareholders.
2. Launching of the bid:

• The bidder files the bid with the CNV. The filing must contain, amongst other
elements, proof of certain funds to pay the offer price and a draft prospectus.
• On the next business day at the latest, the CNV discloses the bid to the public and
the target company. As of that moment, the bid is public, the bidder can no longer
withdraw the bid (except in certain limited circumstances such as in the event of a
counter- bid or certain defensive actions by the target company) and the powers of
the board of the target company are limited. Modifications are only allowed to
improve the offer.
• The CNV will also notify the target and provide the target’s board with a draft of the
prospectus that was filed with the CNV.
• Counter-bids and higher bids can be filed (until the expiration of the acceptance
period of the last bid).
3. The board of the target has a maximum term of 15 calendar days, counted from receipt of
the bid, in order to prepare a detail report on the bid, including its advice either to accept or
reject the bid. In addition, it shall include any express agreement between bidder and the
target. Such report shall be published for two days in the market where the shares are
listed.
4. Review and approval of the prospectus of the bidder by the CNV shall take place within
approximately a term of 15 business days, counted from receipt of the bid. Nevertheless, if
the CNV requires further clarifications, then such term is suspended until the clarifications
are provided by the bidder.
5. Publication of the prospectus after the approval of the CNV.
6. The duration of the acceptance period shall be not less than 10 business days and not
more than 20 business days. Nevertheless, an additional term of five business days can be
granted to those shareholders that have not accepted the offer within the general term.
7. Publication of results (once the term provided under 6 above has expired).
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Step
8. Publication of results and, when relevant, whether or not the bidder waives the conditions
precedent to the bid (within five business days of the end acceptance period).
9. Payment of the offered consideration by the bidder.
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Set out below is an overview of the main steps for a friendly public offer in Argentina.
Indicative timeline for a friendly public offer
Start
process A - Day A+1 A +15 A + 20 Day 0 Day 20 Day 25 Day (x)
Launch of bid: bidder files Bidder discloses bid Report by the target CNV reviews and/or Publication of the End of Publication of Payment of the
bid with the National to the public and the board. The report will be approves prospectus prospectus following acceptance results and, if offered
Securities Commission target in the markets published for 2 days of the bidder. Once the approval of the CNV period. Not less relevant, whether or consideration
(Comisión Nacional de in which the stock is within the market where offer is authorized, the (within 5 calendar than 10 business not bidder waives
Valores or CNV). CNV has listed and in one the shares are listed. bidder must make new days as from days and the conditions
up to 20 business days to newspaper. Board provides advice publications in the approval from CNV). maximum of 20 precedent to the bid
approve the bid (as from on whether to accept or media previously used business days.
the last observation made). reject the bid. and for the same term,
confirming if the Start of the
authorization was acceptance period.
granted on the original
conditions or, failing
that, if any
modifications are
required.
1 business day 15 calendar days within 5 calendar days
20 business days 10 to 20 business days
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6 Takeover Tactics
As the local market for public M&A is relatively small, there has been no major development in this
regard, and the main takeover defense is usually the mandatory tender offer required by the CNV.
However, certain defensive measures used in Argentina have included the following:
Mechanism Assessment and considerations
1. Sale of crown • An arrangement affecting the assets of, or creating a liability

jewels for, the company which is triggered by a change in control or
the launch of a takeover bid.
• Requires prior approval by the general shareholders’
meeting (no quorum and simple majority of the votes cast).
2. Frustrating • Actions such as significant acquisitions, disposals, changes

actions in indebtedness, etc.
• Only transactions that have sufficiently progressed already
(prior to receipt of notification of a takeover bid) may be
implemented by the target’s board.
• Other transactions require the shareholders’ approval after
the takeover bid has been notified to the target.
• As from the publication of the bid, the boards of directors
shall be neutral. For example, they cannot, among other
things, proceed with the sale, lien or lease of real estate or
other assets, do anything to frustrate or disrupt the offer or
declare extraordinary dividends.
3. Shareholders’ • Shareholders undertake to (consult with a view to) vote their

agreements shares in accordance with terms agreed among them.
4. Limitation of • A clause in the articles of association providing for a

voting rights proportional restriction of voting rights (applying to all
shareholders equally).
5. Veto rights for • Clauses providing for nomination rights by a reference

certain shareholder or similar governance mechanisms.
shareholders
• Requires an express inclusion in the articles of association.
6. Limitations on • Board approval or pre-emptive restriction clauses in the

share transfers articles of association or in agreements between
shareholders.
• Exceptional for listed companies (listed securities are, in
principle, freely transferable; impact on share liquidity).
7 Squeeze-out of Minority Shareholders after Completion of the

Takeover
7.1 Squeeze-out
If, following the takeover bid (or its reopening), the bidder (together with the persons with whom they
act in concert) holds 95% of the share capital with voting rights and 95% of the voting securities, the
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same can force all other holders of voting securities and securities conferring the right to voting
securities to transfer their securities to the bidder.
7.2 Sell-out
If a bidder were to be permitted to carry out a summarized squeeze- out bid, the security holders that
did not accept the takeover bid shall nevertheless have the right to demand that the bidder acquires
their voting securities and securities conferring the right to voting securities at the terms of the
takeover bid.
8 Delisting
As a rule, the CNV may oppose the delisting of an Argentine company in the interest of protecting
investors. The CNV will traditionally not permit a delisting unless a squeeze-out has been carried out.
9 Contacts within Baker McKenzie

Gustavo Boruchowicz, Gabriel Gómez Giglio, Roberto Grané and Francisco José Fernández Rostello
in the Buenos Aires office are the most appropriate contacts within Baker McKenzie for inquiries about
public M&A in Argentina.
Gustavo Boruchowicz Gabriel Gómez Giglio

Buenos Aires Buenos Aires
gustavo.boruchowicz@bakermckenzie.com gabriel.gomez-giglio@bakermckenzie.com
+54 11 4310 2271 +54 11 4310 2248
Roberto Grané Francisco José Fernández Rostello

Buenos Aires Buenos Aires
roberto.grane@bakermckenzie.com francisco.fernandezrostello@bakermckenzie.com
+54 11 4310 2214 +54 11 4310 2293
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Australia
1 Overview
The Australian takeover market is well established and highly developed, with the regulatory
framework having been in place for several decades and a substantial body of market practice having
formed.

Public company control transactions, whether by takeover bid or scheme of arrangement, are highly
regulated in Australia.
The main source of regulation of takeover offers is Chapter 6 of the Corporations Act, 2001 (Cth) (the
“Corporations Act”) as modified and interpreted by the exercise of broad discretionary powers vested
in the Australian Securities and Investments Commission (“ASIC”) (the Australian corporate regulator)
and the Takeovers Panel (a specialist tribunal that resolves takeover disputes).
A public company takeover can also be implemented by way of a “scheme of arrangement”, which is
a court-approved form of transaction between a company and its shareholders. The main source of
regulation for schemes of arrangement is Chapter 5 of the Corporations Act, together with ASIC policy
on disclosure principles and other matters and oversight by the court (state Supreme Court or the
Federal Court).
The most common takeover structures in Australia are off-market takeover bids, on-market takeover
bids and court-approved schemes of arrangement. These takeover structures are discussed in further
detail in Section 4.
This guide focuses on the acquisition of shares in a listed public company. The same rules and
principles will generally apply to interests in a listed managed investment scheme (such as units in a
unit trust). However, only companies can use schemes of arrangement, and managed investment
schemes have to use a special kind of “trust scheme”.

Other rules and principles that may be relevant to a takeover offer in Australia include:
• competition rules set out in the Competition and Consumer Act 2010 (Cth) which are
administered by the Australian Competition and Consumer Commission (the “ACCC”);
• foreign investment rules set out in the Foreign Acquisitions and Takeovers Act 1975 (Cth) and
the accompanying regulations, where proposed acquisitions requiring approval are regulated
by the Treasurer of the Commonwealth of Australia with assistance from the Foreign
Investment Review Board (“FIRB”); and
• other rules specific to an industry (such as banking, broadcasting, aviation and gaming) which
may regulate control transactions.
The listing rules of the Australian Securities Exchange (“ASX”) do not separately regulate takeovers in
any major way. This means that non- Australian companies that are listed on the ASX will generally
be regulated only by the law of their home jurisdiction, and will not be subject to Australian takeover
regulation.
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2.3 Supervision and enforcement by the regulatory bodies

Takeovers in Australia are principally regulated by ASIC, with takeover disputes largely being
determined by the Takeovers Panel. The courts play a central role in takeover offers conducted by
way of scheme of arrangement, but otherwise have a limited role in takeovers.
ASIC is a government body which supervises the operation of companies and securities law including
takeovers. It is responsible for monitoring compliance with the Corporations Act and has wide powers
to investigate the conduct and share trading activities of parties involved in a takeover, among other
things. ASIC also has broad facilitative, regulatory and enforcement powers, and has the power to
modify and grant relief from the takeovers rules.
The Takeovers Panel is a non-judicial body and is the principal forum for resolving takeover disputes.
It has the power to declare circumstances unacceptable and to make remedial orders on a principles-
based determination, without requiring there to be a breach of law.
2.4 Fundamental principles

The following principles set out the objectives of the takeover provisions in the Corporations Act:
• that the acquisition of control of a public company takes place in an efficient, competitive and
informed market;
o that the shareholders and directors of a public company:
o know the identity of any person who proposes to acquire a substantial interest in the
public company;
o have a reasonable time to consider the proposal; and
o are given enough information to assess the merits of the proposal;
• that, as far as practicable, the public company’s shareholders should all have a reasonable
and equal opportunity to participate in any benefits accruing to the entity’s shareholders
through the proposal; and
• that an appropriate procedure is followed as a preliminary to compulsory squeeze-out of the

minority shareholders under the Corporations Act.
2.5 Foreign investment regulations

On 29 March 2020, the Treasurer announced certain temporary changes to Australia’s foreign
investment review framework in response to the COVID-19 pandemic. In summary, any proposed
foreign investment into Australia that is subject to the Foreign Acquisitions and Takeovers Act 1975
(Cth) will require approval, regardless of value or the nature of the foreign investor. These temporary
measures are expected to remain in place for the duration of the coronavirus crisis. For acquisition
agreements entered into after 29 March 2020, the relevant monetary thresholds referred to in the
summary below have all been temporarily reduced to $0 until further notice, although the percentage
thresholds below for which approval is not required remain unchanged. Accordingly, the summary
below should be read in light of these changes while they are in force.
Foreign investments in Australian entities, businesses and land are regulated by the Foreign
Acquisitions and Takeovers Act 1975 (Cth) (FATA) and related legislation and Australia’s Foreign
Investment Policy (Policy). The Foreign Investment Review Board (FIRB) administers the legislation
and Policy and assists the Treasurer of the Commonwealth of Australia (“Treasurer”) to make
decisions on foreign investment proposals submitted for approval.
Baker McKenzie | 11
A “foreign person” that proposes to invest in an entity, business or land in Australia must apply for
approval (typically referred to as “FIRB approval”) if the transaction involves a “notifiable action”. If the
transaction involves a “significant action” (but not a notifiable action) it is not mandatory to seek
approval but the Treasurer may prohibit or reverse the transaction if it is contrary to Australia’s
national interest. There is no specific definition of “national interest” in the legislation, although the
Policy provides some guidance. Whether an investment by a foreign person involves a notifiable
action and/or a significant action depends on the nature of the investment and, in most cases, the
extent of the interest acquired and the value of the investment or the relevant entity or business.
In general, proposals to acquire an interest of 20% or more in any Australian business valued at over
A$261 million (or the higher threshold of A$1,134 million for agreement country investors from Chile,
China, Japan, Korea, Singapore, New Zealand and the United States) require prior approval.
All foreign government investors also require approval to acquire a direct interest in an Australian
entity or an Australian business or to start a new Australian business, regardless of the value of the
investment.
Restrictions also apply to the investment by foreign investors in real estate (including commercial and
residential land), agribusiness and agricultural land. In addition, investments in certain sectors are
subject to more stringent requirements, including investments in the telecommunications, media,
transport and defence sectors. For example, an investment of 5% or more in an entity or business in
the media sector will require FIRB approval, regardless of value.
All applications to FIRB must be made online and incur a fee which varies depending on the size of
the proposed transaction.
We recommend that any foreign person seeking to make an investment in an Australian asset or
entity carefully considers the application of FATA prior to entering into any transaction.
2.6 Proposed reforms

There are currently no significant proposed reforms to the takeovers rules in Australia.
ASIC issues and regularly updates regulatory guides to provide informal direction as to how it
normally interprets and applies relevant provisions of the Corporations Act. In addition, the Takeovers
Panel issues guidance notes on various takeover issues that may give rise to unacceptable
circumstances and publishes its reasons for decisions on its website.

3.1 Basic takeover prohibition
The Corporations Act prohibits a person from acquiring a ‘relevant interest’ in issued voting shares of
a company if, because of the transaction, either that person’s or someone else’s ‘voting power’ in the
company increases:
• from 20% or below to more than 20%; or
• from a starting point that is above 20% and to a level below 90%,
unless the acquisition occurs under one of the permitted exceptions permitted by the Corporations Act
(as discussed in 3.2 below).
The Corporations Act regulates acquisitions of more than 20% of:
• the voting shares in a listed Australian company, or in an unlisted Australian company with
more than 50 shareholders; and
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• the voting interests in a listed managed investment scheme (the most common example of
which is a listed unit trust, such as a REIT).
The key concept in determining whether or not an acquisition breaches the 20% limit is the “voting
power” which results from the acquisition.
(a) “Voting power”
A person’s “voting power” in a company is the aggregate of that person’s “relevant interests”
in voting shares and the “relevant interests” of that person’s “associates”, expressed as a
percentage of all issued voting shares.
(b) “Relevant interest”
The concept of “relevant interest” is broad, covering almost all situations where a person has
direct or indirect control over the voting or disposal of a share.
(c) “Association”
An associate of a person is defined to capture a broad range of circumstances. In essence,

two persons will be associated if:
• they are both corporate bodies and one controls the other or they are under the
common control of another person;
• there is an agreement, understanding or arrangement (whether legally enforceable or

not) between them for the purpose of controlling or influencing the relevant company’s
board or affairs; or
• they are acting or proposing to “act in concert” in relation to the relevant company’s
affairs.
3.2 Exceptions to the basic takeover prohibition

Where a bidder aims to take control of the target company (generally 100%, but can be as low as
50%), the main structures for achieving this result are:
Exception Nature of transaction
Off-market takeover An acquisition resulting from the acceptance of an offer under a takeover
bid bid by way of off-market acceptance.
On-market takeover An acquisition resulting from the acceptance of an offer under a takeover
bid bid by way of on-market acceptance.
Scheme of An acquisition approved by the target shareholders and the court.

arrangement
Shareholder approval An acquisition made with the approval of a vote of target company
shareholders in general meeting.
Creep acquisition Acquisitions of no more than 3% of the voting power in a rolling six-month
period from a starting point above 19%.
Downstream An acquisition resulting from the acquisition of shares in an “upstream”

acquisition entity, i.e., one which is listed on the ASX or on a specified foreign
exchange, which itself has a relevant interest in a “downstream” ASX-
listed company or trust.
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Exception Nature of transaction
Rights issue An acquisition resulting from pro-rata rights issues to all shareholders.
Unlike the takeover laws of some other jurisdictions, there is no “follow-on” or “mandatory bid” rule in
Australia which would allow a bidder to acquire shares above the 20% limit if it then immediately
makes a general offer to all other shareholders in the target company. Instead, a bidder must stop at
the 20% limit, and then make its bid from that point.
3.3 Shareholding thresholds

The table below provides an overview of the key shareholding thresholds for a public company under
the Corporations Act:
Percentage (%) of Implications

issued shares
≥5% Substantial holder notice:

• Persons who, together with their associates, have relevant
interests in voting shares representing 5% or more of the votes in
a publicly listed company or listed registered managed investment
scheme must disclose details of their relevant interest by filing a
substantial holder notice. Disclosure must also be made when a
person’s substantial holding changes by 1%, if they cease to have
a substantial holding or if they make a takeover bid.
>10% Blocking of compulsory acquisition following takeover bid:

• A person who has a greater than 10% shareholding interest in a
publicly listed company or listed registered managed investment
scheme will be able to prevent a majority shareholder from
moving to 100% ownership through compulsory acquisition (the
compulsory acquisition threshold is 90%).
>20% Takeovers threshold:

• A person cannot acquire a “relevant interest” in a public
company’s shares if it would result in that person’s or someone
else’s “voting power” in the company increasing from 20% or
below to more than 20%, or increasing from a starting point that is
above 20% to a level below 90%, unless the acquisition occurs
via a specified exception.
≥25% Blocking of scheme of arrangement:

• A person holding 25% or more of a public company’s shares can
block the approval of a takeover conducted by a scheme of
arrangement, as one of the scheme voting thresholds is approval
by at least 75% of the votes cast on the scheme resolution.
Blocking of special resolutions:

• A person holding 25% or more of a company’s shares can
unilaterally block the approval of a special resolution.
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Percentage (%) of Implications

issued shares
>50% Passage of ordinary resolutions:

• A person holding more than 50% of a company’s shares can pass
an ordinary resolution. Importantly, directors can be appointed
and removed by shareholders by ordinary resolution.
≥75% Passage of special resolutions:

• A person holding 75% or more of a company’s shares can pass a
special resolution.
≥90% Entitlement to compulsory acquisition:

• Generally, where a person owns 90% or more of a company’s
shares, they can compulsorily acquire the remainder.

In Australia, there is established market practice and certain rules that impose restrictions prior to the
announcement of a takeover, including in relation to prior stake building by a bidder and prior due
diligence by a potential bidder. Accordingly, some careful planning is necessary if a potential bidder or
target company intends to commence a process that may lead to a takeover.
3.5 Due diligence

In a friendly or solicited bid, the bidder may be given pre-bid access to confidential information of the
target company. Given that publicly listed entities in Australia are subject to extensive reporting
requirements and have strict continuous disclosure obligations in respect of price sensitive
information, the due diligence should generally tease out additional detail around what has already
been publicly disclosed.
Once a bidder comes into possession of non-public price-sensitive information, its ability to buy any
shares before launching the bid may be hindered by insider trading restrictions.
In a hostile bid, there will most likely be no opportunity to undertake detailed due diligence on the
target, and the bidder has to take the risk that the target company’s public announcements may be
incomplete or may not be sufficiently detailed.
3.6 Confidentiality and standstill agreement

A potential bidder will usually be required to enter into some form of confidentiality or non-disclosure
agreement restricting its use and disclosure of the confidential information it receives.
As a trade-off for granting due diligence access, a target company may require the potential bidder to
agree to a standstill restriction. Standstills will generally last for up to 12 months and will prohibit the
potential bidder from buying shares or launching a bid other than on terms which the target
company’s directors have approved. Care needs to be taken before agreeing to a standstill, as these
agreements will be enforced by the Takeovers Panel. A bidder should therefore ensure that a
standstill lasts for no longer than is necessary, and that it releases the Bidder in appropriate
circumstances.
Standstill agreements serve a number of purposes for a target company. They achieve a strategic
goal for a target company by giving it some measure of control over the terms on which a takeover will
occur. Furthermore, they provide some protection for the target company from potential liability for
Baker McKenzie | 15
“tipping” under the insider trading provisions of the Corporations Act. “Tipping” is where a person
discloses non-public, price- sensitive information to a person who the first person believes would be
likely to acquire target company shares.
3.7 Pre-bid acquisitions

A potential bidder may seek to acquire a relevant interest in the target company’s shares in advance
of acquiring shares under a control transaction.
There are several benefits to a bidder in acquiring a pre-bid stake, including:
• it forces the target company to take the bid seriously and engage with the bidder;
• a bidder can deter potential rival bidders with a “blocking stake”;
• the bidder has a first-mover advantage if the bid turns competitive;
• an existing holding counts towards the 90% compulsory acquisition threshold in a takeover
bid; and
• it can reduce the overall average acquisition cost if acquired at below the bid price.
There are risks involved in acquiring a pre-bid stake. The following table outlines the key
considerations in respect of a pre-bid acquisition.
Consideration Implications
Substantial holder If the prospective acquirer acquires 5% or more of the target shares, it
notice must disclose details of its holding via the filing of a substantial
holding notice.
20% takeovers rule The prospective acquirer must ensure that it does not have a relevant
interest in more than 20% of the target shares, or otherwise voting
power of more than 20% in the target, as a result of any pre-bid
acquisitions.
Foreign investment If the prospective acquirer is a non-Australian entity, in many

approval requirements circumstances the acquisition must also be approved by the
Treasurer acting on the advice of FIRB.
Insider trading A bidder seeking to acquire a pre-bid stake must comply with
Australian insider trading laws, which prohibit dealing in shares by
persons who are in possession of material price-sensitive information
that is not publicly available.
Pricing issues The price paid for any shares acquired in the four-month period prior
to a bid being made will operate as a minimum price for the bid.
Collateral benefits The acquisition must not be on terms which offer a benefit selectively
to some but not all shareholders as an inducement to accept a
takeover offer.
Association The prospective acquirer must be mindful of any “agreement,

arrangement or understanding” (written or otherwise) arising between
it and any shareholder for the purposes of controlling or influencing a
target’s board or affairs or in relation to target shares.
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3.8 FIRB applications

A fee is payable in relation to any application to FIRB for approval of a proposed transaction, at the
time the application is submitted. The amount of any fee payable depends on the size of the proposed
transaction. The FIRB application process has recently changed to an online application process.
4.1 Structure of acquisitions in Australia
A key strategic decision to make, for both the bidder and the target company in a control transaction,
is which acquisition structure to use. It is possible to acquire the entire issued share capital of an
Australian public company by two principal means: a takeover bid (the off-market version of which is
like a “tender offer” in other jurisdictions) or a scheme of arrangement (which is like a “merger” in
other jurisdictions).
4.2 Takeover bids

A takeover bid is essentially a regulated offer to buy target company shares which is made on
identical terms to each target company shareholder.
There are two types of takeover bids in Australia: off-market bids and on-market bids. The key
differences between these two methods are as follows:
Consideration Off-market bids On-market bids
Bid procedure The offer is made by sending The bidder stands in the stock
personalized, formal, written offers to market (using a stockbroker) offering
every target company shareholder on to buy all target shares at the offer
identical terms. Shareholders accept price. Shareholders accept by selling
by responding to the bidder. on-market in the normal way, and
settle sales on a standard T+2 basis.
Types of target Listed or unlisted companies. Quoted Listed companies and quoted
or unquoted securities. securities only.
Offer price Cash, securities (shares, debentures, Cash only (like any on-market trade).
options, etc.) or any combination.
Conditions Can be conditional on a wide range Must be unconditional.

of events, subject to some limitations.
If a bidder requires foreign
Common conditions include investment or competition regulatory
acceptances reaching a control or approvals, an on-market bid may not
compulsory acquisition level, be feasible.
obtaining regulatory approvals and
no “material adverse change”.
Partial bids Offer can be a full bid for 100% of Not possible – the offer must be for
each holder’s shares, or a partial 100% of target shares.
offer for up to a fixed proportion
(such as 50%) of each holder’s
shares.
An off-market takeover bid is more commonly used than an on-market bid as it allows for flexibility in
the offer structure, particularly due to the conditions that a bidder may impose.
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(a) Rules applicable to all takeover bids
Both types of takeover bid share a number of common characteristics, including the following:
o Announcing a bid – Once a bidder publicly announces a proposal to make a takeover

bid, it must make takeover offers within two months on terms no less favorable than
the announced terms.
o Offer period – The takeover offer must be open for at least one month. Either kind of
bid can be extended one or more times by the bidder up to a maximum offer period of
12 months. An extension of a conditional off-market offer by more than one month (in
total) will give shareholders who had already accepted the offer a right to withdraw
their acceptance. In some circumstances, the offer will be automatically extended by
up to 14 days by operation of the Corporations Act.
o Offer price – The same price must be offered to all shareholders, and the bidder may
increase the price during the bid. Under an off-market bid, the increased price must
be paid to all shareholders who accept the offer, even those who accepted before the
bid price was increased. However, under an on-market bid, the increased price is
paid only to those shareholders who accept the offer after the price has been
increased.
o Disclosure documents – The offers, when made, must be accompanied by a

disclosure document called a Bidder’s Statement. The target company responds with
its own disclosure document called a Target’s Statement.
o Selective benefits – There is a restriction on providing benefits during the offer period
to some target company shareholders without extending the benefits to all
shareholders.
o Sale of shares by bidder – The bidder is not permitted to dispose of any target
company shares during the bid period, unless another non-associated bidder makes
or increases a competing takeover bid for the target company.
o Compulsory acquisition – Following a bid, the bidder will generally be able to

compulsorily acquire the shares held by the remaining minority shareholders at the
bid price if it achieves at least a 90% holding in the target.
(b) The bid price
The bid price must equal or exceed the highest price paid (or agreed to be paid) by the bidder
or any of its associates during the four months before the date of the bid. If two or more
alternatives are offered (for example, cash or scrip), then the value of each alternative must
comply with the minimum price rule.
In the event that the bidder acquires shares in the target company on the market (as
permitted by the Corporations Act) during the offer period and the consideration for shares
purchased on the market is higher than under the takeover offer, the offer to all other target
shareholders is increased and the additional amount is payable to those who have already
accepted the offer.
(c) Conditions precedent in a takeover offer
Off-market takeover bids may be subject to conditions precedent. On-market bids, however,
must be unconditional. Off-market bids are usually subject to a number of conditions,
including a minimum acceptance condition (generally either 50.1% for control or 90% for
compulsory acquisition), a condition that the target does not announce any material adverse
18 | Baker McKenzie
change in its financial position during the bid period, and a condition that all necessary
regulatory approvals are obtained. Bids can also be conditional on external events, such as a
fall in a specified market index.
However, the Corporations Act provides that conditions of the following kind cannot be
included:
o a maximum acceptance condition (for example, a condition that the bidder is not
obliged to proceed if acceptances are received for more than a specified percentage
of shares);
o a condition that allows the bidder to acquire shares from some, but not all, of the
shareholders who accept the bid;
o a condition that target company shareholders approve or consent to a retirement

payment being made by the target to any officer of the target company; and
o a condition which is dependent upon the opinion, belief or other state of mind of, or
an event that is within the sole control of, the bidder or any of its associates. For
example, a condition that the bidder is “satisfied” with the results of its due diligence
on the target company could not be included.
(d) Bidder’s disclosure obligations
The Corporations Act requires that a Bidder’s Statement must be sent by the bidder to all
target company shareholders with its offer. The document must include a range of specific
information, as well as general disclosure of all information (including confidential information)
known to the bidder that would be material to a decision regarding the acceptance of the offer.
The key specific disclosure requirements are:
o the identity of the bidder, including its controllers and associates;
o the bidder’s intentions regarding the continuation of the business of the target
company, the future employment of the present employees of the target company,
and details of the changes that may be made to the business of the target (such as
any proposed restructuring or sale of non- core divisions); and
o if the bid price includes cash, details of the bidder’s source of cash funding.
(e) Target’s disclosure obligations
The directors of the target company must issue a Target’s Statement in response to the
Bidder’s Statement, which similarly has both specific and general disclosure obligations. The
specific disclosure obligations include a recommendation from each target company director
as to whether or not the bid should be accepted, together with reasons for that
recommendation. The general disclosure obligation requires disclosure of all information
known to directors of the target company which target shareholders and their professional
advisers would reasonably require to make an informed decision in relation to the takeover
bid. As with the Bidder’s Statement, this includes material information which is otherwise
confidential.
The directors’ recommendations are important disclosures because it is common for some
target shareholders to pay particular regard to the views of the board. The prospect of
securing a favorable recommendation from target company directors (that is, a “friendly” bid)
will often be attractive to a bidder. Accordingly, it is essential that the disclosure surrounding
the directors’ recommendations is fully explained and reasoned.
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A Target’s Statement must include an independent expert’s report opining on whether the
takeover bid is “fair and reasonable” in circumstances where the bidder’s voting power in the
target company is 30% or more, if the bidder is a director of the target company or if the
bidder has a director in common with the target company. Even where an independent
expert’s report is not required by law, it is common for target companies to include such a
report in the Target’s Statement.
(f) Updating disclosure documents
There is a general obligation on the bidder and target to update their respective Bidder’s
Statement or Target’s Statement if, during the bid period, they become aware of a new matter
that is material to target shareholders.
The update is made by preparing a supplementary statement, which is lodged with ASIC and
sent to the ASX for public release.
4.3 Schemes of arrangement

An alternative acquisition structure to a takeover bid is a “scheme of arrangement” (sometimes called
a “merger”). A scheme is a court-approved form of corporate reconstruction. The scheme structure
involves a shareholder vote rather than offers being made to, and accepted by, each shareholder
individually (as is the case in a takeover bid) and, depending on the outcome of the vote, it delivers an
“all or nothing” result. If it is approved by shareholders and by the court, the scheme of arrangement
binds all of the target company’s shareholders, including those who voted against it (or did not vote at
all). Conversely, if a scheme is not approved, then it does not become effective, even for those
shareholders who voted in favor of the scheme.
The mechanics of a scheme usually involve a transfer of all existing target shares to the bidder in
exchange for the offer price which, like a takeover, can involve cash, securities, or any combination of
the two. Schemes can also provide for the cancellation of all target shares other than those held by
the bidder. In either case, the target company becomes a wholly owned subsidiary of the bidder. The
target company does not “merge into” the bidder and cease to exist, unlike the merger procedure in
certain other jurisdictions.
As it is the target company which has to prepare the scheme documents, apply to the court and
convene the shareholders’ meeting, a scheme cannot be used for a hostile takeover.
(a) Overview of the scheme procedure
A scheme of arrangement is a seven-step process:
Step
1. Agree a transaction with a bidder:
• Following due diligence and any other pre-bid steps, the first stage in the
process is for the bidder and the target to negotiate and execute a Scheme
Implementation Agreement and announce the transaction.
• Once the deal has been agreed and the Scheme Implementation
Agreement is signed, the target effectively leads each further step in the
scheme process. The Scheme Implementation Agreement sets the
commercial parameters of the transaction and, importantly, provides a
bidder with some level of contractual control over the scheme process to
ensure that the scheme is conducted appropriately and in accordance with
20 | Baker McKenzie
Step
the agreed terms of the deal. The target, however, has the greatest degree
of control over implementation of the transaction.
2. Prepare a draft Scheme Booklet for shareholders:
• The Scheme Booklet is the combined notice of meeting, disclosure

document and independent expert’s report to be sent to target company
shareholders for the purposes of convening a general meeting to vote on
the scheme.
3. ASIC review and approval of Scheme Booklet:
• ASIC is entitled to review the Scheme Booklet for at least 14 days (or
longer in the case of more complex schemes) prior to the first court hearing
and to have an opportunity to make submissions to the court in relation to
the scheme and explanatory statement.
• ASIC’s role is to assist the court to review the content of the scheme
documents and the terms of the scheme, and to represent the interests of
shareholders. This is because ASIC may be the only party appearing at the
court hearing other than the target company and the bidder. ASIC also
aims to ensure that all matters that are relevant to the court’s decision are
properly brought to the court’s attention. For this reason, any complex,
novel or uncertain issues in the scheme or scheme documents should be
brought to ASIC’s attention early, so as to ensure that ASIC can consider
them before the hearing and advise the court that it has no objections to
the scheme.
4. First court hearing:
• The target company must apply to the court for approval to convene the
shareholders’ meeting to consider and vote on the scheme, and to approve
the draft Scheme Booklet. This first court hearing is generally held at the
end of ASIC’s 14-day review period.
• In assessing whether or not to approve the Scheme Booklet and order a
shareholders’ meeting to be convened, the court will consider the structure
of the proposed scheme, the adequacy of information and disclosures in
the Scheme Booklet, and any objections or submissions from ASIC or
other parties.
5. Shareholder meeting and vote:
• The shareholder approval thresholds for a scheme are:

o approval from more than 50% of the number of shareholders who
vote at the meeting, regardless of how many shares they hold; and
o a special resolution of shareholders, which requires at least 75% of

the number of votes cast on the resolution to be in favor of the
scheme. Scheme votes are taken on a poll, which means that this
test requires approval by at least 75% of the shares that are voted
on the resolution.
• In each case, the voting threshold is based on only those shareholders or

shares which are actually voted (either in person or by proxy). Shares
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Step
which are not voted do not count as “no” votes. The scheme meeting vote
binds all shareholders, whether or not they vote on it.
6. Second court hearing:
• Once shareholders have voted to approve the scheme, a second court

hearing will be held soon afterwards, at which the court will be asked to
approve the scheme in order for it to become effective.
• The court’s focus at the second hearing is primarily on ensuring that the
procedural and voting requirements for the shareholders’ meeting were
complied with. The court will also seek confirmation from the target and
bidder that all conditions precedent in the Scheme Implementation
Agreement have been satisfied.
7. ASIC lodgment and scheme implemented:
• Once the scheme is approved at the second court hearing, the court order
is lodged with ASIC and the scheme becomes effective.
• After the effective date, there will be a record date for determining
entitlements of shareholders to participate in the scheme. Shortly after the
record date, the scheme will be completed by payment of the acquisition
price and transfer to the bidder of all target company shares.
(b) Scheme documents
There are several key documents required to implement a scheme of arrangement:
• Scheme Implementation Agreement (SIA) – The SIA is the primary commercial

document in an acquisition by way of scheme of arrangement. Apart from setting out
the terms of the transaction, including the price and conditions precedent, the role of
the SIA (from the bidder’s perspective) is to exercise some degree of control over the
transaction, which is otherwise controlled by the target company.
• Scheme of arrangement – This is a technical procedural document that gives effect to

the scheme when approved by the court and reflects the SIA terms.
• Deed poll – This is a document that binds the bidder to its obligations in the SIA.
Without this document, the shareholders of the target company cannot enforce the
scheme against the bidder, as a scheme is (legally speaking) an arrangement only
between the target company and its shareholders.
The key documents to be sent to shareholders for the shareholder meeting are contained in
the Scheme Booklet and include the following:
• Notice of scheme meeting – The notice of meeting convenes the shareholder meeting
where the scheme is to be voted on. Ordinary notice provisions apply (minimum 28
days’ notice).
• Explanatory statement – This is the key disclosure document for shareholders, which
should provide all relevant information for a decision whether or not to vote in favor of
the scheme. It contains recommendations from directors, together with detailed
reasons. It also contains disclosures from the bidder which are equivalent to the
disclosures that would be made in a Bidder’s Statement for a takeover offer.
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• Independent expert’s report – An independent expert’s report opines on whether the

scheme is in the “best interest” of the target company’s shareholders. This report is
not always required by law, but appointing an independent expert to provide a report
for the benefit of shareholders is an almost invariable characteristic of schemes in
Australia. Target company boards do not generally proceed with a scheme without an
expert’s report confirming that the scheme is in the best interests of shareholders, and
is fair and reasonable. The report will typically contain a detailed review and valuation
of the target company.
• All of the shareholder documents must be lodged with ASIC for a 14-day review
period before they go to court, and are then reviewed and approved by the court for
dispatch to shareholders.
4.4 Differences between a takeover bid and scheme of arrangement

Takeovers and schemes are quite different ways of reaching a similar outcome. Choosing the best
structure for an acquisition depends on a number of factors, some of which are summarized below:
Takeover bid Scheme of arrangement
Control of the Bidder generally controls the Target company runs the scheme
process process. Once commenced, the process, including preparing
bidder can decide whether to waive shareholder meeting documents,
conditions, extend the bid or obtaining independent expert’s
increase the bid price. report, regulatory filings, and making
applications to the court.
A takeover, unlike a scheme, can
proceed with or without the target A target company can break off a
board’s continued support or scheme process leaving the bidder
recommendation. with a break fee as its only remedy.
Going hostile Possible to make a hostile or Not possible, because the structure
unsolicited bid, forcing target to is driven by the target company.
respond.
Approval A bidder needs to achieve 90% Dual voting thresholds at

threshold shareholding to proceed to shareholder meeting:
compulsory acquisition of the
• 75% by number of shares
remaining shares. A higher test
voted; and
applies if the bidder’s pre-bid holding
exceeds 60%, in which case the • 50% by number of
bidder must also receive shareholders who vote.
acceptances for at least 75% of the
shares which it did not own at the In each case, the test is based on
start of the bid. only those shares which are actually
voted. Shares that are not voted do
However, a bidder can make the
not count as “no” votes.
offer unconditional at any
shareholding level it chooses below Where there are different classes,
90% if it does not require 100% each class must separately vote and
control. meet the thresholds. This can give
holders in a small class of shares a
veto power over the whole scheme.
Court approval is also required.
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Effect of pre-bid Any existing shareholding counts The bidder and its associates cannot
shareholding on towards the 90% compulsory vote their own shares in favor of the
approvals acquisition threshold, making it scheme. An option over a third
easier to achieve. An existing party’s shares, however, will not
holding exceeding 60% will increase always disqualify the third party from
the threshold (see above). voting.
Certainty of A bidder will usually have to declare Schemes have an “all or nothing”
outcome its bid unconditional at an outcome depending on whether the
acceptance level below 90% to approval thresholds are met, and will
entice sophisticated shareholders to generally complete on a date fixed in
accept for their shares. An advance by the bidder and target
Institutional Acceptance Facility (IAF) company.
can help overcome this impasse, but
A scheme is preferable from a debt
a bidder often has to accept the risk
financier’s perspective for this
of falling short of 90% when it goes
reason.
unconditional. This can make debt
financing more difficult. Unlike a takeover bid, a bidder under
a scheme of arrangement cannot
A takeover structure can be to a
settle for partial success (such as
bidder’s advantage if it is content
majority control) because the
with majority control, as the bid need
shareholders’ approval condition
not be conditional on reaching
cannot be waived.
compulsory acquisition thresholds.
Timetable and As there is no court or shareholder A scheme is initially a slower

completion approval process, a takeover bid can process than a takeover as it
process be launched quickly. A bidder can requires review and approval of
take early acceptances (if the bid is scheme documents by both ASIC
unconditional) to gain effective and the court before they can be
control of the target company in a sent to shareholders, and then a
matter of weeks. minimum 28 days’ notice for the
shareholders’ meeting.
However, a takeover will often take a
long time to reach compulsory Unlike a takeover, the end date of
acquisition thresholds, as this the scheme process can be fixed
depends on how quickly the and, with an “all or nothing” result, all
remaining shareholders send in their target shares are acquired by the
acceptances. The compulsory bidder shortly after shareholder and
acquisition process itself then takes court approval.
one to two months to complete.
Offer price The bidder can offer cash, shares, Separate and different offers are
debentures or any combination of allowed. For example, equity in the
alternatives. However, all target bid vehicle may be offered only to
shareholders must be offered the target management, with cash
same choices. offered to other shareholders. This
will, however, create separate
classes for voting purposes.
24 | Baker McKenzie
Minimum bid price A takeover bid must offer at least the No minimum offer price rule applies.
highest price paid for target company However, the court may take pre-
shares by the bidder (or its scheme purchase prices into
associates) in the four months before account when exercising its
the bid. discretion to approve the scheme.
Conditions There are some restrictions on the There is no limit on types of

precedent types of conditions precedent that conditions precedent, although all
can be included in an offer. For conditions must be either satisfied or
example, conditions which depend waived by the time of the second
on the bidder’s opinion cannot be court hearing.
used.
The bidder may not be able to waive
A bidder can waive any condition in conditions if they are expressed to
its discretion (other than necessary be for the target’s benefit.
regulatory approvals).
Amending the bid A takeover bid is very flexible. The The terms of a scheme cannot be
or offer price bidder can: amended easily. Any variation after
the shareholders’ meeting has been
• waive conditions (either one
convened will usually require court
by one, or all at once);
consent and may require the
• extend the bid by any length meeting to be reconvened, which will
of time; delay the timetable.
• increase the offer price by The offer price can be increased with
any amount; or some prior notice but it requires
cooperation from the target
• accelerate payment terms for company. Payment terms cannot be
acceptances, accelerated for “early acceptances”
before the shareholders’ meeting as
in its discretion and at any time it is an “all or nothing” process.
during the bid (although some
restrictions apply in the final seven These features of a scheme make it
days of the bid period). This flexibility more difficult for a bidder to respond
allows a bidder to respond quickly to to a rival bid.
a rival bidder.
5 Timeline
5.1 Timetable for an off-market takeover bid
This indicative timetable is based on the minimum timetable for an off-market bid. References to time
are calendar days, not business days (unless otherwise noted). All section references are to the
Corporations Act unless otherwise indicated.
Timing Action Comments
On or before Day 1 Public announcement of intention to Takeover offers must be sent to

make a bid shareholders within two months of
the announcement (section 631).
Baker McKenzie | 25
Day 1 Bidder’s Statement (which includes -

the offer terms) lodged with ASIC
Day 1 Bidder’s Statement served on target The Bidder’s Statement must be

and given to ASX served on the target within 21 days
after it is lodged with ASIC (section
633). If the target is listed, a copy
must be given to ASX. Service is
usually made on the same day as
ASIC lodgement.
Every day during Bidder lodges substantial holder The bidder must notify the target and
the bid period notices as required ASX of its total voting power:
• when it first makes the bid;
• when its voting power

reaches 5%; and
• every day its voting power

changes by at least 1% (for
example, as it receives
acceptances).
The notice must be given by 9.30am

on the next trading day (section
671B).
Day 15 Bidder’s Statement and offer Dispatch of these documents must

document sent to target be done within a three day period
shareholders between 14 and 28 days after service
on the target (section 633). The
target may agree to an earlier
dispatch date. In a hostile bid, an
application by the target to the
Takeovers Panel may delay the
dispatch pending resolution of the
dispute. Notice that the documents
have been dispatched must be given
to the target, ASIC and ASX (section
633).
By Day 30 Target’s Statement sent to bidder The Target’s Statement must be sent
and target shareholders no later than 15 days after the bidder
sends its documents to the target’s
shareholders (section 633). A copy is
also given to ASIC and ASX.
Any time during the Extend the offer period A formal notice of variation is sent to
offer period the target, ASIC and offerees
(section 650D).
If the offer is still conditional the offer
period cannot be extended after the
publication of the notice as to the
26 | Baker McKenzie

status of the bid conditions (see
below), unless a competing bid is
announced or made after the date of
publication or the consideration under
a competing takeover bid is improved
(section 650C).
Any number of extensions can be
made, up to a total offer period of 12
months (section 624(1)). An
extension for more than one month
(in total) will trigger withdrawal rights
for previously accepted shares if the
offer is still conditional.
Any day before or Waive conditions of the bid Notice waiving a condition is given to
on the seventh day the target and ASX (section 650F).
before the end of
Conditions as to the non-occurrence
the offer period
of certain corporate actions by the
target (section 652C(1) and (2)
events, commonly called “prescribed
occurrences”) may be waived up to
three business days after the end of
the offer period.
Seven days before Publish notice as to the The offer document must specify a
the end of the offer status of bid conditions date between seven and 14 days
period before the end of the offer period for
publishing this notice (section
630(1)). Seven days before the end
is the day usually specified. The
publication date is automatically
deferred by the length of any
extension in the offer period (section
630(2)).
The notice is sent to the target and
ASX.
Day 15 plus one Earliest date for close of the offer The offer period will be automatically
calendar month period extended under section 624(2) if, in
the last seven days, the bid price is
increased or the bidder’s voting
power in the target increases to more
than 50%. The automatic extension is
to 14 days after the relevant event.
Up to 21 days after Pay the bid price to accepting The bid price must be paid by the
the end of the offer shareholders earlier of:
period
• the later of one month after
acceptance and one month
Baker McKenzie | 27
after the bid becomes
unconditional; and
• 21 days after the end of the

offer period (section 620(2)).
Immediately after Commence compulsory acquisition A bidder which satisfies the 90% and
the end of the offer procedure 75% thresholds may send notices to
period the remaining target shareholders
under section 661B to initiate the
compulsory acquisition procedure.
The notices must be sent within one
month after the end of the offer
period. The notice must be copied to
ASIC and ASX.
Five business days Target shares are suspended from This happens automatically (ASX
after compulsory trading on ASX Listing Rule 17.4).
acquisition notices
sent
Three business Target is delisted by ASX This happens automatically (ASX

days after Listing Rule 17.14).
suspension of
trading
One month after Complete compulsory acquisition The earliest that compulsory
compulsory procedure acquisition can be completed is one
acquisition notices month after the notices are sent to
sent shareholders (section 666A).
However, the process can be
delayed if minority shareholders
apply to the court under section 661E
to stop the acquisition on the grounds
that the bid price is not fair value for
the shares.
5.2 Timetable for an on-market takeover bid

This indicative timetable is based on the minimum timetable for an on-market takeover bid.
References to time are calendar days, not business days (unless otherwise noted). All section
references are to the Corporations Act unless otherwise indicated.
On or before Day 1 Public announcement of intention to The on-market takeover offer must
make a bid be made within two months of the
announcement (section 631).
Day 1 Bidder’s Statement (which includes The contents of the formal

the offer terms) lodged with ASIC announcement are set out in the
28 | Baker McKenzie

ASIC Market Integrity Rules (ASX
Market), at rule 6.1.1.
Day 1 Bidder’s Statement lodged with This must be done on the same day
target, ASIC and ASX as the formal announcement to ASX
(section 635).
Any time on or after Bidder may purchase shares on- On-market purchases can be made
Day 1 market after the formal announcement, even
before the full on-market takeover
offer commences (section 611, item
2).
Every day during Bidder lodges substantial holder The bidder must notify the target and
the bid period notices as required ASX of its total voting power:
• when it first makes the bid;
• when its voting power

reaches 5%; and
• every day its voting power

changes by at least 1% (for
example, as it receives
acceptances).
The notice must be given by 9.30am

on the next trading day (section
671B).
By Day 15 Bidder’s Statement sent to target This must be done within 14 days
shareholders after the formal announcement.
Copies of all documents sent are
lodged with ASIC and ASX (section
635).
By Day 15 Target’s Statement sent to target This must be done within 14 days
shareholders and bidder after the bidder’s formal
announcement. Copies of all
documents sent are lodged with
ASIC and ASX on the same day
(section 635).
Day 16 Full takeover offer made on the A stockbroker acting for the bidder
ASX must make an on-market offer for all
quoted shares in the target at the bid
price on this day (section 635).
Payment terms for on-market
acquisitions (including under the bid)
are full payment on the second
trading day after the transaction
(called “T + 2”).
Baker McKenzie | 29
Up to five trading Increase the bid price The broker acting for the bidder must
days before the end publicly announce the increased
of the offer period price to ASX before placing the
higher bid (ASIC Market Integrity
Rule 6.2).
Up to five trading Extend the offer period The extension is notified to ASX, the
days before the end target and ASIC (section 649C).
of the offer period
An extension cannot be made within
the last five trading days of the offer
period unless a competing bid is
announced or made or the
consideration under a competing
takeover bid is improved in those last
five trading days.
Any number of extensions can be
made, up to a total offer period of 12
months (section 624(1)).
Day 16 plus one Earliest date for close of the offer The offer period will be automatically
month period extended under section 624(2) if, in
the last seven days, the bidder’s
voting power in the target increases
to more than 50%. The automatic
extension is to 14 days after the
bidder’s voting power increases to
more than 50%.
Immediately after Commence compulsory acquisition A bidder which satisfies the 90% and
the end of the offer procedure 75% thresholds (see section 9.1)
period may send notices to the remaining
target shareholders under section
661B to initiate the compulsory
acquisition procedure. The notices
must be sent within one month after
the end of the offer period. The notice
must be copied to ASIC and ASX.
Five business days Target shares are suspended from This happens automatically (ASX
after compulsory trading on ASX Listing Rule 17.4).
acquisition notices
sent
Three business Target is delisted by ASX This happens automatically (ASX

days after Listing Rule 17.14).
suspension of
trading
One month after Complete compulsory acquisition The earliest that compulsory
compulsory procedure acquisition can be completed is one
acquisition notices month after the notices are sent to
sent shareholders (section 666A).
30 | Baker McKenzie

However, the process can be
delayed if minority shareholders
apply to the court under section 661E
to stop the acquisition on the grounds
that the bid price is not fair value for
the shares.
5.3 Timetable for a scheme of arrangement

This indicative timetable is based on the minimum timetable for a scheme of arrangement.
References to time are calendar days, not business days (unless otherwise noted).
On or before Day 1 Public announcement of agreed Unlike a takeover bid, there is no

scheme terms (as set out in the specific legal obligation to send
Scheme Implementation Agreement documents to target shareholders
between bidder and target) within a particular period after the
announcement.
Day 1 Lodge draft Scheme Booklet, 14 days’ notice must be given to

including independent expert’s ASIC prior to the first court hearing,
report and shareholder meeting together with draft scheme
documents, with ASIC. Apply for a documents.
court date
Days 1 to 14 Consider ASIC comments. Lodge -

final documents with the court
Day 15 First court hearing 14 days after ASIC lodgement.
Day 22 Send Scheme Booklet and meeting Seven days assumed for printing
documents to shareholders and mailing.
Day 50 Scheme meeting Minimum 28 days’ notice of meeting.
Day 53 Second court hearing -
Day 53 Effective Date Lodge with ASIC a copy of the court

order approving the scheme, and
notify ASX.
Trading in target shares is
suspended from close of trading.
Day 53 + 3 Record Date The Record Date for determining

business days entitlements to receive scheme price
(three business days after the
Effective Date).
By Day 63 Implementation Date The scheme is completed, and the

scheme price paid to target
shareholders (usually three to five
business days after Record Date).
Baker McKenzie | 31
Set out below are overviews of the main steps for a typical off-market takeover, an on-market
takeover and a scheme of arrangement in Australia.
32 | Baker McKenzie
Off-market takeover offer (indicative timeline)
Start Day 1 Day 15 By Day 30 Day X - 7 Day X Day X+21 Day Y Day Y+ 5 Day Y+ 8
process
Australian Bidder’s Bidder’s Target’s Publish Earliest date Pay the bid price Commence Target shares Target is Compulsory
Securities Statement served Statement Statement sent notice as to for close of to accepting compulsory are delisted by acquisition
Exchange on target, lodged and offer to bidder and the status of offer period shareholders acquisition suspended ASX procedure
(ASX) with Australian document target bid procedure from trading completed
announcement Securities and sent to target shareholders conditions (when 90% on ASX
of intention to Investments shareholders and 75%
make a Commission thresholds
takeover bid (ASIC) and given satisfied)
to ASX
6-8 weeks Between 14 Up to 21 days Five business Three business

and 28 days after the end of days after days after
Takeover offers
after service the offer period compulsory suspension of
must be made
on the target acquisition trading
within 2 months of
notices sent
announcement
Waive conditions of the bid on any day before or

on the seventh day before the end of the offer
period
Offer period must be open for at least one Compulsory acquisition notices must Earliest that compulsory acquisition can be completed is one
calendar month. Offer period can be extended at be sent to remaining target month after compulsory acquisition notices sent
any time. shareholders within one month of
end of offer period and copied to
ASIC and ASX
Baker McKenzie | 33
On-market takeover offer (indicative timeline)
Start process Day 1 Day 15 Day 16 Day X Day Y Day Y+5 Day Y+8
Australian Securities Bidder’s statement Bidder’s statement Full takeover offer Increase the bid Earliest date for Commence Target shares are Target is delisted Compulsory
Exchange (ASX) served on target, sent to target made on the ASX price or extend the close of offer compulsory suspended from by ASX acquisition
announcement of lodged with Australian shareholders and offer period period acquisition trading on ASX procedure
intention to make a Securities and target’s statement procedure (when completed
takeover bid Investments sent to target 90% and 75%
Commission (ASIC) shareholders and thresholds
and released to ASX bidder satisfied)
6-8 weeks Within 14 days of Up to 5 trading Compulsory Five business Three business days
formal days before the acquisition notices days after after suspension of
Takeover offers must
announcement end of the offer must be sent to compulsory trading
be made within 2
months of period remaining target acquisition notices
announcement shareholders within sent
one month of end of
offer period and copied
to ASIC and ASX
Offer period must be open for at least one Earliest that compulsory acquisition can be completed is one
month month after compulsory acquisition notices sent
34 | Baker McKenzie
Scheme of arrangement (indicative timetable)
Start On or before
process Day 1 Day 1 Day 14 Day 15 Day 22 Day 50 Day 53 Day 53 + 3 Day 63
Public announcement Lodge draft scheme Consider ASIC/ASX First court hearing Send Scheme Booklet Scheme meeting Second court hearing Record date Implementation date.
on ASX of agreed booklet, including comments (assume court date and meeting
Effective date. Lodge a Scheme completed
scheme terms as set independent expert’s available) documents to target
Lodge final documents copy of court order and scheme price paid
out in Scheme report and shareholder shareholders
Implementation with court approving scheme with to target shareholders
documents, with
Agreement ASIC and notify ASX (usually three to five
Australian Securities
days after Record date)
and Investments Trading in target
Commission (ASIC) shares suspended from
Apply for court date close of trading
14 days’ notice must be given to ASIC 7 days assumed for Minimum 28 days’ 3 business days
prior to the first court hearing, together printing and mailing notice of meeting
with draft scheme documents
Baker McKenzie | 35
6 Takeover Tactics
6.1 Transaction structure
The table in section 4.4 above, sets out the different factors that a bidder and target company may
consider when choosing a transaction structure for a takeover.
The “all or nothing” outcome of a scheme generally makes it a favored acquisition structure in
Australia for friendly or agreed transactions. In leveraged acquisitions, where it is essential to obtain
100% control on a certain date, it may actually be necessary to proceed by way of scheme for this
reason. Likewise, a “top-hat” restructure, where all classes of shares and convertible securities are to
be simultaneously exchanged for equivalent securities in a new holding company, would generally
also have to be structured as a scheme for similar reasons.
A scheme of arrangement might also be attractive where special corporate actions need to be
undertaken in connection with the acquisition, such as where part of the acquisition price is in the
form of a share buyback or capital return that requires approval by a shareholder vote.
However, in a hostile situation, a takeover bid is the only feasible structure.
6.2 Deal protection mechanisms

In a takeover bid that is likely to be friendly or recommended, or a scheme of arrangement, it is not
unusual for the target company to grant a limited exclusivity period to the bidder, during which the
bidder has exclusive access to due diligence and negotiations with the target company. In return for
the bidder’s commitment under either type of structure, the target will usually grant the bidder:
• exclusivity, where the target gives the bidder certain exclusive negotiation and dealing rights
before and after the bid is announced (discussed further below); and
• a break fee, where the target agrees to pay a specific amount to the bidder if the bid fails in
certain circumstances. Where there is a break fee, there may also be a reverse break fee,
where the bidder agrees to pay an amount to the target in certain circumstances. To ensure
that the size of the break fee neither unacceptably pressures shareholders to approve the bid
nor deters a rival bidder, the Takeovers Panel recommends that target company directors cap
the maximum fee payable at 1% of the equity value of the target company at the bid price as
a guideline.
The Takeovers Panel has issued a policy on break fees, exclusivity agreements and asset lock-ups
(collectively termed lock-up devices) which aims to ensure that target companies do not hinder an
efficient and competitive market for corporate control. The Takeovers Panel does not consider that
lock-up devices are always unacceptable, but has laid down guidelines to ensure that target
companies do not use lock-up devices to shut out potentially higher competing bids.
6.3 Exclusivity arrangements

An exclusivity arrangement will usually comprise a number of individual components, including the
following:
• No-shop – The target company agrees not to actively solicit offers from other parties. The
Takeovers Panel regards no-shop agreements as acceptable, as target directors do not have
a legal duty to solicit other offers or to actively auction the company when a bid is received.
• No-talk – The target company agrees not to respond to, or even negotiate with, any third
party, even if the third party makes an unsolicited approach. No-talk agreements will only be
acceptable if they are subject to a carve-out, which permits target directors to consider and
36 | Baker McKenzie
recommend an unsolicited superior proposal in circumstances where it may be a breach of

the directors’ fiduciary or legal duties if they were to refuse to engage with the new bidder.
• Notification – A notification obligation requires the target company to notify the bidder of
details of any potential competing proposals.
• Matching right – A notification right may be coupled with a matching right which allows the
bidder to put forward a revised offer for the target company’s shares to at least match the
competing offer.
In a scheme of arrangement, the court may scrutinize an exclusivity agreement to ensure that
shareholders have not been prejudiced by it. In such cases, it may be necessary to show that
exclusivity was granted by the target company only after its advisers canvassed other potential
bidders, and no superior transaction was considered to be available at that time.
6.4 Defensive tactics

Once a takeover bid has been announced, the defensive tactics open to a target company become
very limited. For instance, there are specific restrictions on a listed target company:
• issuing any new shares, options or convertible securities without prior shareholder approval;
and
• providing its directors with termination benefits that are triggered by a change in control of the
company.
The target company’s directors also have to contend with the Takeovers Panel’s policy on “frustrating
action”. This policy broadly restricts the actions that a target company can undertake if the effect of
the action would be to frustrate the bid and cause it to fail. The policy will apply regardless of the
motives or intentions of the target company’s directors.
In light of these restraints, one of the best ways for a company to prevent a hostile bid is to make
arrangements well in advance of any bid being announced. Appropriate arrangements could include
share placements and strategic alliances with like-minded parties, share buybacks and other capital
maintenance tools, regular communication with shareholders, and other measures designed to
ensure the company’s share price reflects the full value of its strengths and available opportunities.
Once a hostile bid is announced, the target company’s directors will often respond by attacking the
Bidder’s Statement or bid structure in the Takeovers Panel, or (where the bidder offers its own scrip)
by attacking the value of the bidder’s offer. Target company directors may also try to improve the bid
price by negotiating with the bidder in exchange for a recommendation to accept the offer, or by
creating an auction to attract other bidders.
6.5 Insider trading

The Corporations Act prohibits any person subscribing for, purchasing or selling shares in a company
or procuring another party to do so, where that person possesses information that is not generally
available and, if it were, would be expected by a reasonable person to have a material effect on the
price or value of shares in that company. The person must also know or ought to reasonably be
expected to know that the information is not generally available and, if it were, it might have a material
effect on the price or value of those shares.
A potential bidder who is already a major shareholder in a target company or has been granted
access to due diligence by the target company may be in possession of information which is not
generally available and would be likely to materially effect the price of shares in the target company.
Provided the information is disclosed to the market (such as in the Bidder’s Statement or Target’s
Baker McKenzie | 37
Statement) before any shares are acquired, contravention of the insider trading provisions is not likely
to occur.
6.6 Statements of intention

A mechanism through which a bidder may build support for a takeover bid or scheme is by target
shareholders making a public statement or consenting to a public statement being made which is
attributed to them, to the effect that they intend to vote in favor of the scheme or accept the takeover
bid (as the case may be). This attracts the “truth in takeovers” policy, under which ASIC states that it
will hold target shareholders to the course of action contained in their public statements of intention,
akin to a promise.

Takeover
7.1 Squeeze-out following a takeover bid
The Corporations Act provides a statutory call option in favor of the bidder and a put option in favor of
remaining target shareholders in certain circumstances. A bidder under a takeover bid may
compulsorily acquire any remaining target shares if, by the end of the offer period:
• the bidder and its associates have relevant interests in 90% by number of the shares in the
bid class; and
• the bidder and its associates have acquired at least 75% by number of the shares that the
bidder offered to acquire under the bid (whether the acquisitions occurred under the bid or
otherwise).
In the event the thresholds are reached and the bidder does not use the compulsory acquisition
mechanism, the remaining shareholders have the right to require the bidder to buy their shares.
Holders of non-voting shares, renounceable options and convertible notes have similar rights to have
their shares acquired by the bidder.
7.2 Squeeze-out following a scheme of arrangement

Schemes have an “all or nothing” outcome depending on whether the approval thresholds are met.
Accordingly, unlike a takeover bid, the scheme process results in the bidder acquiring all the target
company’s shares once the scheme is implemented.
8 Delisting
It is usual for a target company to be removed from the ASX following a successful takeover bid or
scheme of arrangement. Following compulsory acquisition by a bidder in a takeover bid or a scheme
of arrangement, the ASX automatically suspends quotation of the target company’s shares. The ASX
will then remove the target company from the official list at the close of trading on a date in the ASX’s
discretion. This is normally the third business day following suspension of the target company’s
shares.
38 | Baker McKenzie

Steven Glanz, Lance Sacks and Guy Sanderson in the Sydney office and Richard Lustig and Rick
Troiano in the Melbourne office are the most appropriate contacts within Baker McKenzie for inquiries
about public M&A in Australia.
Steven Glanz Richard Lustig

Sydney Melbourne
steven.glanz@bakermckenzie.com richard.lustig@bakermckenzie.com
+61 2 8922 5205 +61 3 9617 4433
Lance Sacks Rick Troiano

Sydney Melbourne
lance.sacks@bakermckenzie.com riccardo.troiano@bakermckenzie.com
+61 2 8922 5210 +61 3 9617 4247
Guy Sanderson
Sydney
guy.sanderson@bakermckenzie.com
+61 2 8922 5223
Baker McKenzie | 39
Austria
1 Overview
Austria’s capital market is comparatively small with approximately 65 companies listed on the
regulated market segment of the Vienna Stock Exchange, which is the “Amtliche Handel” (the second
regulated market segment operated so far, the “Geregelte Freiverkehr”, was abandoned by an
Amendment of the Austrian Stock Exchange Act 2018). Nevertheless, there has been a considerable
amount of deal activity in Austria over the past few years. While in the period from 2004 to 2013, an
average of about three takeover offers were launched for listed companies in Austria, deal activity
picked up in 2014 with 10 offers launched that year, followed by five offers in 2015 and seven
takeover offers in 2016. In 2017 there was only one takeover offer, climbing to six takeovers in 2018
and falling again to only one takeover offer in 2019. Apart from targets in the financial industry and
beverage industry, a considerable amount of deal activity throughout the past few years concerned
Austrian property holding companies. Apart from commercial and economic factors, this increased
deal activity may partly be a consequence of the dispersed ownership structures of property holding
companies. In contrast, the vast majority of Austrian listed companies are controlled by a dominant
shareholder or group of shareholders.
Under Austrian takeover rules, there are three main types of takeover offers: mandatory bids,
“voluntary” offers to acquire control and (voluntary) partial offers. The differences and specifics of
these types of transactions will be discussed below (see 4). With the Austrian Stock Exchange Act
2018, the legislator introduced new regulations for the revocation of the admission of a company’s
equity securities from the regulated market segment and a new kind of takeover-bid has been
implemented (delisting-offer). The delisting-offer is linked to the mandatory offers by way of legal
reference.
The competent authority tasked with supervising public takeovers in Austria is the Austrian Takeover
Commission (the “ATC”), an independent supervisory authority with quasi-judicial status under
Austrian constitutional law. Apart from supervising public takeover offers, the ATC also fulfils a
number of other related functions. These include the publication of (non-binding) opinions
(“Stellungnahmen”) on questions concerning Austrian takeover law, which are typically issued at the
request of an interested party, binding rulings on the application of the takeover rules, especially
regarding exemptions from the duty to launch a mandatory offer, administrative criminal proceedings
in cases of violations of the takeover rules, as well as ex post investigations regarding any violations
of the takeover rules during an offer, or the failure to launch a mandatory bid following a change of
control over a listed company. The ATC conducts 8-12 of such further proceedings per year on
average.

The main piece of takeover legislation in Austria is the Austrian Takeover Act, which has been in force
since 1999 (the “Austrian Takeover Act”). It has subsequently been amended several times, notably in
2006, when it was brought in line with the European Takeover Directive (Directive 2004/25/EC) (the
“Takeover Directive”), in 2013, when the legislator permitted judicial review of the ATC’s decisions by
the Austrian Supreme Court, and in 2018, when new delisting rules were introduced. The original
Austrian Takeover Act was largely modelled on the UK Takeover Code.
2.2 The Austrian Takeover Commission

Public offers and any proceedings relating to the Austrian takeover laws fall within the competence of
the ATC. Unlike in a number of other European jurisdictions, the ATC is a specialized supervisory
40 | Baker McKenzie
authority focusing exclusively on public takeovers and adjacent matters, and as such is separate from
the Austrian Financial Market Authority.
The ATC is an independent quasi-judicial body with a permanent office (employing two to four lawyers
on average) with decisions rendered by one of three panels (the “Senate”). Each panel consists of
four part-time members. The members of the ATC are jointly appointed by the Minister of Finance and
the Minister of Justice. Each of the three consists of a chairman, one sitting judge and one member
each nominated by the Austrian Chamber of Commerce and the Austrian Chamber of Labor.
All members of the ATC enjoy judicial independence in relation to their function, and government
ministers have no instruction rights in relation to the activities of the ATC. With one member of each
panel being a sitting judge, the ATC qualifies as an independent tribunal within the meaning of the
ECHR and under Austrian constitutional law. Thus, it may rule on civil law matters as well as
administrative sanctions.
Appeals against decisions of the ATC in administrative criminal proceedings are decided upon by the
administrative court. Appeals against all other decisions of the ATC are to be addressed directly to the
Austrian Supreme Court. However, the Austrian Supreme Court is only a legal authority and not an
opportunity for hearing new facts of the case. Hence, apart from file irregularities, no objections can
be raised before the Austrian Supreme Court on findings concerning the facts of the case.
Consequently, the assessment of the evidence by the ATC cannot be challenged either.
2.3 Foreign investments

(a) Governmental prior approval only required in specific industries
Foreign investments are not restricted in Austria unless they relate to certain specific sensitive
activities.
Under the Austrian Foreign Trade Act (AußWG) direct or indirect acquisitions of (i) (a) 25% or
more or (b) a controlling interest, or (ii) the business, by non-EU/EEA and non-Swiss persons
in an Austrian enterprise engaged in a particular – protected – industry sector defined under
the Act are subject to prior approval by the Austrian Ministry of Economic Affairs.
If several persons or enterprises jointly acquire a controlling interest or participation or are

acting in concert in regard of their participations in the enterprise, prior approval is required
even if only one of them is a non-EU/EEA or non-Swiss citizen or enterprise.
(b) Sensitive activities
Activities in the following areas are considered sensitive activities:
• the defense equipment industry;
• security services;
• activities in the area of public safety and order, in particular in the areas of
o energy supply;
o water supply;
o telecommunication;
o traffic; and
o infrastructure in the educational and healthcare sector.
Baker McKenzie | 41
(c) Authorization process
Prior authorization is deemed to have been obtained one month after receipt by the Austrian
Ministry of Economic Affairs of a complete application for authorization, unless the applicant is
notified within such period of a decision to grant authorization for the transaction or a decision
to initiate an in-depth authorization process. In the latter case (in-depth authorization
process), a decision must be made by the Austrian Ministry of Economic Affairs within two
months after receipt by the applicant of the first decision to either authorize the transaction, to
authorize the transaction subject to fulfilment of certain conditions or to decline authorization.
Authorization is deemed to have been obtained if no decision is made by the Austrian Ministry
of Economic Affairs within these two months.

The Austrian Takeover Act sets out a number of general principles which essentially mirror the
principles laid down in the European Takeover Directive:
• Equal treatment of shareholders – Holders of securities in listed companies must be treated

equally if of the same class. This specifically applies to the treatment of shareholders holding
the same class of shares in the company. The principle of equal treatment results, in
particular, in the obligation of a bidder to offer all shareholders (who are of the same class)
the same per-share price. Offering benefits beyond the offer price to certain shareholders or
group of shareholders is not permissible. This principle applies for a period from one year
prior to the public offer until 9-12 months following the completion of the public offer, subject
to certain exceptions.
• Exits right upon change of control – In case of change of control over a listed company, all
shareholders must be given the right to sell their shares to the bidder. This does not exclude
the ability of certain shareholders to waive this right in relation to a specific bidder.
• Information and time for decision making – The addressees of a public offer must be provided
with adequate information regarding the offer and need to be given sufficient time to decide
upon the offer. Thus, the offer document needs to comply with certain requirements as to form
and content. Furthermore, the offer period needs to be two weeks minimum, whereas the vast
majority of public offers in Austria provide for offer periods exceeding the two-week minimum.
There is no first come first served principle.
• No obstruction of the target company – Notwithstanding the general principle above, public
offers need to be conducted quickly. The reason behind this principle is that the management
of a target company should not extensively be occupied with takeover offers instead of
managing the target company’s business. As a consequence of this principle, bidders who
have failed to successfully complete their offers, i.e., the minimum acceptance requirement
has not been fulfilled in the case of an offer to acquire control, are, in general, precluded from
launching another offer within a period of one year (the so-called “blocking period”). However,
the bidder is exempted from this rule if the interests of the target company and its
shareholders are not endangered, which is usually the case if the second offer is friendly and
an attractive price is offered.
• Duty of the target company’s boards – In case of a public offer, the management and
supervisory boards of the target company must act in the interests of the shareholders, the
employees and the creditors, and also needs to take public interests into consideration.
Although this principle suggests that the boards may also frustrate a bid if not in the interest of
a certain party, e.g., the employees, the boards are nevertheless bound by a strict neutrality
rule (provided for under § 12 of the Austrian Takeover Act), requiring the boards to abstain
from any action that may deprive the shareholders from their right to make a free and
informed decision about the public offer. In general, the boards may only take defense
42 | Baker McKenzie
measures against a hostile offer if (i) authorized by the general meeting of the target company
or (ii) the boards have partly implemented such measures at the time the bidder announces
its intention to launch a bid.
• Prevention of market distortions – Steps must be taken to prevent any distortion of the normal
market functioning and pricing, in particular, with respect to the shares of the target company
and the bidder company, in the course of a public offer.

3.1 Secrecy and bid announcement
Under Austrian takeover law, an acquirer may confidentially negotiate with the target company board
and/or a significant shareholder in the target company before making any announcement about a
possible takeover offer. Both the potential bidder and the target management must ensure the
secrecy of any negotiations. However, as soon as there are significant price movements in target
company shares or in case of market rumors regarding a possible offer by the bidder, both the bidder
and the target company have an obligation to disclose the fact that the bidder contemplates or intends
to make a takeover offer for the target company. Moreover, the bidder must, in any event, disclose its
intention to launch a takeover offer as soon as its board(s) has(have) resolved to do so.
3.2 Overview of shareholder rights in Austrian listed companies

Potential bidders may aim to acquire a minority stake in the target before launching a public takeover.
The following table summarizes some voting thresholds relevant for public takeovers according to
general Austrian company law. The available and exercisable rights may differ significantly
depending, among other things, on a company’s articles of association.
Percentage of total Relevant rights

voting rights
1%+ Shareholders can make proposals for resolutions upon agenda items of
the general meeting.
5%+ Rights include ability to call extraordinary general meeting and request
agenda items.
10%+ Shareholder can request a special investigation into company affairs by

an independent expert.
25%+ Shareholder can block certain important general meeting decisions,

including share issuances, disapplication of pre-emption rights, changes
to the articles of association, removal of supervisory board members,
and statutory mergers. (Some of these blocking rights are subject to the
company’s articles of association.)
26%+ In listed companies, voting rights of shares acquired after passing the
26% threshold cannot be exercised (effectively a statutory voting cap at
26%) unless a general takeover offer is made (subject to exceptions).
30%+ Control threshold triggering the mandatory bid rule.
50%+ Legal control, i.e., ensuring shareholder can take decisions the general
meeting may adopt with simple majority, including appointment of
supervisory board members (subject to limited minority shareholder
rights), which in turn appoints the management board. Exact rights
depend on the company’s articles of association.
Baker McKenzie | 43
Percentage of total Relevant rights
voting rights
75% Shareholder rights include the issuances of shares with or without pre-
emption rights, changes to the articles of association, removal of
supervisory board members, statutory mergers, and other restructurings
(subject to the company’s articles of association).
90% Right to squeeze out the minority shareholders against fair cash
compensation.
Where only a minority interest is sought in an Austrian company, this can be acquired via either open
market purchases or through a partial offer (as long as the bidder does not end up with more than
30% of the total voting shares following the completion of the takeover offer). In the latter case, the
procedural rules of the Austrian Takeover Act generally apply in full. In particular, the acquirer needs
to file the offer document with the ATC and needs to adhere to the offer timetable. However, the
acquirer is free to set the offer price in a partial offer, meaning past purchases by the bidder do not
result in a minimum offer price. Nevertheless, the bidder must not pay a higher price than the offer
price once the partial bid has been announced. Partial offers are described in more detail below (see
4).
3.3 Mandatory offer threshold

Under Austrian takeover law, any person or group of persons (parties acting in concert) obtaining
control (see 4.2) over a listed company is obliged to make a general cash offer to all shareholders of
the target company to acquire any or all of the company’s outstanding shares. The mandatory bid rule
is triggered where a person or group of persons acquires more than 30% of the voting rights attached
to the company’s shares.
4.1 General
In Austria, acquirers typically obtain control over listed companies in one of two ways. First, as most
listed Austrian companies have a controlling shareholder, the acquirer may privately negotiate an
acquisition of the controlling block of shares from the incumbent dominant shareholder. If successful,
this transaction will typically trigger a mandatory bid, and will thus be followed by a general cash offer
to the remaining shareholders (see below). Where the acquirer follows this path, it is quite common in
practice for the acquirer to conduct a (limited) due diligence review, and the agreement with the
incumbent controller will often contain extensive representations and warranties in relation to the
target company and its business.
Second, control can also be obtained by a general offer (a “voluntary offer to acquire control”). Such
offers may be launched regardless of whether or not the target company has a dominant shareholder,
and they are subject to a statutory minimum acceptance threshold of 50% of the offer’s addressees.
The procedure is set out in more detail below.
It is far less common for listed companies to be acquired through statutory mergers, which in Austria
require the payment of all or a substantial part of the consideration in shares of the surviving
company. Triangular and/or cash-out mergers are not currently available to Austrian-incorporated
companies.
44 | Baker McKenzie
4.2 Definition of control

Public offers are often launched as mandatory bids following a change of control over the target
company. Control is defined in § 22 of the Austrian Takeover Act. Pursuant to this rule, control is
deemed to have been obtained if a person owns or controls more than 30% of the voting shares in a
company (controlling stake). Special rules apply in case control is obtained indirectly, e.g., by
obtaining control over another company directly or indirectly holding a controlling stake in the listed
target. In that case, where the company directly holding a controlling stake in the target is itself a
listed company (pyramid structure), control is defined as above, i.e., with reference to the 30%
threshold. However, where the direct controller is a closely held company, the ATC will determine
whether or not control over that company has changed based on an assessment of the de facto
influence of the (indirect) acquirer.
However, once exceeding the 30% threshold, a shareholder is only deemed to have acquired control
if it has, in light of the shareholder structure and the usual attendance of shareholders in the annual
general meeting, the majority of the voting rights in the shareholders’ meeting of the target company.
Should, for example, a new shareholder acquire 32% of the shares with voting rights, but another
shareholder holds 40% of the voting rights, the new shareholder will not be in a controlling position
despite having acquired more than 30% of the shares with voting rights.
4.3 Parties acting in concert

Shareholders acting jointly to acquire or exercise control over a listed company, e.g., by coordinating
the exercise of voting rights in the company’s general meeting, are regarded as parties acting in
concert. Shareholdings of the concert party are aggregated for the purposes of the mandatory bid rule
(as well as in relation to significant shareholding disclosure rules).
4.4 Mandatory bid rule

A change of control over a listed Austrian company generally triggers an obligation for the new
controlling shareholder (or group of shareholders/ shareholders acting in concert) to launch a
mandatory offer to all other shareholders of the target company.
However, control may not only be acquired by direct or indirect acquisition of a controlling stake, but
also by changes in the composition of a group of shareholders exercising joint control over a listed
company, and even if the rights and obligations of the members within such group are amended,
provided that such amendments result in a change of control within the group of shareholders.
A change of control within a group of shareholders requires all members of this group to launch a
mandatory offer to all other shareholders of the company, provided that group of shareholders holds a
controlling stake in that company.
Furthermore, a mandatory offers needs to be made if a controlling shareholder who holds more than
30% but less than 50% of the shares with voting rights acquires an additional 2% or more of shares in
the target company within a period of 1 year (creeping-in rule). The purpose of the creeping-in rule is
basically to prevent circumvention of the mandatory bid rule.
4.5 Offers to acquire control

If a bidder owns less than 30% of the shares or no shares at all in the target company, it may launch
an offer to acquire control. In order for such offer to be successful, the bidder will need to receive
acceptances for more than 50% of the shares subject to the public offer (the “market test”), whereas
the bidder may voluntarily set a higher threshold, such as 75% or 90%. The latter threshold may be
attractive for the bidder since, as a consequence of acquiring more than 90% of shares in the target
company, the bidder may squeeze out the remaining shareholders and delist the target company
(see 7).
Baker McKenzie | 45
Since, in the course of an offer to acquire control, the bidder will, if successful, end up with a
controlling stake in the target company, most of the rules applicable to mandatory bids also apply to
offers to acquire control.
4.6 Important rules only applicable to mandatory offers

• Unconditional offer – Other than offers to acquire control, mandatory offers may not be
subject to any conditions. This is because the bidder acquires control in the first place. If the
bidder was permitted to make its offer subject to conditions, the control it has acquired would
not fall away in case of non- fulfilment of the conditions set. This would not only contravene
the principle set out above under 2.3, but it would also contravene the Takeover Directive.
• Sufficient funds – A bidder may only acquire control if it has made sure that it has sufficient
funds available to pay the offer price.
• Filing period of 20 trading days – Other than for all other types of offers, the bidder is required
to file its offer document within a period of 20 trading days following the announcement of the
offer (the filing period for all other types of offers is between 10 and 40 trading days).
4.7 Important rules applicable to mandatory offers and offers to acquire

control
• Minimum price rule – The price offered to the shareholders of the target company must not fall
short of the highest price paid by the bidder or any party acting in concert with the bidder
within the period of 12 months prior to the filing of the offer document with the ATC.
Furthermore, the offer price must at least correspond to the average market price of the
shares in the target company within a period of six months prior to the bidder announcing its
intention to launch an offer.
• Sufficient funds – A bidder may only announce the launch of an offer if it has sufficient funds
available to pay the offer price.
• No parallel transactions – Once a public offer is made, the bidder and the parties acting in
concert with the bidder must not acquire shares for a consideration higher than the offer price.
If they do, the offer price must be increased to a level corresponding to the higher price paid.
• Mandatory cash offer – Although barter offers (where shares in the bidder company are
offered for shares in the target company) are permitted under Austrian laws, a mandatory
offer must include a mere cash alternative.
• Subsequent offer period – In case of a mandatory bid or a successful bid to acquire control,
the offer must be extended by the bidder for another three months following the elapse of the
initial acceptance period. This is mainly to give shareholders who have rejected the offer in
the first place the opportunity to exit the company rather than stay in the company together
with a bidder they have rejected.
• Equal treatment within another nine-month period – Within another period of nine months
following the subsequent offer period, the bidder and parties acting in concert with the bidders
must not pay a price for shares in the target company higher than the offer price. Exempted
from this rule are, most importantly, higher payments of the bidder in the course of a squeeze-
out or certain capital measures, such as a capital increase.
4.8 Partial offers

For partial offers, some of the important rules applicable to mandatory offers and offers to acquire
control do not apply, such as the minimum price rule and the mandatory cash offer rule. Furthermore,
as in case of offers to acquire control, partial offers may be subject to conditions.
46 | Baker McKenzie
Partial offers may be launched in the following scenarios:
• a person initially holding no shares in the target company or a shareholder holding a small
stake in the target company intends to acquire such number of shares in the target company
so that they end up with less than 30% of the shares with voting rights;
• the core shareholder holding more that 50% of the shares in the target company intends to
increase its stake in the target company up to a certain threshold, such as 90%; and
• a company intends to acquire up to 10% of its own shares.
Even in the case of partial offers, the principle of equal treatment applies and no shareholders may be
excluded from the offer. In case of oversubscription, the bidder must acquire the tendered shares pro
rata.
5 Timeline
In a typical friendly acquisition, following successful negotiations with target management and, where
applicable, the controlling shareholder or group of shareholders of the target company, a typical
timeline would look as follows:
Date Step
Official announcement of the intention to launch a general offer.
Before filing offer Preparation of offer document, including expert’s report and
document confirmation of financing arrangements.
10 trading days after Filing of offer document with the ATC, which will review the document.
announcement of offer
In practice, the bidder will typically discuss the structure of the offer and
(ATC may extend this by
the offer document with the ATC between filing and publication, and
to up to 40 trading days)
make amendments where requested by the ATC.
12-15 trading days after Publication of offer document, unless the ATC formally prohibits
filing of offer document publication or extends time for review of the document.
Between four and 10 Offer open for acceptances.

weeks after publication
of offer document
Immediately after end of Publication of results, including announcement of additional acceptance

the acceptance period period, where applicable.
Period of three months Additional acceptance period in the case of mandatory bids and
after publication of offer whenever an offer was subject to a minimum acceptance condition.
results
Where a competing offer is made, the acceptance period of the original offer will automatically be
extended to match the competing offer’s timeline, unless the original bidder has retained the right to
withdraw its offer in case of a more favorable competing bid and chooses to exercise this right.
Set out below is an overview of the main steps for a takeover offer in Austria.
Baker McKenzie | 47
Takeover offer (indicative timeline)
Start
process A Day A + 10 Day 0 Day X X + 3 months
Official Filing of offer document Publication of offer End of acceptance Additional acceptance
announcement of the with the Austrian document period. Publish results. period ends
intention to launch a Takeover Commission Announce additional
general offer (ATC) acceptance period, if
required
10 trading days (ATC may extend up to 40 12 – 15 trading days (ATC can extend the Offer open for acceptances for 4 – 10 3 months
trading days) time period for review) weeks
48 | Baker McKenzie
6 Takeover Tactics
6.1 Hostile vs. friendly transactions
As mentioned above, Austria has implemented the so-called non-frustration rule, essentially outlawing
most forms of post-bid defensive actions by the target board. However, given the traditionally
concentrated ownership structures of most Austrian listed companies, only relatively few hostile
transactions have taken place in the Austrian market in the past.
Over the past decade, the number of listed companies with dispersed ownership, or without a strong
controlling shareholder, has increased. This has led to an increased interest by Austrian companies in
pre-bid takeover defenses, which – unlike defensive actions taken by the target board after a bid has
been announced – are legal under Austrian law, provided that adopting the pre-bid defenses is
compatible with directors’ duties. Pre-bid defenses may include, for instance, generous change of
control clauses in financing agreements, conditional sales of joint venture shares, or amendments to
the company’s articles, e.g., providing for higher approval thresholds for significant corporate
restructurings.
6.2 Stakebuilding
In practice, acquirers rarely acquire minority shareholdings (“toeholds”) in target companies before
launching a general control-seeking offer. Open market purchases are subject to the rules on
disclosure of substantial shareholdings, which require the disclosure when an investor exceeds 4% of
the company’s voting rights. Subsequent disclosure thresholds are set at 5%, 10%, 15%, 20%, 25%,
30%, 35%, 40%, 45%, 50%, 75% and 90% of the voting rights. The lowest disclosure threshold can
be set at 3% in the company’s articles of association, and a number of Austrian companies have
made use of this right.
Importantly, any stakebuilding through open market purchases must not be structured in a way that
may be considered to constitute a public offer, or a public solicitation of offers from investors, as such
public offers and solicitations are subject to the procedural rules of the Austrian Takeover Act.
6.3 Due diligence

When preparing/negotiating a friendly acquisition, it is quite common for target management to allow
a due diligence review by the potential acquirer or to otherwise disclose material non-public
information. Any such agreement will be subject to the conclusion of an NDA, and appropriate
safeguards will have to be put in place to ensure compliance with the (EU-wide) rules on market
abuse. The decision on whether or not to disclose any non-public information to the potential acquirer
falls within the business judgment of the target company’s board, and directors will have to exercise
their discretion in accordance with their fiduciary obligations to the company.

Takeover
After a successful takeover, the bidder may squeeze-out the remaining minority shareholders,
provided the bidder holds no less than 90% of the target shares. The minority shareholders to be
squeezed-out have the right to receive an adequate compensation in cash for their shares.
Before the squeeze-out, the target company’s management and the dominant shareholder must draw
up a report explaining and justifying the cash compensation offered, and a court-appointed expert
must examine the accuracy of the report as well as the offered cash compensation. Furthermore, the
supervisory board also needs to examine the reports by management and the court-appointed expert
and report its findings in writing.
Baker McKenzie | 49
Target company shareholders are given access to the reports mentioned above at least one month
before the general meeting at which the squeeze- out is to be resolved. Minority shareholders may
challenge the adequacy of the cash compensation in a squeeze-out in court, but the squeeze-out will
still become effective, i.e., the shares will be transferred to the 90%+ shareholder, notwithstanding
any such challenge. In practice, legal disputes concerning the adequate cash compensation often
drag on for several years, and typically are ultimately settled by the parties involved.
Where a general meeting resolution to squeeze out the minority is taken within three months of a
successful takeover offer, and provided that the offer was accepted by at least 90% of its addressees,
the consideration offered in the takeover offer will be deemed to be adequate for purposes of the
squeeze-out.
8 Delisting
Public companies listed in the regulated market segment (“Amtlicher Handel”) are usually taken
private by a combination of a public takeover offer (sometimes with a minimum acceptance condition
at 90%) followed by a squeeze-out, as described above. Further, for scenarios where no shareholder
holds more than 90% of the shares, a new delisting procedure was enacted by the Amendment of the
Austrian Stock Exchange Act 2018, requiring the following:
• The public company’s shares must have been listed for a period of at least three years.
• The approval of the general meeting to withdraw the public company from the regulated
market segment must be given with a supermajority of 75% of the voting rights, or a
respective request of shareholders jointly holding 75% of the share capital must be filed.
• Protection of the minority shareholders may not be jeopardized. This will be deemed to be the
case if (i) a public takeover offer is launched to which specific (additional) minimum price rules
apply, or (ii) after its delisting from the Vienna Stock Exchange, the public company remains
listed on a regulated market of an EEA member state (in which case the minimum listing
period above is reduced to one year).
The requirement to launch a public takeover offer also applies to cross-border and domestic mergers,
to de-mergers and other restructurings which result in a delisting of a public company.
For other listed companies, a voluntary delisting can be requested by the company.

Dr. Gerhard Hermann, Dr. Wolfgang Eigner and Dr. Eva-Maria Ségur- Cabanac in the Vienna office
are the most appropriate contacts within Baker McKenzie for inquiries about public M&A in Austria.
Dr.Gerhard Hermann Dr. Wolfgang Eigner

Vienna Vienna
gerhard.hermann@bakermckenzie.com wolfgang.eigner @bakermckenzie.com
+43124250424 +43124250472
Dr. Eva-Maria Ségur-Cabanac
Vienna
eva.segurcabanac@bakermckenzie.com
+43124250426
50 | Baker McKenzie
Belgium
1 Overview
With about 45 public M&A transactions since 2010, Belgium has had its fair share of public takeover
activity. Roughly one-third of these public M&A transactions can be qualified as mandatory takeover
bids, while the other two-thirds were of a voluntary nature. In recent years, a number of takeover bids
were made by existing (reference) shareholders in an effort to go private and delist the target
company.

The main rules and principles of Belgian law relating to public takeover bids can be found in:
• the Belgian Act of 1 April 2007, on public takeover bids;
• the Belgian Royal Decree of 27 April 2007, on public takeover bids;
• the Belgian Royal Decree of 27 April 2007, on public squeeze- out bids; and
• the Belgian Companies and Associations Code of 23 March 2019 (as amended from time to
time). The Belgian Companies and Associations Code is expected to be further amended
during 2020, to, among other things, transpose Directive (EU) 2017/828 of the European
Parliament of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of
long-term shareholder engagement (“Second Shareholder Rights Directive”).
The main body of the Belgian takeover legislation is based on Directive 2004/25/EC of the European
Parliament and of the Council of 21 April 2004 on takeover bids (“EU Takeover Directive”). This
directive was aimed at harmonizing the rules on public takeover bids of the different Member States of
the European Economic Area (EEA). Be that as it may, the EU Takeover Directive still allows Member
States to take different approaches in connection with some important features of a public takeover
bid (such as the percentage of shares that, upon acquisition, triggers a mandatory public takeover bid
for the remaining shares of the target company, and the powers of the board of directors).
Accordingly, there are still relevant differences in the national rules of the respective Member States
of the EEA regarding public takeover bids.

In addition to the aforementioned rules, there are a number of additional rules and principles that are
to be taken into account when preparing or conducting a public takeover bid, such as:
• the rules relating to the disclosure of significant shareholdings in listed companies. These
rules are based on Directive 2004/109/EC of the European Parliament and of the Council of
15 December 2014, on the harmonization of transparency requirements in relation to
information about issuers whose securities are admitted to trading on a regulated market (as
amended from time to time) and related EU legislation. For further information, see also 3.5;
• the rules relating to insider dealing and market manipulation (the so-called “market abuse
rules”). These rules are based on Regulation (EU) No 596/2014 of the European Parliament
and of the Council of 16 April 2014, on market abuse (the “EU Market Abuse Regulation”),
and related EU legislation. For further information, see also 6.2;
• the rules relating to the public offering of securities and the admission to trading of these
securities on a regulated market. These rules are primarily set out in Regulation (EU)
2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus
Baker McKenzie | 51
to be published when securities are offered to the public or admitted to trading on a regulated
market, and repealing Directive 2003/71/EC;
• the general rules on the supervision and control over the financial markets; and
• the rules and regulations regarding merger control (these rules and regulations are not further
discussed herein).
2.3 Scope of the Belgian takeover rules

The Belgian takeover bid rules apply in the first instance to public takeover bids with respect to
Belgian companies listed on a Belgian securities market.
The main securities markets in Belgium are the markets organized by Euronext, consisting notably of
the regulated market of Euronext Brussels and a few multi-lateral trading facilities that are not
regulated markets, such as “Euronext Growth” (the former “Alternext”) and “Euronext Access” (the
former “Free Market”).
The Belgian takeover bid rules also apply in whole or in part to public takeover bids for Belgian
issuers listed elsewhere in or outside of the EEA, public takeover bids for foreign issuers listed in
Belgium and public takeover bids for foreign issuers that are not listed in Belgium but which qualify as
a public takeover bid in Belgium because of the number of security holders that are solicited (or
deemed to be solicited) in Belgium. The Belgian takeover bid rules contain specific criteria and
conflicts of law rules to determine the applicable law and procedure for public takeover bids with
cross-border aspects, such as takeover bids for foreign issuers listed in Belgium and takeover bids for
Belgian companies with one or more listings outside of Belgium. These rules are based on the EU
Takeover Directive.
Conceptually, the Belgian public takeover bid rules also apply (in part) to tender offers for bonds and
other debt instruments, as well as self-tender offers by issuers that wish to acquire their own shares.
The remainder of this chapter deals with public takeover bids for Belgian companies listed on the
regulated market of Euronext Brussels, which is the most common type of public takeover bid in
Belgium.
2.4 Supervision and enforcement by the FSMA

Public takeover bids are subject to the supervision and control of the Belgian Financial Services and
Markets Authority (“FSMA”). The FSMA is the principal securities regulator in Belgium.
The FSMA has a number of legal tools that it can use to supervise and enforce compliance with the
Belgian public takeover bid rules, including administrative fines. In addition, criminal penalties may be
imposed by the courts in cases of non-compliance.
The FSMA also has the power to grant (in certain cases) exemptions from the rules that would
otherwise apply to a public takeover bid in Belgium.

The following general principles apply to public takeovers in Belgium. These rules are based on the
EU Takeover Directive:
• all holders of the securities of the same class of a target company must be afforded
• the holders of the securities of a target company must have sufficient time and information to
enable them to reach a properly informed decision on the bid; the board of the target
52 | Baker McKenzie
company must give its views on the effects of implementation of the bid on employment,
conditions of employment and the locations of the company’s places of business;
• the board of a target company must act in the interests of the company as a whole;
• false markets must not be created in the securities of the target company, of the bidder
company or of any other company concerned by the bid in such a way that the rise or fall of
the prices of the securities becomes artificial and the normal functioning of the markets is
distorted;
• a bidder must announce a bid only after ensuring that they can fulfil in full any cash
consideration, if such is offered, and after taking all reasonable measures to secure the
• a target company must not be hindered in the conduct of its affairs for longer than is

Foreign investments are not restricted in Belgium. Unless in the context of specific industries and
sectors (such as the financial services industry), takeovers are not subject to prior governmental or
regulatory approvals other than customary anti-trust approvals.

The FSMA issues from time to time practical guidance and regulations as to how the Belgian takeover
bid rules should be interpreted and applied. At the date of this publication, no fundamental reforms to
Belgian takeover rules are currently envisaged.

3.1 Shareholding rights and powers
The table below provides an overview of the respective rights and powers that typically apply to
different levels of shareholding within a Belgian listed limited liability company (naamloze
vennootschap/société anonyme) whose shares are listed on the regulated market of Euronext
Brussels:
Shareholding Rights
1. One share • The right to attend and vote at general shareholders’

meetings.
• The right to challenge resolutions of general
shareholders’ meetings.
• The right to obtain a copy of the documentation
submitted to general shareholders’ meetings.
• The right to submit questions to the directors and
statutory auditors at general shareholders’ meetings
(either orally at the meeting, or in writing prior to the
meeting).
• The right to request the nullity of decisions of general
shareholders’ meetings for irregularities as to form,
process, or other reasons.
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Shareholding Rights
• In case of a merger or de-merger, the right to file a
liability claim against directors or to request the nullity of
the merger or de- merger.
• The right to petition the enterprise court for the
dissolution of the company (a) for legal reasons, or (b) if,
due to losses incurred, the ratio of net assets to share
capital (on an unconsolidated basis in accordance with
Belgian accounting law) is lower than EUR 61,500. The
right to petition the court in case of (b) is also available to
any interested party, including also creditors of the
company.
2. 1% or shares • The right to file a minority claim against the directors on

representing EUR behalf of the company.
1,250,000 of its share
• The right to ask, subject to certain conditions, the
capital
Enterprise Court to appoint an expert to review
accounting records and acts of the company’s corporate
bodies.
3. 3% The right to put additional items on the agenda of a general

shareholders’ meeting and to table draft resolutions for items on
the agenda.
4. 10% The right to request the board of directors to convene a general

5. More than 20% of the The right to block changes to the corporate purpose clause of the
votes at a general company.
shareholder’s
meeting(1)
6. 25% of the votes at a The ability to require the dissolution of the company if the ratio of
general shareholders’ the company’s statutory (unconsolidated) net equity to the
meeting company’s share capital has dropped below 25%.
7. More than 25% of the The ability at a general shareholders’ meeting to block:
votes at a general
• any other changes to the articles of association, mergers,
shareholders’
de-mergers, capital increases, capital reductions, and
meeting(1)
dissolutions of the company (subject to item 6 above);
• the authorization of the board of directors to increase the
company’s share capital without further shareholder
approval (the so-called “authorized capital”); and
• the disapplication (limitation or cancellation) of the
preferential subscription right of existing shareholders in
case of share issues in cash, or issues of convertible
bonds or subscription rights (warrants).
8. 30% The ability to petition the Commercial Court to squeeze out a

shareholder and force the shareholder to sell its stake to the
plaintiff for good cause.
54 | Baker McKenzie
Shareholding Rights
9. More than 33.33% of The ability at a general shareholders’ meeting to block

the votes at a general amendments to the articles of association in order to introduce
shareholders’ meeting the double “loyalty” vote for shareholders.
10. More than 50% of the Legal control and the ability at a general shareholders’ meeting
votes at a general to:
shareholders’ meeting
• appoint and dismiss directors and to approve the
remuneration and, as relevant, severance package of
directors;
• approve certain aspects of the remuneration and
severance package of executive management;
• appoint and dismiss statutory auditors and to approve
their remuneration;
• approve the annual financial statements (including the
remuneration report of the remuneration committee of
the board of directors);
• grant discharge from liability to the directors and
statutory auditor for the performance of their mandate;
and
• take decisions for which no special majority is required.
11. 66.66% of the votes at The ability at a general shareholders’ meeting to approve
a general shareholders’ amendments to the articles of association in order to introduce
meeting(1) the double “loyalty” vote for shareholders.
12. 75% of the votes at a The ability at a general shareholders’ meeting to approve:
general shareholders’
• any changes to the articles of association (other than
meeting(1)
changes to the corporate purpose clause), mergers, de-
mergers, capital increases, capital reductions, and
dissolution of the company (subject to item 6 above);
company’s share capital without further shareholder
approval (the so-called “authorized capital”); and
• the dis-application (limitation or cancellation) of the
preferential subscription right of existing shareholders in
case of share issues in cash, or issues of convertible
bonds or subscription rights (warrants).
13. 80% of the votes at a The ability at a general shareholders’ meeting to approve:
• changes to the corporate purpose clause of the
meeting(1)
company; and
• the authorization of the board to repurchase or dispose
of the company’s shares.
14. 95% The possibility to force all other shareholders to sell their shares
through a public bid (a “squeeze-out”).
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Note: (1) In order to exercise these voting rights, the general shareholders’ meeting must have
an attendance of at least 50% of the outstanding shares representing the share
capital. If this attendance requirement is not met and if a new general shareholders’
meeting is convened with the same agenda, the attendance requirement does not
apply at the new meeting.

Belgian law contains a number of rules that already apply before a public takeover bid is announced.
These rules impose restrictions and hurdles in relation to prior stake building by a bidder,
announcements of a potential takeover bid by a bidder or a target company, and prior due diligence
by a potential bidder. The main restrictions and hurdles have been summarized below. Some careful
planning is therefore necessary if a potential bidder or target company intends to start up a process
that is to lead towards a public takeover bid. See also 4.3 (below).
3.3 Acting in concert

The Belgian takeover rules contain specific provisions that apply to persons that “act in concert”. A
notable example is the obligation that applies if one or more persons in a group of persons acting in
concert acquire voting securities as a result of which the group in the aggregate would pass the 30%
threshold. In such case, the members of the group will have a joint obligation to carry out a mandatory
takeover bid, even though the individual group members do not pass the 30% threshold. It should be
noted that the 30% threshold refers to the number of securities with voting rights, and not the number
of voting rights. Accordingly, the double voting right for listed companies, which is permitted under the
Belgian Companies and Associations Code, will not be taken into account for the purpose of the
takeover rules set out in the Belgian Act of 1 April 2007 on public takeover bids.
For the purpose of the Belgian takeover bid rules, persons “act in concert” if they:
• collaborate with the bidder, the target company or with any other person on the basis of an
express or silent, oral or written, agreement, aimed at acquiring control over the target
company, frustrating the success of a takeover bid, or maintaining control over the target
company; or
• have entered into an agreement relating to the exercise in concert of their voting rights with a
view to having a lasting common policy vis-à-vis the target company.
Persons that are affiliates of each other are deemed to act in concert or to have entered into an
agreement to act in concert. An entity is an affiliate of another entity if it is controlled by the latter
entity, or if it is controlled by the same entity as the latter entity. The concept of control is defined as
the de jure or de facto ability to exercise a decisive influence over the appointment or dismissal of
directors of the target company, or over the orientation of the target company’s policies.
Based on these definitions and criteria, the target company could be one of the persons with whom a
shareholder acts in concert or is deemed to act in concert. This is, for example, the case where a
target company is already controlled by a shareholder.
The concept of persons acting in concert is very broad, and in practice many issues can arise to
determine whether persons act or do not act in concert. The FSMA and the Markets Court, which has
jurisdiction over claims related to the Belgian takeover bid rules, also appear to adhere to a very
broad interpretation of “acting in concert”.

remain applicable. The rules include, among other things, that manipulation of the target’s stock price,
56 | Baker McKenzie
e.g., by creating misleading rumors, is prohibited. In addition, the rules prohibit insider dealing,
improper disclosure of inside information and misuse of information (see 6.2).
3.5 Disclosure of shareholdings and trading

The general rules regarding the disclosure of significant shareholdings apply before and during a
public takeover bid. Pursuant to these rules, if a potential bidder starts building up a stake in the target
company, it will be obliged to announce its stake if the voting rights attached to its stake have passed
an applicable disclosure threshold. The relevant disclosure thresholds in Belgium are 5% and
multiples of 5% (10%, 15%, etc.). Several listed companies also apply a lower threshold than the
initial threshold of 5% (in most cases 3%). Additional thresholds can also apply. When determining
whether a threshold has been passed, a potential bidder must also take into account the voting
securities held by the parties with whom it acts in concert or may be deemed to act in concert (see
3.3). These parties include affiliates. The parties could also include existing shareholders of the target
company with whom the potential bidder has entered into specific arrangements such as call option
agreements.
As of the announcement of the public takeover bid, the bidder must disclose the number of voting
securities it already has in the target company. Furthermore, as from the announcement, additional
disclosures will need to be made by the target company as well as the bidder, persons acting in
concert with the bidder or the target company, and certain other persons. Notably, each business day
during the takeover bid period, the target company (or the other aforementioned persons, as relevant)
must inform the FSMA of the acquisition or disposal of voting securities (or securities conferring the
right to voting rights) issued by the target company, the bidder or the company whose securities are
offered as consideration in the takeover bid (as the case may be).

transparency. These rules include that a company must as soon as possible announce all inside
information (see 6.2). The facts surrounding the preparation of a public takeover bid may constitute
inside information. If so, the target company must announce this. However, the board of the target
company can delay the announcement if it believes that a disclosure would not be in the legitimate
interest of the company. This could, for instance, be the case if the target’s board believes that an
early disclosure would prejudice the negotiations regarding a bid. A delay of the announcement,
however, is only permitted if the non-disclosure does not entail the risk that the public is misled, and
that the company can keep the relevant information confidential. The target company will have to
provide a written explanation to the FSMA of how these conditions are being met.

Pursuant to Belgian public takeover bid rules, only the FSMA can announce a public takeover bid.
Prior to the public announcement of the takeover bid by the FSMA, no-one is permitted to announce
the launching of a public takeover bid. This prohibition does not only apply to a bidder, but also to the
target company even if the target company has to announce the launch of a bid pursuant to the
general disclosure obligations described in 3.6.
A bidder that intends to announce a public takeover bid must first inform the FSMA of its intention and
obtain the FSMA’s permission to make the announcement. In addition, the bidder will at that time
have to make the necessary filings for the actual launching of a public takeover bid (including
providing proof of certainty of funds in the event the offer includes cash, and a draft prospectus), since
as soon as the public takeover bid is announced, it can normally no longer be withdrawn (except in
certain circumstances).
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If there are rumors or leaks that a potential bidder intends to launch a public takeover bid, the FSMA
could force a party to make an announcement as to its intentions regarding a public takeover bid (see
3.8).
Specific rules apply to self-tenders by the issuer of securities.
3.8 Early disclosures – Put-up or shut-up

(a) Early disclosures required by the FSMA – Whenever required for the good functioning of the
markets, the FSMA has the right to request that a person that could be involved in a possible
public takeover bid make an announcement without delay. If the latter person does not make
such disclosure, the FSMA can make the announcement instead. This type of disclosure is
often made when the takeover bid cannot yet be formally launched, e.g., for practical
purposes or due to merger control, but an announcement is nevertheless appropriate to
inform the market.
(b) Put-up or shut-up – The FSMA can also force a person to make an announcement as to
whether or not they intend to carry out a public takeover bid if this person (themself or via
intermediaries) made statements that have raised questions with the public as to such
person’s intentions. The FSMA can impose a maximum window of 10 business days within
which the announcement must be made. A person that confirms their intention to launch a
public takeover bid must launch such takeover bid within a term to be agreed upon with the
FSMA. If a person does not confirm, within the term imposed by the FSMA, their intention to
launch a public takeover bid within a reasonable period, they cannot (and the persons acting
in concert with them cannot) launch a takeover bid for the securities of the target company for
a term of six months following the publication of such announcement (or the expiry of the term
imposed by the FSMA to make such announcement).
3.9 Due diligence

The Belgian public takeover bid rules do not contain specific rules regarding the question of whether a
prior due diligence can be organized, nor how such due diligence should be organized. Be that as it
may, the concept of a prior due diligence or pre-acquisition review by a bidder is generally accepted
by the market and the FSMA. Appropriate mechanisms have been developed in practice to organize a
due diligence or pre-acquisition review and to cope with potential market abuse and early disclosure
concerns. These include the use of strict confidentiality procedures and data rooms.
Due diligence is usually only made possible in a friendly takeover scenario. A target company will
normally allow due diligence on non-public information only after having received a serious indication
of interest by the potential bidder. Customarily, the due diligence of non-public information will be less
comprehensive than in a private acquisition context.
In the event of a counter bid, the counter bidder may request access to the same information that was
made available by the target company to the first bidder.
The mere fact of having access to inside information relating to another company and using it in the
context of a public takeover bid for the purpose of gaining control of that company or proposing a
merger with that company should not be deemed to constitute insider dealing, provided that the inside
information has been made public or has otherwise ceased to constitute inside information, e.g., via
disclosure in the prospectus of the bidder, or a disclosure by the target company (see 6.2).
4.1 Types of public takeover bid
The public takeover bid is the most common type of transaction that is used in Belgium to effect a
takeover of a listed company in Belgium.
58 | Baker McKenzie
The public takeover bid is, in essence, a contractual offer by a bidder to acquire the shares (and other
securities conferring voting rights) issued by the target company. There are three main forms of
takeover bids in Belgium, namely the voluntary takeover bid, the mandatory takeover bid, and the
squeeze-out bid:
• Voluntary public takeover bid – This is a public takeover bid in which a bidder makes an offer
on a voluntary basis for all of the voting securities issued by the target. Subject to certain
restrictions, the takeover bid can contain limited conditions precedent, allowing the bidder to
withdraw the takeover bid if the conditions precedent have not been met such as a minimum
acceptance level, and the absence of material adverse changes (see 4.2).
• Mandatory public takeover bid – This is a public takeover that a bidder is obliged to make if,
as a result of an acquisition of voting securities, the bidder (alone or in concert with others)
crosses a threshold of more than 30% of the outstanding voting securities of the target
company. As the bidder is legally obliged to carry out the public takeover bid, the takeover bid
cannot contain any conditions precedent, and the price offered cannot be lower than a
statutory minimum price (see 4.3).
• Squeeze-out bid – A person holding 95% of the voting securities of a company can force all of
the other holders of voting securities (and securities conferring the right to voting securities) to
tender their securities by means of a squeeze-out bid. A squeeze-out bid can either by made
on a stand-alone basis by any person that already holds 95% of the voting securities, or as
part of a (voluntary or mandatory) public takeover bid by a bidder who is able to acquire 95%
of the outstanding voting securities via the public takeover bid (see 7.1).
In certain cases, the takeover is structured via a corporate merger between companies, whereby the
merger is effected when it is approved by the general shareholders’ meeting of both companies
involved, and whereby either both companies are merged into a new company or one company is
absorbed by the other company. The structure of a corporate merger offers some advantages as
compared to a takeover bid, as it allows the companies to squeeze out all shareholders of the
companies involved in the merger and to make them shareholders in the surviving entity. The
corporate merger also has some disadvantages, as it requires the co-operation of the board of the
target company and as the scope for a cash portion of the merger consideration is limited to 10%. As
a result, the corporate merger is sometimes used if the merger consideration consists exclusively of
new shares in the surviving entity, or after a takeover when the bidder has already obtained a
significant shareholding in the target company and has the desire to squeeze-out all minority
shareholders of the target company by making them shareholders of the bidder.
A scheme of arrangement structure does not exist under Belgian law.

The voluntary public takeover bid consists of a contractual offer on a voluntary basis for all the voting
securities issued by the target company.
• The public takeover bid offer must apply to all voting securities of the target company, as well
as all other securities issued by the target company conferring the right to acquire voting
securities of the target company. A partial tender offer (seeking less than 100%) is not
permitted, except in the case of a self-tender by a company to acquire its own shares.
• The bidder is, in principle, free to determine the price and (absent any pre-existing controlling
interest in the target company) the form of consideration offered to the target shareholders.
The offered price may be paid in cash, securities or a combination of cash and securities.
There is no minimum price for a voluntary takeover bid, but the terms of the takeover bid,
including the price, must be such that they could reasonably be expected to allow the
takeover bid to succeed. If there are different categories of securities, (such as, for example,
Baker McKenzie | 59
subscription rights for shares or convertible bonds issued by the target company) different
prices per category can only be due to the characteristics of such categories.
• The bidder can make the takeover bid subject to merger control clearance and, subject to
prior approval by the FSMA, certain other conditions precedent. Conditions precedent that are
usually accepted by the FSMA are a minimum acceptance level, and the condition that there
should not have been a material adverse change in the target company and/or the broader
market.
• During the takeover bid period, the bidder cannot withdraw or amend the public takeover bid
(unless to the benefit of the security holders of the target company). Subject to prior
permission by the FSMA, a bidder can amend or withdraw the takeover bid in certain limited
cases, such as the issuance of new voting securities by the target company in excess of 1%
of the outstanding voting securities, or decisions or transactions by the target company that
have or could have a significant change in the composition of the assets or liabilities of the
target company, or obligations that were assumed without effective consideration. The
takeover bid can also be withdrawn in the event of a higher bid or counter bid by a third party,
when the conditions precedent of the takeover bid were not met, or subject to the permission
of the FSMA in exceptional circumstances that prevent the takeover bid taking place for
objective reasons outside the control of the bidder.
• Pending a takeover bid, any person can launch a counter bid or higher bid. The intention to
launch a counter bid or higher bid must be announced at the latest two calendar days before
the expiry of the acceptance period of the most recent bid, counter bid or higher bid. The price
that is offered in a counter bid or higher bid must be at least 5% higher than the price offered
in the most recent bid, counter bid or higher bid (as the case may be). In addition, the
conditions of the counter or higher bid may not be more restrictive than the conditions of the
most recent bid, counter bid or higher bid. The counter bid or higher bid may, however, be
made subject to the condition precedent of merger control approvals.

In certain cases, a public takeover bid is legally required:
• if a person, as a result of an acquisition of voting securities (alone or in concert with others),

owns more than 30% of the outstanding voting securities of a company, this person is obliged
to make an offer for all of the remaining outstanding voting securities issued by the company
(and securities issued by the company conferring the right to acquire voting securities of the
target company); and
• a mandatory takeover bid can also be triggered if a person acquires a controlling participation
in a holding company that holds more than 30% of the voting securities of the target company,
provided that the holding company’s shareholding in the target company represents (based
on its last publicly filed unconsolidated financial statements) more than half of the holding
company’s net assets or more than half of its average net results during the last three
financial years.
It should be noted that the 30% threshold refers to the number of securities with voting rights, and not
the number of voting rights. Accordingly, the double voting right for listed companies, which is
permitted under the Belgian Companies and Associations Code, will not be taken into account for the
purpose of the takeover rules set out in the Belgian Act of 1 April 2007 on public takeover bids.
The Belgian takeover rules provide for a number of circumstances in which there is no obligation to
carry out a mandatory takeover bid even though a person has acquired more than 30% of the
outstanding voting securities. These include situations where: (i) the stake of more than 30% is
acquired as a result of a voluntary takeover bid; (ii) the stake is acquired from an affiliate; (iii) a third
60 | Baker McKenzie
party exercises control over the target company or holds a larger shareholding in the company than
the party that acquired more than 30%; (iv) the stake is acquired within the framework of a
subscription to a capital increase with preferential subscription rights for the shareholders that has
been decided upon by the general shareholders’ meeting of the company, i.e., a rights offering; and
(v) the stake is acquired within the framework of a corporate merger, provided that the person who,
alone or acting in concert with others, acquired more than 30% of the voting rights in the acquiring or
surviving company did not exercise the majority of the votes approving the merger at the general
shareholders’ meeting of the company to be merged.
As a mandatory takeover bid is required by law it cannot be made conditional, nor can it be
withdrawn.
The price offered in a mandatory public takeover bid must be equal to at least the higher of: (i) the
highest price paid by the bidder (or any person acting in concert with the bidder) during the period of
12 months preceding the announcement of the takeover bid; and (ii) the weighted average trading
price for the securities of the target company on the most liquid market during the last 30 calendar
days prior to the moment giving rise to the public takeover bid obligation. The FSMA has the power to
allow or require an amendment to the price, including if it appears that, apart from the consideration
offered, special, direct or indirect advantages are being granted to certain transferors of the securities.
The consideration offered can consist of cash, securities or a combination of both. A cash alternative
must be offered (in an amount corresponding to the cash value of the consideration securities at the
time of the filing of the takeover bid with the FSMA) if: (i) the consideration does not consist of liquid
securities that are admitted to trading on a regulated market in Belgium or elsewhere in the EEA; or
(ii) during the term of 12 months prior to the announcement of the mandatory public takeover bid or
during the takeover bid period, the bidder (or a person acting in concert) acquired securities in
consideration of a payment in cash (or agreed to make such cash payment).
A mandatory public takeover bid must follow the same rules as a voluntary public takeover bid, except
in terms of conditionality and price (as referred to above).
4.4 Certain funds requirement

If the consideration that is offered in the takeover bid consists of cash, the funds that are necessary to
complete the takeover bid must be available, either on an account with an EEA-based credit
institution, or in the form of an irrevocable and unconditional credit that has been granted to the bidder
by an EEA-based credit institution. The funds must be blocked in order to guarantee the payment of
the consideration for the securities that are acquired in the bid and can only be used for such
purposes. The bidder must provide the proof of certain funds when it notifies the FSMA of its intention
to launch a public takeover bid. The FSMA will not announce the public takeover bid unless it has
been provided with proof of certain funds.
If the offered consideration includes securities, the bidder must have the power to issue (or have the
ability to ensure that the issuer of the securities issues) the securities in sufficient number, amount
and time.
4.5 Offer documents

A number of different documents are common and/or required in the context of a public takeover bid.
Some notable documents and some of the applicable requirements imposed by Belgian takeover
rules are set out in more detail below.
(a) Pre-transaction documents and contractual documentation
In the preparatory phase certain documents are often concluded with a view to organizing and
structuring the transaction. Notable examples of such documents are confidentiality agreements,
irrevocable undertakings, share purchase agreements and support undertakings by the target
Baker McKenzie | 61
company. Confidentiality agreements are particularly important in situations where a target company
intends to offer potential bidders the possibility of carrying out a due diligence review. Irrevocable
undertakings are sometimes used within the context of a voluntary takeover bid to try to secure prior
support from important shareholders of the target company. The effect and legal consequences and
enforceability of such undertakings depend on their terms. Share purchase agreements can be used
for stake-building purposes before or during a takeover bid. If the bidder crosses the 30%
shareholding threshold via a share purchase agreement, this will trigger a mandatory takeover bid. In
friendly takeover bids, the bidder and the target company often conclude a prior agreement regarding
the terms and conditions of the takeover bid, the support that will be granted by the target board for
the takeover bid, and certain other elements (see also 6.3).
(b) Prospectus
The bidder must prepare a prospectus in connection with the takeover bid. The prospectus must
mention the terms and conditions of the takeover bid and must contain certain necessary information,
taking into account the characteristics of the bidder, the target company, the securities to which the
takeover bid applies and (as the case may be) the securities offered as consideration, in order to
allow security holders of the target company to come to an informed opinion as to the transaction. The
information must be presented in a form that is easy to analyze and understand. In addition, the
Belgian public takeover bid rules contain a list of specific minimum information that is to be included in
the prospectus. The prospectus must be approved by the FSMA before it can be published.
Any new significant fact, substantial error or incorrectness regarding the information included in the
prospectus that could have an influence on the assessment of the bid and that arises or is discovered
during the period as of the approval of the prospectus by the FSMA and the expiry of the acceptance
period for the bid, must be mentioned in a supplement to the prospectus. The supplement must be
approved by the FSMA and disseminated in the same manner as the prospectus.
The prospectus must be prepared in Dutch and in French. If the bidder can show that the target
company usually publishes its financial information in only one of the Belgian official languages
(Dutch, French or German) or in a language that is customary in the international financial sphere
(such as English), the FSMA can accept a prospectus that is only prepared in the applicable official
language or such other language. The summary of the prospectus must be prepared in Dutch and in
French. If the advertising, announcements and other documentation regarding the takeover bid are
disseminated in only one of the Belgian official languages, the summary may be disseminated in this
language only.
(c) Response memorandum
The board of directors of the target company must prepare an opinion with respect to the takeover
bid, called a “response memorandum” (memorie van antwoord/mémoire en réponse). In the response
memorandum, the board of directors should address among other things, any comments it may have
on the prospectus of the bidder and any transfer restrictions on the shares of the target company of
which it is aware (as the case may be). The response memorandum should also contain the opinion
of the board of directors with respect to the takeover bid, including the board’s opinion on: (i) the
consequences of the takeover bid, taking into account the whole of the interests of the target
company, its security holders, its creditors and its employees (including the employment in general);
(ii) the strategic plans of the bidder for the target company and the probable consequences of these
plans with regard to the results, employment and operational sites of the target company; and (iii)
whether the board of directors recommends securities holders to accept the takeover bid. The
directors must individually indicate in the response memorandum whether they will tender any
securities in the target company held by them. They should provide the same information for the
shareholders that they represent in fact (as the case may be). If the directors or the shareholders that
they represent in fact do not have the same opinion or intention, the different opinions and intentions
should be mentioned.
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The board must send its opinion on the takeover bid to representatives of the target company or, in
the absence of such representatives, the employees of the target company. In practice, if there is a
works council, the target’s board will already involve the works council prior to the finalization of the
response memorandum. If the board has received the position of the works council, this must be
attached to the response memorandum.
The response memorandum must be approved by the FSMA before it can be published. The
response memorandum is often included in the prospectus of the bidder, in particular in the event of a
friendly tender offer, but it can also be disseminated separately.
Any new significant fact or substantial error or incorrectness regarding the information included in the
response memorandum that could have an influence on the assessment of the bid and that arises or
is discovered during the period between the approval of the response memorandum and the
completion of the bid, must be mentioned in a supplement to the response memorandum. The
supplement must be approved by the FSMA and disseminated in the same manner as the response
memorandum.
In general, all information regarding the bid that is provided by a target company (or its intermediaries)
and in whichever form, must always be compatible with the information in the response memorandum.
The response memorandum must be prepared in Dutch and in French. If the target company can
show that it usually publishes its financial information in only one of the Belgian official languages
(Dutch, French or German) or in a language that is customary in the international financial sphere
(such as English), the FSMA can accept a prospectus that is only prepared in the applicable official
language or such other language. The foregoing is subject to possible stricter language requirements
imposed by the individual regions in Belgium.
(d) Fairness opinion
There is no general legal obligation for a bidder or a target company to obtain a fairness opinion for
the purpose of the prospectus or the response memorandum, albeit that a fairness opinion is
sometimes obtained on a voluntary basis to support the valuation of the target company. As an
exception, in the event of a voluntary public takeover bid by a controlling shareholder of the target
company (as the case may be), the bidder must obtain a fairness opinion from an independent
financial expert, and the fairness opinion must be included in the prospectus. Likewise, a fairness
opinion must be obtained in the context of a stand-alone squeeze-out bid by a shareholder holding
95% of the outstanding voting securities if such bid does not take place within the framework of a
voluntary or a mandatory public takeover bid.
5 Timeline
The table below contains a summarized overview of the main steps of a typical voluntary public
takeover bid process under Belgian law. The takeover bid process for a mandatory public takeover
bid is similar to the process that applies to a voluntary public takeover bid.
Date Step
Ahead of a first Preparatory stage:

approach (no
• The bidder should appoint advisers that can assist it in the overall
fixed timeline)
process.
• The bidder should closely monitor the risk of potential leaks when it
engages with external parties, and should obtain non-disclosure
undertakings and put in place a leak strategy.
Baker McKenzie | 63
Date Step
• The bidder can carry out a (desk-top) due diligence review of publicly
available information of the target company.
First approach First approach of the target company:

(no fixed
• The initial approach by the bidder of the target company is likely to be
timeline)
an informal chairman-to-chairman discussion, or adviser-to-adviser
discussion.
• Depending on the structure of the shareholder base of the target
company, there can be parallel discussions with (some) key
shareholders.
• During this stage the bidder should work on an indicative offer letter and
presentation for the target board.
If the target Due diligence, certain funds and negotiation of terms, leading up to the
company agrees announcement of the takeover bid:
to engage (no
• If the target company agrees to engage with the bidder, the bidder may
fixed timeline)
negotiate the terms of its offer with the target company and its key
shareholders (as relevant).
• During this stage, the bidder can request access to non-public
information regarding the target company to carry out a due diligence.
• In parallel, the bidder should work on the contractual documentation
with the target company and (as the case may be) the key
shareholders, as well as the draft prospectus and the certain funds
financing.
D – 1 business Notification of the FSMA by the bidder:

day
• Before the bidder can launch the takeover bid, it must notify the FSMA.
The bidder’s notification must contain, among other things, a draft
prospectus and proof of certain funds to pay the offer price.
• The FSMA will review whether the takeover bid complies with the
requirements of the Belgian takeover rules.
D Public announcement of the takeover bid:

• At the latest within one business day following the notification of the
FSMA by the bidder, the FSMA will announce the takeover bid to the
public and the target company. As of the moment the bid is made
public, the bidder can no longer withdraw the bid (except in certain
limited circumstances such as in the event of a counter bid or certain
defensive actions by the target company), and the powers of the board
of the target company are limited.
• The FSMA will notify the target and provide the target’s board with a
draft of the prospectus that was filed by the bidder with the FSMA.
• As soon as the takeover bid is announced, the board of the target
company and the board of the bidder must each notify this to the
representatives of their respective employees or, in the absence of
such representatives, their respective employees.
D + 4 to 6 weeks Prospectus review:
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Date Step
• The review and approval by the FSMA of the prospectus of the bidder
can generally take between four to six weeks. This period can take
longer if the transaction is subject to anti-trust approvals or attracts
controversy from market participants.
• Within five business days as of the receipt of the draft prospectus from
the FSMA, the board of directors of the target company must inform the
FSMA whether it is of the opinion that the draft prospectus contains
omissions or that it contains information that could mislead security
holders of the target company.
D + 4 to 6 weeks Response memorandum by the target’s board:

+ 5 business
• After the FSMA’s approval of the prospectus, the FSMA provides a
days
copy of the prospectus to the board of the target company. The board
has a term of five business days as of the receipt of the prospectus to
send its response memorandum to the FSMA.
• The response memorandum must be reviewed and approved by the
FSMA.
• Usually, in the context of a friendly takeover bid, the review of the
response memorandum runs in parallel with the review of the
prospectus. In that event the response memorandum can, in practice,
be approved by the FSMA at the same time as the prospectus.
• If the target company has a works council, the target’s board will usually
involve the works council prior to the finalization of the response
memorandum. If the board has timely received the position of the works
council, this must be attached to the response memorandum.
Before A Publication of the prospectus and response memorandum:

• The prospectus and response memorandum can only be published
after their approval by the FSMA.
• As soon as the prospectus is published, the board of the target
company and the board of the bidder must send the prospectus to the
representatives of their respective employees or, in the absence of
such representatives, their respective employees.
A Start of acceptance period:

• The acceptance period can start at the earliest five business days after
the approval of the prospectus by the FSMA, or immediately after the
approval of the response memorandum if this approval is earlier.
• The acceptance period has a minimum term of two weeks and a
maximum term of 10 weeks.
A + 10 business Hearing of the works council of the target company:

days
• If the target company has a works council, the works council must
organize a hearing with the representatives of the board of the bidder
(unless the works council unanimously decides not to call for a
hearing). The hearing must take place at the latest 10 days after the
start of the acceptance period for the bid, and the date must be sent to
Baker McKenzie | 65
Date Step
the board of the bidder at least three days in advance. In practice, the
hearing can be organized prior to the start of the acceptance period.
• During the hearing, the representatives of the bidder must present the
industrial and financial policy of the bidder and its strategic plans for the
target company and the probable consequences of these plans for the
results, employment and operational sites of the target company. The
representatives of the bidder must take note of the potential comments
of the works council.
• As long as a bidder, after having been invited for the hearing, has not
presented itself for such hearing, the bidder cannot exercise the voting
rights attached to the securities acquired in the context of the takeover
bid at the general shareholders’ meeting of the target company.
End acceptance Deadline for counter bids or higher bids:

period – 2 days
• Counter bids and higher bids must be announced (by the FSMA) at the
latest two calendar days prior to the expiry of the acceptance period of
the last bid.
P Publication of results:
• Within five business days after the end of the acceptance period, the
bidder must publish the results and, when relevant, whether or not the
bidder waives the conditions precedent to the bid.
P + 10 Settlement:
• Within 10 business days after the publication of the result, the offered
consideration must be paid by the bidder.
P + 10 Reopening of the takeover bid:

• The acceptance period of the takeover bid will be reopened if, after the
end of the acceptance period, the bidder (alone or together with its
affiliates) holds more than 90% of the voting securities. The acceptance
period must also be reopened if the bidder has obtained 95% and
requests the delisting of the target company.
• The new acceptance period has a minimum term of five business days
and a maximum term of 15 business days.
Set out below is an overview of the main steps for a voluntary public takeover bid in Belgium.
66 | Baker McKenzie
Voluntary public takeover bid (indicative timeline)
Acceptance period (ends 2 calendar days after

deadline to announce counter bid)
Start Announcement
process (A) Day A + 5 (BD) Day 0 Day 5 Day 10 Day (X) Day (X) Day (X) Day (X) Day (X)
Bidder files FSMA Target board FSMA approves Target board FSMA approves Information to Deadline to Publication of Payment of Potential
announcement announces bid files comments prospectus files draft response works council announce result offer price reopening of
and draft and notifies with FSMA response memorandum counter bid takeover bid
prospectus with target (within 5 memorandum
Financial Services business days with FSMA
and Markets from receipt of
Authority (FSMA) draft prospectus
from the FSMA)
10 business days (4 – 6 weeks in practice) 5 business days 5 business days 10 calendar days 2 – 10 weeks 5 business 10 business days 5 – 10 business days
days
• In practice, periods are longer as they start from when the FSMA considers the submitted documents to be complete.
• The overall timeline from announcement to closing can take between 8 to 12 weeks (subjects to counter/higher bids, and any merger control waiting periods).
Baker McKenzie | 67
6 Takeover Tactics
6.1 Stake building
One tactic a potential bidder may consider is to build up a stake in the target company. This would
have a number of potential benefits, including indicating to the target’s board the seriousness of the
bidder’s intentions, lowering the overall cost of acquiring the shares in the target and potentially
deterring competing bidders. However, before deciding to acquire any interests in the securities of the
target, the bidder should consider (amongst other things) the following issues and implications:
• The bidder should not acquire any interest in target securities at a time when to do so would
constitute market abuse or insider dealing (see 6.2). This is likely to be the case if the bidder
is in possession of non-public due diligence information which includes inside information and
the bid has not yet been made. The bidder could also be subject to challenge by investors
that may have sold shares of the target company at the time at which the public takeover bid
has not yet been made public, but the bidder has decided for itself to start preparing for a
public takeover bid.
• Any acquisition (even of one share) may be prohibited or may result in a requirement for a
mandatory bid to be made for the target if that acquisition takes the shareholder’s aggregate
holding to 30% or more (see 4.3).
• Any dealing by the bidder (or anyone acting in concert with it) may be publicly disclosed prior
to or as of the start of the offer period (see 3.5).
• An acquisition may impact on the nature and level of consideration that the bidder may then
offer in a takeover bid. Notably, in the event of a mandatory takeover bid, if the bidder (or any
person acting in concert with it) acquired any shares during the period of 12 months preceding
the announcement of the takeover bid, the price offered in the mandatory takeover bid cannot
be lower than the highest price paid by the bidder (or such person with whom the bidder acts
in concert) for shares during such 12-month period. Furthermore, when the bidder in a
mandatory takeover bid offers securities, it must also offer a cash alternative if during the term
of 12 months prior to the announcement of the mandatory public takeover bid or during the
takeover bid period the bidder (or a person acting in concert) acquired securities in
consideration of a payment in cash (or agreed to make such cash payment).

All parties involved in a potential takeover bid must be aware of and comply with the rules and
regulations on insider dealing and market abuse.
The rules relating to insider dealing are set out in the EU Market Abuse Regulation, and related EU
and Belgian legislation. These rules make it a criminal offense for a person who has inside
information to deal or to encourage others to deal on the basis of inside information or to disclose
inside information.
In summary, inside information is:
• information of a precise nature;
• which has not been made public;
• relating to a particular company or particular securities;
• but which, if it were made public, would be likely to have a significant effect on the price of the
securities.
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Information will be deemed to be of a “precise nature” if it indicates a set of circumstances which

exists or may reasonably be expected to come into existence, or an event which has occurred or may
reasonably be expected to occur and if it is specific enough to enable a conclusion to be drawn as to
the possible effect of that set of circumstances or event on the prices of financial instruments or
related derivative financial instruments. “Information which, if it were made public, would be likely
to have a significant effect on the prices of financial instruments or related derivative financial
instruments” shall mean information a reasonable investor would be likely to use as part of the basis
of their investment decisions.
The EU Market Abuse Regulation (and related rules) has a direct effect in Belgium, as in all EEA
jurisdictions, and contains a civil prohibition on market abuse. The FSMA is empowered to decide that
certain conduct constitutes market abuse. It can then impose fines and/or other penalties. Given that
the rules relating to market abuse are based on the EU Market Abuse Regulation, the position on
market abuse in Belgium will be similar to that in other EEA jurisdictions. In addition, Belgian national
legislation contains criminal sanctions for insider dealing and market abuse.
In principle, a Belgian company has the obligation to immediately disclose to the public all “inside
information” that relates to it, including all material changes in information that has already been
disclosed to the public. It is up to the company to determine if certain information qualifies as “inside
information”. This will be, in many circumstances, a difficult exercise, and a large grey area will exist
as to whether certain events will need to be disclosed or not.
6.3 Deal protection

The Belgian takeover bid rules do not provide for a prohibition or regulation of inducement fee
agreements exclusivity/ “no-shop” agreements, or other arrangements aimed at increasing deal
protection for bidders.
In the context of a friendly takeover bid, potential bidders often try to obtain support for the bid by the
target company, including exclusivity undertakings and break fee arrangements. While there are no
strict legal prohibitions to such undertakings, their value and enforceability can be limited, given that
the board of a Belgian company has a general obligation to act in the corporate interest, which
includes the interest of all of its shareholders, and to treat all of its shareholders in an equal manner.
That being said, potential bidders can take some comfort from the fact that the powers of the board of
a target company are restricted pending a takeover bid, which reduces the scope for frustrating
actions (see 6.5).
As a general principle, all security holders of the same class must be offered equivalent treatment by
a bidder in the context of a takeover bid. Special deals for certain shareholders are in principle not
possible, but depending on specific circumstances different arrangements could be implemented for
management, e.g., to incentivize management, or for certain shareholders of the target company
reinvesting into the target company after the takeover.
6.4 Irrevocable undertakings

An irrevocable undertaking is an undertaking given by a shareholder of the target company to a
bidder where they undertake to accept the bidder’s bid for the target company when it is made.
Irrevocable undertakings are used so that bidders do not need to purchase the shares directly, but at
the same time have comfort that the shares (subject to the terms of the undertaking) will be tendered
to the bidder in the takeover bid. The effect and enforceability of irrevocable undertakings depend to a
large extent on their terms and drafting. This is because the Belgian takeover bid rules provide that
the terms of a takeover bid must include that a security holder that accepted a bid in the context of a
takeover bid can withdraw their acceptance at any time during the acceptance period. In line with
practice in other jurisdictions, notably the United Kingdom, irrevocable undertakings can be “hard”
(meaning that they remain binding even in case of a counter bid) or “soft” (meaning that, depending
on the circumstances, the shareholder that provided the undertaking is released from its
Baker McKenzie | 69
commitment). Depending on the terms of the undertaking, the shareholders concerned could be
deemed to be acting in concert with the bidder.
6.5 Target board responsibilities and prohibition on frustrating actions

The powers of the target company (and in particular the powers of its board) are limited during the
public takeover bid period. Notably:
• When the board of directors of a target company has been granted the power to increase the
share capital through a contribution in kind or through contributions in cash with disapplication
(cancellation or limitation) of the preferential subscription right of the existing shareholders,
this power will be suspended during a takeover bid unless the general shareholders’ meeting
expressly approved that these powers can also be exercised in case of a public takeover bid.
• During the period as of the receipt by the target company of the notification by the FSMA of a
public takeover bid for the securities of the target company and until the end of the takeover
bid, only the general shareholders’ meeting of the target company can decide upon or carry
out transactions that could entail a significant change in the composition of the assets or
liabilities of the target company, or assume obligations without effective consideration. The
performance of operations or transactions that have started before the receipt by the target
company of the aforementioned notification by the FSMA can continue, provided the
performance has had sufficient progress.
• Existing obligations of the target company (for example, convertible rights and options to
acquire assets) remain in place and must be performed. However, when contracts contain
clauses that can be accelerated or triggered as a result of a change of control or public
takeover bid, e.g., a termination right in a loan agreement in the event of a change of control,
and such acceleration or trigger has a significant effect on the assets or liabilities of the
company, or either a significant debt or obligation for the company, such clauses may not be
effective unless they have previously been approved by the general shareholders’ meeting of
the target company and unless the decision of the general shareholders’ meeting has been
filed with the local company registrar.
This entails that potential defense strategies or mechanisms could be limited or restricted (see 6.6).
The Belgian takeover bid rules allow for additional restrictions on the powers of the board or
shareholders of the target company, but these are rarely put in place.
6.6 Common anti-takeover defense mechanisms

The table below contains a summarized overview of the mechanisms that can be used by a target
company as a defense against a takeover bid. These take into account the restrictions that apply to
the board and general shareholders’ meeting of the target company pending a takeover bid.
1. “Loyal” shareholder voting rights • Requires an express authorisation in the

articles of association of the target
Double voting rights for registered shares
company.(1)
held by the same shareholder for a term of
at least two years. • The double voting right applies to all
shareholders that hold registered shares for
at least two years.
• The two-year term starts as from the date
the shares are registered in the share
register book even if the registration
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occurred before the double voting right was
introduced in the articles of association, and
even if the target company was not yet listed
at the time.
2. Capital increase (poison pill) • Requires an express authorization in the

articles of association.(2) The authorization is
Capital increase by the board of the target
valid for three years only, but can be
company (authorized capital) without
renewed.
preferential subscription rights of the
shareholders. • The capital increase may not exceed 10% of
the existing share capital or the amount
remaining available under the authorized
capital.
• The issue price of the new shares may not
be less than the price offered in the takeover
bid. The shares are to be fully paid up upon
issuance. As relevant, the applicable
conflicts of interest rules must be applied
within the board of directors.
3. Share buyback • Requires an express authorization by the

general shareholders’ meeting.(2)
Share buyback by the target company.
• The authorisation is valid for a maximum of
five years or three years only (in case the
buyback powers were granted with a view to
avoid an imminent and serious harm to the
company), but can be renewed.
• The amount that can be used to finance the
share buyback is capped at the amount of
available distributable profits and reserves
4. Sale of crown jewels Requires a prior approval by the general

shareholders’ meeting if the arrangement
An arrangement significantly affecting the
significantly affects the assets or liabilities of the
assets of, or creating a liability for, the target
target company or gives rise to a significant debt or
company which is triggered by a change in
obligation for the target company.(3)
control or the launch of a takeover bid.
• Limitations on director dismissals • The articles of association of the target

company can provide that the mandate of a
• Payment of termination fee or
director can only be terminated subject to
granting of a notice period upon
the payment of a termination fee or the
dismissal of a director.
granting of a prior notice period. This
requires an express authorization by the
general shareholders’ meeting.(2)
• The general shareholders’ meeting can
always terminate the mandate of a director,
without termination fee or notice period, for
legal reasons.(3)
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• As director mandates have a limited term of
4 years (but can be renewed), the effect of
such termination fee or notice period may be
limited in time. It does not prevent the
appointment of new directors in addition to
the directors to be dismissed (unless the
articles of association contain restrictions
regarding the size of the board).
5. Subscription rights for new • Requires a prior approval by the general

shares shareholders’ meeting.(2)
Subscription rights (warrants) are issued • The subscription rights have a maximum
prior to the takeover bid in favor of “friendly duration of five years. The identity of
person(s)” (without preferential subscription beneficiaries must be disclosed to the
rights of the shareholders) who can exercise shareholders’ meeting approving the issue
the subscription rights at their option and of the subscription rights.
subscribe for new shares.
• No authority is available under the
authorized capital to issue subscription
rights in favor of specified persons only
(other than employees) without preferential
subscription right of the shareholders.
6. Frustrating actions • Only transactions which have already

sufficiently progressed prior to the receipt of
Actions by the target company such as
the notification of a takeover bid may be
significant acquisitions, disposals, changes
implemented by the target company’s board.
in indebtedness, etc.
• Other transactions require shareholders’
approval after the takeover bid has been
notified to the target company.
7. Shareholders’ agreements • Voting agreements must be limited in time,

and cannot be against the corporate
Shareholders of the target company
interest.
undertake to (consult with a view to) vote
their shares in accordance with terms • Shareholders cannot commit to vote upon
agreed among them. instruction of the board.
• The shareholders could be considered as
“acting in concert”. In that event, the
arrangement may need to be disclosed. If
the parties acting in concert hold more than
30% of voting rights, any subsequent
acquisition of shares within the next three
years will trigger an obligation to launch a
mandatory takeover bid.
• Assumes a stable shareholder base or
reference shareholders.
• The articles of association can, however,
contain a provision indicating that, at a
general shareholders’ meeting, convened
during the bidding period and where
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protective measures are to be discussed,
voting restrictions set out in the articles of
association and shareholders’ agreements
will not apply, and that securities with
multiple voting rights will only have one vote.
8. Limitation of voting rights • Requires an express authorization in the

articles of association.(2)
Clause in the articles of association of the
target company providing for a proportional • The limitation must apply to all shareholders
restriction of voting rights (applying to all equally.
shareholders equally).
• The articles of association can, however,
contain a provision indicating that, at a
general shareholders’ meeting, convened
during the bidding period and where
protective measures are to be discussed,
voting restrictions set out in the articles of
association and shareholders’ agreements
will not apply, and that securities with
multiple voting rights will only have one vote.
9. Veto rights for certain • Requires an express authorization in the

shareholders articles of association.(2)
Clauses providing for nomination rights by a • Requires reference shareholder(s).
reference shareholder or similar governance
mechanisms.
10. Limitations on share transfers • Requires an express authorization in the

articles of association.(2)
Board approval or pre-emptive rights
clauses in the articles of association or in • Shareholder agreements can also provide
agreements between shareholders. for pre-emptive rights.
• Non-transferability clauses must be justified
by a legitimate interest, in particular as to
their duration. Non-transferability clauses for
an indefinite period can always be
terminated subject to a reasonable prior
notice.
• Limitations consisting of a prior approval
right or a pre-emptive right cannot result into
a transfer restriction that is longer than 6
months as of the request for approval or the
invitation to exercise the pre-emptive rights.
• If the articles of association contain approval
clauses or pre-emptive rights, the board of
the target company must indicate in its
response memorandum whether these
clauses or rights apply vis-à-vis the bidder
and, as the case may be, whether it will
grant an approval or not, or whether the
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board will demand the application of the pre-
emptive rights.
• If the approval is not granted or if pre-
emptive rights are exercised, the shares
must be acquired by a person that is
approved or with respect to which pre-
emptive rights are not exercised within five
days after closing of the takeover bid for a
price at least equal to the bid price.
• Prior approval clauses can only be invoked
against a bidder provided that a refusal or
approval is motivated on the basis of a
permanent or non- discriminating application
of approval rules that have been approved
by the board and which are notified to the
FSMA after the receipt by the target
company of the announcement of the
takeover bid.
• Shareholders could be considered as
“acting in concert”. If so, see “Shareholders’
agreements” above.
• Exceptional for listed companies (listed
securities are in principle freely transferable,
impact on share liquidity).
11. Certification of shares • The terms of the foundation usually provide

that it may not transfer the certified shares.
Transfer of shares to a (Dutch) foundation
(stichting administratiekantoor) in exchange • Lengthy and heavy process to put in place.
for certificates with economic rights only. Only efficient if reference shareholders or a
The foundation exercises the voting rights. block of shareholders participate.
Notes: (1) The matter requires a majority approval of two thirds of the votes cast at a general
shareholders’ meeting at which at least 50% of the share capital is present or
represented (the 50% attendance quorum does not apply to the second meeting that
is convened if the 50% attendance quorum was not reached at the first meeting).
(2) The matter requires a majority approval of 75% of the votes cast at a general
shareholders’ meeting at which at least 50% of the share capital is present or
represented (the 50% attendance quorum does not apply to the second meeting that
is convened if the 50% attendance quorum was not reached at the first meeting).
(3) The matter requires a simple majority (no attendance quorum and simple majority of
the votes cast).
74 | Baker McKenzie

Takeover
7.1 Squeeze-out
A person holding 95% of the voting securities of a company can force all of the other holders of voting
securities (and securities conferring the right to voting securities) to tender their securities by means
of a squeeze-out bid.
A squeeze-out bid can either by made on a stand-alone basis by any person that already holds 95%
of the voting securities, or as part of a (voluntary or mandatory) public takeover bid by a bidder who is
able to acquire 95% of the outstanding voting securities via the public takeover bid.
The squeeze-out that is conducted in the context of a public takeover bid is subject to the conditions
that: (i) following the takeover bid (or its reopening) the bidder (alone or in concert with others) holds
95% of the share capital with voting rights and 95% of the voting securities; and (ii) the bidder
acquired, via the acceptance of the takeover bid, securities representing at least 90% of the share
capital with voting rights to which the takeover bid applied. The latter 90% condition does not apply in
the event the bidder acquired the 95% following a mandatory public takeover bid. If the conditions for
the squeeze-out are satisfied, the takeover bid will be reopened at the same price for at least 15
business days, commencing within three months following the expiry of the acceptance period of the
bid. The securities that are not tendered to the bidder at the expiry of the reopened bid are deemed
automatically acquired by the bidder.
The process for a stand-alone squeeze-out bid is similar to that of a public takeover bid, but requires
that an independent expert issues a separate opinion on the fairness of the price offered. The offered
consideration can only consist of cash.
7.2 Sell-out
In the circumstances that a bidder is permitted to carry out a summarized squeeze-out bid (see 7.1),
the securities holders that did not accept the takeover bid have the right to demand that the bidder
acquires their voting securities and other securities conferring the right to voting securities on the
same terms as the takeover bid. This right can be exercised by means of a registered letter with
confirmation of receipt to the bidder (or the intermediary appointed by the bidder for this purpose)
within a period of three months following the expiry of the acceptance period of the bid.
7.3 Restrictions on acquiring securities after the takeover bid period

During a period of one year as of the end of the takeover bid period, the bidder and the persons
acting in concert with the bidder cannot directly or indirectly acquire any securities to which the
takeover bid applied on terms that are more favorable for the transferees than the terms and
conditions that applied to the takeover bid, unless the price difference is paid to all security holders
that tendered their securities to the bidder.
8 Delisting
The FSMA may oppose a delisting of a Belgian company that is listed on Euronext Brussels in the
interest of protecting investors. The FSMA will traditionally not permit a delisting of a Belgian company
unless a squeeze-out has been carried out.
As an exception to the rule that the FSMA will not allow a delisting without a squeeze-out, the Belgian
Act of 21 November 2017 allows for a simplified delisting procedure for listed companies with a very
limited free float, if certain conditions are met. Such conditions relate to the number of securities not
yet held by the controlling shareholder(s) (and persons acting in concert with such person(s)), which
should not represent more than 0.5% of the total number of voting securities of the company, or have
Baker McKenzie | 75
a total value of more than more than EUR 1,000,000. The matter also requires a majority approval of
75% of the votes cast at a general shareholders’ meeting at which at least 50% of the share capital is
present or represented (the 50% attendance quorum does not apply to the second meeting that is
convened if the 50% attendance quorum was not reached at the first meeting), after the board of
directors submitted a special board report to this effect.

Koen Vanhaerents and Roel Meers in the Brussels office are the most appropriate contacts within
Baker McKenzie for inquiries about public M&A in Belgium.
Koen Vanhaerents Roel Meers

Brussels Brussels
koen.vanhaerents@bakermckenzie.com roel.meers@bakermckenzie.com
+32 2 639 37 69 +32 2 639 36 51
76 | Baker McKenzie
Brazil
1 Overview
Historically, the Brazilian securities market for equity was somewhat limited, as its volume of business
was low and derived mainly from a few investment funds and government controlled entities. Although
Brazil still has a long road ahead when compared to more mature securities markets, this situation
has already significantly changed over more recent years, both from a regulatory perspective and
from a market standpoint. These changes were a result of, among others things, important actions by
the Brazilian securities regulator to improve market laws and regulations and launch marketing
campaigns to instruct potential investors on how and why to invest in Brazilian listed companies. Self-
regulation of market players and the need of Brazilian companies to pursue new financing alternatives
to expand their capabilities have also been key factors in the exponential growth seen in the Brazilian
securities market.
Despite the economic setbacks currently faced by the Brazilian market, the Brazilian securities
regulator continues to implement changes to bring the Brazilian securities market up to international
standards and to simplify certain regulations to reduce the cost for companies to access the Brazilian
capital markets as an alternative source of funding. This enhances the liquidity of securities traded on
the local stock exchange and encourages investors to use the capital markets in Brazil as an
alternative for investments.
In general, the share control of Brazilian listed companies is more commonly acquired through private
transactions between the acquirer and the controlling shareholder(s). This is because the majority of
Brazilian listed companies still have their voting shares held by a controlling shareholder and have a
relatively small free float. However, more recently, the Brazilian market has seen a few cases of public
companies without a defined controlling shareholder structure being the object of takeover bids.
Takeover bids are still incipient in the Brazilian market but have great potential to increase over the
coming years, given that more and more Brazilian listed companies are moving away from a defined
controlling shareholder structure towards a more diluted shareholder base.

The pillars of the legal framework governing the acquisition of share control of Brazilian listed
companies through private transactions or by public takeover bids are:
• Law No. 6,404 of 15 December 1976 (as amended from time to time), which governs
corporations in Brazil (“Corporations Law”);
• Law No. 6,385 of 7 December 1976 (as amended from time to time), which provides the
general structure of the Brazilian securities market (“Securities Law”); and
• Normative Rule No. 361 of 5 March 2002 (as amended from time to time), issued by the
Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - “CVM”)
which provides for the specific rules governing takeover bids in the Brazilian market (“CVM
Rule 361/02”).

While the legislation referred to in 2.1 above contains the main legal framework for the takeover
transactions of Brazilian listed companies, there are a number of additional rules and principles that
need to be taken into account when preparing or conducting a public M&A transaction, such as:
• the rules relating to the disclosure of extraordinary events related to Brazilian listed
companies (disclosure of material fact notices) and significant shareholdings in listed
Baker McKenzie | 77
companies. These rules are derived from Normative Rule No. 358/02 (“CVM Rule 358/02”) of
the CVM. For further information, see 3.4 below;
• the rules relating to insider dealing and market manipulation, which are derived from the
Securities Law and the Normative Rule No. 08/79. For further information, see 6.3 below;
• the general rules on the supervision and control over the securities markets;
• the regulations issued by the São Paulo Stock Exchange (“B3”) concerning the listing and
delisting of securities from its trading segments; and
• the rules and regulations regarding merger control. These rules and regulations are not
discussed herein.
2.3 Supervision and enforcement by the CVM

Transactions for the acquisition of the share control of Brazilian listed companies are subject to the
supervision and control of the CVM. The CVM is the federal regulatory agency responsible for directly
regulating and supervising the Brazilian securities market. It is associated with the Ministry of Finance
(Ministério da Fazenda) and it was created by the Securities Law.
On an administrative level, the CVM has powers to investigate and apply penalties for any irregularity
or breach of law or regulations that might occur in the securities market. The penalties that the CVM is
entitled to apply include monetary fines, suspension and cancellation of registrations and
authorizations granted to participants in the Brazilian capital market, and temporary or permanent
prohibitions from operating in the Brazilian capital market. In addition, criminal penalties and the
obligation to indemnify for losses and damages may be imposed by the courts in case of non-
compliance.
In certain cases, the CVM also has the power to grant exemptions from the rules that would otherwise
apply to a public takeover bid.

In general, the share control of Brazilian listed companies is most commonly acquired through private
transactions between the acquirer and the controlling shareholder. This is because the majority of
Brazilian listed companies do not have a dispersed ownership or a high free float of voting shares.
The direct or indirect transfer of the share control of a Brazilian listed company through a private
transaction requires the authorization of the CVM and is conditioned upon a tender offer by the
acquirer for the remaining free float voting shares for a price equal to at least 80% of the price paid for
each voting share that is part of the share control. Depending on the segment of the stock exchange
on which the company is listed, and on the provisions of the bylaws of the company, the public tender
offer may also have to be addressed to the non-voting free float shares. The price to be offered to the
free float may also reach 100% of the price paid for each voting share that is part of the share control.
Public M&A transactions may also be structured through public takeover bids. Although public
takeover bids are not a common practice in Brazil, they are regulated by the Corporations Law and
CVM Rule 361/02. If any portion of the offer price is expected to be paid with securities owned or to
be issued by the potential acquirer (a swap offer), the prior authorization of the CVM is required. The
following general principles apply to takeovers bids in Brazil:
• all holders of the securities of an offeree company of the same class or type must be afforded
equivalent treatment;
• the bid must remain open for acceptance by the shareholders for a period of between 30 and
45 days following the publication of the bid notice to allow shareholders sufficient time to
make an informed decision in relation to the bid;
78 | Baker McKenzie
• in takeover offers for the acquisition of share control, the board of directors may opine on the
contents of the offer and, if it so decides, its opinion must address all relevant aspects to
support the decision of the shareholders, including the offer price and financial changes to the
offeree company since the date of the last disclosure of the annual or quarterly financial
statements; and
• false markets must not be created in the securities of the offeree company, of the offeror
company or of any other company concerned by the bid such that movements in the market
price of the securities become artificial and the normal functioning of the markets is distorted.
2.5 Foreign investments regulation

Foreign investments are generally not restricted in Brazil and, except for customary anti-trust
approvals, are only subject to reporting upon completion (as opposed to prior authorization). However
for specific industries and regulated sectors such as banking, insurance, energy - public utilities, port
and telecommunications — mainly those related to the rendering of public services — takeovers are
not subject to prior governmental or regulatory approvals.
In addition, the purchase by a foreign investor of a direct or indirect controlling interest in a Brazilian
state controlled company will be, as a rule of thumb, subject to a previous public tender procedure to
be conducted by the governmental entity that controls such company. The direct sale would only be
allowed in cases where the controlling governmental entity is able to demonstrate that a public tender
is unfeasible (usually, due to a lack of potential competition).

To date, there are no proposed or upcoming reforms to the Brazilian regulations applicable to
takeover transactions.

The table below provides an overview of the different rights and powers that are attached to different
levels of shareholding within a Brazilian listed company:
Shareholders Rights
With 0.5% of the capital To obtain the addresses of shareholders for the purpose of granting
stock powers of attorney for their representation in meetings by another
shareholder.
With 5% or more of the • To obtain the judicial exhibition of the company’s books
capital stock whenever acts violating the law or the bylaws are inferred, or if
there is a well-founded suspicion of serious illegality performed
by the company’s management.
• To call for a shareholders’ general meeting when management
fails to do so within a term of eight days after a justified request
(which must include the agenda) is made by the shareholders.
• To obtain written copies of the management’s report, financial
statements, opinion of independent auditors, opinion of the
audit committee, and any other documents that will be
discussed at the annual shareholders’ meeting.
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Shareholders Rights
• To file a lawsuit against management for damages caused to
the company, unless the general shareholders’ meeting decides
otherwise.
• To obtain information on subject matters within the competence
of the audit committee.
• To file a lawsuit for the winding-up of the company attesting that
it cannot accomplish its purposes anymore.
• To file a lawsuit against the controlling shareholder to recover
damages resulting from an abuse of power of control.
With 5% of the voting To call a shareholders’ general meeting for the establishment of an
capital audit committee if management fails to convene the same within eight
days after a request by the shareholders.
With 5% of the non- • To call a shareholders’ general meeting for the establishment of
voting capital an audit committee if management fails to convene the same
within eight days after a request by the shareholders.
• To request, during any shareholders’ general meeting, the
establishment of an audit committee. CVM Rule 324/00 states
that this percentage may vary for listed companies based on
their corporate capital.
With at least 10% of the • In the case of listed companies, to request, within 15 days from
free float the date the price of the delisting public offer (or public offer for
the increase of controlling shareholder’s equity participation
above a certain threshold) is disclosed, that the administrators
of the company call a special meeting of the holders of free-
floating shares to deliberate on the performance of a new
evaluation of the price to be offered, based on the same or
different criteria. Holders of 10% of the free-floating shares may
call such a special meeting if the administrators fail to do so
within eight days of receiving a request to call such meeting.
• The shareholders requesting/approving the new evaluation shall
reimburse the company for the costs incurred therewith if the
value ascertained is not greater than the initial price offered.
With 10% of the voting • To request the adoption of the cumulative vote (voto múltiplo)
capital proceeding in the election of the members of the board of
directors, provided that it is made no later than 48 hours before
the shareholders’ general meeting. CVM Rule 282/98 states
that this percentage may vary for listed companies based on
their corporate capital.
• To request, during any shareholders’ general meeting, the
establishment of an audit committee. CVM Rule 324/00 sets
forth that this percentage shall vary for listed companies,
according to their corporate capital.
• To elect a member and a respective alternate of the audit
committee in a separate election. Holders of preferred shares
without voting rights or with restricted voting rights, acting
jointly, shall be entitled to the same right. The controlling
80 | Baker McKenzie
Shareholders Rights
shareholders shall have the right to elect the same number of
members elected by both holders of at least 10% of the voting
shares and preferred shares, plus one member.
With non- voting shares Holders of the majority of the preferred shares without the right to vote
representing at least or with restrictions on the exercise of such a right representing at least
10% of the corporate 10% of the corporate capital of listed companies shall be entitled to
capital with at least 15% elect and replace a member of the board of directors and respective
of the voting shares alternate in a separate election (holders of the majority of the voting
shares of listed companies representing at least 15% of the total voting
shares shall be entitled to the same right. If the aforesaid percentages
are not achieved, holders of voting shares and of preferred shares
without the right to vote or with restrictions on the exercise of such right
representing, jointly, at least 10% of the corporate capital shall be
entitled to the abovementioned right). Only shareholders holding the
relevant percentages of shares for an uninterrupted period of at least
three months prior to the date of the shareholders’ meeting at which the
directors will be elected will be entitled to the abovementioned right.
With 25% of the voting To install the general shareholders’ meeting on first call, except if
capital otherwise provided by the Corporations Law (i.e., in case of amendment
to the bylaws, the quorum to install the meeting shall be of shareholders
representing at least two-thirds of the voting shares).
Shareholder or group of A shareholder (or group of shareholders) of a listed company that is

shareholders part of a bound to the provisions of a shareholders’ agreement and who holds
shareholders’ more than 50% of the common shares shall have the right to elect the
agreement with more same number of directors elected by the other shareholders, plus one
than 50% of the voting member, regardless of the number of members that make up the board
shares of directors, provided that: (i) the election of the board members is
performed through the cumulative vote (voto múltiplo) proceeding, and
(ii) holders of preferred or common shares exercise their right to elect
one of the directors.
Any common If the company is listed, the right to sell shares in a public offer for the
shareholder transfer of the share control for a price at least equal to 80% of the price
paid for each voting share that is part of the share control.
Any preferred • Any preferred shareholder whose type of preferred shares has
shareholder whose type been adversely affected and who dissents from the decisions
of preferred shares have on any of the following matters shall have the right to withdraw
been adversely affected from the company through the reimbursement of the value of
their shares:
(i) to create preferred shares or increase an existing class
of preferred shares disproportionately in relation to
other classes, except to the extent already provided for
or authorized in the bylaws; or
(ii) to modify a preference, privilege or condition of
redemption or amortization of one or more classes of
preferred shares, or to create a new class with greater
privileges.
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Shareholders Rights
• The creation of preferred shares or increase of an existing class
not in proportion to the other classes of preferred shares, if not
authorized in the bylaws, shall be approved by the holders of at
least half of such class of preferred shares at a special
shareholders’ meeting called for such specific purpose. The
CVM may authorize the reduction of such quorum for listed
companies, provided that their shares are diluted (dispersas) in
the market and that less than half of the holders of the voting
shares attended the last three shareholders’ meetings.
Any shareholder • Any shareholder dissenting from the decisions on any of the
following matters shall have the right to withdraw from the
company through the reimbursement of the value of their
shares:
(i) to reduce the mandatory dividend;
(ii) to amalgamate the company or cause its merger into
another company;
(iii) to participate in a group of companies;
(iv) to change the corporate purposes; or
(v) to split off the company, provided that it results in:
(a) a change of the corporate purpose, except if the
split net worth value is transferred to a company
whose main activity is the same as the one set
forth in the corporate purpose clause of the
company being split;
(b) a reduction of the mandatory dividend; or
(c) the participation in a group of companies.
• In the case of listed companies and of decisions to:
(i) amalgamate the company or cause its merger into
another company; or
(ii) participate in a group of companies,
the holders of classes or types of shares that have liquidity and are
diluted (dispersas) in the market are not entitled to withdraw from the
company.
82 | Baker McKenzie
Shareholders Rights
Any shareholder To file a lawsuit:

(i) to annul the incorporation of the company due to any irregularity
or defect;
(ii) to annul a resolution made at a general or special shareholders’
meeting irregularly called or held in violation of law or bylaws, or
flawed by error, bad faith, fraud or misrepresentation;
(iii) to request indemnification for the losses incurred due to the
appraisal of property from any appraisal expert or subscriber of
capital;
(iv) to collect dividends;
(v) to bring a claim to receive indemnification for a negligent or
fraudulent act committed by founders, shareholders,
administrators, liquidators, members of the audit committee or
controlling company in violation of the law, bylaws or the
group’s agreement;
(vi) to bring a claim against a shareholder for the refund of a
dividend received in bad faith;
(vii) to bring a claim against the administrators or holder of securities
who grants the right to receive part of the company’s profits
(partes beneficiárias) for the refund of profits received in bad
faith; and
(viii) in the case of listed companies, to request indemnification from
the offering party, the financial institution and the CVM for the
damages incurred if the said parties do not comply with their
duty of confidentiality in connection with any tender offer for the
acquisition of share control.
Holders of preferred • The holders of preferred shares without voting rights or with
shares restricted voting rights, acting jointly, shall be entitled to elect
one member of the audit committee and respective alternate in
a separate election.
• Holders of preferred shares have the right to vote if the
company does not pay the minimum or fixed dividend to which
they are entitled for the period provided in the bylaws (not
exceeding 3 years).

Brazilian securities laws and regulations contain a number of rules that already apply before a
takeover transaction is announced. These rules impose restrictions and hurdles in relation to prior
stake building by a potential acquirer, announcements of a potential takeover transaction by a
potential acquirer or a target company, and prior due diligence by a potential acquirer. The main
restrictions and hurdles have been summarized below. Some careful planning is therefore necessary
if a potential acquirer intends to start a process that is to lead to the takeover of a Brazilian listed
company.
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Before, during and after a takeover transaction, the normal rules regarding insider dealing and market
abuse remain applicable. The rules include, among other things, restrictions on the trade based on
confidential information, manipulation of the target’s stock price (e.g., by creating misleading rumors)
or creating false demand over the volume of trading of the target’s stock price. For further information
on the rules on insider dealing and market abuse, see 6.3 below.
3.4 Disclosure of shareholdings

Pursuant to CVM Rule 358/02, the direct or indirect controlling shareholders, the shareholders who
elect members to the board of directors, and any individual or legal entity, or group of individuals or
legal entities acting in concert or representing the same interest, which directly or indirectly acquires
5% or more of a type or class of shares representing the capital of a Brazilian listed company
(including through debentures convertible into shares, share subscription bonuses, share subscription
rights, put and call options or rights over shares or over the securities mentioned above) is required to
inform the Brazilian listed company. The investor relations officer of the Brazilian listed company will
be responsible for informing the CVM, the stock exchanges and organized over-the-counter markets
where the company is listed. If the investor’s intention is to change the share control or the
administrative structure of the Brazilian listed company, or in the cases where the acquisition will
result in an obligation to launch a tender offer, the investor will also be required to publish a material
fact notice with the details of the transaction.
The communication to be provided by the investor must include at least the following information: (i)
its particulars, e.g., name, address, Brazilian resident attorney in fact in case of non-Brazilian resident
investors, etc.; (ii) the purpose of the participation acquired and the number of shares the investor
intends to acquire, with a statement as to whether it intends to change the share control or the
administrative structure of the Brazilian listed company; (iii) the number of shares and other securities
and derivative financial instruments referred in such shares, even if only subject to financial
liquidation; and (iv) whether the investor or any party related to the investor is a party to any
agreement governing the right to vote and/or the purchase or sale of securities issued by the Brazilian
listed company.
In addition, under the current requirements of CVM Rule 358/02, the investor is not only required to
disclose the acquisition of shares (or share- convertible securities) representing a relevant investment,
but also the acquisition or disposal of derivative instruments representing shares of Brazilian issuers,
to the extent that the 5% threshold is met. Such disclosure obligation applies regardless of whether
the derivatives are cash-settled or settled by physical delivery of the underlying asset. The difference
will be in the form of calculation and how the information is disclosed to the issuer. For the purposes
of calculating the 5% threshold:
• derivatives with physical delivery of the underlying asset (e.g., the shares of the Brazilian
issuers) should be bundled together with the shares and other share-convertible securities for
the purposes of determining the disclosure threshold under CVM Rule 358/02; and
• derivatives which are exclusively cash-settled should be calculated separately from shares
and other share-convertible securities for the purposes of determining the disclosure
threshold under CVM Rule 358/02.
The individuals/entities referred to above are also required to issue such communication whenever
their participation in any type or class of shares (or of the securities mentioned above) varies upwards
or downwards, through either single or multiple transactions, at each 5% threshold, i.e., 5%, 10%,
15%, etc.
The members of the board of directors, board of officers, audit committee, and any other board which
may be set forth in the company’s bylaws, must inform the company of transactions carried out by
84 | Baker McKenzie
them with securities issued by the company (and by its controlled or controlling companies, if they are
also listed). The investor relations officer will then be responsible for transmitting the information to the
CVM, the stock exchanges and organized over-the-counter markets where the company is listed.
In addition to the above, and specifically during the tender offer period, shareholders representing at
least 2.5% of a class or type of shares of the target company must communicate to the market any
increase or decrease of 1% or more in their holdings of the total securities of that type or class.

transparency throughout a takeover process. These rules require a company to immediately
announce all relevant inside information that may influence (a) the trade price of the securities; (b) the
investors’ decision to purchase, sell or keep the securities issued by the company; or (c) the investors’
decision to exercise any rights arising from their position as holders of securities issued by the
company. For further information on inside information, see 6.1 below.
The facts surrounding the preparation and negotiation of a public M&A transaction may constitute
inside information. As such, the target company would ordinarily be required to announce this to the
general public. However, the management of the target company can delay the announcement if it
believes that disclosure would not be in the legitimate interest of the company. This could be the case
if the target’s management believes that early disclosure would prejudice the negotiation of the
transaction.
A delay of the announcement is only permitted provided that the non-disclosure does not entail a risk
that the public will be misled, and that the company can keep the relevant information confidential. To
the extent there is any leak of information concerning the possibility of a public M&A transaction
involving a Brazilian listed company, the CVM may require the issuance of a formal notice to the
market confirming or denying such transaction. For further information on early disclosures, see 3.7
below.
3.6 Announcements of a public M&A transaction

According to CVM Rule 358/02, the transfer or the acquisition of the share control of a Brazilian listed
company must be reported to the CVM and the stock exchanges where the company’s securities are
traded and disclosed to the market as a media announcement by both the company and the acquirer.
The acquirer of share control is required to disclose to the market, among other things, information on
the price paid (total and per share), the form of payment, the number and percentage of shares
acquired, the purpose of the acquisition of the share control, the existence of any shareholders’
agreement governing the exercise of the voting right or the sale and purchase of securities. The
acquirer will also be required to notify the market if it intends to delist the company within 1 year
following the acquisition of control, and other important information related to the business and any
corporate reorganization.
If the transaction is expected to be conducted through a public takeover bid, there are no prior
announcement requirements. Given that this specific type of tender offer is voluntary, and therefore
not subject to the prior approval of the CVM, the candidate bidder is able to announce the takeover
tender offer directly upon the publication of the tender offer notice.
If there are rumors or leaks that a potential acquirer intends to acquire the share control of a Brazilian
listed company either through a private transaction or by way of a takeover bid, the CVM could force
an announcement. For further information, see 3.7.

(a) Early disclosure demanded by the CVM – Whenever required for the good functioning of the
markets, the CVM has the right to require a person that could be involved in a possible public
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M&A transaction to make an announcement confirming or denying the intentions to pursue
the transaction. This type of disclosure is often made when there are leaks or rumors
regarding a potential transaction involving a Brazilian listed company.
(b) Put-up or shut-up – In addition to the foregoing rule, specifically in relation to takeover bids,
the CVM has a specific mechanism to require a person to make an announcement as to
whether or not it intends to carry out a public takeover bid. The relevant rules can be
summarized as follows:
o If there are leaks or rumors concerning a potential takeover bid, the potential acquirer
and/or the target company is expected to either publish the tender offer notice or
inform the market of whether or not it is considering launching the takeover bid. If the
potential acquirer and/or the target company fails to do so, the CVM may demand
such publication subject to the application of penalties imposed by Brazilian securities
regulations.
o If the potential acquirer issues a notice to the market indicating that it is still
considering whether or not to launch a takeover bid, the CVM may impose a window
of time for the potential acquirer to either (a) publish the tender offer notice, or (b)
issue a new announcement to the market indicating that it does not intend to launch a
takeover bid during the period of six months following the publication of such
announcement.
3.8 Due diligence

The Brazilian public takeover laws and regulations do not contain specific rules as to whether prior
due diligence can be organized nor how such due diligence is to be organized. Be that as it may, the
concept of a prior due diligence or pre-acquisition review by a potential acquirer is generally accepted
both by market practice and by the CVM, and appropriate mechanisms have been developed to
organize a due diligence or pre- acquisition review in order to address potential market abuse issues
and early disclosure concerns. These include the use of strict confidentiality procedures and data
rooms.
In addition, and more specifically in relation to public takeover bids, the potential bidder may not have
sufficient information on the target company to populate the tender offer notice as required under
CVM Rule 361/02. As a result, the CVM requires the target company to disclose the following
information publicly to the CVM and the market after the publication of the tender offer notice by the
potential acquirer:
(i) the number, class and type of securities issued by the target company and owned (a) by the
target company itself, i.e., treasury shares, (b) by the members of management, (c) by
individuals/entities related to the target company, and (d) by individuals/entities related to the
management of the target company;
(ii) a detailed description of the exposure of (a) the target company, (b) the members of
management, (c) the individuals/entities related to the target company, and (d) the
individuals/entities related to the management of the target company to derivatives referenced
by securities of the target company;
(iii) a report on transactions with securities of the target company by (a) the target company itself,
i.e., treasury shares, (b) the members of management, (c) individuals/ entities related to the
target company, and (d) individuals/ entities related to the management of the target company
for the period between three months before the publication of the tender offer notice until the
disclosure of this information to the market;
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(iv) a detailed description of any agreements, options, letters of intent or other legal documents
related to the acquisition or sale of securities issued by the target company involving (a) the
target company itself, i.e., treasury shares, (b) the members of management, (c) the
individuals/entities related to the target company, and (d) the individuals/entities related to the
management of the target company;
(v) a description and analysis of possible economic consequences of the tender offer for the
members of the management of the target company, including, among others, extraordinary
payments and acceleration of stock option rights; and
(vi) securities issued by the potential acquirer and owned by (a) the target company itself, i.e.,
treasury shares, (b) the members of management, (c) individuals/entities related to the target
company, and (d) individuals/entities related to the management of the target company.

For the purposes of the Brazilian public takeover bid rules, persons “acting in concert” shall be those
acting together to represent the same interest as another person.
Pursuant to the CVM’s current understanding on the matter, the following situations will be construed
as “acting in concert” or “representing the same interest”: (a) existence of a shareholders’ agreement
providing for the exercise of voting rights; (b) kinship; (c) two or more companies under common
control; (d) a company and its direct or indirect controlling shareholder; (e) an exclusive investment
fund and its only investor; and (f) a situation in which there is discretionary management of resources
by one party on behalf of others.
The following are the main types of takeover bids:
• takeover offer due to the increase in the controlling shareholder’s interest. This is a mandatory
offer that the controlling shareholder of a Brazilian listed company is required to launch if it
wishes to acquire more than one-third of the free float shares;
• takeover offer due to the transfer of share control. This is a mandatory offer that the acquirer
of the control of a Brazilian listed company is required to launch. The acquirer is required to
offer to the remaining holders of free float voting shares the right to sell their shares for a price
equivalent to at least 80% (or 100%, depending on the segment of the stock exchange on
which the company is listed or the provisions of its bylaws) of the price paid by the acquirer to
the former controlling shareholder in the acquisition of the share control through a private
transaction; and
• takeover offer for the acquisition of the share control of a Brazilian listed company. This is a
voluntary offer launched by a potential acquirer aiming to acquire free float shares in the
market in a sufficient number to acquire share control.
4.1 Takeover offer due to the increase in the controlling shareholder’s

interest
Pursuant to CVM Rule 361/02, the controlling shareholder of a Brazilian listed company is required to
launch a takeover offer whenever it, a person related to it, or other persons that act jointly with the
controlling shareholder wishes to acquire more than one-third of the free float of a given type or class
of shares. It is a mandatory offer which requires the prior approval of the CVM to be launched.
The offer price per share must be fair and duly supported by an appraisal report prepared in
accordance with CVM Rule 361/02. It must be at least equal to the appraisal value of the target
company based on the following criteria: (a) book value, (b) market value, (c) discounted cash flow,
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(d) multiples comparison, (e) average trade price of the securities in the stock exchange, and/or (f)
other criteria accepted by the CVM.
The controlling shareholder, those related to the controlling shareholder or other persons that act
jointly with the controlling shareholder may request from the CVM an authorization not to be required
to make a public offer due to an increase in the ownership of shares, provided that the controlling
shareholder or those mentioned above agree to sell the shares in excess of the threshold amount
within three months. This period is counted from the date of the acquisition of shares which breached
the one-third threshold. This alternative proceeding may be used only once every 2 years.
4.2 Takeover offer due to the transfer of share control

As a general rule, the direct or indirect transfer of the share control of a Brazilian listed company
through private transactions requires the authorization of the CVM and is conditional upon the
acquirer launching a takeover offer for the acquisition of the remaining voting shares of the free float
issued by the company, for a price equal to at least 80% of the price paid for each voting share that is
part of the share control. Depending on the segment of the stock exchange on which the company is
listed, and on the provisions of the bylaws of the company, the public offer may also have to be made
to holders of the non-voting shares and the price to be offered to the free float may reach 100% of the
price paid for each voting share that is part of the share control.
Alternatively, the acquirer of the share control may offer the minority shareholders the option to
remain as shareholders upon the payment to them, by the acquirer, of the difference between the
market value of the shares and the amount paid for each voting share forming part of the share
control.
No appraisal report of the target company will be required except that, in case of an indirect transfer
of the share control, (i) the offeror must submit to the CVM, along with the request for the registration
of the public offer, a duly justified calculation of the price due in such public offer, prepared based on
the price paid for the acquisition of the share control of the company, and (ii) the CVM may request
the preparation and submission of such appraisal report.
Note that stricter requirements are imposed if there is a transfer of share control of companies listed
within certain special trading segments of B3, i.e., Nivel 2, Novo Mercado, BOVESPA Mais or
Bovespa Mais Nível 2, in accordance with the listing regulations applicable to each respective trading
segment.
4.3 Takeover offer for the acquisition of the share control

In general, the acquisition of the share control of a Brazilian listed company is made through private
transactions. This is because Brazilian listed companies typically do not have a dispersed ownership
or a high free float of voting shares. However, as the Brazilian capital market evolves, public
takeovers are becoming more common. The Corporations Law allows the acquisition of the share
control of a listed company through a public takeover offer. This is a voluntary proceeding and it is not
subject to registration with the CVM unless it involves the exchange of securities.
With the launch of this type of takeover offer, the board of directors of the target company will be
allowed to present an opinion to the company’s shareholders on the terms of the offer and whether
the offer should be accepted or not. The opinion shall cover all aspects relevant to the shareholders’
decision making process, including the offer price, and shall provide a description of the main
changes in the financial situation of the company that have occurred since the last disclosure to the
market of its financial statements or periodic information.
Where there is a takeover offer for the acquisition of share control which includes an offer to acquire
all voting shares of the free float, the shareholders who decide not to sell their shares will have the
88 | Baker McKenzie
right to sell them after the offer ends and for a period of 30 days thereafter, for the final price of the
offer.
In takeover offers for the acquisition of such number of shares as to gain share control only rather
than the acquisition of all shares of the free float of a particular class or type, the offerees may decide
that they will only sell their shares conditioned upon the offer being successful. If the offer is not
successful, the offeror will not be able to acquire shares by means of the takeover offer.
5 Timeline
As a general rule, the process for a mandatory public takeover bid is similar to the process that
applies to a voluntary public takeover bid, with certain exceptions.
takeover bid process under Brazilian law.
Step
• Preparation of the bid by the bidder (study, due diligence, financing, draft tender
offer notice).

• The bidder publishes the bid in the press and submits the documentation to the
CVM.
3. The target company is required to disclose specific information about itself, within three
business days of the publication of the tender offer bid. For further information see 3.8.
4. The board of directors of the target company may issue an opinion on the terms and
conditions of the takeover bid.
5. Acceptance period:
• Start: with the publication of the tender offer notice in the press.
• Duration: not less than 30 days and not more than 45 days.
6. Tender offer auction date at the end of the acceptance period.

7. Payment of the offered consideration by the bidder within three business days following the
tender offer auction date.
8. B3 will communicate the results to the offeror and the CVM within four business days
following the tender offer auction date.
9. Disclosure to the market of the results of the bid by the bidder and of information on the
acquisition of the share control by the bidder and the target company.
10. Acquisition of and payment for additional shares from minorities that did not participate in
the tender offer within 30 days following the conclusion of the tender offer.
Set out below is an overview of the main steps for a voluntary public takeover in Brazil.
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Voluntary public takeover (indicative timeline for cash offer)*
Start A+3
process A Day business days A + 15** A + 45 A + 48 A + 49 A + 75
Launch bid by publishing Target must publicly disclose Board of Directors of target End of acceptance period - Payment of the offered Stock Exchange to Acquisition of and payment
terms and conditions - start of specific information about may issue an opinion on the tender offer auction date consideration communicate results to for additional free float voting
acceptance itself terms and conditions of the bidder and the CVM shares, if required
bid
Offer period: at least 30 and up to 4 days 3 business days
4 business days
* If the offer involves payment with securities, it will be subject to prior registration with the Brazilian Securities and Exchange Commission (Commissao de Valores Mobiliarios - “CVM”).
** According to the rules of the Novo Mercado and the Nivel 2 listing segments of B3, the board of directors has 15 days to issue its opinion, counted from the bid launch. The board of directors do not have this obligation if the company is listed in
other segments of B3, unless otherwise provided in its bylaws.
90 | Baker McKenzie
6 Takeover Tactics
6.1 Inside information
The members of a Brazilian listed company’s management have an obligation to immediately disclose
to the public all “material information” that relates to the company, including all material changes to
information that has already been disclosed to the public.
In this context, “material information” shall be considered as any decision of the controlling
shareholder, shareholders’ meeting or any administration body of a listed company, or any other act
or fact of an administrative, political, technical, managerial or economic/financial nature that has
occurred or is related to the business of the company, which may considerably influence: (a) the
quotation of the securities issued by the company in the market; (b) the investors’ decision to
purchase, sell or keep the securities issued by the company; or (c) the investors’ decision to exercise
any rights arising as a result of being a holder of the company’s securities.
It is up to the company to determine if certain information qualifies as “material information”. This can
be a difficult exercise, and there may be gray areas as to whether certain events will need to be
disclosed or not. The CVM has indicated that the following types of information should be considered
as examples of potentially “material information” for the purposes of disclosure:
• the execution of an agreement or contract for the transfer of the listed company’s corporate
control;
• change in the control of the company, including as a result of the execution, amendment or
termination of a shareholders’ agreement;
• the admittance or withdrawal of a shareholder who maintains an operational, financial,

technological or administration agreement or contract with the listed company;
• authorization for the admission to trade securities issued by the listed company in any market,
whether foreign or Brazilian;
• the delisting of the company;
• any merger, amalgamation or spin-off involving the company or related companies;
• the renegotiation of debts;
• any amendment to rights and advantages attached to securities issued by the company; and
• the filing for reorganization, bankruptcy or any lawsuit that may affect the economic or
financial health of the company.
6.2 Public takeover bid

In the event of a potential public takeover bid, Brazilian takeover rules provide that no announcement
is to be made until the publication of the tender offer notice. If any leaks or rumors occur at such a
time, the potential acquirer and the company will be subject to the early disclosure rules summarized
in 3.7.

The basic legal framework regarding insider dealing and market abuse under Brazilian law is set forth
in the Corporations Law, the Securities Law and CVM Rule 08/79.
Insider trading is expressly forbidden in Brazil. As a general rule, the controlling shareholders, the
board of directors, the board of officers, the audit committee and any other statutory board, as well as
anyone with access to privileged information that remains undisclosed to the market, are prevented
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from using such information to obtain undue advantage, either for themselves or third parties in the
purchase or sale of securities. All Brazilian listed companies are required to approve a policy for the
disclosure of material facts or acts and maintain confidentiality with respect to information that
remains undisclosed to the market.
Violation of the laws and regulations concerning insider trading subjects the violator to both
administrative penalties imposed by the CVM and criminal charges imposed by the Securities Law.
Moreover, the party suffering losses due to participation in the purchase and sale of securities may
claim indemnification against the insider in court.
In principle, the rules on insider dealing and market abuse remain applicable before, during and after
a public takeover bid, albeit that during a takeover bid additional disclosures and restrictions apply in
relation to trading in listed securities. To that effect, during the takeover offer period, the offeror and its
related parties may not:
• dispose, directly or indirectly, of shares of the same type or class as the shares that are
subject to the offer, other than in the public offer auction;
• acquire shares of the same type or class as the shares that are subject to the offer in
circumstances where the public offer is not intended to acquire all the free float shares of a
particular class or type; and
• carry out transactions with derivatives related to shares of the same type or class as the
shares that are subject to the offer.
Notwithstanding the above, if there is a breach of the restrictions related to the trading of shares
during the public offer period, the price per share in the takeover offer shall not be less than the
highest price paid by the offeror or its related parties in transactions carried out during the public offer
period.
In addition, during the course of a takeover offer:
• the offeror, the target company, the administrators of the target company, those related to any
of them and the third parties which intend to participate in the public offer auction as
competing offerors shall immediately inform the market of any transaction involving, directly or
indirectly, securities of the target company, and of any contracts or any other kind of
agreement, including letters of intent and options, for the acquisition or disposal of securities
of the target company, or executed with the company, its administrators or shareholders
representing more than 5% of the shares that are subject to the offer, or their related parties;
• the target company, the administrators of the target company, those related to any of them
and the third parties which intend to participate in the public offer auction as competing
offerors shall immediately inform the market of any transactions with derivatives related to the
shares of the target company; and
• any person or group of persons acting jointly, representing directly or indirectly 2.5% or more
of a given type or class of shares of the target company, or of derivatives related to the target
company’s shares, shall immediately inform the market of:
o any direct or indirect variation of its holding of a given type or class of shares by more
than 1%;
o the execution of any contract or other kind of agreement, including letters of intent
and options, that involves the acquisition or disposal of shares representing more
than 1% of a given type or class, taken individually or in the aggregate; and
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o transactions with derivatives related to shares which, taken individually or in the

aggregate, represent more than 1% of a given class or type.

Poison pill Requires an express provision in the bylaws of

the company, detailing the specific requirements
Requirement for an acquirer of a relevant equity
to trigger this poison pill.
interest in a Brazilian listed company (usually
25% to 30% of the voting shares) to launch a
tender offer for the acquisition of the remaining
shares of the free float, for a price usually
including a premium over the market value of
the company.
Shareholders’ agreements The shareholders could be considered as

“acting in concert”.
Shareholders undertake to consult with a view
to vote their shares in accordance with terms Assumes a stable shareholder base or
agreed among them. reference shareholders.

Takeover
7.1 Squeeze-out
The Corporations Law expressly provides that if less than 5% of the total shares issued by the
company remain in the free float after a delisting tender offer, it is possible to implement the
redemption of such shares, and, therefore, squeeze out the remaining minorities, upon payment of
the same price as paid in the offer. The redemption must be approved by a special shareholders’
meeting of the company and the redemption monies must either be paid directly to the minority
shareholders or be made available at Brazilian financial institutions for collection.
7.2 Sell-out
In the event of a takeover offer for the acquisition of share control in which the acquirer seeks the
acquisition of all voting shares of the free float, the shareholders who decide not to sell their shares
will have the right to sell them after the offer ends for a period of 30 days thereafter, for the final offer
price.
In other tender offers, except those resulting from the transfer of share control, that are launched by
the controlling shareholder, by any person related to it or by the listed company itself, which seek to
acquire more than one-third of the free float shares of a given type or class, if the offeror acquires
more than two-thirds of the free float shares of a given type or class, it will have an obligation to
purchase any free float shares from the minority shareholders who did not tender their shares in the
tender offer auction, for an additional period of three months following the conclusion of the tender
offer.
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7.3 Squeeze-out followed by a merger
Other than the squeeze-out following the successful conclusion of a delisting tender offer and other
instances where the shareholder did not pay the portion of the corporate capital it had subscribed, the
Corporations Law does not authorize the squeeze-out of minority shareholders.

For one year following the end of the takeover bid period, the controlling shareholder and the persons
acting in concert with it:
• cannot launch a new takeover bid targeting the acquisition of the same shares that were the
object of a prior takeover bid, unless the terms of the new tender offer are extended to those
shareholders who tendered their shares in the initial offer, including paying the price
difference, if there is any; and
• are required to pay the difference between the price originally paid to the minority
shareholders who tendered their shares in the takeover bid and the price due to minority
shareholders if (a) the offeror is required to launch any mandatory tender offer or (b) there is
any corporate transaction which triggers the right of the minority to withdraw from the
company, pursuant to the Corporations Law.
8 Delisting
Taking a listed company private is subject to the prior authorization of the CVM and must be preceded
by a delisting tender offer for the acquisition of the free float shares of the target company. This offer
may be made by the controlling shareholder or the company itself and shall be for the acquisition of
all outstanding shares of the free float. In summary, the following requirements are applicable, among
others:
• the offer price per share must be fair and duly supported by an appraisal report prepared in
accordance with CVM Rule 361/02. It must be at least equal to the appraisal value of the
company, based on the following criteria: (a) book value, (b) market value, (c) discounted
cash flow, (d) multiples comparison, (e) quotation of the securities on the stock exchange,
and/or (f) other criteria accepted by the CVM; and
• shareholders representing more than two-thirds of the shares of the free float must accept the
offer or expressly agree to the delisting of the company. For this purpose, only the shares
whose owners expressly agree to the delisting or register themselves to participate in the
public offer auction will be deemed as shares of the free float.
Additional rules and requirements need to be observed to delist the company from the special trading
segments of B3.
9 Contacts within Trench, Rossi and Watanabe Advogados

Anna Mello in the Rio de Janeiro office and Lara Schwartzmann in the São Paulo office are the most
appropriate contacts within Trench, Rossi and Watanabe Advogados* for inquiries about public M&A
in Brazil.
Anna Mello Rio Lara Schwartzmann

de Janeiro São Paulo
anna.mello@trenchrossi.com lara.schwartzmann@trenchrossi.com
+55 21 2206 4915 +55 11 3048 6828
*In cooperation with Baker & McKenzie International, a Swiss Verein.
94 | Baker McKenzie
Canada
1 Overview
The acquisition of a Canadian public company may be structured as a corporate transaction or a
“takeover bid”. The rules for acquiring a Canadian public company are complicated and involve
aspects of securities, corporate and administrative law.
Corporate transactions typically take the form of a plan of arrangement (which requires court approval
before implementation), statutory amalgamation or other corporate reorganization, and require the
approval of the target’s shareholders.
A takeover bid is the Canadian equivalent of a US tender offer. The acquirer must follow a prescribed
process when launching and completing a bid.

2.1 Takeover bids – legal framework
Each of the provincial and territorial Canadian securities administrators (CSAs) has jurisdiction over
takeover bids in its respective province or territory through its provincial or territorial Securities Acts.
All of the provincial and territorial acts have generally been harmonized. Further, the regulatory
regime governing the conduct of takeover bids is harmonized in all Canadian jurisdictions through the
application of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104).
In Ontario, Québec, Alberta, Saskatchewan, Manitoba and New Brunswick, additional disclosure,
valuation and security holder approval requirements may apply to certain transactions that involve the
rights of minority security holders and which may raise conflict of interest concerns, specifically:
insider bids, issuer bids, specified business combinations and related party transactions. These
additional requirements can be found in Multilateral Instrument 61-101 Protection of Minority Security
Holders in Special Transactions (MI 61-101). In any event, these requirements apply to companies
whose securities are listed on the Toronto Stock Exchange or the TSX Venture Exchange.
National Policy 62-202 Take-Over Bids – Defensive Tactics (NP 62-202) sets out the view of the
CSAs on takeover bid defensive tactics.
The early warning reporting regime (EWR regime) applies when a person or company acquires
ownership of 10% or more of the voting or equity securities of a reporting issuer. This provides the
market with immediate notice that a particular person or company is accumulating a significant block
of voting or equity securities in a reporting issuer. The provisions comprising the EWR regime can be
found in NI 62-104 and National Instrument 62-103 The Early Warning System and Related Take-
Over Bid and Insider Reporting Issues.
The target’s corporate statute typically has application solely in the squeeze-out or follow-on
transaction context. The applicable exchange also has some oversight over takeover bids, mostly
relating to trading issues.
2.2 Corporate transactions

Friendly acquisitions in Canada are typically structured as corporate transactions under the target’s
corporate statute as amalgamations, reorganizations and, most often, plans of arrangement or
“arrangements”. Arrangements are court approved “mergers”. They permit the parties to structure a
combination in ways that are not contemplated by corporate statutes. They are also often used to
address tax issues relating to the merger and usually combine many steps into one transaction in a
specified order.
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Arrangements are subject to requirements imposed by (i) the corporate statute governing the
company, (ii) the securities regulatory authorities in the jurisdictions in which the company is a
reporting issuer, such as many of the rules (including MI 61-101) described above and (iii) the
company’s stock exchange, to some degree.
2.3 Supervision and enforcement by the provincial or territorial regulatory

authorities
Public takeover bids and plans of arrangement are subject to the supervision and control of securities
regulatory authorities in the jurisdiction in which the company is a reporting issuer. The regulatory
authority in the company’s jurisdiction of incorporation or head office is, in most cases, the principal
securities regulator of such company and the other jurisdictions generally defer to the principal
regulator under a prescribed harmonization model.
The securities regulatory authority has a number of legal tools that it can use to supervise and enforce
compliance with the applicable rules, including administrative fines, penalties and cease trade orders.
In addition, sanctions could be imposed by the courts in case of non-compliance.
The securities regulatory authority also has the power to grant (in certain cases) exemptions from the
rules that would otherwise apply to a public takeover bid or arrangement.

The primary objective of the takeover bid provisions and the provisions relating to corporate
transactions of Canadian securities legislation is the protection of the bona fide interests of the
shareholders of the target company. A secondary objective is to provide a regulatory framework within
which takeover bids and other transactions may proceed in an open and even-handed environment.
The takeover bid provisions should favor neither the offeror nor the management of the target
company, and should leave the shareholders of the target company free to make a fully informed
decision.
2.5 Foreign investment restrictions

Foreign investment in Canada is regulated by the Investment Canada Act (ICA). Generally speaking,
a foreign investor seeking to acquire control of an established Canadian business valued at or above
a prescribed financial threshold must apply for review of the investment’s likely net benefit to Canada,
and may not complete the acquisition until approval is obtained. The review threshold differs for
investments from World Trade Organization (WTO) members (WTO Investors), private investors from
jurisdictions with which Canada has trade agreements, state-owned investors, non-WTO investors
and investments in Canadian cultural businesses. For all other investments valued below the relevant
threshold, investors need only file a simple post-closing notification and the investment is not
reviewable for net benefit. A similar notification is required when an investor from a WTO member
jurisdiction indirectly acquires control of an existing Canadian business or when a foreign investor
establishes a new business in Canada.
The ICA also contains an independent national security review regime (similar to the Committee on
Foreign Investment in the United States) that applies to all acquisitions by foreign investors,
regardless of value and level of ownership, and can result in conditions or prohibition if an acquisition
is found likely to be injurious to Canada’s national security. In the case of a reviewable investment,
national security review will generally be conducted in parallel with net benefit review. For notifiable
investments, while the ICA does not allow for voluntary pre-clearance of transactions on national
security grounds, investors can obtain certainty by filing the post-closing notification prior to closing,
allowing for the expiry of the initial national security screening period. For investments that fall entirely
outside the ICA’s regular provisions, e.g., when the requisite level of ownership is not being acquired,
while a foreign investor may voluntarily file a notification, as a practical matter, little certainty can be
obtained prior to closing.
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The table below provides an overview of the different rights, powers and obligations that are attached
to different levels of holdings of voting shares within a corporation subject to the Canada Business
Corporations Act and applicable securities laws. Canadian corporations may be incorporated under
this federal statute or under the corporate statute of a province or territory of Canada, which may
provide for slightly different shareholder rights:
Shareholding Rights
One share The right to attend and vote at annual shareholders’ meetings.
The right to access certain corporate records and obtain annual financial
statements.
The right to apply to a court for an oppression remedy where the actions
of the company, management or directors are oppressive or unfairly
prejudicial to, or unfairly disregard, the interests of the shareholder.
The right to fair value for shares where the shareholder dissents from
approving certain fundamental corporate changes.
1% or shares The right to submit a proposal to the company to be discussed and voted
representing C$2,000 on at the next annual meeting.
fair market value, held
for at least six months
5% The right to requisition a meeting.
10% (on a partially The obligation to prepare an early warning report.

diluted basis)
20% (on a partially The obligation to make a formal takeover bid (or otherwise rely on an
diluted basis) exemption) if acquiring more shares.
More than 331/3% (at a The ability at an annual shareholders’ meeting to block the matters set
special shareholders’ out for shareholdings of 662/3%, below
meeting)
More than 50% (at The ability at an annual shareholders’ meeting:

annual shareholders’
• to determine the outcome of an election of directors; and
meeting)
• to determine the outcome of a proposed resolution for which a
special resolution (662/3% vote) is not required (see below).
662/3% The right to effect fundamental changes to the company by special

resolution, such as:
• changing its name;
• amending its articles;
• creating new classes of shares or changing the rights, privileges,

restrictions and conditions of any of its shares;
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Shareholding Rights
• approving the sale, lease or exchange of all or substantially all of
the company’s property other than in the ordinary course of
business;
• approving the liquidation and dissolution of the company; and
• approving the amalgamation (merger) of the company with

another company.
90% The right to exercise the “compulsory acquisition” of shares following a

successful takeover bid, i.e., if, within 120 days after the date of the bid,
the bid is accepted by holders of not less than 90% of the shares other
than shares held by the bidder or its affiliates or associates.

Canadian law contains a number of rules that apply before a public takeover bid is announced. The
main restrictions and hurdles have been summarized below. Some careful planning is therefore
necessary if a potential bidder or target company intends to start up a process that is to lead towards
a public takeover bid.

The rules regarding the disclosure of shareholdings and transparency apply before, during and after a
Pursuant to the EWR regime, if a potential bidder starts building up a stake in the target company, it
will be obliged to announce its stake and file an early warning report if the voting rights attached to its
stake have passed applicable disclosure thresholds. The relevant disclosure (early warning)
thresholds in Canada are 10% and, thereafter, every increase or decrease of 2% or more or
decreases below 10% of the outstanding class of voting or equity securities that was the subject of
the most recent disclosure. Similar disclosure must be made if there is a change in any material fact in
the required disclosure. The potential bidder must disclose the purpose of the acquisition(s) and any
plans or future intentions. If it intends to launch a takeover bid, this must be disclosed.
When determining whether or not a threshold has been passed, a potential bidder must include
securities underlying derivative securities convertible within 60 days. The bidder must also take into
account the voting securities held by the parties with whom it acts jointly or in concert, or may be
deemed or presumed to act jointly or in concert (see 3.7 below). These include affiliates and
associates. The parties may also have to include existing shareholders of the target company with
whom the potential bidder has entered into specific arrangements (such as call option agreements).
The potential bidder (or any person acting jointly or in concert with such) must not acquire or offer to
acquire beneficial ownership, control or direction over shares in respect of which the above disclosure
was required to be filed until the expiry of the first business day following the date that the disclosure
is filed. This does not apply with respect to holdings of securities that constitute 20% or more of the
class.
The above 10% disclosure threshold drops to 5% if a takeover bid has been made.

transparency. These rules include that a company must immediately announce all material changes.
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The facts surrounding the preparation of a public takeover bid or arrangement may constitute a
material change. If so, the target company must announce this. However, the board of the target
company can delay the announcement in certain circumstances. For instance, this could occur if the
transaction has not been agreed to fully and the target’s board believes that an early disclosure would
prejudice the negotiations regarding a bid.
3.5 Early disclosures

Canadian regulatory authorities do not have a right to request a person that could be involved in a
possible public takeover bid to make an announcement without delay. However, if the bidder acquires
shares past the applicable thresholds set out in 3.3, it is required to disclose the purpose of such
transaction, in addition to its holdings. If there is an intention to launch a takeover bid and the bidder
must file or has previously filed an early warning disclosure, this intention must be disclosed.
3.6 Due diligence

The Canadian public takeover bid rules do not contain specific rules regarding whether or how a prior
due diligence can or should be organized. However, the concept of a prior due diligence or pre-
acquisition review by a bidder is universally accepted in Canada, and appropriate mechanisms have
been developed in practice to organize a due diligence or pre- acquisition review and to cope with
potential market abuse, early disclosure and potential competition concerns. These include the use of
strict confidentiality procedures, non-disclosure agreements and data rooms.
3.7 Joint actors

The issue of whether or not persons are “joint actors” is one of fact. For the purposes of the Canadian
takeover bid rules, a person is deemed or presumed to be “acting jointly or in concert” with an offeror
if it is:
(a) a person that, as a result of any agreement, commitment or understanding with the offeror or
with any other person or company acting jointly or in concert with the offeror, acquires or
offers to acquire securities of the same class as those subject to the offer to acquire;
(b) a person that, as a result of any agreement, commitment or understanding with the offeror or
with any other person or company acting jointly or in concert with the offeror, intends to
exercise jointly or in concert with the offeror or with any person or company acting jointly or in
concert with the offeror any voting rights attaching to any securities of the target; or
(c) an affiliate or associate of the offeror.
This is especially relevant in relation to the potential obligation to make a formal takeover bid. If one or
more persons in a group of persons acting in concert acquire voting securities as a result of which the
group in the aggregate would pass the 20% threshold, the members of the group will have a joint
obligation to carry out a formal takeover bid, even though the individual group members do not pass
the 20% threshold.
As previously mentioned, there are two principal ways in which an offeror could effect an acquisition
of the target:
• a takeover bid (often followed by a compulsory acquisition of all the shares not tendered in the
bid (if available) or another form of subsequent acquisition transaction); or
• a court approved plan of arrangement or other corporate transaction.
The method of acquisition is often determined based on the cooperation (or lack thereof) of the target.
In a hostile acquisition environment, the acquirer would only have the option of structuring the
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acquisition as a takeover bid (since a plan of arrangement requires the target’s cooperation). In a
friendly acquisition environment, the determination to proceed with either structure will be dependent
on the particular facts of each case and may be influenced by tax considerations.
The following provides a general overview of each of these two acquisition methods and discusses
certain advantages and disadvantages associated with each. Illustrative timelines are also included
for reference in 5.
4.1 Takeover Bids

(a) What is a takeover bid?
A takeover bid is an offer to acquire outstanding voting or equity securities of a class made to
shareholders of the target, where the securities subject to the offer, together with the offeror’s existing
holdings, constitute 20% or more of the outstanding securities of that class. Existing holdings include
securities held by any person or company deemed to be “acting jointly or in concert” with the offeror.
(b) To whom must the bid be made?
Subject to certain exemptions, a formal bid must be made to all Canadian holders of securities of the
class subject to the bid and delivered to holders of securities that may be converted into securities of
that class before the expiry of the bid. The offeror is required to comply with the takeover bid regime in
each of the jurisdictions in which shareholders of the target reside.
(c) Confidentiality agreement
In a friendly bid, the parties often enter into a confidentiality or non-disclosure agreement. In addition
to regulating the disclosure and use of confidential information, confidentiality agreements also
typically include “standstill” provisions that will limit the offeror’s ability to acquire target securities, or
to undertake any transaction or other actions that have not been approved by the target’s board, for a
period of time after the due diligence period.
(d) Acquiring a “toe-hold”; early warning reporting
The acquisition of a “toe-hold” position in the target’s securities (up to 19.99%) is permitted, subject to
compliance with the EWR regime. For further information, see also the pre-bid integration trading
restrictions discussed below.
Every offeror who, together with any joint actors, acquires a 10% stake in a Canadian public company
must immediately issue a press release and, within two business days, file an early warning report
with securities regulators. This report must include disclosure of the offeror’s intentions in purchasing
the securities and any future intentions to acquire additional securities. Similar disclosure must be
made whenever a further 2% interest is acquired or disposed, there is a decrease below 10% or there
is a change in any material fact in the required disclosure. Once 20% of the voting or equity securities
have been or are proposed to be acquired, the provisions relating to takeover bids apply.
(e) Insider trading restrictions
The acquisition of target securities by the offeror itself does not give rise to liability under Canadian
insider trading rules, unless the offeror has knowledge of undisclosed material information concerning
the target. However, any insider of the offeror, i.e., a director, officer or principal shareholder, is
subject to insider reporting and trading rules (as are certain other persons in a “special relationship”)
and should not acquire securities of the target with knowledge of the undisclosed proposed bid.
(f) Pre-bid integration trading restrictions
Certain pre-bid integration rules apply with respect to any shares of the target acquired by the offeror
within 90 calendar days prior to the making of a bid. For example, the offeror must offer consideration
100 | Baker McKenzie

in the same form and which is at least equal to the highest consideration paid under any of the pre-
bid transactions, or must offer at least the cash equivalent of such consideration.
(g) Lock-up agreements
Before (or after) making an offer, the offeror is free to seek lock-up agreements from shareholders of
the target. Lock-up agreements can be “hard” (where the shareholder’s undertaking to tender into the
bid is irrevocable) or “soft” (where the shareholder agrees to tender but is free to withdraw if a higher
competing bid is made).
To avoid making the locked-up shareholder a “joint actor” of the offeror, no collateral benefit, i.e., a
benefit not offered to other shareholders, may be offered and the locked-up shareholder cannot
actively participate in the strategy of the bid.
(h) Support agreement
In a negotiated transaction, it is customary for the offeror and the target to enter into a support
agreement. The support agreement usually covers issues such as (i) the terms and conditions of the
transaction (including the amount and form of consideration to be exchanged for the securities of the
target), (ii) management’s support of the transaction, (iii) break fees, (iv) “no-shop” provisions and (v)
representations, warranties and covenants.
(i) Defensive tactics
Directors of Canadian companies have both statutory and common law fiduciary duties to act honestly
and in good faith with a view to the best interests of the corporation, and to exercise the care,
diligence and skill that a reasonably prudent person would exercise in comparable circumstances. In
a negotiated transaction, this is achieved through bargaining, the creation of a special (typically
independent) committee and the use of independent professional advisers.
However, where an offeror makes an unsolicited bid or the bid is otherwise unsupported by the
directors of the target, the directors have an array of defensive tools which can be used to delay or
thwart the bid if they deem it necessary, subject to their overarching fiduciary obligations. These may
include: (i) employing a shareholder rights plan (also known as a “poison pill”), although changes to
the law in May 2016 have limited the general usefulness of poison pills (see 6), (ii) finding an
alternative purchaser (also known as a “white knight”), (iii) disposing of certain key assets (also known
as “selling the crown jewels”) or engaging in other restructuring transactions, for business purposes,
(iv) seeking a strategic investment from a friendly party, or (v) bringing legal or regulatory challenges
to the bid.
(j) The offer
All shareholders of the target must be offered identical consideration. Accordingly, agreements that
have the effect of paying an indirect premium to certain shareholders are prohibited. Certain collateral
agreements are permitted in limited circumstances (such as a specified employment agreement with a
senior officer of the target who is also a shareholder).
An offeror may attach almost any condition to its obligation to complete a takeover bid, e.g., minimum
tender condition, receipt of requisite government consents and absence of material change. In the
case of cash consideration, takeover bid legislation requires an offeror to have made adequate
arrangements prior to the bid to ensure that funds are available to acquire all of the securities subject
to the bid. Such financing arrangements may be subject to conditions, if, at the time the bid is
commenced, the offeror reasonably believes the possibility to be remote that, if all other bid conditions
are satisfied or waived, the offeror will be unable to pay for the securities deposited under the bid due
to a financing condition not being satisfied.
Baker McKenzie | 101

(k) Timing and process
A takeover bid may be kept open for any amount of time, provided that it remains open for at least 35
days if certain conditions applicable to a friendly bid are met (or 105 days otherwise).
The offeror may vary the terms of a bid made (including to extend the bid) at any point up to the
expiry of the offer (subject to complying with certain prescribed requirements).
The offeror may not take up any shares deposited in acceptance of the bid until after the bid period
has expired.
If all the terms and conditions of the bid have either been met or waived, the offeror must take up and
pay for all shares deposited no later than 10 days after the expiry of the bid and any securities taken
up by the offeror under the bid shall be paid for as soon as possible, and in any event not more than
three business days after the taking up of the securities.
A target shareholder may withdraw target shares deposited under the bid at any time if (i) the target
shares have not yet been taken up by the offeror, (ii) if the target shares have been taken up by the
offeror but not paid for within three business days or (iii) within 10 days from the date of notice of
change or variation of the bid.
If there is a variation including any extension in the bid, the offeror must send a notice of variation to
the shareholders and, in some circumstances, the bid period must be extended by at least 10 days
(see 6).
(l) Disclosure obligations
A takeover bid circular must be prepared by the offeror and sent to the target and its shareholders.
The circular includes a certificate of the offeror certifying that the circular does not contain a
misrepresentation. Canadian securities laws provide that, where a takeover bid circular contains a
misrepresentation, each security holder has a right of action for recession or damages against the
offeror and for damages against, among others, its directors and executive officers who signed the
certificate in the circular. In addition, the circular must be filed with the securities regulatory authority
of each jurisdiction in which shareholders of the target are resident. However, the circular is not
automatically subject to formal review by the regulatory authorities prior to its use.
The offeror’s circular must contain certain prescribed information about the offer and the offeror
(including prospectus level disclosure about the offeror where share consideration is involved).
Within 15 days of the bid, the directors of the target must send a circular to the shareholders of the
target, the offeror and securities regulators containing certain prescribed information, including the
directors’ recommendation to accept or reject the bid and the reasons for making those
recommendations, or, if no recommendation is made or is unable to be made, the reasons for not
making or being unable to make the recommendation.
(m) Restrictions on trading during the bid
Subject to one specified exception (allowing the purchase of up to 5% of the target shares on the
market if certain prescribed requirements are met), an offeror may not acquire shares of the target
during the term of the bid.
(n) Post-bid considerations and post-bid purchases
For post-bid considerations and restrictions on post-bid purchases, see 7 below.

4.2 Arrangements
(a) Arrangement agreement
As an arrangement is a negotiated transaction, a common step is the entering into of an arrangement

agreement between the offeror and the target. The arrangement agreement usually covers issues
such as (i) the terms and conditions of the transaction (including the amount and form of
consideration to be exchanged for the securities of the target), (ii) mutual representations, warranties
and covenants, (iii) break fees, (iv) “no shop” provisions, and (v) the calling of a shareholders’ meeting
to vote on the arrangement.
(b) Interim court order
Once the arrangement agreement has been entered into, the parties apply for court approval. In the
first of two applications, the court is asked to direct that a shareholders’ meeting be held to consider
the arrangement and to prescribe the level of voting required to approve the arrangement. The court
will usually require the approval of at least 662/3% of shareholder votes and may, if appropriate, also
require that the arrangement be approved by a majority of the target’s disinterested shareholders. The
court will typically expect the offeror to grant rights of dissent to shareholders who do not approve of
the transaction and wish to be paid fair value for their shares instead of the consideration being
offered under the arrangement.
(c) Shareholder approval
The target’s directors are required to prepare and mail an information circular to its shareholders in
connection with the special meeting called to consider the transaction. If the approval of the
shareholders of the offeror is required as a result of the structure of the transaction, the offeror also
sends an information circular to its shareholders. The target and offeror circulars can be combined
into one. The information circular will contain certain prescribed disclosure about the offer and the
offeror (including prospectus level disclosure about the offeror where share consideration is involved).
In addition, the circular usually contains a copy of a fairness opinion from a financial adviser stating
that the consideration to be received by the target’s shareholders in the transaction is fair, from a
financial point of view, to the shareholders.
(d) Final court order
If the required levels of shareholder approval are obtained at the shareholders’ meeting, the court will
be asked to give its final approval for the arrangement in a hearing at which all affected security
holders are entitled to attend. In sanctioning the arrangement, a court will consider whether the
statutory requirements have been strictly complied with and whether the arrangement is fair and
reasonable to all classes of affected security holders.
5 Timeline
The table below contains a summary of the main steps of a typical public takeover bid process under
Canadian law.

Step
• Board of directors of the bidder meets to consider proceeding with the bid.
• Approach the target and significant shareholders and attempt to negotiate terms of
the support agreement/lock-up agreement.
• Request shareholder list from target company.
• Finalize offer documents.
• Translate offer documents into French (if takeover bid is being made in Québec).
• Board of directors of the bidder approves bid and offer documents, support
agreement and lock-up agreements.
• Execute final support agreement and lock-up agreements.
• Announce execution of support agreement and lock-up agreements.
• Mail offer documents to shareholders of the target company and file with securities
regulatory authorities and applicable stock exchanges.
3. Within 15 days of the bid, directors’ circular (of the target company) mailed to its
shareholders and filed with securities regulatory authorities and applicable stock
exchanges.
4. Expiry of bid (open for a minimum 105 days from date of bid, subject to shortening to 35
days under certain friendly scenarios (initial deposit period)):
• Bidder issues press release confirming it has achieved the 50% minimum tender
requirement (and all other terms and conditions have been complied with or
waived), disclosing the number of shares deposited and to be taken up and paid
for, and that bid has been extended by at least 10 days.
5. Bidder immediately takes up shares deposited under bid and, not later than three business
days (assuming not a partial bid) thereafter, pays for such shares.
6. Bid extended by mandatory minimum 10 days after initial deposit period:
7. Bidder issues press release after expiry of bid disclosing the number of shares deposited
and to be taken up.
8. Bidder takes up and pays for shares (deposited during the mandatory 10-day extension
period) not later than 10 days after the deposit.
9. Commence second stage transaction, if applicable.

A typical timetable for a plan of arrangement is as follows:
Step
• Meeting of the board of the offeror to consider proceeding with arrangement.
• Approach the target and negotiate terms of the arrangement agreement.
• Approach significant target shareholders in respect of support agreements and

negotiate same.
• Meeting of the board to approve terms of the arrangement agreement.
• Execution of the arrangement agreement.
• Announce execution of the arrangement agreement by press release.
• File material change report in respect of execution of the arrangement agreement.
• Preparation of draft proxy circular, notice of meeting and proxy forms for
shareholders of the target.
2. Record date for meeting of target shareholders, not more than 60 days and not less than
30 days prior to meeting date.
3. Seek interim order of court regarding arrangement, prior to mailing of meeting materials.
4. Mail meeting materials to shareholders of the target and file with securities regulatory
authorities and applicable stock exchanges, at least 21 days prior to the meeting date.
5. Meeting of security holders of target to consider arrangement.
6. Seek final order of court to approve plan of arrangement, as soon as possible after meeting
date.
7. Completion of arrangement, subject to satisfaction of conditions to completion, by filing of

articles of arrangement, as soon as possible after final court order.

Set out below is an overview of the main steps for a public takeover and a plan of arrangement bid in Canada.
Public takeover bid (indicative timeline)
Start
process Day 0 Day 15 Day 105 Day 108 Day 115 ASAP
Prepare bid
Launch bid Directors’ circular is Expiry of bid Bidder immediately Expiry of mandatory Start of “second stage”
materials (and
sent to shareholders (subject to takes up shares minimum 10-day bid transaction, if applicable
negotiate the of target and filed with mandatory 10–day deposited under bid extension
support Offeror mails offer
securities regulatory extension)
agreement if a documents to If at least 90% of target
authorities and stock
friendly bid) shareholders of target Pays for shares Bidder takes up and shares are tendered to
exchanges
and files with within 3 business pays for shares the bid within 120 days
securities regulatory days deposited during after the commencement
authorities and stock extension (no later than of the bid, the bidder may
exchanges 10 days after deposit) acquire the remaining
shares
Initial deposit period: bid open for a minimum of 105 days (35 days 10-day extension designed to alleviate concern that target shareholders will be coerced If less than 90% of target
under certain friendly scenarios) into tendering shares before the initial expiry of the bid (avoiding the risk of being left shares are tendered to the
behind as a minority shareholder) bid, offeror may use voting
power to cause target to
enter into a “second step
business combination”
transaction (amalgamation or
other form of reorganization
involving offerer / its affiliates)
that must be completed
within 120 days after expiry
of the bid

Plan of arrangement (indicative timeline)
Start
process Day 0 Day 21 Day 39 Day 60 Day 65 Day 70
Execution of the
Record date for Seek interim court Mail meeting Meeting of target Seek final court order to Complete arrangement by
arrangement meeting of target approve plan of filing articles of
order regarding materials to target shareholders to
agreement (and shareholders (not arrangement shareholders and consider arrangement arrangement (assumes a arrangement (3 to 5
voting support more than 60 days (assumes a typical file with securities typical turnaround time of business days following
agreements) and
and not less than 30 time of about 2 weeks regulatory about 5 days to obtain final order assuming all
announcement of
days before meeting to finalize meeting authorities and stock final court approval) other conditions are met)
the transaction by
date)* materials from the exchanges
press release
start of the process
and 1 week to obtain
court order once
materials are
submitted to court)
30 – 60 days
at least 21 days
*Some issuers are comfortable with calling the meeting before the interim court order. Others prefer to wait until the court order is obtained before setting the record and calling the meeting to ensure that the meeting materials can be finalized
on the initial timeline.

6 Takeover Tactics
6.1 2016 amendments
Historically, the primary tactic used in defense of a hostile takeover bid was a shareholder rights plan
or poison pill. Effective from May 2016, the CSA adopted a new takeover bid regime. The new bid
regime attempts to rebalance the dynamics among Canadian bidders, target boards and target
shareholders, particularly in relation to poison pills. The three key elements are:
(a) Extension of the minimum bid period to 105 days
All non-exempt takeover bids must remain open for a minimum of 105 days (rather than 35 days
under the prior regime), subject to a target board’s ability to reduce the bid period. The extension of
the minimum bid period to 105 days is aimed at addressing concerns that target boards did not have
enough time to respond to hostile takeover bids.
A target board may reduce the bid period:
• by issuing a news release announcing a shorter bid period for a specific takeover bid (which
cannot be less than 35 days), in which case all outstanding or subsequent takeover bids will
also become subject to the shorter minimum bid period (a bidder can, of course, elect to keep
its bid open for longer); or
• by issuing a news release indicating that it has agreed to enter into or determined to effect a
specified alternative transaction (generally, a plan of arrangement or other change of control
transaction requiring shareholder approval), in which case all outstanding or subsequent
takeover bids must remain open for at least 35 days.
(b) Irrevocable minimum tender condition of more than 50%
All non-exempt takeover bids must be subject to a mandatory tender condition that a minimum of
more than 50% of all outstanding target securities owned or held by persons other than the bidder
and its joint actors be tendered and not withdrawn before the bidder can take up any securities under
the takeover bid. The purpose of this requirement is to ensure that the acquisition of control of a target
through a takeover bid will only occur if a majority of independent shareholders support the
transaction.
(c) Mandatory 10-day bid extension
All non-exempt takeover bids must be extended by the bidder for at least 10 days after the bidder
achieves the mandatory minimum tender condition and all other terms and conditions of the bid have
been complied with or waived. This requirement is aimed at alleviating the concern that target
shareholders will be coerced into tendering their shares before the initial expiry of the bid (for
example, to avoid the risk of being left behind as a minority shareholder of an issuer with a controlling
shareholder).
6.2 Rights plans and other defensive tactics

The extended minimum bid period provides the target board more time to evaluate a takeover bid,
seek an alternative transaction or attempt to enhance the takeover bid. However, the target board
must at all times exercise a duty of care and act honestly and in good faith with a view to the best
interests of the corporation (see also 4.1(i)).
The CSA has reiterated its position, in accordance with NP 62-202, that securities regulators will
examine the actions of target boards to determine whether they are abusive of security holder rights,
and it may intervene where shareholders are deprived of their ability to respond to an unsolicited bid
or a competing bid. The CSA are of the view that the takeover bid provisions should favour neither the

offeror nor management of the target company, and should leave the shareholders of the target
company free to make a fully informed decision.
The utility of rights plans to block bids or to extend their time is now limited due to the longer minimum
bid period which gives target boards more time to respond to a bid (being the main justification for the
existence of rights plans). Furthermore, a recent decision of the Ontario Securities Commission, has
stated that it will be a rare case in which a tactical rights plan (implemented in the face of a bid) “will
be permitted to interfere with the established features of the takeover bid regime such as the
opportunity for bidders and shareholders to make decisions in their own interests regarding whether
to tender to a bid by entering into lock-up agreements of the kind under consideration in [that] case.” It
remains to be seen what types of rights plans will be accepted as enhancing shareholder choice,
though it appears they could be used to prevent certain creeping takeover bids which are otherwise
still possible using limited transactions that are exempt from the formal bid requirements.
Also, the extended minimum bid period, the power of the target board to reduce the minimum bid
period to 35 days and the corresponding costs and uncertainty provide more incentive for bidders to
enter into friendly transactions with target companies rather than to commence a hostile bid.

Takeover
7.1 Compulsory acquisition
If, within 120 days of the commencement of the bid, at least 90% of the shares of the target are
tendered to the bid (other than shares held by or on behalf of the offeror or its affiliates or associates),
an offeror may, acquire the remaining shares of the target at the same price offered under the bid
under the “compulsory acquisition” provisions of the relevant corporate statute (subject only to the
remaining shareholders’ rights to dissent and be paid fair value for their shares).

If fewer than 90% of the shares of the target are tendered to the bid (other than shares held by or on
behalf of the offeror or its affiliates or associates), the offeror may requisition a meeting of the target’s
shareholders and use its voting power to cause the target to enter into a “second step business
combination” transaction that is completed no later than 120 days after the expiry of the bid. The
second step business combination might take the form of an amalgamation, plan of arrangement or
some other form of reorganization involving the offeror or one of its affiliates.
In addition to obtaining two-thirds approval of votes cast by the target’s shareholders entitled to vote
thereon (including by the offeror with respect to its shares of the target), as required under corporate
law, the completion of the transaction requires the approval of at least 50% of the target’s remaining
minority shareholders. Shares of the target acquired by an offeror and its joint actors before a
takeover bid (and in some circumstances, pursuant to “lock-up” agreements) cannot be voted in
connection with this approval of a second step business combination. However, if a certain disclosure
is made in the original takeover bid circular, the offeror may vote the shares tendered into the bid as
part of the required 50% approval. The shareholders affected by such actions have a right to dissent
and be paid fair value for their shares.

Subject to an exception for “normal course trades”, an offeror may not purchase shares of the target
after the expiry of the takeover bid until 20 business days thereafter, except by way of a transaction
that is generally available to holders of that class of securities on identical terms.

8 Delisting
An application will need to be made to the relevant stock exchange to delist the securities and with
the applicable securities regulatory authorities for the target company to cease to be a reporting
issuer. The application to cease to be a reporting issuer can only be made once there are fewer than
51 target company shareholders remaining, and not more than 15 shareholders in any one Canadian
jurisdiction. The target company’s continuous disclosure obligations under the Canadian securities
regime cease once it ceases to be a reporting issuer in Canada.

David Palumbo, Greg McNab and Matthew Grant in the Toronto office are the most appropriate
contacts within Baker McKenzie for inquiries about public M&A in Canada.
David Palumbo Greg McNab

Toronto Toronto
david.palumbo@bakermckenzie.com greg.mcnab@bakermckenzie.com
+1 416 865 6879 +1 416 865 2311
Matthew Grant
Toronto
matthew.grant@bakermckenzie.com
+1 416 865 6897

Chile
1 Overview
Chilean laws governing public takeovers have been designed to protect minority shareholders and
increase market liquidity and transparency.
In order to provide protection for minority shareholders, Chilean laws establish that when a change in
corporate control takes place, a public bid must offer prorated acquisition of all shares, with certain
limited exceptions, such as in cases of equity issuance, mergers, and transfer of controlling interests
that do not involve a substantial premium over market price.
Chilean laws also establish that when a controlling shareholder accumulates more than two-thirds of
the shares of a listed company, the shareholder has to launch a tender offer for the remaining shares.
This provision is designed to protect shareholders from very high concentrations of ownership, which
may reduce liquidity and therefore restrict remaining shareholders.
For those cases where a tender offer is not mandatorily required (or voluntarily conducted), Chilean
law requires a prior public announcement to be made by any person who intends to obtain a
controlling interest in a listed company. The announcement must be made at least 10 working days in
advance of the acquisition or as soon as negotiations begin or information and documentation related
to the listed company are distributed.

The main rules and principles of Chilean law relating to public takeover bids can be found in:
• Chapter XXV of Law No. 18,045 (the “Securities Act”) relating to tender offers; and
• General Ruling No. 104 (the “Tender Offer Rules”) issued by the Financial Market
Commission (the “Commission”).

While the aforementioned chapter of the Securities Act and the Tender Offer Rules contain the main
legal framework for public takeover bids in Chile, there are a number of additional rules and principles
within the Securities Act, Law No. 18,046 (the “Corporations Act”) and other rulings issued by the
Commission that are to be taken into account when preparing or conducting a public takeover bid,
such as:
(a) The rules relating to the disclosure of significant shareholdings and other material information
in listed companies based on the Securities Act and rulings issued by the Commission. For
further information, see 3.4 below.
(b) The rules relating to insider dealing and market manipulation.
(c) The rules under the Securities Act and regulations issued by the Commission relating to the
public offering of securities.
(d) The rules and regulations regarding merger control. These rules and regulations are not
further discussed herein.
2.3 Supervision and enforcement by the Commission

Public takeover bids are subject to supervision and control by the Commission. The Commission is
the securities regulator in Chile.

The Commission has a number of legal tools that it can use to supervise and enforce compliance with
the public takeover bid rules, including administrative fines. In addition, criminal penalties could be
imposed by the courts in the case of non-compliance.

The following general principles apply to public takeovers in Chile. These rules and principles
generally flow from several provisions applicable under the Tender Offer Rules and the Securities Act:
(a) subject to certain exceptions, a mandatory tender offer is required in order to consummate
any acquisition that would allow the purchaser to obtain, either directly or indirectly, the
“control” of a Chilean listed corporation;
(b) all holders of the securities of an offeree company of the same class must be afforded
equivalent treatment;
(c) the offer price must be clearly determined, and it must be payable in cash or with securities
that have been duly registered and can be publicly offered as consideration payable for the
offered shares;
(d) each member of the board of directors of the offeree listed corporation must provide a written
report reflecting their individual opinion with respect to the convenience (or inconvenience) of
the offer to the shareholders of the company; and
(e) all shareholders that have tendered their shares within the offer period have the right to
withdraw their acceptances at any time until the end of the offer period.
2.5 Foreign Investment Restrictions

Foreign investments are not restricted in Chile. Unless in the context of specific industries and sectors
which must have Chilean national ownership, such as fishing companies, 100% foreign ownership of
investments is possible. Therefore, from a foreign investment perspective, takeovers are not generally
subject to prior governmental or regulatory approvals. The above is notwithstanding customary anti-
trust approvals and approvals required for certain specific industry sectors (e.g., insurance, banking
and telecoms), which need special authorizations for a change of control.
Although not a requirement or restriction, foreign investors may enter into foreign inward investment
agreements with Chile’s Foreign Investment Agency, which benefits them primarily because of foreign
exchange considerations. A foreign inward investment that is registered with Chile’s Foreign
Investment Agency will provide the investor with the right and guarantee of access to the foreign
exchange market in order to perform future returns of capital, dividend distributions and repatriation of
the sale proceeds of the investment, in foreign currency.
A cash investment would also allow the foreign investor to register the foreign inward investment with
the Central Bank, and would be a valuable supporting tool to keep track of the investment and the
cost basis incurred by the investor for Chilean tax purposes.

levels of shareholding within a Chilean listed corporation:
Shareholding Rights
One share • The right to attend and vote at general shareholders’ meetings.

Shareholding Rights
• The right to vote in elections of board members.
• The right to obtain a copy of the documentation submitted to

general shareholders’ meetings and the right to obtain sufficient,
true and timely information with respect to the legal, economic
and financial situation of the company.
• The right to submit questions to the directors and statutory

auditors at general shareholders’ meetings (either orally at the
meeting, or in writing prior to the meeting).
• The right to obtain dividends. Unless unanimous consent of all

shareholders is obtained, the company must distribute at least
30% of its profits as dividends on an annual basis.
• The right to retrieve its capital contribution upon liquidation of the

company.
• The right to freely transfer its shares. The bylaws of a corporation

(sociedad anónima) must not contain any limitation to the free
transfer of shares, but the shareholders may subscribe
shareholders’ agreements which may include limitations.
• A pre-emptive right for the subscription of new shares issued by

the company on a pro rata basis to the number of shares owned
by each shareholder.
• The right to withdraw from the company in case of certain

decisions taken by the shareholders’ meetings, such as merger,
de-merger, transformation, sale of more than 50% of the
company’s assets, etc. If a shareholder exercises its withdrawal
rights, the company must pay the market value of the shares to
the withdrawing shareholder (or book value in case the shares of
the company are not sufficiently traded).
• The right to withdraw from a listed company in case a controller

acquires 95% or more of the shares of the company.
• The right to withdraw from the company in case the controlling

shareholder, after acquiring two-thirds of the shares, does not
launch a tender offer over the remaining shares after 30 days
from reaching the two-thirds stake.

shareholders’ meetings for irregularities as to form, process, or
other reasons.
• The right to file a liability claim against directors.
1% The right to nominate independent directors, when applicable.
5% The right to file a minority claim for damages, on behalf of the company,
against any person who has caused a loss to the company as a
consequence of a breach of the Corporations Act, its regulations, the

Shareholding Rights
bylaws of the company, the rules issued by the board according to law
and the rules issued by the Commission.
10% • The right to request the board of directors to convene a general

• The right to include comments in the annual report of the

company.
More than 50% (at a The ability to take any decision at a shareholders’ meeting other than the
general shareholders’ ones that require a special quorum under the law (or the bylaws). These
meeting) are the following:
• Transformation, spin off or merger of the company.
• Amendment of the term of the company.
• Dissolution.
• Change of corporate domicile.
• Capital decrease.
• Approval and valuation of contributions different than money.
• Amendment of the faculties reserved to the shareholders’

meeting or the limitations and attributions of the board.
• Decrease in the number of members of the board.
• Disposal of 50% or more of the assets of the company or of one

of its subsidiaries that represents at least 20% of the assets of
the company, or any disposal of the shares of such subsidiary
that implies that the company ceases to be its controller.
• The way in which the profits of the company are distributed.
• Granting of guaranties to guarantee third parties’ obligations,

except in the case of subsidiaries.
• Acquisition of shares issued by the company.
• Others that the bylaws may include.
• Validation of formal nullity vices in connection with any of the

above matters.
• To grant the squeeze-out right referred to below.
• Approve or ratify related party transactions.
Two-thirds of the voting The ability to take any decision at a shareholders’ meeting (unless the
shares bylaws require a higher quorum).
95% The bylaws may expressly authorize the controlling shareholder who has
acquired 95% of the shares to force all other shareholders to sell their
shares (a “squeeze-out”).


Chilean law contains a number of rules that already apply before a public takeover bid is announced.
announcements of a potential takeover bid by a bidder or a target company and prior due diligence by
a candidate bidder. The main restrictions and hurdles have been summarized below. Some careful
planning is therefore necessary if a candidate bidder or target company intends to start up a process
that is to lead towards a public takeover bid.

remain applicable. The rules include, amongst other things, that manipulation of the target’s stock
price, e.g., by creating misleading rumors, is prohibited.

Generally, any person or entity who directly or indirectly owns 10% or more of the share capital of a
listed company, or acquires such percentage, is required to make a public disclosure and inform the
Commission, and each stock exchange in Chile on which the company has listed its shares, of all
acquisitions and transfers of shares of the company they make. They are also required to disclose if
such an acquisition has been made with the intention to acquire control over the company or,
otherwise, if the acquisition is only a financial investment. Lastly, such shareholders are also required
to disclose any transaction involving agreements or securities in which the transaction price or result
depends or is significantly conditioned by the variation or evolution of the price of the shares of the
company.

transparency. These rules include that a company must immediately disclose all material information.
For further information on material information disclosure, see 6.1 below.
The facts surrounding the preparation of a public takeover bid may constitute material information if it
is known by the target company. If so, the target company must communicate this to the Commission.
However, the board of the target company can communicate this material information to the
Commission on a confidential basis if it believes that a disclosure would affect the transaction or
would otherwise affect the interest of the company. This could, for instance, be the case if the target’s
board believes that an early disclosure would prejudice the negotiations regarding a bid.
Notwithstanding the above, it may be the case that the target company does not know about a
shareholder or third party’s intention to launch a tender offer, in which case no disclosures need to be
made to the Commission or the public before the offer is launched.

Unless the bidder (and the controlling shareholder in case of a negotiated transaction) is subject to
the supervision of the Commission, it would not be required to disclose to the Commission and/or the
market its intention to launch a tender offer or the fact that negotiations with respect to a potential
tender offer are taking place until the date the bidder initiates the tender offer process. However, in
the event the bidder (or the controlling shareholder) is under the supervision of the Commission, e.g.,
by being a listed entity, then the bidder (and/or the controlling shareholder) would be obligated to
make the proper disclosures to the Commission.

The Commission has the right to require mandatory disclosure in limited cases, typically based on
leaks and unusual movement of shares price.
3.7 Due diligence

Neither the Securities Act nor the Corporations Act contain specific rules regarding the question of
whether or not a prior due diligence can be organized, nor how such due diligence is to be organized.
Be that as it may, the concept of a prior due diligence or pre-acquisition review by a bidder is
generally accepted by the market and the Commission, and appropriate mechanisms have been
developed in practice to organize a due diligence or pre-acquisition review and to cope with potential
market abuse and early disclosure concerns. These include the use of strict confidentiality procedures
and data rooms. However, as listed companies are regulated and a substantial amount of information
about them is publicly available, due diligence in the case of listed entities is usually more limited than
that of privately held companies.
Members of the board of directors and officers of the target company have a legal duty to abstain
from disclosing any information with respect to the business of the target company, and the target
company in general, that they may have access to based on their position and that has not been
officially disclosed by the target company. In relation to this, we note that the following information has
to be officially disclosed by any listed company and therefore would qualify as public information: (a)
financial statements that have been previously reported to the Commission (on a quarterly basis); (b)
Material Facts (Hechos Esenciales) that have been reported as required by applicable law; (c) annual
reports of the target company; (d) any information that has been disclosed as “Information of Interest”
on the website of the target company; and (e) any other information that has been disclosed or
delivered to the authorities based on laws and regulations applicable to listed companies, such as the
bylaws and articles of incorporation of the target company and minutes of shareholders’ meetings.
In order for a bidder to conduct due diligence on the non-public information of the target company, the
board of the target company has to approve the disclosure of information and adopt the necessary
measures to maintain the confidentiality of such information. Generally, shareholders of a listed
company (whether controlling or not) do not have the right to access the non-public information of a
listed company. Therefore, even in the case where negotiations are being conducted between the
controlling shareholder and the potential bidder, the board has to approve the disclosure of
information for due diligence purposes.
3.8 Usual structure

Generally, listed company takeovers in Chile are the result of negotiations between the prospective
bidder and the controlling shareholder(s) of the target company. The process generally involves (i)
private meetings and discussions between the controlling shareholder and a potential bidder; (ii)
execution of a confidentiality agreement; (iii) delivery of public information to the potential bidder; (iv) a
non-binding offer from the potential bidder to the controlling shareholder (or binding offer subject to
adjustment based on a due diligence); (v) signing of Letter of Intent or Agreement to Tender (in both
cases being the price subject to determination or adjustment, as applicable, based on a due
diligence); and (vi) launching of tender offer.
The involvement of the board of the target company before the launching of the tender offer, if any,
will depend on the stage in which non-public information is requested for due diligence purposes.
3.9 Agreement to tender

Usually the transaction involves the signing of an Agreement to Tender which in public M&A
transactions takes the place of a Share Purchase Agreement used in private M&A transactions. The
Agreement to Tender is executed by the controlling shareholder(s) and the bidder, pursuant to which
the bidder agrees to commence a tender offer to acquire all the issued and outstanding shares of the

target company, and the controlling shareholder agrees to tender all of the target company’s shares
owned by it.
3.10 Publicity
As referred to above, and assuming that neither the controlling shareholder nor the bidder are listed
companies in Chile, the transaction may become public or may be communicated to the Commission
at various different stages in the process. Listed below are the most common ones:
• At the start of the negotiations, when the controlling shareholder communicates to the board
of the target company that it intends to sell its stake and requests them to deliver non-public
information for due diligence by the prospective bidder. In this case, the board may agree to
(i) communicate the Commission and the general public that the board has become aware of
the transaction; or (ii) make the Commission aware of the transaction on a confidential basis,
in which case the agreement of three-quarters of the members of the board will be needed.
• After an Agreement to Tender or Letter of Intent has been entered into.
• If no binding document has been entered into, once the offer is published according to 4.3
below.
Notwithstanding the above, the bidder or the controlling shareholder may, at any time, inform the
public about the transaction by any means they deem appropriate.
4.1 General rules
There are three main forms of takeover bids in Chile:
(a) a voluntary takeover bid – A bidder voluntarily makes a tender offer for all or part of the
shares issued by the target company (and securities issued by the company conferring the
right to acquire shares of the target company);
(b) a mandatory takeover bid – The Securities Act requires that any acquisition of shares,
whether direct or indirect, allowing the purchaser to obtain control of a listed company must
be made through a tender offer in accordance with and subject to the tender offer rules
included in the Securities Act (see 4.3).
There are five exemptions from the obligation to conduct a mandatory tender offer, namely:
• control obtained by subscribing for newly issued shares of the target company;
• acquisition of shares transferred by the controller of the target company in circumstances

where (i) the shares have “stock exchange presence”; (ii) the price is payable in cash; and (iii)
the price is not “substantially” higher than “market price” (currently, this means not more than
a 10% premium over market average price).
• acquisitions that result from a merger;
• acquisitions that are a result of inheritance; and
• acquisitions resulting from judicial non-voluntary enforcement.
Other kinds of mandatory bids include the following:
• if, after an acquisition, the controlling shareholder reaches a two-thirds voting stake in the
target company, it must launch a tender offer for the remaining shares; and

• if an individual or entity intends to take control over a company which in turn controls a listed
company that represents more than 75% of its consolidated assets, the offeror must first
launch a tender offer for the shares of the listed company for a number of shares that allows
the bidder to take control over that entity; and
(c) a squeeze-out bid – A shareholder who has reached a 95% stake in the target company after
a voluntary or mandatory tender offer can squeeze-out the remaining holders of shares.
However, this right is subject to other specific requirements and may only be exercised by the
controlling shareholder if the bylaws of the target company expressly authorize it.
Both mandatory and voluntary tender offers are subject to the same rules. Squeeze-out bids, in turn,
are subject to more simple rules, given their nature.
4.2 Control
Under the Securities Act, an individual or entity, or group of individuals and/or entities with a
collaboration agreement (acting in concert), would be considered to be controllers of a company if
they, directly or indirectly through other individuals or entities, own shares issued by such company
and have the power to (i) secure the majority of votes in shareholders’ meetings and elect the majority
of the members of the board, or (ii) decisively influence the administration of the company.
4.3 The tender offer process

(a) Tender offer commencement publications
One day before the commencement of the validity of the tender offer, the offeror must publish a
“highlighted” tombstone advertisement in at least two national newspapers announcing that a tender
offer is being launched (the “Tender Offer Commencement Publications”). At this point the tender offer
becomes public. These Tender Offer Commencement Publications must include the essential
elements of the tender offer so that any recipient, i.e., any existing shareholder, may correctly
understand the terms of the tender offer.
The tender offer itself must have a validity term which cannot be shorter than 20 days nor longer than
30 days. However, in the event the shares are registered with securities depositaries, the term must
be 30 days. Nevertheless, the tender offer term can be extended one time only for a minimum of five
and a maximum of 15 additional days.
After the Tender Offer Commencement Publications are made, certain restrictions apply to the
administration of the target company. For example, the company is precluded from selling relevant
assets, redeeming shares, incorporating subsidiaries and increasing its indebtedness by more than
10%). Additionally, the target company is required to provide an updated shareholders’ list to the
offeror or bidder, and the directors of the company must issue an independent opinion on the
convenience of the tender offer for the shareholders.
(b) Prospectus
The bidder is required to prepare and deliver a prospectus to the Commission, the stock exchanges
and the target company on the same date the Tender Offer Commencement Publications are made.
The prospectus must contain the terms and conditions of the tender offer and should be available to
the shareholders of the target from the date the tender offer begins and throughout the entire period
the offer is open.
The following information must be included in the prospectus:
• the shares and securities to which the tender offer relates, including the minimum number or
percentage of shares required for the tender offer to be successful. The tender offer may be
directed to obtain all or part of the shares, with no statutory minimum, except for the case in

which the tender offer is launched for the shares of the subsidiary of a company in which the
offeror intends to take control, in which case the offer must be for a number of shares that
allows the bidder to take control over the company. If the maximum percentage is reached,
then the bidder will acquire such number of shares from all shareholders who tendered their
shares on a pro rata basis;
• price and payment conditions;
• the terms and sources of financing of the tender offer by the offeror. In case the bidder has
obtained loans or capital contributions for these purposes it shall have to provide the
necessary documents to evidence that it has or will have the funds required for the
acquisition;
• any potential guarantees that may be offered in order to secure the seriousness of the offer;
and
• conditions that may trigger the revocation of the offer.
(c) General terms and conditions applicable to a tender offer
The tender offer is irrevocable for the bidder. However, the offer itself may contain objective
conditions that may trigger the right to revoke it. Such conditions must be included in both the Tender
Offer Commencement Publications and the prospectus and are normally referred to as material
adverse changes.
In contrast to bidder, acceptance by the shareholders may be retracted at any time during the term of
the tender offer. This is especially important in the event a competing tender offer is launched at a
higher price.
(d) Publication of the results of the tender offer
On the third day after the end of the tender offer period, the offeror must publish the result of the
tender offer in the same newspapers on which the Tender Offer Commencement Publications were
made. If the publications are not made in time, the shareholders will have the right to withdraw their
acceptance. In any case, the results cannot be published later than 15 days after the end of the
tender offer period.
4.4 Price and payment conditions

The price must be determined and may be paid in cash or publicly offered securities. It may also be
increased during the offer period, which may be necessary, e.g., if a competing bid is made.
Generally, there is no minimum or maximum price. An exception to this is in the case of a mandatory
tender offer where, after the acquisition, the controlling shareholder reaches a two- thirds voting stake
in the target company. In this case, the price should not be lower than the price to be paid to
dissenting shareholders who exercised withdrawal rights in case those rights were triggered.
If, during the term within the 30 days prior the commencement of the tender offer and the 90 days
after the publication of the notice of results, the bidder has directly or indirectly acquired or acquires
shares subject to the tender offer in a different price than the one offered during the tender offer, the
shareholders who sold their shares to the bidder have the right to require the bidder to pay them the
difference. Therefore, in case the price of the tender offer was higher, the shareholders who sold
outside the tender offer have the right to require the difference. Likewise, if the tender offer price was
lower, the shareholders who tendered their shares may require the difference.
4.5 Competitive bids

During the term of a tender offer, other offers may be launched. These competitive offers will be
subject to the same rules applicable to the original bid. However, they will only be valid in case their

respective Tender Offer Commencement Publications are published no later than 10 days before the
end of the term of the original tender offer.
If the original tender offer is being conducted in a stock exchange, the competitive bids must be
conducted under the same procedure and end on the same date. If the original tender offer has not
been made in a stock exchange, the competitive bids may have a different end date. Notwithstanding
the above, in both cases (in or outside a stock exchange), if the term of the original tender offer is
extended, the competitive bids may only be extended in a way that their end date is the same as the
new end date of the original tender offer.
Individuals or entities that are bidders in one of the competitive or original tender offers may not
tender their own shares in the other offers.
5 Timeline
The table below contains a summarized overview of the main steps of a typical public takeover bid
under Chilean law.
Day Action
- Various actions and activities must be complied with before the Tender Offer
Commencement Publications are made, including, among others:
(i) execution of an Agreement to Tender with the controlling shareholder;
(ii) defining and implementing a tax and corporate structure in order to
consummate the acquisition;
(iii) execution of an agreement between the bidder and one or more investment
banks or broker dealers that shall act as the administrator of the offer;
(iv) obtaining and organizing all relevant information required to be disclosed in the
prospectus, including detailed corporate, legal and business information of the
offeror, its related companies and ultimate controllers; and
(v) preparing all the various documents and forms of contracts involved in the
tender offer, including, among others, the Tender Offer Commencement
Publications, the prospectus, the form of purchase agreements and transfer
deeds to be executed by each shareholder tendering its shares.
1 Tender Offer Commencement Publications and delivery of prospectus to the

Commission, stock exchanges and target company.
2 Commencement or initial effective date of tender offer.
7 Each director of the target company prepares a written report with respect to the
convenience or inconvenience of accepting the tender offer. The report must be
delivered to the Commission, the stock exchanges, the offeror and the administrator of
the tender offer.
31 Final effective day of the tender offer.
34 Public notice disclosing the results of the tender offer.
34 Closing and closing date.
35 Payment of purchase price.

This timeline may be altered in case of extension or other amendments made to the bid, such as
increase in the price, which may occur, for example, in case a competing offer is launched.
Set out below is an overview of the main steps for a tender offer in Chile.

Tender offer (indicative timeline)
Start
process Day 0 Day 1 Day 6 Day 30 Day 33 Day 34
Announcement of Initial effective Presentation of directors’ Final effective Closing date Payment of
tender offer in two date of tender report on the day of the purchase price
national offer convenience of accepting tender offer Offeror publishes
newspapers the offer (reports cannot results of tender
be delivered later than 5 offer in national
Delivery of business days after the newspapers
prospectus to the initial announcement of (results cannot be
Financial Market the tender offer) published later than
Commission, stock 15 days after end
exchanges and Report must be delivered of tender offer
target to the Financial Market period)
Commission, stock
exchanges, offeror, and
administrator of tender
offer

6 Takeover Tactics
6.1 Material information
A Chilean listed company is required to immediately disclose to the public all material information that
relates to it and the securities it offers, including all material changes in information that has already
been disclosed to the public. Under the Securities Act, “material information” is all the information that
a wise man (hombre juicioso) would consider important for their investment decisions.
It is up to the company to determine if certain information qualifies as “material information”. This may
be a difficult exercise, and a large gray area will exist as to whether certain events will need to be
disclosed or not.
The intention of the controlling shareholder to sell its stake in a listed company and/or the existence of
negotiations oriented to the acquisition of a listed company qualifies as material information for the
target company and therefore has to be disclosed as a “Hecho Esencial”. Thus, in the event the target
company becomes aware of that information either through its board of directors or through its CEO
as legal representative of the target company, the target company would be required to report the
material information to the Commission and the stock exchanges. The target company may provide
the material information to the Commission on a confidential basis as a “Hecho Reservado” if at least
three-quarters of the board of directors of the target company vote to approve this. This may be
because negotiations are ongoing and because public disclosure may adversely affect the best
interests of the target company.
As stated before, to the extent they are not listed companies themselves, neither the controlling
shareholder nor the potential bidder are obligated to disclose their intentions or negotiations until the
Tender Offer Commencement Publications are made.

The basic legal framework regarding insider dealing and market abuse under Chilean law is set forth
in the Securities Act.
relation to trading in listed securities.

After the tender offer publications are made, certain restrictions apply to the administration of the
target company. The company is precluded from selling relevant assets, redeeming shares,
incorporating subsidiaries, and increasing its indebtedness by more than 10%.
Other common takeover defense mechanisms, such as increasing the capital without providing
preferential subscription rights to the existing shareholders or issuing warrants prior to the takeover
bid in favor of “friendly person(s)” (without providing preferential subscription rights to the
shareholders), are not allowed, given that there must be pre-emptive right for subscription of newly
issued shares in favor of all shareholders.
The table below contains a summarized overview of the mechanisms that we understand are
commonly used by target companies in other jurisdictions as a defense against a takeover bid,
explaining whether they could be adopted in Chile or not. These take into account the restrictions that
apply to the board and shareholders’ meeting of the target company pending a takeover bid.

1. Capital increase, veto rights, • All these actions would require an

maximum concentration of amendment to the bylaws of the
shareholdings and other similar company and therefore the affirmative
restrictions (poison pills) vote of more than 50% or two- thirds, as
applicable, of the shares of the
company at an extraordinary
shareholders’ meeting specially
convened for said purpose.
• In addition, the completion of all these
actions would require more than the
standard 30-day period for tender offers.
2. Share buyback • Expressly forbidden under the Tender

Offer Rules.
Share buyback “with a view to avoid imminent
and serious harm” to the company.
3. Sale of crown jewels • Expressly forbidden under the Tender

Offer Rules.
An arrangement affecting the assets of, or
creating a liability for, the company which is
triggered by a change in control or the launch of
a takeover bid.
4. Cross shareholdings • Any cross shareholdings between two

companies are prohibited (even
Acquisition of shares in the potential bidder
indirectly through other entities).
prohibits a bidder from holding shares in a
However, this defense may not be very
target.
effective given that if a cross
shareholding occurs the transaction is
not automatically voided, as the
situation is required to be remedied
within a year.
• The acquisition of voting shares in the
bidder may need to be disclosed
pursuant to applicable transparency
rules.
• Requires sufficient means to finance the
acquisition.
5. Frustrating actions • Expressly forbidden under the Tender

Offer Rules.
Actions such as significant acquisitions,
disposals, changes in indebtedness, etc.
6. Shareholders’ agreements • Allowed.

Shareholders undertake to (consult with a view • Disclosure obligations may apply if all
to) vote their shares in accordance with terms participants jointly own more than 10%,
agreed among them. and advance disclosure informing their
intention to obtain control will also be
necessary in case participant

shareholders acting jointly would

acquire control of the company

Takeover
7.1 Squeeze-out
The minority shareholders of a listed company in which a controlling shareholder acquires more than
95% of the shares of that company will have withdrawal rights, i.e., the right to sell their shares to the
company at market value (or book value in case the shares of the company are not sufficiently
traded), within 30 days after the bidder has reached 95% of the shares.
The bylaws of a listed company may authorize that, following a tender offer, if the bidder (together
with the persons with whom it acts in concert) holds 95% of the share capital, all other shareholders
can be forced to transfer their shares to the bidder at the price offered in the takeover bid, provided
that the bidder acquired, via the acceptance of a takeover bid launched for the acquisition of 100% of
the shares, at least 15% of the share capital from shareholders that are not related to the bidder.
The price for the shares will be the same as that offered in the tender offer, duly adjusted (for inflation
purposes) plus ordinary interest (average interest paid by banks and financial institutions in similar
amount operations).
This squeeze-out right may be exercised by the bidder within 15 days after the end of the term to
exercise the withdrawal rights referred to above, by means of a certified letter sent to each
shareholder and a “highlighted” advertisement in a national newspaper and on the webpage of the
target company, if applicable.
The purchase of the shares will be completed 15 days after the exercise of the squeeze-out rights is
notified to the shareholders, without the need to sign any document. The target company will register
the shares under the controlling shareholder’s name and immediately make the price paid for the
shares available to the squeezed-out shareholders.
7.2 Restrictions on acquiring securities after acquiring control

During a period of 12 months after a shareholder has taken control of the target company by any
means, such controlling shareholder cannot directly or indirectly acquire any shares of the target
company for an amount equal to or higher than 3% of the stock capital of its shares without launching
a tender offer. The price per share offered in the tender offer may not be lower than the price paid in
the operation that allowed the shareholder to take control of the target company.
8 Delisting
The delisting of listed entities in Chile is subject to the approval of two- thirds of the issued voting
shares of the company. This decision triggers withdrawal rights to the dissenting shareholders. In
order for the delisting decision to be valid, the company must not meet any of the requirements which
make it mandatory to be a listed entity, namely:
• 500 or more shareholders; and
• Companies in which at least 100 shareholders own at least 10% of the company, excluding
the ones who directly or indirectly own 10% or more.
The company has to request the Commission to be delisted, which will approve it if all the
requirements have been met.

Jaime Munro, Fernando Castro and Cristóbal Larrain in the Santiago office are the most appropriate
contacts within Baker McKenzie for inquiries about public M&A in Chile.
Jaime Munro Fernando Castro

Santiago Santiago
jaime.munro@bakermckenzie.com fernando.castro@bakermckenzie.com
+56 2 2367 7022 +56 2 2367 7064
Cristóbal Larrain
Santiago
cristobal.larrain@bakermckenzie.com
+56 2 2367 7054

Colombia
1 Overview
The Colombian M&A market has experienced significant growth in the past few years, with foreign
direct investment reaching US$14.5 billion in 2019. This is a 25% increase with respect to 2018. It is
expected that the Colombian market will experience an increase in cross-border M&A transactions,
thanks to the measures taken by the Colombian government to boost investor confidence by
observing key standards on corporate governance, investment, competition, capital markets and
public administration, among other important efforts. However, the impact of the COVID-19 crisis on
these forecasts is still uncertain.
M&A activity in Colombia has traditionally been dominated by private transactions and there have
been relatively few transactions involving listed companies and public tender offers in recent years.
However, transactions involving public companies tend to be larger and more visible than even the
largest private deals.
The largest deals in the recent past include:
• The acquisition of government-controlled, publicly listed Isagen S.A., Colombia’s third largest
power generator, by Brookfield. The first stage involved the US$2 billion acquisition of the
Colombian government’s 58% stake, which was followed by two mandatory tender offers to
acquire the remainder from minority shareholders.
• The acquisition by public tender offer of a controlling stake in Odinsa by Grupo Argos S.A.
• The acquisition of a significant minority stake in LifeMiles BV, one of the largest and fastest-
growing loyalty coalition programs in Latin America, a subsidiary of Avianca Holdings S.A.,
the company that integrates several Latin American airlines under the Avianca brand.
• The acquisition by public tender offer of a controlling stake in Gas Natural S.A. E.S.P., one of
the main gas distribution and retail supply companies in Colombia, by Brookfield.
• The acquisition by public tender offer of a 30% stake in Cartón de Colombia S.A., one of the
main players in the corrugated and paperboard packaging industry, by Smurfit Kappa.

Public takeovers are primarily regulated by the following:
• Law 964/2005 is the general statute in which the Colombian congress sets out the general
principles, objectives and criteria for the government to regulate the Colombian securities
market. It assigns overall responsibility for the regulation and supervision of the Colombian
securities market to the Superintendency of Finance (“SFC”).
• Decree 2555/2010 is an all-encompassing regulation that, among many other topics,

regulates public takeovers (section 6.15.2.1.1. and following).
• The operational aspects of public tender offers are defined in Chapter 3 of the General
Regulations (Reglamento General) issued by the Bolsa de Valores de Colombia (“BVC”).
• Colombian antitrust and competition rules, such as Law 155/1959, Law 1340/2009 and
Decree 2153/1992 (among others), are relevant if antitrust clearance is required as a
condition for obtaining control of the target company.

2.2 The regulatory authorities
(a) The SFC is the national authority, linked to the Ministry of Finance, responsible for the
regulation and supervision of the financial sector (banks and insurance companies) and the
capital markets (issuers and stock exchanges).
(b) The BVC is the Colombian securities exchange and administers trading platforms for equities,
fixed income and standard derivatives securities. It is listed on the stock exchange.
(c) The Superintendency of Industry and Commerce (Superintendencia de Industria y Comercio

or the “SIC”) is the competition authority of Colombia. It is responsible for preventing
restrictive trade practices and unfair competition and is also in charge of the general antitrust
clearance regime for mergers and acquisitions.

In Colombia, the decision to sell shares of public companies lies exclusively with the shareholders.
The management of the target does not play a formal role in the process. Therefore, the traditional
distinction between hostile bids (that is, those bids that occur without the consent of the management
of the target, but rather by directly approaching the target’s shareholders) and recommended bids is
not applicable.
Hostile bids that occur without the prior agreement of the target company’s shareholders are allowed,
but are uncommon for the following reasons:
(i) A bidder who has not reached an agreement with the controlling shareholder will not have
access to information that is not in the public domain.
(ii) A shareholder cannot be compelled to sell its shares and can simply abstain from accepting a
public tender offer.
Takeover bids in Colombia are regulated so that third parties (that is, parties that have not reached an
agreement with the controlling shareholders) are given the opportunity to submit competing bids
against a public tender offer that has been launched by a bidder who has already reached an
agreement with the controlling shareholder. In practice, competing bids are rare because the third
party bidders are at a clear disadvantage in terms of access to information regarding the target.
Any person or group of persons with the same “beneficial owner” can only acquire, directly or
indirectly, shares representing 25% or more of the issued and outstanding shares of a company
registered at a Colombian stock exchange through a mandatory tender offer (oferta pública de
adquisición, or an “OPA”). Anyone who already owns 25% or more of the shares of the relevant
company can only increase its shareholding by more than 5% through a mandatory tender offer. The
objective of these regulations is to ensure that all shareholders have the opportunity of receiving the
same treatment afforded to the controlling shareholders.
A mandatory tender offer will also be required whenever a company intends to delist the shares from
a Colombian stock exchange if the decision is not approved by all of the shareholders of the
company.
A mandatory tender offer will not be required whenever all the shareholders of the company accept
that the transaction is carried out directly between the buyer and seller or whenever the transaction
takes place between entities controlled by the beneficial owner of the relevant shares. A mandatory
tender offer will also not be required for the subscription of newly issued shares or capitalization of
receivables, among other scenarios.
Under current regulations, “prearranged transactions”, i.e., transactions referring to shares listed in a
stock exchange, the terms and conditions of which are not the result of open market transaction but of

direct negotiations between the parties, are considered to be contrary to the securities regulations,
unless they are disclosed to the SFC, the BVC and the market in general at least one month before
the date on which they are to be perfected. The disclosure of the transaction must include the main
terms and conditions thereof, in which exchange or trading system the transaction will take place as
well as the date and time when the transaction will take place. This means that other shareholders
could interfere by agreeing to sell their shares pursuant to a tender offer. In those cases where the
tender offer refers to anything less than 100% of the issued and outstanding shares of the company,
this could mean that the shareholders with whom an agreement has been reached may not be able to
dispose of all the shares that they intended to sell. Conversely, it could mean that, in order to assure
the selling shareholders that they will dispose of all the shares they intend to sell, the buyer may have
to be willing to buy more shares than it needs. This is because, in those cases where the shares
tendered exceed demand, shares are allocated proportionally among the relevant sellers.
If the shares representing 25% or more of the target company (or representing more than 5% in the
case of purchases by someone who already owns 25% or more) are acquired as a result of a merger,
in Colombia or abroad, an ex-post tender offer would have to be launched within the three months
following the transaction, unless the purchaser divests the relevant shares within the three months
following the merger. The tender offer would have to refer to a percentage of shares of the target
equal to those that were directly or indirectly acquired by way of the merger (or the balance in case
the percentage acquired by way of merger is greater than 50%) at a minimum price to be established
in an independent valuation, as described in 4.4 below.
Minority shareholders owning at least 1% of the shares of a listed company may request that a tender
offer be carried out by the owner of more than 90% of the shares of the relevant listed company if this
threshold was reached by means other than a tender offer for all of the shares in the company. In this
case, the mandatory tender offer would have to be launched within the three months following the
date on which the 90% threshold was exceeded.
A person may carry out a tender offer, even if not legally required to, for at least 5% of the shares of a
company listed on a Colombian stock exchange, subject to the same rules set out for mandatory
tender offers.
2.4 Foreign Investment Restrictions

Foreign investments are permitted in all areas of the economy with the exception of activities related
to defence and national security, and the processing and disposal of toxic, dangerous or radioactive
waste not generated in the jurisdiction. A Colombian company can be 100% foreign-owned, except for
foreign investment in national broadcast television, which is limited to a maximum of 40% ownership
of the relevant operator.
Under the Colombian Constitution and foreign investment regulations, foreign investment in Colombia
shall receive the same treatment as an investment made by Colombian nationals. The conditions for
reimbursement of foreign investment and remittance of profits in effect at the time the investment is
registered may not be changed so as to affect foreign investment adversely, except on a temporary
basis when the international reserves are lower than the value of three months of imports.
Foreign investments in Colombia do not require prior government approval. They must be registered
with the Central Bank either automatically upon the receipt of currency in the jurisdiction or by filing
the relevant documents with the Central Bank. Registration of foreign investment guarantees the
foreign investor access to the foreign exchange market to purchase convertible currency to remit
dividends and repatriate the investment. The failure to report or register could result in the imposition
of fines by pertinent agencies and require the investor to rely on the free market for access to
convertible currency. The registration of foreign investment must be annually updated with the Central
Bank, unless there are no changes in the foreign direct investment of the relevant company.
Colombia has exchange controls, but these are relatively benign.

All foreign currency for the operations listed below must be acquired or handled through ‘exchange
intermediaries’, i.e., Colombian banks, some financial institutions and exchange houses, or by using
overseas registered foreign currency accounts known as ‘compensation’ accounts:
• import and export of goods
• foreign loans and earnings related thereto
• foreign investment in Colombia and related earnings
• Colombian investment abroad and related earnings
• financial investments in securities issued or assets located abroad and earnings related to
them, except when investment is made with currency originating from ‘free market’ operations
(i.e., operations that are not required to be made through the exchange market)
• guarantees in foreign currency
• derivatives
All other foreign currency operations may be made through the exchange market or the free market.
In general, Colombian regulations do not allow for the set-off of the payment obligations resulting from
these transactions.
Unless the law specifically permits otherwise, the general rule is that payments between Colombian
companies or individuals must be made in Colombian pesos, or through compensation accounts.

levels of shareholding within a Colombian listed corporation:
Shareholding Rights

general shareholders’ meetings.

auditors at general shareholders’ meetings.

other reasons.
• In case of a merger or de-merger, if dissenting or absent from the

relevant shareholders’ meeting, the right to request that its
shares be acquired by assenting shareholders, or redeemed by
the company.
• The ability to block at a general shareholders’ meeting:
o “asymmetrical splits”;
o waivers of public tender offers; and

Shareholding Rights
o adoption of resolutions by unanimous written consent.
1% The right to request that a mandatory tender offer be carried out by the
owner of more than 90% of the shares of the relevant listed company, if
this threshold was reached by means other than a tender offer for all of
the shares in the company.
More than 22% (at a The ability at a general shareholders’ meeting to block any decision to
general shareholders’ withhold payment of dividends below legal limit (50% of distributable
meeting) profits).
More than 30% (at a The ability at a general shareholders’ meeting to block the disapplication
general shareholders’ (limitation or cancellation) of the preferential subscription right of existing
meeting) shareholders.
More than 50% (at a The ability at a general shareholders’ meeting:

• to appoint a majority of directors;
meeting)
• to appoint and dismiss statutory auditors and to approve their
remuneration;
• to approve the annual financial statements (including the

remuneration report of the remuneration committee of the board
of directors); and
• to take decisions for which no special majority is required.
3.2 Public domain information

In Colombia, listed companies are required to provide two main types of information to the market
through the SFC and the stock exchange:
(a) General or periodic information – This is comprised of annual and quarterly information.
Annual information must contain, at the very minimum, the information that a company is
required to provide to its shareholders at the annual meeting (financial statements,
management and auditor reports and proposed dividends, among other matters). Quarterly
information is mostly comprised of financial statements.
(b) Special or “material” information – This is comprised of any and all facts and events relating to
the listed company, its business, assets or the shares themselves that would have been
considered by a diligent expert when deciding to purchase, sell or maintain its shares in the
target company or that the diligent expert would have considered when deciding how to vote
such shares. This type of information must be disclosed to the market as soon as possible
after the company becomes aware of it.
3.3 Pre-bid due diligence

In a recommended bid, access to the information required by the bidder is made possible through the
management of the company. The information that shareholders have the right to access directly,
regardless of the size of their stake and whether or not they control the target, is limited to the
financial statements, main accounting books and minute books only 15 days before the annual
meeting. Therefore, the controlling shareholders must persuade (or otherwise prevail over)
management to make the information available to the bidder.

In bids where the management of the target company is involved (which are the overwhelming
majority, if not all the cases), a confidentiality agreement is usually entered into as a condition to
provide the bidder with access to information that is not in the public domain. From there on, the
bidder conducts a standard due diligence review (that is, analogous to the review that would be
undertaken in the acquisition of a private company).
The purchaser will be able to request and review the same type of information regarding the target as
if the target were a privately held company, provided that the target has complied with its obligation to
report all “material corporate events” (información eventual) that may be reflected in the information
that the purchaser is given access to.
Under a more conservative approach, the purchaser may want to limit its access to any relevant
information that qualifies as “reserved information” until after the board of directors of the target has
authorized the management of the target to disclose such reserved information to the purchaser.
If management of the target company is not aligned with the controlling shareholder’s intention of
facilitating a sale to a bidder (which would be extremely rare, except in the case of a competing
takeover bid), the bidder would only have access to information that is in the public domain.
There are no specific rules that require secrecy prior to the announcement of the bid. Managers are,
however, subject to general rules regarding the use of privileged information and insider trading. The
target company must disclose the existence of a binding agreement regarding the sale of the shares,
as special or material information, as soon as its management learns of its existence. Prospective
buyers and sellers are also subject to the same obligation if they, themselves, are listed on a
Colombian stock exchange.
3.4 Documentation
A written undertaking of the purchaser to the selling shareholders is the market practice. However, as
a general rule, the acquisition of shares of a listed company can only take place through the stock
exchange. Therefore, the agreement in which the terms of the exchange are agreed does not actually
transfer title to the shares. The scope of the agreement, with respect to the specific issue of share
transfer, is limited to a commitment by:
(i) one of the parties (the bidder) to launch a public tender offer in the pre-agreed terms and
conditions; and
(ii) the other party (the selling shareholder) to accept the public tender offer in the pre-agreed
terms.
These obligations are expressly subject to the condition precedent of securing the relevant approvals
under the stock exchange regulations, among others, and, if applicable, antitrust clearance. This does
not, however, prevent the parties from including customary stipulations, such as representations and
warranties from the sellers regarding the shares and the target, and any relevant indemnification
obligations.
Under current regulations, these “prearranged transactions” are considered to be contrary to

securities regulations since they are not the result of open market transactions but of direct
negotiations between the parties. They are only valid if they are disclosed to the SFC, the BVC and
the market in general at least one month before the date on which they are to be perfected, in order to
give third parties the chance to prepare a competing offer. The disclosure of the transaction must
include the main terms and conditions as well as the date and time when the transaction will take
place.

3.5 Antitrust clearance

Antitrust clearance is required if the transaction involves all the following elements:
(a) unrelated parties are engaged in the same economic activity with regard to a sector of
production, supply, distribution, or consumption of a given article, raw material, product,
merchandise or service in Colombia;
(b) the parties establish a horizontal relationship, or participate in the same chain of value,
establishing a vertical relationship; and
(c) turnover or total assets of the parties from the previous fiscal year, individually or combined,
exceed the annual thresholds established by the SIC. For operations undertaken in 2020, the
thresholds were set at the peso equivalent of 60,000 minimum monthly wages (in Colombia,
the minimum wage is often used as an index in order to maintain thresholds) so, for antitrust
clearance purposes, the applicable monthly wage is COP 877,803, meaning that the peso
threshold figure would be COP 52,668,180,000 , approximately US$ 14 million .
When the combined market share is below 20%, the parties can apply for an abbreviated notification
procedure. In this case, the transaction is deemed as authorized on filing of a mere notification to the
SIC by the parties.
If the percentage exceeds 20%, the transaction must be expressly cleared by the SIC. The timeframe
for clearance depends on the complexity of the competition issues triggered by the transaction, but
usually takes from three to six months.
4.1 Means of obtaining control
The main means of obtaining control of a public company in Colombia are:
(a) by acquiring existing shares from current shareholders as a result of a public tender offer;
(b) subscribing newly issued shares of the public company; or
(c) by upstream mergers – this is less common.
Contests to obtain board control are uncommon, probably because, despite being listed, public
companies in Colombia usually have a defined controlling shareholder and therefore the majority of
the board and the management have been appointed by that controlling shareholder.

(a) Public tender offers are mandatory when:
(i) any person (or group of persons sharing the same beneficial owner) intends to
acquire shares representing 25% or more of the voting shares of a company
registered at a Colombian stock exchange;
(ii) any person (or group of persons sharing the same beneficial owner) who already
owns 25% or more of the voting shares of the relevant company intends to increase
its voting shares by more than 5%;
(iii) any person (or group of persons sharing the same beneficial owners) acquires voting
shares representing 25% or more of the target company as a result of a merger, in
Colombia or abroad (in which an “ex- post” public tender offer must be launched
within three months of the transaction, unless the purchaser divests the relevant
shares within three months of the merger);

(iv) any person (or group of persons sharing the same beneficial owner) holds more than
90% of the shares of the relevant listed company, if:
(A) this threshold was reached by means other than a public tender offer for all of
the shares in the company; and
(B) the minority shareholders owning at least 1% of the voting shares of the target
company request the launch of a public tender offer (in which case the public
tender offer must be launched within three months of the date on which the
90% threshold was exceeded); and
(v) the shareholders of the relevant listed company decide to delist the company by a
majority shareholder vote (as opposed to a unanimous shareholder vote).
4.3 Requirements
Any public tender offer must comply with the following requirements:
(a) the bidder must file a formal request before the SFC with a draft of the notice of its intention to
make the public tender offer, which must include:
(i) the name and identification of the bidder;
(ii) the minimum and maximum number of shares that the bidder will accept (with at least
a 20% margin between the two figures);
(iii) information regarding the shares that the bidder already has in the target company;
(iv) the price at which the shares will be paid;
(v) the date by which the offer must be accepted;
(vi) settlement terms, form of payment and guarantees;
(vii) the name of the exchange broker to be used in the operation; and
(viii) information on any pre-agreed terms.
(b) the bidder must also prepare and submit an offering memorandum for the SFC’s approval
with the following information (in addition to the information contained in the public tender
offer notice):
(i) the name and principal place of business of the target company;
(ii) the name, principal place of business and main corporate activity of the bidder;
(iii) a list of individuals or companies that are subordinated to the bidder or are part of a
business group with it, indicating the corresponding corporate structure;
(iv) information on shares that the bidder already has in the target company and any
prearranged transactions or other agreements between the bidder and the
management of the target company or other shareholders;
(v) a brief description of the tax, foreign exchange and foreign investment regimes
applicable to the securities offered as payment (if applicable);
(vi) information on the methodology used to value the securities offered as payment (if
any);

(vii) certificates by the bidder and its investment bank on the accuracy of the offering
memorandum and information on authorizations to issue the offer;
(viii) other information requested by the SFC; and
(ix) once the above information is filed, the SFC must notify the BVC in order to suspend
the negotiation of the shares until the day after the publication of the public tender
offer notice. The SFC has five days to make any comments it deems relevant.
4.4 Pricing rules

No minimum price rules would apply in a tender offer unless the bidder purchased shares in the three
months prior to submitting the request for authorization with the SFC (in which case, the offer cannot
be less than the highest price paid during those three months) or if there is an agreement to carry out
prearranged transactions (in which case, the price cannot be less than the price set forth in such
agreement). Applicable regulations simply provide that the tender offer notice must clearly indicate
either (i) the price at which the shares offered in payment shall be delivered as well as the applicable
exchange ratio, i.e., the number of shares delivered in payment for each share to be acquired, or (ii)
the manner in which the price and the exchange ratio are to be calculated.
If the relevant shares are acquired by way of a merger (or otherwise indirectly, if applicable), the
minimum price of the mandatory tender offer would have to be established in an independent
valuation by a professional firm, hired and paid by the bidder but approved by the SFC. In any event,
if the acquisition was through a merger of the target, the price offered for the shares could not be less
than the value assigned for the shares in the merger. The shares to be paid in this type of tender offer
can only be paid in cash.
The fact that the price at which the mandatory ex-post tender offer is established by a third party has,
in the past, led purchasers to carry out a voluntary ex-post tender offer before the mandatory ex-post
tender offer, at the same price per share paid in the direct acquisition, as a way of sweeping up as
many shares as possible before the mandatory tender offer has to be launched.
If the obligation to carry out a mandatory tender offer is triggered by the decision to delist the shares,
the minimum price of the mandatory tender offer would have to be established in an independent
valuation by a professional firm, hired and paid by the listed company but approved by the SFC.
If the obligation to carry out a mandatory tender offer is triggered by the request of minority
shareholders (as described in 4.2(a)(iv)(B) above), the minimum price of the mandatory tender offer
would have to be established in an independent valuation by a professional firm, hired and paid by the
listed company but approved by the SFC.
4.5 Committed funding

Committed funding is required before announcing an offer. The bidder must launch the public tender
offer through a brokerage firm and establish a performance guarantee, covering a certain percentage
of the value of the transaction. The guarantee can be in the form of a stand-by letter of credit or a
bank guarantee, among other options.
4.6 Announcing and making the offer

The public tender offer notice must be posted three times in the finance section of a national
newspaper, the first within the five days following the expiration of the SFC’s term to make comments
to the draft public tender offer notice and offering memorandum; the other postings cannot be spaced
more than five calendar days apart. The public tender offer notice must also be posted in the official
information bulletins issued by the BVC, on each day from the date the public tender offer notice is
first published until the day set for acceptances.

Acceptances of the public tender offer must be made on the date set-out in the public tender offer
notice, at a special two-and-one half hour round, under an open outcry system. If the number of
acceptances meets the minimum amount of shares indicated by the bidder, then all acceptances are
deemed to be final. If not, the bidder is not required to purchase the shares (but may freely elect to do
so).
If more acceptances are received than the maximum offer was made for, then the right to sell shares
is allocated proportionally among those who accepted.
Agreements in which one party (the bidder) agrees to launch a public tender offer and another party
(the shareholder) commits to accept the public tender offer must be disclosed to the SFC, the BVC
and the market in general at least one month before the date on which they are to be perfected. This
must include an indication of the main terms and conditions of the exchange or trading system of the
transaction as well as the proposed date and time of the transaction.
4.7 Offer conditions

Once a public tender offer is launched, it is irrevocable and cannot be made subject to pre-conditions.
However, it is common for the bidder’s obligation to launch the tender offer to be subject to the
satisfaction of preconditions, such as securing antitrust clearance.
In practice, once the offer is launched, the only condition to which the bidder’s obligation to purchase
the shares can be subject to is that acceptances received at least equal the minimum number of
shares set out in the notice.
5 Timeline
The approximate timeline for the public tender offer can be summarized as follows:
(a) Submission of the application to the SFC;
(b) Issuance of comments or expiration of the SFC’s term to issue comments (five business days
from the date of submission): eight days from the date of submission;
(c) Publication of the first notice in a national newspaper (within five calendar days after the
issuance of comments or expiration of the SFC’s term to issue comments): 13 days from the
date of submission at the latest;
(d) Start date for receipt of acceptances (five business days from the publication of the first
notice): 20 days from the date of submission;
(e) Final deadline for the acceptance of the tender offer (a minimum of 10 and a maximum of 30
business days from the start date for receipt of acceptances): 35 days from the date of
submission at the earliest; and
(f) Delivery of target shares by selling shareholders and payment by purchaser: 38 days from the
date of submission.

Set out below is an overview of the main steps for a public tender offer in Colombia.
Public tender offer (indicative timeline)
Start
process A Day A+7 Day 0 Day 7 Day 49 Day (X)
Bidder notifies Expiry of term within which Publication of tender offer Start date for receipt of Final deadline for acceptance of Delivery of target shares
Superintendency of the SFC can issue notices (3 times in national acceptances (5 tender offer (35 days from the by selling shareholders
Finance (SFC) of comments on the draft newspaper, within 5 days from business days from the date of submission at the earliest) and payment by buyer
intent to make tender tender offer notice (8 days A+7 and within 5 days of each publication of the first (38 days from the date of
N.B., At the latest 2 business
offer from the date of other) notice, and 20 days submission)
days before the final deadline for
submission) from the date of
The public tender offer notice acceptance of the tender offer is
submission)
must also be posted in the the maximum term to launch a
official information bulletins competing tender offer (OPA)
issued by the Colombia Stock
Exchange (BVC), on each day
from the date the public tender
offer notice is first published
until the day set for acceptances
5 business days 5 business days 10 - 30 business days

6 Takeover Tactics
6.1 Stake building
Colombian listed companies are required to disclose, as special or material information, the fact that a
single person has become the beneficial owner of 5% or more of its voting shares.
No express equivalent obligation exists for non-listed shareholders. In practice, shareholders who
hold or intend to hold 5% or more of voting shares (but less than 25%) avoid the disclosure
obligations by acting through two or more holding vehicles, none of which exceed the 5% threshold.
Some consider such an approach aggressive. If the holding vehicles are given discretion on how the
shares are to be voted (pursuant to a mandate, a trust, a swap or otherwise) then the shareholder is
not considered to be the ultimate beneficial owner and thus no reporting obligations apply, even under
the most conservative of approaches.
6.2 Target’s response

The decision to sell shares of public companies lies ultimately with the shareholders. If an offer is not
agreed to by the shareholders or is otherwise unsolicited, the shareholders can simply choose not to
accept it. However, if the shareholders have already accepted a tender offer launched by a particular
bidder, and a third party launches a competing public tender offer (which, by definition, must be better
than the original offer and must be launched before the period for accepting the original bid has
expired), the shareholders would be deemed to have accepted the third party’s competing bid.
6.3 Dissenting shareholders’ rights

In addition to its ability to refuse to sells its shares, a dissenting shareholder has the following rights:
(i) Disclosure and opportunity to prepare a competing takeover bid – Takeover bids in Colombia
are regulated so that when someone agrees to launch a public tender offer and shareholders
commit to accept the public tender offer, all other shareholders are informed about the main
aspects of the negotiated offer (main terms and conditions of the exchange or trading system
of the transaction as well as the proposed date and time of the transaction), and given the
opportunity to prepare a bid to compete with the negotiated public tender offer; and
(ii) Public tender offer in event of delisting – Although the decision to delist a company’s shares
simply requires a majority shareholder vote, the shareholders voting in favor of the delisting
must carry out a public tender offer addressed to all shareholders that either voted against the
delisting or did not attend the shareholders’ meeting where the delisting was approved. The
public tender offer must be carried out within three months of the shareholders’ meeting. The
delisting only becomes effective after the public tender offer is completed.
6.4 Break fees

Break fees have been used to require initial selling shareholders to pay amounts to the bidder in the
event a third party launches a competing offer and ultimately acquires the relevant shares. The
market’s view is that break fees are acceptable in principle, as long as the amounts involved do not
hinder the right of selling shareholders to accept competing offers. The SFC has revised agreed break
fees to reduce them whenever it considers they are excessive.

Takeover
In Colombia, minority shareholders cannot be compelled to sell their shares. Minority shareholders
owning at least 1% of the shares of a listed company may request that a mandatory tender offer be
carried out by the owner of more than 90% of the shares of the relevant listed company, if this
threshold was reached by means other than a tender offer for all of the shares in the company. In this

case, the mandatory tender offer would have to be launched within the three months following the
date on which the 90% threshold was exceeded.
8 Delisting
Going-private transactions are extremely rare because the typical Colombian target portfolio company
is not listed on the stock exchange.
The decision to delist a company’s shares simply requires a majority shareholder vote. However, the
shareholders voting in favor of the delisting must carry out a public tender offer addressed to all
shareholders that either voted against the delisting or did not attend the shareholders’ meeting where
the delisting was approved. The public tender offer must be carried out within three months of the
shareholders’ meeting. The delisting only becomes effective after the public tender offer is completed.

Jaime Trujillo, Andres Crump and Juan Felipe Vera in the Bogotá office are the most appropriate
contacts within Baker McKenzie for inquiries about public M&A in Colombia.
Andres Crump Juan Felipe Vera

Bogotá Bogotá
andres.crump@bakermckenzie.com juan.vera@bakermckenzie.com
+57 1 634 1560 +57 1 634 1580
Jaime Trujillo
Bogotá
jaime.trujillo@bakermckenzie.com
+57 1 634 1570

Czech Republic
1 Overview
The number of companies with their shares listed on the Prague Stock Exchange (the “PSE”) is not
currently large enough to allow any significant public M&A market in the Czech Republic to develop.
Accordingly, there is not at present any public M&A activity and all major deals in the M&A sector are
private M&A transactions.

The main rules and principles of Czech law relating to public takeover bids can be found in:
• Czech Act No. 104/2008 Coll. (“Czech Takeover Bids Act”);
• Czech Act No. 125/2008 Coll. (“Czech Transformations Act”);
• Czech Act No. 90/2012 Coll. (“Czech Companies Act”); and
• Czech Act No. 256/2004 Coll. (“Czech Capital Markets Act”)
The main body of the Czech takeover legislation is based on Directive 2004/25/EC of the European
Parliament and of the Council of 21 April 2004 on takeover bids (“Takeover Directive”). This directive
was aimed at harmonizing the rules on public takeover bids of the different Member States of the
European Economic Area (EEA). Be that as it may, the Takeover Directive still allows Member States
to take different approaches in connection with some important features of a public takeover bid (such
as the percentage of shares that, upon acquisition, triggers a mandatory public takeover bid on the
remaining shares of the target company, and the powers of the board of directors). Accordingly, there
are still relevant differences in the national rules of the respective Member States of the EEA
regarding public takeover bids.

While the aforementioned legislation contains the main legal framework for public takeover bids in the
Czech Republic, there are a number of additional rules and principles that are to be taken into
account when preparing or conducting a public takeover bid, such as:
(a) The rules relating to the disclosure of significant shareholdings in listed companies (the so-
called transparency rules). These rules are based on Directive 2004/109/EC of the European
Parliament and of the Council of 15 December 2004 on the harmonization of transparency
requirements in relation to information about issuers whose securities are admitted to trading
on a regulated market and amending Directive 2001/34/EC and related EU legislation. For
(b) The rules relating to insider dealing and market manipulation (the so-called market abuse
rules) under (i) Directive 2014/57/EU of the European Parliament and of the Council of 16
April 2014 on criminal sanctions for market abuse (“Market Abuse Directive”), which is
effective from 3 June 2017, and (ii) Regulation 596/2014 of 16 April 2014 (“Market Abuse
Regulation”), which is effective from 3 July 2016. The Market Abuse Regulation is directly
applicable in the Czech Republic.
(c) The rules relating to the public offer of securities and the admission to trading of these
securities on a regulated market. These rules could be relevant if the consideration that is
offered in the public takeover bid consists of securities. These rules are set out in the directly
applicable Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14

June 2017 on the prospectus to be published when securities are offered to the public or
admitted to trading on a regulated market and related EU legislation.
(d) The general rules on the supervision and control of the financial markets.
(e) The rules and regulations regarding merger control. These rules and regulations are not
2.3 Supervision and enforcement by the Czech National Bank

Public takeover bids are subject to the supervision and control of the Czech National Bank (“CNB”).
The CNB is the principal securities regulator in the Czech Republic.
The CNB has a number of legal tools that it can use to supervise and enforce compliance with the
public takeover bid rules, including administrative fines. In addition, criminal penalties could be
imposed by the courts in case of non-compliance.
The CNB also has the power to grant (in certain cases) exemptions from the rules that would
otherwise apply to a public takeover bid.

The following general principles apply to public takeovers in the Czech Republic. These rules are
based on the Takeover Directive:
(a) all holders of the securities of an offeree company of the same class must be afforded
(b) the holders of the securities of an offeree company must have sufficient time and information
to enable them to reach a properly informed decision on the bid. Where it advises the holders
of securities, the board of the offeree company must give its views on the effects of
(c) the board of an offeree company must act in the interests of the company as a whole and
must not deny the holders of securities the opportunity to decide on the merits of the bid;
(d) false markets must not be created in the securities of the offeree company, the offeror
distorted;
(e) an offeror must only announce a bid after ensuring that it can fulfil any cash consideration in
full, if such is offered, and after taking all reasonable measures to secure the implementation
of any other type of consideration; and
(f) an offeree company must not be hindered in the conduct of its affairs for longer than is
2.5 Foreign investments restrictions

Although foreign investments are not directly restricted in the Czech Republic, the so called
“significant reporting entities” have an obligation to compile and submit a statement on direct
investments in the Czech Republic to the Czech National Bank. This obligation is applicable to a
Czech company with a direct foreign investment provided that the amount of the foreign investor’s
interest in the company’s business or the volume of loans granted or received as part of its direct
investment in the Czech Republic amounts, at the end of the calendar year, to at least CZK

25,000,000. In April 2020, the Czech Government approved a bill introducing a complex framework of
screening foreign investments in strategic sectors of the Czech economy. This bill, including its
effective date, has yet to be approved by Parliament, and thus it may be subject to changes before it
becomes law.

levels of shareholding within a Czech listed corporation:
Shareholding Rights
• The right to submit questions to and receive answers from the
company at general shareholders’ meetings (either orally at the
• The right to submit proposals and counterproposals relating to
issues on the agenda of a general shareholders’ meeting.
• The ability at a general shareholders’ meeting to block a
decision to merge shares if the shareholder holds at least one
share to be merged.
shareholders’ meetings for conflict with law, bylaws or good
morals.
• In case of a merger or de-merger, the right to file a liability claim
against directors or to request the nullity of the merger or de-
merger.
1% of shares in a • The right to put items on the agenda of a general shareholders’

company having meeting and to table draft resolutions for items on the agenda.
registered share capital
• The right to request the board of directors to convene a general
over CZK500 million
or
• The right to request a supervisory board to check performance
3% of shares in a of duties by the board of directors.
company having
• The right to claim damages on behalf of the company against a
registered share capital
member of the board of directors or the supervisory board.
over CZK100 million
• The right to bring a claim for payment of the issue price on
or
behalf of the company against a shareholder who is in default
5% of shares with payment of such issue price.
• The right to represent the company in the proceedings
commenced by bringing such claim.

Shareholding Rights
More than 10% • The ability to block a splitting-up of a joint- stock company with
an unequal exchange ratio.
• The ability to block a decision to transfer assets of a company
to a shareholder.
More than 25% (at a • The ability to block a transformation of the company.
• The ability at a general shareholders’ meeting to block the
meeting)
following decisions:
o change of type or form of shares;
o change of the rights attached to a certain type of
shares;
o restriction of the transferability of registered shares or
book-entry shares;
o exclusion of participating securities from trading on a
European regulated market;
o exclusion or restriction of the preferential right to
acquire convertible or preferential bonds;
o allowing the distribution of profit to persons other than
the shareholders;
o exclusion or restriction of the shareholder’s preferential
right when the registered share capital is being
increased by subscription of new shares; and
o increase of the registered share capital with in-kind
contributions.
More than 33% (one- • The ability to block a decision to provide financial assistance.
third)
• The ability at a general shareholders’ meeting to block following
decisions:
o an amendment of the bylaws;
o those resulting in an amendment of the bylaws;
o authorizing the board of directors to increase the
registered share capital;
o the possibility to set off a pecuniary receivable towards
the company against a receivable from the payment of
the issue price;
o the issuance of convertible or preferential bonds;
o liquidating the company; and
o distributing the liquidation balance.
More than 50% (at a The right to take decisions for which no special majority is required.
meeting)

Shareholding Rights
90% The possibility to force all other shareholders to sell their shares (a
“squeeze-out”).

Czech law contains a number of rules that already apply before a public takeover bid is announced.
These rules impose restrictions and hurdles in relation to prior stake building by a bidder and
announcements of a potential takeover bid by a bidder or a target company. The main restrictions and
hurdles have been summarized below. Some careful planning is therefore necessary if a potential
bidder or target company intends to start up a process that is to lead towards a public takeover bid.

remain applicable. For further information on the rules on insider dealing and market abuse, see 6.3
below. The rules include, among other things, that manipulation of the target’s stock price, e.g., by
creating misleading rumors, is prohibited. In addition, the rules on the prohibition of insider trading
prevent a bidder that has inside information regarding a target company (other than in relation to the
actual takeover bid) from launching a takeover bid.

Pursuant to these rules, if a potential bidder starts building up a stake in the target company, it will be
obliged to announce its stake if the voting rights attached to its stake have passed an applicable
disclosure threshold. The relevant disclosure thresholds in the Czech Republic are 5%, 10%, 15%,
20%, 25%, 30%, 40%, 50% and 75%. The initial threshold in companies with registered share capital
over CZK100 million is 3%. For companies with registered share capital over CZK500 million, the
initial threshold is 1%.
When determining whether or not a threshold has been passed, a potential bidder must also take into
account the voting securities held by the parties with whom it acts in concert or may be deemed to act
in concert (see 3.9 below). These include affiliates. The parties could also include existing
shareholders of the target company with whom the potential bidder has entered into specific
arrangements (such as call option agreements).

transparency. These rules require that a company must immediately announce all inside information.
For further information on inside information, see 6.1 below. The facts surrounding the preparation of
a public takeover bid may constitute inside information. If so, the target company must announce this.
However, the board of the target company can delay the announcement for serious reasons as long
as the public is not misled thereby and the company is able to protect such information. The CNB
must be notified of the delay by submitting a statement of reasons thereof and the content of
information to be announced.

Prior to the public announcement of the takeover bid upon a notification containing information that
there are no reasons for prohibition of such announcement (or a failure to issue a letter of prohibition)
by the CNB (see 6.2), no one is permitted to announce the launching of a public takeover bid. This

prohibition not only applies to a bidder, but also to the target company (even if the target company has
to announce the launch of a bid pursuant to the general disclosure obligations described in 3.5).
A bidder that intends to announce a public takeover bid must first inform the CNB of its intention and
wait for its reaction. If the CNB issues a notification containing information that there are no reasons
for the prohibition of such announcement (or if it fails to issue a letter of prohibition), the bidder will
announce the takeover bid. If the CNB fails to issue a letter of prohibition, the takeover bid will be
announced no sooner than 15 days and no later than 30 days after the bidder notified the CNB. If the
CNB issues a notification not prohibiting the announcement, the bid may be announced even sooner
(following the notification). The bid may be withdrawn if such possibility is expressly set out in the bid
and provided that the CNB, following a prior notice of the intention to withdraw the bid, does not
prohibit such withdrawal.
If there are substantiated rumors or leaks that a (potential) bidder intends to launch a public takeover
bid, there is a legal obligation to make an announcement or to act in a manner that will give rise to an
obligation to make a takeover bid (see 3.7).

(a) Early disclosure demanded by the Czech Takeover Bids Act
If serious fluctuations of the target company’s share price occur or if there are rumors or leaks
that a bidder intends to launch a takeover bid and it is reasonably foreseeable that such
rumors or leaks are connected with the preparation of such takeover bid, the bidder will
announce its intention to make a takeover bid or act in a manner that will give rise to an
obligation to make a takeover bid. Such information must be provided to the CNB.
(b) Put-up or shut-up
In addition to the foregoing rule, a bidder that has announced its intention to make a takeover
bid must publish such bid within 90 days. If the bidder fails to comply with this rule, a 1-year
protection period as in 7.3 below will apply, i.e., the bidder and the persons acting in concert
with the bidder cannot make another bid aimed at acquiring securities of the same target
company unless an obligation to make a takeover bid arises or in a case of a counter-bid.
3.8 Due diligence

Czech public takeover bid rules do not contain specific rules regarding the question of whether or not
a prior due diligence can be organized, nor how such due diligence is to be organized. Be that as it
may, the concept of a prior due diligence or pre-acquisition review by a bidder is generally accepted.

For the purpose of the Czech takeover bid rules, persons “act in concert”:
• if they collaborate with the bidder in order to acquire or execute control of the enterprise of
target company, e.g., by coordinated exercise of voting rights; or
• if a person cooperates with the target company in order to frustrate the success of a takeover
bid.
Under the Czech Takeover Bids Act, the following persons are deemed to act in concert:
• controlling and controlled entities;
• persons who entered into an agreement relating to the exercise in concert of their voting
rights for election of members of bodies of the target company; and

• members of a group of companies.
In view of the above rules and criteria, the target company could be one of the persons with whom a
shareholder acts in concert or is deemed to act in concert. For example, this is the case where a
determine whether or not persons act in concert. This is especially relevant in relation to mandatory
takeover bids. If one or more persons in a group of persons acting in concert acquire voting securities
as a result of which the group in the aggregate would pass the 30% threshold, the members of the
group will have a joint obligation to carry out a mandatory takeover bid, even though the individual
group members do not pass the 30% threshold.
There are three main forms of takeover bids in the Czech Republic:
• a voluntary takeover bid, in which a bidder voluntarily makes an offer for the voting securities
issued by the target company (and securities issued by the company conferring the right to
acquire voting securities of the target company);
• a mandatory takeover bid, which a bidder is required to make if, as a result of an acquisition
of securities, it crosses (alone or in concert with others) a threshold of 30% of the voting
securities of the target; and
• a follow-on (squeeze-out) takeover bid, which a bidder is required to make if, as a result of a
previous unlimited and unconditional takeover bid, it receives at least a 90% share of the
voting rights and the registered share capital of the target company.
A bidder that intends to launch a takeover bid must include a draft offer document in its notice to the
CNB and may be asked to provide proof of certain funds as well.

• The bidder is free to make the takeover bid subject to merger control clearance and subject to
prior notice to the CNB and its subsequent reaction.
• The bidder is in principle free to determine the price and the form of consideration offered to
the target shareholders (absent any pre-existing controlling interest in the target):
o There is no minimum price for a voluntary takeover bid.
o Any acquisition of securities subject to the takeover bid at a price in excess of the
offered price during a period of six months after the end of the takeover bid period will
trigger an obligation to pay the difference to holders of securities who tendered their
securities in the takeover bid.

concert (or persons acting for their account) as a result of an acquisition of voting securities,
directly or indirectly holds more than 30% of the (actual outstanding) voting securities of the
target company.

• The mandatory takeover bid is unconditional.
• The main exceptions to the takeover bid obligation include situations where:
o the stake of at least 30% is acquired as a result of an unconditional and unlimited

voluntary takeover bid;
o the stake is acquired as a result of a transfer between members of a group of

companies;
o the shareholder does not control the target company (nor as a member of group of
persons acting in concert); or
o the stake is acquired within the framework of a corporate merger, provided that the
relevant persons were members of one group of companies (or if there was a
controlling and a controlled company).
• In terms of the price offered and the form of the consideration, the same rules apply as in
case of a voluntary takeover bid. In addition:
o The mandatory offer price must at least equal the highest price paid by the bidder (or
any person acting in concert with it) during a period of 12 months preceding the
constitution of an obligation to announce the takeover bid. If such price cannot be
determined, the offer price must at least equal the weighted average trading price for
the securities of the target company on the European regulated market during the last
six calendar months prior to the moment giving rise to the public takeover bid
obligation.
o The consideration offered can consist of cash, securities or a combination of both. A

cash alternative must be offered if (i) the consideration does not consist of liquid
securities that are admitted to trading on a European regulated market, or (ii) during a
term of 12 months prior to the announcement of the mandatory public takeover bid or
during the takeover bid period, the bidder (or a person acting in concert) acquired
securities connected with at least 5% share in the voting rights of the target company
in consideration of a payment in cash (or agreed to make such cash payment).
o The CNB has the power to adjust the consideration in certain cases.

• Follow-on squeeze-out – if a bidder, as a result of a previous unlimited and unconditional
takeover bid, acquires at least a 90% share of the voting rights and the registered share
capital of the target company, it has an obligation to make a follow-on squeeze-out bid. Such
follow-on bid has to be made to all shareholders of the target company within 30 days after
the last day of the previous takeover bid. The duration of the follow-on takeover bid is 90
days. The consideration has to be at least equal to the consideration set out in the previous
takeover bid. Rules governing mandatory takeover bids will apply to the follow-on takeover bid
as well with certain exceptions.
• Sell-out right if the bidder is not itself launching a squeeze-out – shareholders have a sell-out
right if the bidder fulfils the conditions necessary to squeeze out the residual minority
shareholders.
5 Timeline
process that applies to a voluntary public takeover bid, with certain exceptions.

The table below contains a summarized overview of the main steps of a voluntary public takeover bid
process under Czech law.
Step
• Preparation of the bid by the bidder (study, due diligence, financing and draft offer
document).

• The bidder files the bid with the CNB. Following the filing, the bidder may be asked
to provide proof of certain funds.
• Counter-bids can be announced (until five business days prior to the expiry of the
acceptance period of the last bid, at the latest; see 6. below).
3. Review of the bidder’s offer document by the CNB and issuance of a notification.
4. Consultation of and provision of information to trade unions, the employees’

representatives or employees directly by the bidder and the board of directors of the target
company.
5. Response memorandum by the target’s board:

• The target’s board will prepare a response memorandum containing its position on
the bid as to compliance with interests of the target, the shareholders, the
employees and the creditors. The response memorandum has to be issued within
five business days after the receipt of the offer document.
• Response memorandum is to be sent to the CNB.
6. After notification from the CNB containing information that there are no reasons for
prohibiting of such announcement (or if the CNB fails to issue a letter of prohibition), the bid
may be disclosed to public.
7. Launch of the acceptance period:

• Start:
o after notification from the CNB (not prohibiting the announcement); or
o no sooner than 15 days and no later than 30 days after the bidder notified
the CNB (if the CNB fails to issue a letter of prohibition).
• Duration: not less than four weeks. If the duration exceeds 10 weeks, the bidder
will announce the day of expiry of the bid two weeks prior to such day of expiry.
8. Notification of results (acceptance of the bid; entering into a contract; pro-rata satisfaction;
compliance with conditions precedent; withdrawal from a contract) in writing (unless the
European market regulator’s rules prescribe otherwise) has to be made within one month of
the end of the acceptance period.
9. Publication of results (without undue delay) after the end of the acceptance period. The
bidder will publish the results in the same manner in which the bid was announced. The

Step
bidder will also notify the board of directors and the supervisory board of the target
company in writing.
11. Re-opening of bid (follow-on squeeze-out) if the bidder acquired 90% of the shares.
• Start: within 30 days following the last day of the duration of the previous
acceptance period.
• Duration: 90 days.
• Further steps regarding the additional bid are governed, in principle, by rules
governing the mandatory takeover bids.
Set out below is an overview of the main steps for a voluntary public takeover in the Czech Republic.

Voluntary public takeover (indicative timeline)
Start
process A Day Day 0 Day (X) E Day E + 30 Day (X) Day (X)
Launch the bid by filing CNB notification that • Launch of acceptance End of the acceptance • Notification of results End of re-opened Payment of the offered
with Czech National there is no prohibition on period1 period and publication acceptance period consideration by the
• Re-opening of bid (if
Bank (CNB) for review announcement of results without bidder
• Bid may be disclosed the bidder acquired
undue delay
to the public 90% of the shares)2
15 days from making the decision 15 – 30 days (if no CNB letter of minimum of four weeks within 1 month 90 days
to proceed with the bid prohibition of announcement)
1
Launch of acceptance period:
− after notification from CNB that it is not prohibiting the announcement; or
− no sooner than 15 days and no later than 30 days after the bidder notifies the CNB if the CNB fails to issue a letter of prohibition
2
Re-opening of bid must begin within 30 days of the previous acceptance period

6 Takeover Tactics
A Czech company is obligated to disclose to the public all “inside information” that directly relates to it.
Disclosed information has to be comprehensive and may not be distorted.
• “Inside information” means information of a precise nature which has not been made public,
relating, directly or indirectly, to one or more issuers of financial instruments or to one or more
financial instruments and which, if it were made public, would be likely to have a significant
effect on the prices of those financial instruments or on the price of related derivative financial
instruments.
• Information shall be deemed to be of a “precise nature” if it indicates a set of circumstances

which exists or may reasonably be expected to come into existence, or an event which has
occurred or may reasonably be expected to do so, and if it is specific enough to enable a
conclusion to be drawn as to the possible effect of that set of circumstances or event on the
prices of financial instruments or related derivative financial instruments.
• “Information which, if it were made public, would be likely to have a significant effect on the
prices of financial instruments or related derivative financial instruments” shall mean
information a reasonable investor would be likely to use as part of the basis of their
investment decisions.
It is up to the company to determine if certain information qualifies as “inside information”. This will
often be a difficult exercise, and a large gray area will exist as to whether certain events will need to
be disclosed or not.
6.2 In the event of a public takeover bid

In the event of a (potential) public takeover bid, the Czech takeover bid rules provide that an
announcement can only be made upon the CNB’s notification containing information that there are no
reasons to prohibit such announcement (or its failure to issue a letter of prohibition). This means that
the CNB would normally have to be informed prior to disclosure.

The rules relating to insider dealing and market abuse are under the Market Abuse Directive and the
Market Abuse Regulation. The Market Abuse Regulation is directly applicable in the Czech legal
system.

The table below contains a summarized overview of some of the most probable mechanisms (given
the Czech legal environment) that can be used by a target company as a defense against a takeover
bid. These take into account the restrictions that apply to the board and general shareholders’
meeting of the target company pending a takeover bid.
1. Capital increase • Capital increase by subscription of new shares shall

(poison pill) only be permitted if the issue price of the previously
subscribed shares has been paid up in full by the
Capital increase by the
shareholders. This prohibition does not apply where
board (authorized
the registered share capital is only increased by in-kind
capital).
contributions.

• Requires approval by a majority of at least two-thirds of
the votes of the present shareholders in total and for
each type of shares whose rights are affected by that
decision. Unless provided otherwise in the bylaws of
the company, the general shareholders’ meeting shall
have quorum if the shareholders present hold shares
the par value or the number of which exceeds 30% of
the registered share capital.
• The decision of the general shareholders’ meeting to
approve a capital increase shall be certified by a notary
deed.
• The decision becomes effective upon its registration in
the Commercial Register (this does not apply to
companies whose shares are admitted to trading on a
European regulated market).
2. Share buyback • It is unclear whether a normal share buyback

authorization can be used following the announcement
Share buyback “with a
of a bid.
view to avoid imminent
and serious harm” to the • Acquisition of own shares shall only be permitted if the
company. issue price of the previously subscribed shares has
been paid up in full by the shareholders.
• Requires approval of the general shareholders’
meeting by a simple majority of votes by the present
shareholders. The decision shall state conditions of the
acquisition.
• The target company may not acquire its own shares if
such an acquisition would result in the company’s
bankruptcy pursuant to Czech insolvency legislation.
• The acquisition shall not result in a decrease of equity
below the subscribed registered share capital
increased with the funds which cannot be distributed
among the shareholders pursuant to the Czech
Companies Act or the bylaws.
• The target company has resources to establish a
special reserve fund for own shares.
• Buybacks are to be made in compliance with corporate,
transparency and market (abuse) rules.
3. Sale of crown jewels • If a significant part of the company’s enterprise would

be sold, a prior approval by the general shareholders’
An arrangement affecting
meeting (with two-thirds of the votes cast) would be
the assets of, or creating
required.
a liability for, the
company which is
triggered by a change in
control or the launch of a
takeover bid.

4. Frustrating actions • Only transactions which have sufficiently progressed

already (prior to receipt of notification of a takeover bid)
Actions such as
may be implemented by the target’s board.
significant acquisitions,
disposals, changes in • Other transactions (especially those that can frustrate
indebtedness, etc. the takeover) require shareholders’ approval after the
takeover bid has been notified to the target.
5. Shareholders’ • It is generally acceptable for shareholders to enter into

agreements an agreement regarding the exercise of voting rights.
Actions such as • Assumes a stable shareholder base or reference
significant acquisitions, shareholders.
disposals, changes in
indebtedness, etc.

Takeover
7.1 Squeeze-out
If, following an unconditional and unlimited takeover bid, the bidder holds 90% of the registered share
capital with voting rights and 90% of the voting securities, the bidder is required to make a squeeze-
out bid to all other holders of securities admitted to trading on a European regulated market.
This type of summarized squeeze-out bid is not subject to the rules and procedures that would
otherwise apply to a stand-alone squeeze-out procedure outside the framework of a voluntary or a
mandatory public takeover bid.
In the event of a summarized squeeze-out, the takeover bid will be reopened at least at the price set
out for the original takeover bid with an acceptance period of 90 days and will start within 30 days
following the expiry of the last day of the acceptance period of the original takeover bid.
7.2 Sell-out
The sell-out right is granted to minority shareholders, who may request the majority shareholder to
buy all their shares in the company in the case that such majority shareholder meets the criteria to
enforce a squeeze-out.

For 1 year as of the end of the takeover bid period, the bidder and the persons acting in concert with
the bidder cannot make another bid aimed at acquiring the securities of the same target company
unless an obligation to make a takeover bid arises or in a case of a counter-bid.
8 Delisting
A Czech company that is listed on the PSE must inform both the CNB and the PSE that it has decided
to delist its shares from the PSE. Prior consent from the CNB is required if a squeeze-out is to be
approved by the general meeting of a Czech company with its shares listed on the PSE prior to such
delisting.

Tomáš Skoumal and Libor Basl in the Prague office are the most appropriate contacts within
Baker McKenzie for inquiries about public M&A in the Czech Republic.
Tomáš Skoumal Libor Basl

Prague Prague
tomas.skoumal@bakermckenzie.com libor.basl@bakermckenzie.com
+420 236 045 001 +420 236 045 001

Denmark
The information in this summary was prepared by Mazanti-Andersen Korsø Jensen.
1 Overview
Denmark currently has a well-developed regulatory regime and few obstacles to public takeovers and
direct foreign investments.

Denmark’s regulatory regime aims to protect the shareholders of a target company, safeguard the
rights of minority shareholders, secure equal treatment of shareholders belonging to the same share
class and establish the basis for a well-adjusted and efficient capital market. The main rules and
principles of Danish law relating to public takeover bids can be found in:
• the Capital Markets Act, Consolidated Act no. 931 of 6 September 2019 (replacing the Danish
Securities Trading Act) implementing the Takeover Directive (2004/25/EC) and Regulation
(EU) No. 596/2014 on Market Abuse (MAR)
• the Takeover Order, Executive Order no. 1171 of 31 October 2017 supplementing the
regulation in the Capital Markets Act
• the guidelines to the Takeover Order issued by the Danish Financial Supervisory Authority
(DFSA)
• the Danish Companies Act, Consolidated Act no. 763 of 23 July 2019 regulating both private
and public limited companies, containing, for example, the regulation of squeeze-out
procedures
• the Market Abuse Regulation (the “MAR”), Regulation (EU) No 596/2014 of the European
Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation)
and repealing Directive 2003/6/EC of the European Parliament and of the Council and
Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC, which contains rules
regarding insider information, insider dealing and market manipulation
The main body of the Danish takeover legislation is based on Directive 2004/25/EC of the European
Parliament and of the Council of 21 April 2004 on takeover bids (the “Takeover Directive”). This
the European Economic Area (EEA). Be that as it may, the Takeover Directive still allows Member
bid, for example, the percentage of shares that, upon acquisition, triggers a mandatory public
takeover bid on the remaining shares of the target company, and the powers of the board of directors.
Accordingly, there are still certain differences in the national rules of the respective Member States of
the EEA regarding public takeover bids.

Denmark, there are a number of additional rules and principles that are to be taken into account when
preparing or conducting a public takeover bid, such as:
(a) The Prospectus Regulation, Regulation (EU) 2017/1129 on the prospectus to be published
when securities are offered to the public or admitted to trading on a regulated market and
repealing Directive 2003/71/EC.

(b) Stock exchange regulations issued by Nasdaq Copenhagen, including the recommendations
on corporate governance.
(c) Further rules may apply to bids on companies in certain sectors, such as companies
operating under the supervision of the Danish Financial Supervisory Authority (the “DFSA”)
(Dk. Finanstilsynet), for example companies with license to conduct banking, insurance or
finance business operations.
2.3 Supervision and enforcement

Public takeover bids are subject to the supervision and control of the DFSA. The DFSA is the principal
securities regulator in Denmark.
The DFSA has a number of legal tools available to supervise and enforce compliance with the public
takeover bid rules, including administrative fines.
The DFSA may in certain cases grant exemptions from the rules that would otherwise apply to a

The following general principles apply to public takeovers in Denmark. The below principles are based
on the Takeover Directive and the Capital Markets Act:
enable them to reach a properly informed decision on the bid. The board of the target
company must give its views on the effects of implementation of the bid on employment,
conditions of employment and the locations of the target company’s places of business;
(d) false conditions for trading must not be created in the securities of the target company, the
offeror company or any other company concerned by the bid in such a way that the rise or fall
of the prices of the securities becomes artificial and the normal functioning of the markets is
distorted;
(e) an offeror must announce a bid only after ensuring that it has certain funds and after taking all
reasonable measures to secure the implementation of any other type of consideration; and
It should be noted that Danish law has a strong focus on the rights of shareholders in relation to
takeover bids. However, it is not only the short term interests of the current shareholders that will be in
focus or that will be the decisive factor, as the long term interests of the company subjected to the bid
may also influence the final decision.


Foreign investments are not restricted in Denmark and takeovers are not subject to prior
governmental or regulatory approvals other than customary anti-trust approvals.

Danish law allows multiple classes of shares with different voting rights. One class of shares may be
without any influence, meaning that it is possible to issue shares without any voting rights or,
alternatively, a certain class of shares may be entitled to 10 or 100 times the voting rights of another
class. Consequently, the number of shares does not always correspond to the voting power. It is not
possible to issues shares without the right to attend and speak at the annual general meeting.
levels of shareholding within a Danish listed entity:
Shareholding Rights
One share • The right to attend and vote at general shareholders’

meetings.
• The right to introduce additional items on the agenda of a

general shareholders’ meeting and to table draft resolutions
for items on the agenda, by request to the board of directors
prior to the issuance of the notice of a meeting.


auditors at general shareholders’ meetings (orally at the
meeting).

shareholders’ meetings for irregularities as to form, process,
or other reasons (as provided for in article 109 of the Danish
Companies Act).
5% of the shares or the • Substantial holding level which requires the holder to notify
votes the listed company, the DFSA and typically also publish the
information via the regulated market. Subsequent increases
in holdings need to be notified when the shareholder passes
the following holding thresholds: 10%, 15%, 20%, 25%,
33⅓%, 50%, 66⅔% and 90% of the total number of shares
or votes in the company.
• The right to request the board of directors to convene a

general shareholders’ meeting.
10% of the shares • The right to file derivative action against the directors on
behalf of the company.
• The right to block decisions which require more than 90%

majority according to the Companies Act.

Shareholding Rights
25% of the votes • The right to request a review (Dk. “granskning”) of the
company, including to check the company’s books, financial
records and acts of the company’s corporate bodies, or to
appoint a minority auditor who will take part in the statutory
audit.
More than 33⅓% of the The ability at a general shareholders’ meeting to block any changes
votes or capital (at a to the articles of association.
Substantial holding level which requires the holder, once the level is
meeting)
reached, to announce the magnitude of the shareholding and, within
four weeks, place a mandatory bid regarding the remaining shares.
More than 50% of the votes The ability at a general shareholders’ meeting to pass resolutions
(at a general shareholders’ regarding most issues. However, some resolutions require two-thirds
meeting) of the votes and the capital and some resolutions require 90%
majority of votes and capital. When holding more than 50% of the
votes, the shareholder has the ability to, among other things:
• appoint and dismiss directors and approve the remuneration
and, as relevant, severance package of directors;
• approve remuneration policies for incentive schemes for the

executive management;
• appoint and dismiss statutory auditors and approve their

remuneration;

remuneration report of the remuneration committee of the
board of directors); and
• approve payment of dividend.
At least 662/3% of the votes The ability to ensure that certain special resolutions are passed, e.g.,
and capital directed share issues and to change the articles of association.
More than 90% of the votes The possibility to force all other shareholders to sell their shares
and the shares held by a through a public bid (a “squeeze-out”) and corresponding right for the
single shareholder minority shareholder to request a redemption of shares.

Danish law contains a number of rules that already apply before a public takeover bid is announced.
by a potential offeror. The main restrictions and hurdles have been summarized below. Some careful
planning is therefore necessary if a potential offeror or target company intends to initiate a process

according to the MAR and the Capital Markets Act are applicable. For further information on the rules

on insider dealing and market abuse, see 6.3 below. The rules include, amongst other things, that
manipulation of the target’s stock price, e.g., by creating misleading rumors is prohibited. In addition,
the rules prohibiting insider trading prevent an offeror that has inside information regarding a target
company (other than in relation to the actual takeover bid) from launching a takeover bid.

The rules relating to the disclosure of significant shareholdings in listed companies (the so-called
‘transparency rules’) are contained in the Capital Markets Act and the Danish Companies Act. These
rules are based on Directive 2004/109/EC of the European Parliament and of the Council of 15
December 2004, on the harmonization of transparency requirements in relation to information about
issuers whose securities are admitted to trading on a regulated market and amending Directive
2001/34/EC, with Directive 2013/50/EU amending the Transparency Directive.
Pursuant to these rules, if a potential offeror starts building up a stake in the target company, it will be
obliged to announce its stake if the voting rights attached thereto have passed an applicable
disclosure threshold. As stated above, the relevant disclosure thresholds are 5%, multiples of 5% up
to 25%, 33⅓% and 50%, 66⅔% and 90% thereafter.
When determining whether a threshold has been passed, a potential bidder must also take into
arrangements, such as call option agreements or voting agreements.

transparency.
These rules include that a company must immediately announce all inside information, subject to
exceptions contained in Article 17 of the MAR as referred to in the Capital Markets Act. For further
information on inside information, see 6.1 below. The facts surrounding the preparation of a public
takeover bid would in most cases constitute inside information. If so, the target company may be
obliged to announce this. However, the board of the target company can delay the announcement for
a limited period of time if it believes that a disclosure would not be in the legitimate interest of the
company. For instance, this could be the case if the target’s board believes that an early disclosure
would prejudice the negotiation of a bid. A delay of the announcement, however, is only permitted
provided that the non-disclosure does not entail the risk of the public being misled, and that the
company can keep the relevant information confidential.

An offeror that intends to make a public takeover bid must first undertake to comply with the Capital
Markets Act and the Takeover Order by a notification to the regulated market on which the target
company’s shares are admitted to trading. After the notification, the offeror may announce the bid. As
a takeover bid announcement will normally influence the price of the target’s shares, it must, as far as
possible, contain all the facts that are relevant to making a proper assessment of the share price.
Within four weeks from the announcement, the bidder must file an offer document with the DFSA. The
DFSA usually approves the offer document within 10 business days. As soon as the approved offer
document is published, the acceptance period can start.

If there are rumors or leaks that a potential offeror intends to launch a public takeover bid, the DFSA
could force an announcement. This could lead to an early disclosure and possibly an acceleration of
the preparations by an offeror, as the bidder could be forced to make an announcement as to the
offeror’s intentions.
3.7 Early disclosure

If an offeror has been compelled by the DFSA to make an early disclosure, the DFSA may decide that
a bid must be announced within a certain period of time or that the offeror must otherwise refrain from
making a bid.
3.8 Due diligence

The Danish public takeover bid rules do not contain specific rules as to whether a prior due diligence
can be organized, nor how such due diligence should be organized. Nevertheless, the concept of a
prior due diligence or pre-acquisition review by an offeror is generally accepted and appropriate
mechanisms have been developed in practice to organize a due diligence or pre-acquisition review
and to cope with potential market abuse and early disclosure concerns. These mechanisms include
the use of strict confidentiality procedures and data rooms.
There is no obligation for the target board to allow a due diligence process and it is up to the board of
directors to decide whether or not a due diligence is appropriate in the individual case. It is unlikely
that a reasonable refusal from the board of directors to allow a due diligence could lead to the target
board being held liable for damages on any ground. The target board must determine to what extent a
request for due diligence should be met, taking into consideration the commercial interest of the target
and its shareholders, and keeping in mind the principle that all shareholders must receive equal
treatment. Thus, the target board must assess whether or not the offeror is serious and if the terms of
the takeover bid are sufficiently favorable to justify a due diligence.

For the purposes of the Danish takeover bid rules, persons are “acting in concert”:
• if they collaborate with the offeror, the target company or with any other person on the basis
of an express or silent, oral or written, agreement aimed at acquiring control over the target
company, frustrating the success of a takeover bid or maintaining control over the target
company;
• if they have entered into an agreement relating to the exercise in concert of their voting rights
with a view to having a lasting common policy vis-à-vis the target company.
agreement to act in concert.
shareholder acts in concert or is deemed to act in concert. This is the case, for example, when a
The concept of persons acting in concert is very broad and, in practice, many issues can arise to
determine whether persons act or do not act in concert. This is especially relevant in relation to
mandatory takeover bids. If one or more persons in a group of persons acting in concert acquire
voting securities as a result of which the group in the aggregate would pass the 33⅓% threshold, the
members of the group will have a joint obligation to carry out a mandatory takeover bid, even though
the individual group members do not pass the 33⅓% threshold.

There are two main forms of takeover bids in Denmark:
• a voluntary takeover bid, in which an offeror voluntarily makes an offer for all or up to 33⅓%
of the voting securities issued by the target company. A bid for less than all of the shares is
uncommon; and
• a mandatory takeover bid, which an offeror is required to make if, as a result of an acquisition
of securities where controlling influence is established, mainly if the acquirer owns more than
⅓ of the voting rights in the target company.

• The offeror is free to make the takeover bid subject to specified conditions that the offeror
may not have control over, such as, amongst other things, merger control clearance,
minimum acceptance level (typically 90%), the offer being recommended by the board of
directors, resolutions by the general meeting in the target company approving amendments of
the articles of association, e.g., to delete defensive measures, voting restrictions, or a material
adverse change condition. Financing being a pre-condition will typically not be accepted.
• The offeror is in principle free to determine the form of consideration offered to the target
shareholders, cash or shares or other contribution in kind, or a combination thereof.
• The offeror is in principle free to decide the price if the consideration is to be paid in cash,
subject to the condition that any price paid by the offeror within six months before or after the
bid, or during the bid, must be reflected in the price.
• The offered price may be paid in cash, securities, in kind or a combination of both. All
shareholders must have equal rights to any form of consideration, subject to exceptions
granted by the DFSA.

directly or indirectly holds more than 33⅓% of the (actual outstanding) voting securities of the
target company. The mandatory takeover bid is unconditional. However, instead of making a
mandatory bid, the offeror may make a voluntary bid. The DFSA may grant exceptions from
the mandatory public takeover bid obligation. Situations in which the DFSA has granted
exceptions include the following:
o the stake is acquired from an affiliate, i.e., no change of real control;
o a third party exercises control over the target company or holds a larger shareholding
in the company than the party holding more than 33⅓%;
o the stake is acquired within the framework of a subscription to a capital increase by a

target company in financial difficulties, which has been decided upon by the general
shareholders’ meeting; and
o the stake is acquired in connection with an issue in kind, i.e., where the third party is
being paid shares in the target company as consideration when the target company is
making an acquisition.

o the price must be equal or higher to the price paid by the bidder for any shares within
a period of six months before or after the bid, or the waited average trading price for
securities of the target company which have been settled in shares;
o the consideration offered can consist of cash, securities or a combination of both.

However, a cash alternative must be offered; and
o the DFSA may allow exceptions from the rules on consideration.

shareholders if it holds, directly or indirectly, more than 90% of the shares and votes of the
target company.
• Sell-out right if the bidder is not itself launching a squeeze- out – minority shareholders have a
sell-out right if the offeror holds, directly or indirectly, more than 90% of the shares and votes
5 Timeline
takeover bid process in Denmark.
Step
• Preparation of the bid by the offeror (study, due diligence, financing and draft
prospectus).
• The bidder approaches the board of the target company and/ or its key
shareholders. Due to the ownership structure on the Danish stock market, it is
usually advisable to approach key shareholders at this stage.
• Negotiations with the board of the target company and/or its key shareholders. It is
usually advisable to negotiate with key shareholders, possibly securing irrevocable
undertakings where the shareholders agree to accept the takeover bid under
certain circumstances.

Step

• The offeror may announce a bid after having undertaken to comply with the
applicable takeover regulations.
• The board of the target company issues a statement recommending whether the
target shareholders should accept the bid or not.
• Within four weeks from the announcement, the offeror must make an offer
document public. Prior to that, the offer document must have been filed with, and
approved by, the DFSA.
• The offeror may not withdraw from the bid after it has been announced.
• In a negotiated bid, the offeror is expected to include the response on the bid from
the board of directors of the target company.

• Start: not before the offer document has been made public.
• Duration: not less than four weeks and not more than 10 weeks.
• The acceptance period may be extended (by at least two weeks) if the bidder has
provided for possible extension in the offer document, after approval by the DFSA,
or in accordance with applicable takeover regulation. The total acceptance period
may not exceed 10 weeks or, if the offer is conditional on the attainment of
necessary regulatory approval, nine months.
• Without prejudice to the above, the acceptance period may be extended if the
offeror has announced that it will complete the bid.
4. Publication of results as soon as possible after the end of the acceptance period.
5. Payment of the offered consideration by the offeror as soon as possible after publication of
the result.
6. Squeeze-out if the offeror acquired more than 90% of the shares and delisting of the target
shares is applied for.
Set out below is an overview of the main steps for a voluntary public takeover in Denmark.

Start
process A Day L Day T Day E Day P Day C Day X Day
Announce takeover bid Bidder makes offer Launch of the Target’s board of End of acceptance Publication of Payment of the Squeeze-out if the
after having undertaken to document available to acceptance period1 directors announces period2 results after the offered offeror acquired
comply with applicable the public (after filing opinion regarding bid end of the consideration as more than 90% of
during first half of acceptance soon as possible the shares and
takeover regulations and approval of offer
deleting of the
document by the acceptance period period after the publication target shares is
Danish Financial of the takeover applied for
Supervisory Authority outcome
(DFSA)
2-5 weeks
Within 4 weeks 4-10 weeks As soon as possible As soon as possible
(1) Not before the offer document has been made public.
(2) The acceptance period may be extended (by at least two weeks) if the bidder has provided for possible extension in the offer document, after approval by the DFSA, or in accordance with applicable takeover regulation. The
total acceptance period may not exceed 10 weeks or, if the offer is conditional on the attainment of necessary regulatory approval, nine months.

6 Takeover Tactics
A Danish company has the obligation to immediately disclose to the public all “inside information” that
relates to it, including all material changes in information that has already been disclosed to the public:
relating directly or indirectly to one or more issuers of financial instruments or to one or more
instruments.

which exists or may reasonably be expected to come into existence or an event which has
occurred or may reasonably be expected to do so and if it is specific enough to enable a
information that a reasonable investor would be likely to use as part of the basis of their
It is up to the target company to determine if certain information qualifies as “inside information”. In

many circumstances, this will be a difficult exercise and a large gray area will exist as to whether
certain events will need to be disclosed or not.
The public disclosure of inside information may be delayed according to Article 17.4 of the MAR.

Prior to the announcement of a public takeover bid, the parties will rely on the provisions in Article
17.4 of the MAR to delay the public disclosure of the potential bid. In case of rumors or leaks, an
obligation to disclose information may be imposed by MAR, listing rules or by a decision from the
DFSA.

Rules on what constitutes insider dealing and market abuse follows from the MAR. In principle such
offences are subject to criminal prosecution and punishable according to the Capital Markets Act,
which is a transposition of the of Directive 2014/57/EU of the European Parliament and of the Council
of 16 April 2014 on criminal sanctions for market abuse. As the framework is based on EU legislation,
similar rules on insider dealing and market abuse exist in other jurisdictions of the EEA.
As a general rule, a potential bidder should refrain from trading in the target company’s securities
without appropriate prior legal consultation in order to minimize the risk of any unintentional negative
effects.
6.4 Anti-takeover defense mechanisms

Several Danish companies have implemented measures against hostile takeovers in their articles of
association, including limitations on voting rights, a voting ceiling and division of the company’s shares
into classes, typically into a class of unlisted shares with the majority of the voting rights and a listed
class of shares with minimum voting rights. As a result, hostile takeovers are not frequently

experienced in Denmark. However, the Danish Companies Act provides that shareholders
representing at least two-thirds of both votes and capital may at a general meeting adopt a resolution
suspending all special rights or restrictions associated with a shareholding or specific shares if a
public takeover bid is submitted to the company. This ‘break-through’ rule, which is based on the
Takeover Directive, only applies to special rights or restrictions established after 31 March 2004.
Furthermore, such suspension may be restricted only to a public tender offer submitted by a company
within the European Union or EEA.
When a voluntary takeover bid is made, the board of directors must weigh the interests of the
shareholders against other relevant interests, including the interests of the target itself (if contrary to
the shareholders), the target’s creditors and the employees. However, the shareholders’ interests will
take priority in most situations. Measures available for the board of directors include: refusal to have
due diligence carried out by the bidder, a recommendation to the shareholders to refuse the submitted
tender offer, determining the possibility of a more favorable competing bid, and so on. Alternatively,
the board of directors may decide to actively defend against the takeover by the use of a capital
increase directed at friendly third parties, “poison pills”, conducting merger negotiations with third
parties, and so on. However, these measures should be carefully considered as the directors risk
incurring liability if not acting in the best interests of the target. It is generally advisable (and in
accordance with the Danish Corporate Governance Recommendations) to involve the shareholders in
such actions. Further, under the Danish Companies Act, shareholders representing at least two-thirds
of both votes and capital may at a general meeting resolve to introduce a procedure whereby the
board of directors must obtain the approval of the general meeting before taking any actions that may
hinder or frustrate a takeover bid, other than resolving to seek alternative bids.
6.5 Squeeze-out
If, following the takeover bid, the bidder directly or indirectly holds more than 90% of the share capital
with voting rights, the bidder can force the other shareholders to sell their shares at the price offered
in the takeover bid.
This type of squeeze-out procedure is basically subject to the same rules and procedures that would
otherwise apply to a stand-alone squeeze-out procedure outside the framework of a voluntary or
mandatory public takeover bid, with the exception of the price.
6.6 Redemption
In the same situation referred to in 6.5, the minority shareholders have a corresponding right to force
redemption of their shares.

The Takeover Order sets out an equal-treatment period from the start of the offer period until six
months after expiry of the offer period. If the majority shareholder, within a period of six months after
the expiry of the offer period, enters into agreements regarding the transfer of shares in the company
on more attractive terms than those offered in the mandatory or voluntary bid, the majority
shareholder is obliged to compensate the shareholders who accepted the original bid.
7 Delisting
Under the stock exchange regulations issued by Nasdaq Copenhagen, a delisting must be decided by
shareholders at a general meeting representing at least 90% of the votes cast and of the represented
capital.


Joakim Falkner and Carl Svernlöv in the Stockholm office are the most appropriate contacts within
Baker McKenzie for inquiries about public M&A in Denmark.
Joakim Falkner Carl Svernlöv

Stockholm Stockholm
joakim.falkner@bakermckenzie.com carl.svernlov@bakermckenzie.com
+46 8 56617780 +46 8 56617707

Egypt
This summary is current only as of 1 July 2018
1 Overview
The Alexandria stock exchange was officially established in 1883, with the Cairo stock exchange
following in 1903. Both exchanges were very active in the 1940s. However, the central planning and
socialist policies adopted in the mid-1950s led to both exchanges becoming dormant between 1961
and 1992.
In the 1990s, the Egyptian government’s restructuring and economic reform program resulted in the
revival of the Egyptian stock market, and a major change in the organization of the Cairo and
Alexandria stock exchanges took place in January 1997 with the election of a new board of directors
and the establishment of a number of board committees.
In February 2007, the Minister of Investment issued a decree adding a new chapter 12 to the
executive regulations of the Capital Markets Law (“Chapter 12”), which was replaced by a Prime
Ministerial Decree in 2018. Chapter 12 sets out certain disclosure requirements and other regulatory
measures and thresholds to create a more efficient and regulated environment for the Egyptian public
M&A market. Chapter 12 also covers the disclosure of “potential offers”, mandatory offers, the role of
investment banks and financial advisers, requirements for setting the offer price and the required
notifications following the acquisition of a substantial shareholding. Generally, the Financial
Regulatory Authority (“FRA”) is legally entrusted with enforcing Chapter 12 in relation to public tender
offers.
In March 2017, the Minister of Investment issued a decree that legal persons shall abide by the rules
of disclosure of the beneficiary. The rules are set out in annex 7 of the executive regulations. These
apply when issuing shares in a joint stock company or partnership limited by shares, amending the
shareholder ownership structure, requesting an approval for a mandatory or voluntary public tender
offer or an approval for an exception, offering securities for public subscription in the Egyptian market
or listing securities on the Egyptian stock exchange.
In March 2018, the Capital Market Law was amended to allow (i) the establishment of a private stock
exchange, (ii) the establishment of a futures exchange and (iii) for regulation to issue and trade
financial instruments.

The main rules and principles of Egyptian law relating to public tender offers can be found in the
Capital Markets Law 95 of 1992 (“Capital Markets Law”) and its executive regulations.
The main body of the Egyptian tender offer legislation is based on the Capital Markets Law and the
Egyptian Stock Exchange Listing Rules, together with its implementation directions. The legislation is
aimed at harmonizing the rules on public tender offers for public companies. A company is considered
to be a public company if it is either:
(a) listed on the Egyptian stock exchange (“EGX”); or
(b) a delisted company whose shares are still publically offered. For these purposes,
“publically offered” means a company that (i) is incorporated or (ii) has had its capital
increased, based on a subscription prospectus certified by the FRA.

2.2 Miscellaneous rules and principles

The aforementioned legislation applies to public companies and contains the main legal framework for
public tender offers in Egypt. Within this legislation, there are a number of rules and principles that are
to be taken into account when preparing or conducting a public tender offer, such as:
(a) The rules relating to the disclosure of significant shareholdings in listed companies.
These rules are embodied in the Egyptian Stock Exchange Listing Rules on the
harmonization of transparency requirements in relation to information about issuers
whose securities are admitted to trading on a regulated market (see 3.4); and
(b) The rules relating to insider dealing and market manipulation (the so-called market
abuse rules). These rules are based on chapter 11 of the executive regulations of the
Capital Markets Law (see 6.2).
2.3 Supervision and enforcement by the Financial Regulatory Authority

Public tender offers are subject to the supervision and control of the FRA. The FRA is the principal
securities regulator in Egypt.
The FRA has a number of legal tools that it can use to supervise and enforce compliance with the
public tender offer rules, including administrative fines. In addition, criminal penalties could be
imposed by the courts in cases of non-compliance.
The FRA also has the power, in certain cases, to grant exemptions from the rules that would
otherwise apply to a public tender offer.

As a general rule, foreign investments are not restricted in Egypt. However, certain activities
conducted in Egypt by foreigners are subject to reporting or prior approvals before competent
authorities. As an exception to the general rule, foreign ownership is strictly prohibited in importation
and commercial agency activities and ownership of properties in the Sinai Peninsula, desert land and
agricultural land. Accordingly, such activities are exclusively reserved for Egyptian nationals.
(a) Banking sector
• There is an obligation on foreigners who own more than 5% of the capital of a bank
but not exceeding 10% of it, to notify the Central Bank of Egypt within 15 days from
the date of acquisition.
• Further, foreigners are not allowed to own more than 10% of the bank’s capital or any
percentage which leads to the actual domination of it except with the prior approval of
the board of directors of the Central Bank of Egypt
(b) Insurance sector
• There is an obligation on a natural or juristic person who owns 5% of the capital of

any insurance or reinsurance company to notify the FRA within two weeks from the
date of acquisition of such percentage.
• An approval must be granted by the Prime Minister and the competent Minister in the
case of an acquisition exceeding 10% of the company’s capital.
(c) Commercial agency activities
• Foreign investors are not permitted to engage in commercial agency activities. Such
activities are reserved for Egyptian nationals.

(d) Importation activities
• Foreign companies are not permitted to engage in importation activities. Such

activities are limited to Egyptian nationals only.
(e) Ownership of properties in the Sinai Peninsula
• It is of paramount importance to note that foreigners are strictly prohibited from

owning properties in the Sinai Peninsula.
(f) Ownership of desert land
• The ownership of a desert lands is limited to Egyptian nationals only unless a

presidential decree is granted to foreign investors to own the relevant land.
(g) Ownership of agricultural land
• The ownership of agricultural lands is reserved for Egyptian nationals only.
(h) Ownership of non-banking activities companies:
• There is an obligation on a natural or juristic person who owns 5% of the capital or

voting rights of any of the said companies to notify the FRA within two weeks from the
date of acquisition of such percentage.
• Prior approval must be granted by the FRA in the case of an acquisition exceeding
10% of the company’s capital.

The following general principles apply to public tender offers in Egypt. These rules are based on the
Capital Markets Law and the Egyptian Stock Exchange Listing Rules:
to enable them to reach a properly informed decision on the tender offer. Where it advises the
holders of securities, the board of the offeree company may give its views on the effects of
implementation of the tender offer;
must not deny the holders of securities the opportunity to decide on the merits of the tender
offer;
company or any other company concerned by the tender offer in such a way that the rise or
fall of the prices of the securities becomes artificial and the normal functioning of the markets
is distorted;
(e) an offeror must only announce a tender offer after ensuring that they can fulfil any cash
consideration in full, if such is offered, and after taking all reasonable measures to secure the
reasonable by a tender offer for its securities.

2.6 Taxes on securities transactions

A tax shall be imposed on all securities transactions whether Egyptian or foreign, listed on the stock
exchange or not, and no costs shall be deducted. The buyer and the seller shall bear the burden of
this tax in the rate of:
• 1.25 per thousand by the buyer and 1.25 per thousand by the seller from the validation date of
this law until 31 May 2018.
• 1.50 per thousand by the buyer and 1.50 per thousand by the seller from 1 June 2018 to 31
May 2019.
• 1.75 per thousand by the buyer and 1.75 per thousand by the seller from 1 June 2019.
Acquisitions and disposals made in a single transaction are taxed at 3% per thousand as mentioned
in article “83 bis” of Income Tax law no. 91 of 2005 which was amended by law no. 76 of 2017. There
is no deduction for costs in the following cases:
• If the transaction relates to 33% or more of the shares or voting rights whether in terms of
number or value in a resident company.
• If the transaction relates to 33% or more of the assets of a resident company or the
obligations by another resident company for a number of shares in the purchasing company.
Tax is charged on capital gains from trading in securities listed on the Egyptian Exchange. However,
this provision was suspended for two years starting on 17 May 2015, and then extended for another
three years to 16 May 2020. Since then, as at the time of writing, the government has not provided
any formal update on this. However, we understand that a draft of amendments to the income tax law
is currently being deliberated by parliament and the expectation is that these will impose a 10% tax on
the capital gains of the listed companies.

levels of shareholding within a public company.
Shareholding Rights
• The right to submit questions to the directors and statutory auditors
at general shareholders’ meetings (either orally at the meeting, or
in writing prior to the meeting).
• The right to request the company’s regulator to nullify decisions of
general shareholders’ meetings for irregularities as to form,
process, or other reasons.
• In the case of a merger, the right to request an exit from the
company.
• In the case of delisting, the right to request an exit from the
company.

Shareholding Rights
5% of its shares • The right to file a minority claim against the directors on behalf of
the company.
• The right to put additional items on the agenda of a general
• The right to request the board of directors to convene an ordinary
• The right to request FRA to suspend any resolution issued by the
General Assembly to the detriment of such shareholders or for the
benefit of a specific category of shareholders or to bring about a
private benefit for the board of directors or others.
company.
10% of its shares • The right to request the board of directors to convene an
extraordinary general shareholders’ meeting.
• The right to submit, subject to certain conditions, a request to FRA
or the General Authority for Investment and Free Zones (GAFI) to
inspect the company’s regular books, financial records and acts of
the company’s corporate bodies.
• The right to be represented on the board of directors, but not
exceeding one board seat.
• The right to keep information, copies of the documents of the
opposition contracts or company’s transactions with related parties.
company.
More than 25% of its • The ability at a general shareholders’ meeting to block:
shares (at a general
o changes to the main objective(s) of the company; and
shareholders’
meeting) o changes to the articles of association related to mergers,
capital increases, capital reductions and dissolution of the
company.
company.
More than 33.33% of • The ability at a general shareholders’ meeting to block:

its shares (at a
o extraordinary general assembly resolutions; and
general
shareholders’ o the other matters set out above.
meeting) • In the case of delisting, the right to request an exit from the
company.
More than 50% of its • The ability at a general shareholders’ meeting to:
shares (at a general
o appoint and dismiss directors and approve the
shareholders’
remuneration and, as relevant, severance package of
meeting)
directors;

Shareholding Rights
o appoint and dismiss a statutory auditor and approve its
remuneration;
o approve the annual financial statements (including the
remuneration report of the remuneration committee of the
board of directors, if any);
o grant discharge from liability to the directors and statutory
auditor for the performance of their mandate; and
o take decisions for which no special majority is required.
company.

Egyptian law contains a number of rules that already apply before a public tender offer is announced.
announcements of a potential tender offer by a bidder or a target company, and prior due diligence by
a potential bidder. The main restrictions and hurdles have been summarized below. Some careful
that is to lead towards a public tender offer.

Before, during and after a tender offer, the normal rules regarding insider dealing and market abuse
prevent the use of such information in a tender offer.

public tender offer. Pursuant to these rules, if a potential bidder starts building up a stake in the target
company, it will be obliged to announce its stake if the ownership attached to it has passed an
applicable disclosure threshold. The relevant disclosure thresholds in Egypt are 5% of the ordinary
shares or the voting rights and multiples thereof for shareholders and 3% of the ordinary shares or
voting rights and multiples thereof for board members. These are in addition to the requirements
related to the thresholds referred to in 5.5 below.
account the voting securities held by its related parties (see 3.9 below), including affiliates. The parties
could also include existing shareholders of the target company with whom the potential bidder has
entered into specific arrangements, such as a call option agreement.

transparency. These rules require a target company to immediately announce the commencement of
negotiations for a bid and all inside information. For further information on inside information, see 6.1
below. The facts surrounding the preparation of a public tender offer may constitute inside
information. If so, the target company must announce this.

3.6 Announcement of a public tender offer
After commencement of serious negotiations either in writing or verbal, also, if the target company
receives a notification from the bidder that it intends to announce a public tender offer or the bidder
and the target company sign a memorandum of understanding then the target company must
immediately inform the FRA and the EGX of the bidder’s intention. In addition, the bidder will have to
make the necessary filings with the FRA to launch the public tender offer within 60 days from the date
the target company informs the FRA and the EGX of the potential tender offer. The FRA has the right
to extend such period for another 60 days based on reasonable grounds that the bidder submit. If
there are reasonable grounds to believe that a (potential) bidder intends to launch a public tender
offer, the EGX or the FRA could request the target company to clarify the situation. If the price of the
securities of the target company is being affected, the EGX can suspend trading of the securities until
it obtains clarification from the target company. The chairman of the FRA has the right, once the
bidder submits the public tender offer to suspend trading of the securities of the target company.

(a) Early disclosure demanded by FRA – Whenever required for the good functioning of the
markets, the target company that may be involved in a possible public tender offer should
make an announcement without delay to FRA and the EGX about any rumors which might
affect the prices of its securities in the market.
(b) Put-up or shut-up – In addition to the foregoing rule, the EGX and the FRA have a sanction
mechanism in case the target company does not announce the bidder’s intention to submit a
public tender offer. The relevant rules can be summarized as follows:
• The FRA or the EGX can force an announcement by the target company to clarify
rumors relating to it that may affect the price of the securities of the target company.
• A bidder must launch the tender offer within 60 days from the date the target
company informs the FRA and the EGX of the potential tender offer. The FRA has the
right to extend such period for another 60 days if the bidder provides reasonable
grounds for this.
• If a bidder does not submit the necessary filings to the FRA to launch the public
tender offer within the 60-day term imposed by the FRA or any extension thereof, the
bidder (and the persons related to it) is not permitted to launch a tender offer for the
securities of the target company for six months following the lapse of such time limit
unless approved by the FRA based on reasonable grounds submitted by the bidder. If
the bidder did not submit during the prescribed period, they will be prohibited by the
FRA from purchasing shares of the target company during the six-month period.
3.8 Due diligence

The Egyptian public tender offer rules do not contain specific rules regarding the question of whether
a prior due diligence can be organized, nor how such due diligence is to be organized. Be that as it
may, the concept of a prior due diligence or pre-acquisition review by a bidder is generally accepted in
the market and by the FRA as well, and appropriate mechanisms have been developed in practice to
organize a due diligence or pre-acquisition review and to cope with potential market abuse and early
disclosure concerns. These include the use of strict confidentiality procedures and data rooms.

For the purpose of the Egyptian tender offer rules, persons are considered related parties:
• if they collaborate with the bidder, the target company or with any other person on the basis of
an express or silent, oral or written, agreement aimed at acquiring the control over the target

company, frustrating the success of a tender offer, or maintaining the control over the target
company. Natural persons and any of their second degree relatives, juridical persons that
consist of two or more persons where most of their shares are owned directly or indirectly by
the other party or are owned by one person and holding companies, affiliates and subsidiaries
are all considered related parties;
with a view to having a lasting common policy in relation to the target company.
Persons that are affiliates of each other are deemed related parties or to have entered into an
agreement to act as related parties.
The concept of related parties is very broad, and in practice many issues can arise to determine
whether or not persons are related parties. This is especially relevant in relation to mandatory tender
offers. If one or more persons in a group of persons acting as related parties acquire voting securities
as a result of which the group in the aggregate would pass the 33.33% threshold, the members of the
group will have a joint obligation to carry out a mandatory tender offer even though the individual
group members do not pass the 33.33% threshold.
All public company takeovers in Egypt are effected by way of a public tender offer. There are two
main forms of tender offers in Egypt:
• a voluntary tender offer, in which a bidder voluntarily makes an offer for less than 33.33% of
its voting securities or shares issued by the target company, including securities issued by the
company conferring the right to acquire voting securities of the target company; and
• a mandatory tender offer, which a bidder is required to make if, as a result of an acquisition of
the voting securities or shares issued by the target company, including securities issued by
the company conferring the right to acquire voting securities of the target company, it crosses
(alone or in concert with others) a threshold of 33.33% of the voting securities or shares of the
target.
A bidder that intends to launch a tender offer must include in its notification to FRA a draft
memorandum of information, as well as proof of certain funds from a certified bank in Egypt.
4.1 Voluntary public tender offer

The bidder is free to make the tender offer subject to prior approval by FRA and certain other
conditions precedent, such as a minimum acceptance level or a material adverse change condition.
The bidder is, in principle, free to determine the price and the form of consideration offered to the
target shareholders absent any pre-existing controlling interest in the target:
• The offered price may be paid in cash, securities or a combination of both.
• There is no minimum price for a voluntary tender offer, but the legal rules provide that the
terms of the tender offer, including the price, must be such that they could reasonably be
expected to allow the tender offer to succeed.
4.2 Mandatory public offer

In all cases, a mandatory tender offer applies to 100% of the ordinary shares, voting rights and
convertible securities of the company. A person who wishes to acquire ordinary shares or voting
rights, independently or together with related parties, directly or indirectly, will trigger a mandatory
tender offer in the following instances:

• If a person acquires one-third or more of the ordinary shares or voting rights of the target
company. However, if a person already owns one-third but less than 50% of the share capital
or voting rights and they subsequently acquire more than an additional 5% of the share capital
or voting rights within 12 consecutive months, they will also trigger a mandatory tender offer.
• If the ownership of the person reaches 50% or more of the ordinary shares or voting rights of
the target company. However, if a person already owns more than 50% but less than two-
thirds of the share capital or voting rights and they subsequently acquire more than an
additional 5% of the share capital or voting rights within 12 consecutive months, they will also
trigger a mandatory tender offer.
• If the ownership of the person exceeds three-quarters of the ordinary shares or voting rights
of the target company, they will trigger a mandatory tender offer. However, if a person already
owns two-thirds of the share capital or voting rights but does not exceed three-quarters, and
they subsequently acquire more than an additional 5% of the share capital or voting rights
within 12 consecutive months, they will trigger a mandatory tender offer.
In all the above instances, if the bidder undertakes to continue listing the company on the EGX, it shall
be required to submit a mandatory tender offer for 100% of the ordinary shares, while subtracting
10%, which is the minimum free float required to remain listed on the EGX. In the event that holders
representing more than 90% of the ordinary shares accept such tender offer, proration will be applied
in order to maintain the 10% minimum requirement. If the bidder wishes to delist the company from
the EGX, the mandatory tender offer must cover 100% of the ordinary shares.
The mandatory tender offer is binding and unconditional, save for the conditions set out in step 5 of
the timeline below related to the minimum targeted number of shares. The main exceptions to the
mandatory tender offer obligation include situations where:
• the stake is acquired by a successor;
• the stake is acquired within the framework of a corporate merger;
• the stake is acquired within the framework of sale by a bank of pledged shares in accordance
with the provisions of the Egyptian Banking Law;
• there is a group restructuring;
• the stake is acquired by financial institutions licensed to undertake underwriting activities;
• there has been a decrease of capital due to the cancellation of ordinary shares held in
treasury;
• all of the company’s shareholders have approved the sale;
• there has been a transfer of full ownership of securities owned by a union of employees who
are shareholders in the subsidiary companies of state-owned holding companies to
restructure such companies and inject additional investments therein; and
• there has been an increase to the share capital in cash or through debt-to-equity swaps
provided that such is not due to the purchase of subscription rights.
In terms of the price offered and the form of the consideration, the same rules apply as in the case of
a voluntary tender offer. In addition:
(a) If the share of the target company was among the active shares on the EGX, the bidder
should consider the following when determining the purchase price:

• The average closing price of the EGX during the past six months or the average
closing price of the company during a period of three months preceding the
submission of the tender offer, whichever is higher.
• The mandatory offer price must be at least equal to the highest price paid by the
bidder (or any person acting as related parties with it) during a period of 12 months
preceding the submission of the tender offer;
The aforementioned may be not be considered if the purchase price suggested by the bidder
was determined in accordance with a fair value study prepared by an independent financial
advisor who is registered with the FRA’s register pursuant to the financial valuation standards.
(b) If the share of the target company was not amongst the active shares on EGX, the price shall
be determined in accordance with a fair value study prepared by an independent financial
advisor who is registered with the FRA’s register pursuant to the financial valuation standards.
The consideration offered can consist of cash, securities or a combination of both. A cash alternative
must be offered in an amount corresponding to the cash value of any securities offered as
consideration at the time of the filing of the tender offer with the FRA.
The offeror may amend the conditions of the tender offer provided that it does so, at the latest, five
days before the elapse of the tender offer period after obtaining the FRA’s approval. The FRA will
base its approval on whether such amendments will be to the benefit of the transferors of the
securities.
5 Timeline
As a general rule, the tender offer process for a mandatory public tender offer is similar to the process
that applies to a voluntary public tender offer, with certain exceptions.
The table below contains a summarized overview of the main steps of a typical mandatory public
tender offer process under Egyptian law.
Step
• The target company and/or its key shareholders disclose the potential offer to the
FRA and the EGX immediately after commencement of serious negotiations with
the bidder either in writing or verbally. The target company and/or its key
shareholders will also need to disclose a potential offer to the FRA and the EGX if it
receives a notification from the bidder that it intends to announce a public tender
offer or the bidder and the target company and/or its key shareholders sign a
memorandum of understanding.
information memorandum).
• The bidder will have to make the necessary filings with the FRA to launch the
public tender offer within 60 days from the date the target company informs the
FRA and the EGX of the potential tender offer.
2. Launch of the tender offer:
• The bidder files the tender offer with the FRA. The filing must contain, among other
elements, certain information including the objectives of the bidder, the number and

Step
description of the securities that are already owned by the bidder in the target
company (whether alone or together with related parties), the proposed purchase
price as well as the other main terms of the tender offer.
• The filing must be accompanied by an information memorandum prepared by the
bidder accredited by the legal and financial advisors. The information memorandum
must contain information allowing the shareholders of the target company to take a
decision regarding the tender offer, including the following:
o information on the bidder, its related parties and advisers as well as the
names of its board members;
o the duration of the tender offer and its main terms, including the price;
o the main aspects of the bidder’s plans for the 12 months following the
successful completion; and
o the number of securities of the target company that the bidder already
directly or indirectly owns.
• The bidder must represent the accuracy of the information contained in the
information memorandum and its advisers must verify the accuracy of such
information, including the price valuation.
• A letter from an Egyptian bank confirming the availability of the bidder’s funds for
the offer must be submitted to the FRA by the bidder.
• Undertaking issued by the bidder to notify the Egyptian Competition Authority of the
relevant offer.
• Fair value study issued by an independent financial advisor (registered with the
FRA’s register pursuant to the financial valuation standards) in relation to the
shares of the target company involving (i) swaps or a mixed purchase offer (the
study should include a detailed list of the swaps shares); and (ii) shares of the
target company that are not among the active shares on the EGX.
• Obtain preliminary approvals from the competent authorities if required.
• Submit average closing prices of the target company for three and six months prior
to the filing date of the tender offer with the FRA and prices of tender offers for the
same security within the twelve months prior to such date.
• The FRA may request any additional information or documentation that it deems fit
• Upon accepting the application, the FRA must notify the EGX of the main terms
contained in the application and the information memorandum. Upon such
notification, the EGX shall post it on its screens. As of that moment, the bid is
public.
• Counter tender offer applications may be submitted to the FRA at least five days
before the elapse of the tender offer period. Such counter tender offer application
shall not be accepted by the FRA unless (i) the purchase of the securities is for
cash, i.e., swap tender offers are not acceptable, (ii) the counter tender offer price
is at least 2% higher than the original offer price or (iii) if the counter tender offer
contains a material amendment in the tender offer conditions that is for the benefit
of the shareholders of the target company.

Step
3. Validity of the tender offer:

• The duration of the tender offer may not be less than 20 days in cases where the
opinion of an independent consultant has been requested and 10 days in all other
cases. In all cases, the duration of the tender offer cannot exceed 30 days.
4. Minimum targeted number of shares:

• A tender offer may be subject to the acquisition by the offeror of at least 75% of the
voting rights of the target company if the acquisition is made for the purposes of a
merger, or at least 51% of such voting rights in all other cases. If the FRA grants
such an approval and the securities offered for sale are less than the percentage
stipulated in the tender offer, the bidder will not be able to implement the
transaction unless the FRA approves it.
5. Within 15 days from the date that the information regarding the application has been posted
on the EGX screens, the board of the target company may issue a statement expressing its
opinion on the tender offer and clarifying its viability and importance for the target company.
6. The review and approval of the application of the bidder by the FRA should be issued
within two days. No publication of the tender offer may be made without first obtaining such
approval. Following receipt of the application, the FRA may request additional information
and documents, in which case the two-day period in question shall start as of the date
when the FRA receives such additional information and documents.
7. Restrictions during the tender offer:

• During the period from the date the FRA approves the application for the tender
offer until the publication of the results of such offer, the board of directors of the
target company is prohibited from taking any action which may have a material
adverse effect on the tender offer. In particular, the board or any of the managers
of the target company may not take any decisions for a capital increase or the
issuance of bonds if such decision may render the offer impossible or difficult. The
board or any of the managers of the target company is also forbidden from taking
any action affecting in a material way the base of the target company, increasing its
liabilities or obstructing the development of its activities in the future.

• The board of the target company may issue a statement expressing its opinion on
the tender offer Within 15 days from the date that the information regarding the
application has been posted on the EGX screens, If (i) the acquisition is to be made
by means of a swap of securities or (ii) the securities of the target company are
heavily traded and the tender offer price is less than the average price of the
securities in the last six months, the target company shall be obliged to issue such
a statement.
• The FRA may require the target company to appoint an independent financial
advisor to evaluate the tender offer and provide a report. Such appointment must
be approved by a resolution of the Board of Directors, for which voting is limited to
independent or expert board members that are not related to the bidder. Such a
report may be required by the FRA in the following circumstances:
o the bidder (or any of its related parties) already owns 20% of the share
capital of the target company;

Step
o the bidder is a board member or in the top management of the target
company;
o the purchase price is in cash or share swaps or a combination of both; or
o such other cases where the FRA deems that such report is necessary for
the protection of the target company’s shareholders and the interests of the
market and its stability.
• The independent financial advisor’s evaluation report must be disclosed, at the
latest, five days prior to the expiry of the validity of the tender offer.
9. The bidder must notify the target company of the tender offer and provide the information
memorandum on the same day as approval is received from the FRA and must publish the
tender offer within two days from the date of approval by the FRA. The means of
publication shall be in accordance with the rules and regulations set out by the FRA.
10. Tender offer amendment and withdrawal:

• After receiving FRA’s approval, the bidder may still amend the conditions of the
tender offer provided that any such amendment is made at least five days before
the elapse of the tender offer period and that the amendments in question are for
the benefit of the shareholders of the target company. The amendments must be
published in the same manner as the tender offer itself and may not result in an
extension of the tender offer period unless otherwise approved by FRA.
• The tender offer may not be withdrawn unless there is a material adverse event
and the approval of the head of FRA has been obtained. The bidder, in such a
case, shall not be allowed to submit another tender offer for the period of six
months following the date of the withdrawal of the tender offer. Such period is
extended to 12 months from the date of withdrawal of tender offer in case of a
mandatory tender offer unless otherwise allowed by the FRA based on reasonable
grounds.
11. Execution of the sale orders:

• The shareholders of the target company who wish to sell their securities shall
submit their sale orders to a brokerage company during the tender offer period. The
shareholders may withdraw their sale orders during the tender offer period. The
sale orders shall be executed through the EGX system.
• The results of the tender offer will be published on the EGX at the end of the tender
offer period and the offeror will have to execute the transaction within five days at
the latest from the date of the publication of the results of the tender offer on the
EGX.
12. Tender offer price:

• The price of the tender offer must reflect the fair value of the shares of the target
company. The price offered to all shareholders must be the same. However, in
order to protect the minority shareholders, the FRA may, subject to its discretion,
request that an independent valuation is made to determine the fair value of the
shares of the target company(see section 4.2).
13. After the elapse of the tender offer period, the EGX should publish the results on its screen
and, when relevant, whether or not the bidder waives the conditions precedent to the bid
(within the acceptance period).

Step
14. Undertakings:
• The FRA’s current practice is to require the offeror to undertake that it will:
o comply with Article 8 of the Capital Markets Law concerning disclosure
o purchase all shares offered
• The template of the information memorandum as prescribed by the FRA requires
the bidder to disclose and undertake the following:
o any intention to restructure the target company or terminate any of the
current employment contracts during the first year following the acquisition;
and
o any intention to dispose of the acquired shares within the first year
following the acquisition.
15. Payment of the offered consideration by the bidder within five business days of the result
being published by the EGX.
Set out below is an overview of the main steps for a mandatory public tender offer in Egypt.

Mandatory public tender offer (indicative timeline)
Start
process A-2 A Day A + 15 X-5 X Day X+5
Bidder files tender offer with Launch of tender offer by Target board may issue a Latest date to submit End of tender offer period Payment of the offered
the Financial Regulatory publication on Egyptian statement or opinion on the counter tender offer to FRA and publication of results consideration
Authority (FRA) Stock Exchange (EGX) tender offer or for bidder to amend on the EGX
screens and bid becomes tender offer conditions
public
10 – 30 days (at least 20 days if opinion of independent consultant is required ) 5 business days
Review and approval of the 15 days

application of the bidder by FRA

6 Takeover Tactics
An Egyptian company is obligated to immediately disclose to the public all “inside information” that
relates to it, including all material changes in information that has already been disclosed to the public:
• “Inside information” means any material information of a precise nature which has not been
made public, relating, directly or indirectly, to one or more issuers of financial instruments or
to one or more financial instruments and which, if it were made public, would be likely to have
a significant effect on the prices of those financial instruments or on the price of related
derivative financial instruments.

• It is up to the company to determine if certain information qualifies as “inside information”.

This will often be a difficult exercise, and a large gray area will exist as to whether certain
events will need to be disclosed or not.

The basic legal framework regarding insider dealing and market abuse under Egyptian law is set forth
in the Capital Markets Law.
a public tender offer, albeit that during a tender offer additional disclosures and restrictions apply in
6.3 Common anti-tender offer defense mechanisms

During the period from the date that the FRA approves the application for the tender offer until the
publication of the results of such offer, the board of directors of the target company is prohibited from
taking any anti-tender offer acts which have a material adverse effect on the tender offer, as
summarized in the table below.
1. Capital increase (poison The board may not take any decisions for a capital increase
pill) or the issuance of bonds if such an increase or issuance, as
the case may be, will render the tender offer transaction
Capital increase by the board
impossible or difficult, unless such decision was obtained
(authorized capital).
30 days before the FRA ratified the tender offer.
2. Share buyback During the validity of the tender offer, the target company
and any of its related parties may not, whether directly or
Share buyback “with a view to avoid
indirectly, purchase securities issued by the target company
an imminent and serious harm” to
if such securities constitute a part of the capital or give a
the company.
right to own a part of the capital However, the target

company may buy back shares during the validity of the
tender offer if such purchase is in execution of a company’s
general meeting resolution which was issued on a date
earlier than the date on which the FRA ratified the draft of
the tender offer and the memorandum of information.
3. Frustrating actions The board of directors of the target company is prohibited

from taking any action affecting in a material way the target
Actions such as significant
company, increasing its liabilities or obstructing the
acquisitions, disposals, changes in
development of its activities in the future, unless these
indebtedness, etc.
actions are in the normal course of business of the target
company and on a date before the FRA’s ratification on the
tender offer and the memorandum of information.

Tender Offer
The Capital Markets Law does not grant any squeeze-out rights to majority shareholders. However, if
a person and its related parties control 90% or more of the company’s shares and voting securities,
shareholders owning 3% or more of the shares or a minimum of 100 shareholders representing 2% of
the free float shares, may, within 12 months from such ownership threshold being reached, request
the FRA to oblige the majority shareholder to submit a mandatory tender offer for the minority shares.
8 Delisting
As a rule, the EGX may oppose a delisting of an Egyptian company that is listed on the EGX in the
interest of protecting investors.
The EGX may also oppose a delisting in the following circumstances:
• if registration was effected based on false information that affects the validity of listing;
• if the company does not comply with the disclosure rules, subject to a one-month compliance
notice by the EGX;
• if the foreign shares corresponding to locally listed depository receipts have been canceled;
• in the event that six consecutive months have lapsed without a transaction in the shares being
effected. Transactions would not include disposal of shares between related parties;
• if the company did not pay the required listing fees;
• if the company does not comply with any listing conditions that are rectifiable in nature,
provided that the company did not rectify such condition within the time limit determined by
the EGX; or
• if the company violates any non-rectifiable listing rules twice within any 12-month period.
In addition to the above circumstances, the EGX shall have the right to delist any company that has
violated the minimum threshold for net profits and equity rights for two consecutive years following its
listing.


Mohamed Ghannam and Mostafa El Sakaa in the Cairo office are the most appropriate contacts
within Baker McKenzie for inquiries about public M&A in Egypt.
Mohamed Ghannam Mostafa El Sakaa

Cairo Cairo
mohamed.ghannam@bakermckenzie.com mostafa.elsakaa@bakermckenzie.com
+20 2 2461 5520 #110 +20 2 2461 5520 #191

France
1 Overview
In 2019 there were 30 public takeover bids in France compared to 35 in 2016, 40 in 2017 and 22 in
2018. 2019 also saw an increase in the total value of the companies targeted by takeover bids,
representing €16 billion, compared to €12.5 billion in 2018 but €106.2 billion in 2017.
The proportion of amicable takeover bids initiated by the reference shareholder or the company itself
has remained unchanged, with 17 out of 30 (57%) in 2019, 12 out of 22 (55%) in 2018 and 22 out of
40 (55%) in 2017.
With respect to regular takeover bids, i.e., where the target company has no controlling shareholder,
there were no unsolicited offers in 2019. There were also none in 2018 and 2017, and only one in
2016 (Vivendi’s takeover bid for Gameloft).
The rules hereinafter described are those applicable on Euronext Paris which is the main trading
venue of the Paris market place and qualifies as a regulated market within the meaning of the
Directive 2014/65/EU of the European Parliament and Council of 15 May 2014 on markets in financial
instruments (MIFID II). Rules applicable with respect to takeover bids for companies listed on other
French trading venues such as Euronext Growth for small and medium companies, differ in several
respects from the rules hereinafter described.

The main body of the French takeover legislation is based on Directive 2004/25/EC of the European
Parliament and of the Council of 21 April 2004 on takeover bids (the “Takeover Directive”). The
Takeover Directive has harmonized the European public takeover bids legislation applicable to the
different Member States of the European Economic Area (EEA). However, the Takeover Directive still
allows Member States to maintain domestic specificities in connection with some important features of
a public takeover bid (such as the percentage of shares that, upon acquisition, triggers a mandatory
public takeover bid on the remaining shares of the target company, and the powers of the board of
directors). Accordingly, there are still relevant differences in the national rules of the respective
Member States of the EEA regarding public takeover bids. The Takeover Directive was implemented
into French law in 2006.

The main rules and principles of French law relating to public takeover bids are based on the
Takeover Directive and set forth in:
• the Monetary and Financial Code;
• the Commercial Code;
• the Autorité des marchés financiers General Regulation (and Implementing Instructions); and
• the rules and regulations of the market operator applicable to the relevant financial market
(Euronext Paris).
France, a number of additional rules and principles must be taken into account when preparing or
conducting a public takeover bid, such as:
Parliament and of the Council of 15 December 2004, on the harmonization of transparency

on a regulated market as amended by Directive 2013/50/EU (“Transparency Directive”). For
rules). These rules are set forth by the Market Abuse Regulation (EU) No 596/2014 as of 16
April 2014 (the “Market Abuse Regulation”). For further information, see 6.3 below.
offered in the public takeover bid consists of securities. These rules are based on Regulation
(EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017, on the
prospectus to be published when securities are offered to the public or admitted to trading and
repealing Directive 2003/71/EC and related EU legislation. These rules and regulations are
not further discussed herein.
2.2 Supervision and enforcement by the Autorité des marchés financiers

(the “AMF”)
Public takeover bids are subject to the supervision and control of the French stock exchange
authority, the AMF, which is the principal securities regulator in France.
The AMF has a number of legal tools that it can use to supervise and enforce compliance with public
takeover bid rules, including administrative fines (as further described below). The AMF also has the
power to grant (in certain cases described below) exemptions from the rules that would otherwise

The following general principles apply to public takeovers in France:
securities, the board of the target company must give its views on the effects of
(d) false markets must not be created in the securities of the target company, the offeror
distorted;
(e) a bidder must announce a bid only after ensuring that they can fulfil any cash consideration in

Besides these general principles contained in the Takeover Directive, the AMF also refers to the
following principles to impose fairness in the offer process. These must be complied with consistently
by the bidder(s) throughout the offer process:
• equal treatment and information for all shareholders;
• market transparency and integrity;
• fairness of transactions and competition among bidders; and
• a level playing field between competing bidders.
2.4 Recent modifications and proposed changes

• Squeeze-out: The “Pacte” Law enacted on 22 May 2019, lowered the squeeze-out threshold
from 95% to 90%. Before that, only a shareholder that held, alone or in concert, at least 95%
of the share capital and voting rights of a listed company (see 4.3 below) was allowed to
squeeze-out minority shareholders. The “Pacte” law lowers this threshold to 90% of the share
capital and voting rights of the target company in order to align French law with the laws of
other main EU jurisdictions and facilitate public-to-private transactions.
• Foreign investments: The Pacte Law, as well as Decree 2019-1590, and a related order
(arrêté) dated 31 December 2019, significantly reinforced French foreign investment
regulations (see 2.5 below). The reforms (i) extend the list of industries where acquisitions by
non-French investors are subject to the prior approval of the French Ministry of Economy, (ii)
change the timeline for obtaining a prior authorization from the French Ministry of Economy,
and (iii) substantially increase the list of information and documentation to be provided as part
of a prior authorization application.
• Prospectus Regulation: Prospectus Regulation (EU) 2017/1129 of the European Parliament

and of the Council of 14 June 2017, became effective from 21 July 2019.
• Independent expertise: In February 2020, the AMF amended its General Regulation with
respect to the independent expertise to be issued in negotiated takeovers. The changes are
essentially aimed at strengthening the protection of minority shareholders and reinforcing the
independence of the independent expert in charge of issuing the fairness opinion. The reform
is a response to public takeover offers by controlling shareholders where the diligence
procedures of the target’s board and the independent expert had been subject to much
criticism.

Foreign investments are not restricted in France and are only subject to reporting upon completion (as
opposed to prior authorization), unless they relate to certain specific sensitive activities.
The purchase by a foreign investor of a direct or indirect controlling interest in a French public
company conducting sensitive activities requires the prior approval of the French Ministry of Economy,
i.e., before completion of the transaction. In relation to non-French investors incorporated in the EEA,
such provision is triggered by crossing a 50% threshold of the share capital or voting rights. For non-
EEA investors, the threshold triggering the prior approval requirement is 25% of the voting rights.
The following are considered sensitive activities:
• gambling sectors (with the exception of casinos);

• private security regulated services;
• activities aimed at fighting the illegal use, in connection with terrorist activities, of pathogenic
and toxic substances and preventing the health consequences of such use;
• activities related to equipment used for intercepting communication and remote detection of
conversations;
• activities relating to evaluation and certification of security of information technology products

and systems;
• goods or services relating to security in the information systems’ security sector;
• activities relating to goods and technologies that may have a dual purpose, e.g., civil and
military;
• activities relating to the means of cryptology and services of cryptology;
• company activities related to national defense secrets;
• activities relating to research into, production or trade of weapons, ammunition, powder and
explosive substances;
• activities conducted by a company that has entered into a study agreement or a supply
agreement with the French Ministry of Defense (directly or by sub-contracting) in order to
conduct activities relating to goods and technologies for dual use or research, manufacture or
sale of arms or weapons; and
• activities related to data hosting whose jeopardizing or disclosure is likely to harm the
exercise of activities or interests;
• other activities relating to equipment and products or services that are essential to guarantee
French national interests in terms of public policy, public security or national defense, as listed
below:
o energy;
o water supply;
o transportation networks and services;
o space operations;
o electronic communication networks and services;
o installations, facilities or structures of vital importance; and
o public health.
• activities related to production, processing or distribution of agricultural products when these

contribute to national food security;
• activities related to editing, printing or distribution of press publications of political and general
information relating to the status of group companies and distribution of newspapers and
periodical publications, and online press services of political and general information; and
• activities of research and development of means to be implemented relating to the sectors

listed below:
o cybersecurity;

o artificial intelligence;
o robotics;
o additive manufacturing;
o semiconductors;
o quantum technology;
o energy storage; and
o dual-use items and technologies.
The approval process is in two-phases:
(i) an initial phase of up to 30 business days from the receipt by the French Ministry of Economy
of the authorization request, during which time the French Ministry of Economy will provide its
position on whether the proposed investment is (i) out of scope of the foreign investments
regulation, (ii) in scope and unconditionally authorized or (iii) in scope and requiring further
analysis to determine under what conditions it could be authorized; and
(ii) if during the initial phase the French Ministry of Economy determines that it requires further
analysis to ensure that the preservation of national interests may be guaranteed by granting
an authorization under condition(s), it will have a further period of up to 45 business days to
provide its position.
If the French Ministry of Economy does not provide its position by the expiry of either phase, the prior
authorization request will be deemed refused.
2.6 Information of the target company’s employees - the “Hamon Law

Information”
A law of 31 July 2014 (the “Hamon Law”), later revised by a law of 6 August 2015 (the “Macron Law”),
introduced a “prior information right of the employees in case of sale of business” (droit d’information
préalable des salaries en cas de vente d’une entreprise) into French law.
The new provisions established an obligation for the owner of a block of shares representing more
than 50% of the share capital of a target company to notify the management of the target company of
its intention to transfer the control of the target company so that each of the employees of the target
company (but not of the subsidiaries thereof) is informed of such proposed sale and may bid for the
acquisition of the block of shares to be transferred. For the avoidance of doubt, the employees do not
have any priority right over the shares to be transferred under the Hamon Law.
The employees must be informed individually of the proposed sale prior to the signing of any share
purchase agreement.
Where the proposed sale is subject to prior consultation with the works council (comité social et
économique) of the target company, the information process is conducted simultaneously with the
consultation and cannot adversely affect the timetable of the transaction.
It should be noted that most public M&A transactions involving French target companies are not
subject to such an obligation since it is applicable only where the target company:
(i) employs less than 250 persons; and
(ii) has an annual turnover exceeding EUR 50 million or a balance sheet exceeding EUR 43
million.

In addition, the Hamon Law only applies to public M&A transactions involving the sale of a controlling
block of shares. Voluntary public takeover bids are not subject to the Hamon Law.

levels of shareholding within a French listed corporation:
Shareholding Rights
• The ability at a general shareholders’ meeting to block any
decision that must be taken unanimously, such as:
o relocation of the registered office outside of France
(except if the target company is incorporated as a SE
(Societas Europaea) and relocated with the European
Union);
o increase in the shareholders’ obligations towards the
company, e.g., increase of the share par value, change
of the corporate form into an unlimited liability form,
etc.; and
o change of the corporate form into a simplified joint-
stock company (société par actions simplifiée).
meeting or in writing prior to the meeting).
other reasons (as provided for in Articles L. 225-121 and L.
235-1 of the Commercial Code).
5% • The right to submit questions to the management regarding any

matter which may compromise the operations of the company,
twice a year, at any time.
• The right to petition a court to appoint an expert to establish a
report on one or more operations of the management.
• The right to request the addition of new items on the agenda
and draft resolutions in relation to a general shareholders’
meeting. The shareholding required to make such request
gradually decreases from 5% for target companies whose share
capital is above EUR 750,000.
• The right to petition a court to appoint an agent to convene a

Shareholding Rights
331/3% + one share The ability at a general shareholders’ meeting to block resolutions of the
extraordinary general shareholders’ meeting’s competence, which are
the following:
• any changes to the articles of association;
• mergers and/or de-mergers;
• capital increases and/or capital reductions;
• change of the corporate form;
• issue of new shares and/or any equity securities (including, but
not limited to, convertible bonds, mandatory convertible bonds
and warrants);
• issue/allocation of stock options or RSUs;
• relocation of the registered office in another district
(département) (other than an adjacent district);
• dissolution of the company or extension of its term;
• any change in the rights attached to the shares, including, but
not limited to, the introduction of a double voting right or the
creation of a new class of shares;
• the disapplication (limitation or cancellation) of the preferential
subscription right of existing shareholders in case of share
issues in cash, or issues of convertible bonds or warrants; and
• any other amendments to the articles of association.
Given that the outcome of a vote on a resolution at a general
shareholders’ meeting is determined based only on the total number of
votes cast by shareholders participating in the meeting (physically, by
mail or by proxy) without counting the voting rights held by the non-
participating shareholders, the level of shareholding required to block a
resolution is usually less than 331/3% in practice.
50% + one share The ability at a general shareholders’ meeting to pass resolutions of the
ordinary general meeting’s competence, which are the following:
• approve the annual standalone and consolidated financial
statements;
• decide a dividend and any other exceptional distribution
(reserves and premium);
• appoint and dismiss directors;
• approve the remuneration policy and the individual
remuneration of the executive corporate officers;
• appoint and dismiss statutory auditors;
• decide a share buy-back program;
• approve the related party agreements entered into by the
company;

Shareholding Rights
• ratify the relocation of the registered office within the same
district or an adjacent district (as decided by the board of
directors); and
662/3% The ability at a general shareholders’ meeting to pass resolutions of the

extraordinary general meeting’s competence, as listed above.
90% The ability to implement a “squeeze- out” (retrait obligatoire) of the

minority shareholders following a takeover offer, and subsequently
delist the company from Euronext Paris.

French law contains a number of rules that apply before a public takeover bid is announced. These
rules impose restrictions and hurdles in relation to prior stake building by an bidder, announcements
of a potential takeover bid by the target company or the bidder prior due diligence by a potential
bidder. The main restrictions and hurdles have been summarized below. Some careful planning is
therefore necessary if a potential bidder or target company intends to start up a process that is to lead
towards a public takeover bid.
3.3 Insider dealing

Before, during and after a takeover bid, the normal rules regarding insider dealing and more broadly
market abuse remain applicable. For further information on the rules on insider dealing and market
abuse, see 6.3 below.
Prior to the announcement of the offer, the bidder is not prohibited from trading the target’s shares
subject to the general principles governing offers and insider trading rules.
The knowledge by the bidder of its offer is not regarded as an obstacle to the bidder acquiring shares
of the target company but under certain circumstances, such acquisitions may be challenged by the
AMF for being allegedly in breach of the general principles governing public takeover offers (in
particular, market integrity). Any bidder having access to a data room opened by the target would, in
any event, be deemed an “insider” and thus prohibited from acquiring the target’s shares in the
market.
During the pre-offer period, i.e., from the announcement of the offer until the filing of the offer, the
bidder is prohibited from buying the target’s shares.

obliged to announce its stake in the share capital or that the voting rights attached to this stake have
crossed a disclosure threshold. Such threshold crossings should be reported to both the AMF and the
company.
The relevant disclosure thresholds in France are 5%, 10%, 15%, 20%, 25%, 30%, 331/3%, 50%,
662/3%, 90% and 95%. Several listed companies also apply a lower threshold than the initial threshold
of 5% (0.5% in most cases), with disclosure to the company having to be made at each crossing of a

multiple of said initial threshold (1%, 1.5%, etc.). It should be noted that the disclosure must be made
regardless of the direction of the crossing (either upwards or downwards).
In addition, any crossing of the shareholding threshold of 10%, 15%, 20% or 25%, either in voting
rights or in share capital, triggers the additional obligation to disclose, to the AMF and the target
company, a description of the objectives intended to be pursued by the stake builder with respect to
the company for the subsequent six months, within five trading days of the crossing of the threshold.
Such declaration of intent must disclose, among other things, whether the shareholder is acting alone
or in concert, whether or not it seeks to purchase additional securities of the company, whether or not
it intends to obtain corporate control and whether or not it intends to request the appointment of board
members.
account the voting securities held by the parties with whom it acts in concert (see 3.9 below) and any
other assimilated shares under French rules (including shares subject to a call option of which it is the
beneficiary).

The target company must comply with the general rules regarding disclosure and transparency
throughout the takeover process. In particular, as a listed company, it must immediately disclose any
inside information under Market Abuse Regulation. For further information on inside information, see
6.1 below.
The negotiation of a public takeover bid may constitute inside information. If so, the target company
must disclose it. However, the management of the target company can delay (and usually do)
disclosure on the ground of the legitimate interest of the company. For instance, this could be the
case if the target’s management believes that an early disclosure would prejudice the negotiations
regarding a bid. A delay of the announcement, however, is only permitted if such non-disclosure does
not mislead the public and the company can keep the relevant information confidential. The
company’s management may be held liable for delaying disclosure if considered unlawful.

Any bidder contemplating a transaction that may have a material impact on the market price of a stock
(such as a takeover offer) must state its intents and disclose the main terms of the contemplated
transaction as soon as possible.
The bidder may postpone the disclosure at its own risk provided confidentiality is maintained. In case
of a friendly offer, confidentiality is secured by a non-disclosure agreement between the bidder and
the target / its shareholders covering the existence and content of the on-going negotiations and the
information exchanged between the parties
As soon as a bidder makes the terms of a potential offer public, it must immediately inform the AMF.
The AMF will subsequently post a notice on its website, which starts the pre-offer period during which
share dealing restrictions apply to the bidder.
If there are rumors or leaks that a potential bidder intends to launch a public takeover bid, the AMF
could force such potential bidder to disclose its intentions. This mechanism could lead to an early
disclosure and accelerate the bidder’s preparations. For further information, see 3.7 below.

(a) Early disclosure required by the AMF – The AMF may require any person making statements
either personally or via intermediaries that raise questions with the public as to such person’s
intentions regarding a potential public takeover bid to disclose its intentions within a time
period set by the AMF. The disclosure must typically be made within a couple of trading days.

(b) Put-up or shut-up – In addition to the foregoing rule, the AMF is entitled to force a person to
make an announcement as to whether or not it intends to carry out a public takeover bid. The
relevant rules, inspired by the UK rules, can be summarized as follows:
o The AMF can force an announcement by a person if such person is reasonably

believed to be preparing an offer (for example, in the event of market rumors).
o In forcing such announcement, the AMF can impose a window of time within which
the announcement must be made, typically a couple of trading days.
o A person that confirms their intention to launch a public takeover bid must launch
such takeover bid within the term agreed by the AMF. In the few precedents available
so far, the AMF granted between 18 and 23 trading days to the suspected bidder to
make the required disclosure once it had confirmed its intent to launch an offer.
o If a person denies their intention to launch a public takeover or does not confirm their
intention to launch a bid within the term imposed by the AMF, they (and the persons
acting in concert with them) will be prevented from launching a takeover bid for the
securities of the target company for a period of six months following the publication of
such announcement (or the expiry of the term imposed by the AMF to make such
announcement), unless the circumstances, the situation of the target company or the
shareholding of the entities concerned have substantially changed.
3.8 Due diligence

The French public takeover bid rules do not contain specific rules regarding the question of whether or
not a prior due diligence can be organized or how such due diligence is to be organized. Be that as it
may, the concept of a prior due diligence or pre-acquisition review by a bidder is generally accepted,
including by the AMF as well, and appropriate mechanisms have been developed in practice to
disclosure concerns. These mechanisms include the use of strict confidentiality procedures and data
rooms.
The due diligence process will vary depending on the type of bid.
In a friendly offer, the bidder is given access to a data room containing non-public information, subject
to the display of a “serious interest” expressed by the bidder for the transaction and the execution of a
letter of intent as defined by AMF Regulation n° 2016-08. In accordance with the level playing field
rule, if there are any competing bids, the target is required to allow any competing bidder to have
access to the same level of non-confidential information as the initial bidder, subject to antitrust
considerations as the case may be. The offer documentation must state whether or not a data room
was put in place. In addition, any material non-public information made available in the data room
must be disclosed in the offer document made public by the bidder in order to provide shareholders
with the same level of information, which in practice restricts the content of the data room in public
M&A transactions.
In a hostile offer, the bidder will usually need to rely on publicly available documents, as the target
company will not allow it to have access to a data room. The most comprehensive document is the
universal registration document (document d’enregistrement universel) disclosed every year by most
French public companies, which can be found on their website. Regulated information (permanent
and periodic disclosures) made public by French public companies in accordance with the
Transparency Directive, as implemented into French law, are also available on their website.
Corporate documents (certificate of incorporation (K-bis), by-laws, security interests, bankruptcy
filings) are available from clerks of competent commercial courts.

Under French corporate law, persons “act in concert” if they enter into an oral or written agreement to
acquire, sell or exercise voting rights aimed at implementing a common policy relating to the company
or to acquire control over the company.
Such agreement is deemed to be existing:
• between a company, its chairman and its general managers (directeurs généraux).
Depending on the corporate form of the company, instead of the chairman and the general
managers, the officers to be considered acting in concert with the company would be the
members of the managing committee (directoire) or the managers (gérants);
• between the company and the company it controls under the meaning given to control by
French law;
• between companies controlled by the same person;
• between the shareholders of a simplified joint stock company (société par actions simplifiée),
towards the companies that such company controls; and
• between the trustee (fiduciaire) and the beneficiary (bénéficiaire) of a fiduciary contract
(contrat de fiducie), where the beneficiary is also the settlor (constituant).
For the purpose of the French takeover bid rules, the persons who enter into an agreement with the
initiator of a takeover bid aimed at acquiring control of the target company are considered to be acting
in concert. Persons who enter into an agreement with the target company aimed at preventing the
takeover bid are also considered to be acting in concert.
takeover bids. If one or more persons in a group of persons acting in concert acquires voting
securities as a result of which the group in the aggregate would pass the 30% threshold, the members
of the group will have a joint obligation to carry out a mandatory takeover bid, even though the
individual group members do not pass the 30% threshold.
There are two main forms of takeover bids in France:
• a voluntary takeover bid in which a bidder voluntarily makes an offer for all the shares issued
by the target company (and all the securities issued by the target company conferring the right
to acquire its shares, regardless of whether or not they are listed); and
• a mandatory takeover bid that a bidder is required to make if, as a result of an acquisition of
securities, a shareholder crosses (alone or in concert with others) a threshold of 30% of share
capital or voting rights of the target company, or if it increases, within 12 consecutive months,
its shareholding by more than 1% in shares or voting rights while holding a shareholding
between 30% and 50% in shares or voting rights.
Both forms of takeover bids can be followed by a squeeze-out bid whereby a shareholder holding
90% of the share capital and voting rights of a company governed by French law can squeeze out the
remaining holders of voting securities.
A bidder that intends to launch a takeover bid must appoint a presenting bank in order to guarantee
the offer consideration. Unlike most EU jurisdictions, there is no regulatory or stock exchange
requirement for debt financing to be provided on a certain-fund basis but the presenting bank usually
requires the benefit of a cash guarantee or any other back- to-back guarantee. Only financial

intermediaries authorized to provide the investment service of underwriting in France are allowed to
act as presenting banks.

• Offers must be unconditional and irrevocable. The bidder is, however, free to make the
takeover bid subject to merger control clearance, a minimum acceptance level (the statutory
success threshold is 50% + one share but the bidder can set a higher threshold within the
limit of 662/3%), governmental approval and approval of the bidder’s shareholders. No other
condition precedent such as financing or absence of a material adverse event are allowed.
• The bidder is, in principle, free to determine the price and the form of consideration offered to
o The offered price may be paid in cash, securities or a combination of both. However,
such securities have to be (i) regarded as liquid by the AMF and (ii) listed or admitted
to trading on a regulated market in one of the EU or EEA member states for the
takeover bid to be approved. As a result, where the bidder which is offering
consideration in the form of securities is from outside the EU or EEA, it must seek a
listing in the EU or EEA (preferably in France, failing which the AMF usually requires
the implementation of a sale facility to allow the former shareholders of the target to
promptly dispose of their newly-received securities following the settlement of the
operation at no cost) for the securities it plans to offer as consideration. This will
require the preparation of a prospectus. If the offered securities do not meet these
conditions, the bidder must offer a cash alternative to all the target company
shareholders. The bid may also provide for a choice or a mix of alternative
consideration, i.e., cash and/or securities at the option of the target company’s
shareholders and/or within the limits set by the bidder.
o If the bidder or persons acting in concert with the bidder have acquired securities
giving access to more than 5% of the share capital or the voting rights of the target
company for cash, they will have to offer an unlimited cash alternative to the target
company’s shareholders as part of the takeover bid.
o There is no minimum price for a voluntary takeover bid. The offer price may be set at
the discretion of the bidder and is not subject to the approval of the AMF. The AMF
will, however, systematically ensure that (i) the offer price complies with the general
principles governing public offers (including, in particular, equal treatment of all
shareholders and the fairness of transactions among bidders), and (ii) the information
with respect to the offer price disclosed in the offer document, particularly the
valuation, and in the fairness opinion is complete and coherent.
o The target’s board must appoint, on the proposal of an ad hoc committee composed
of at least three members and including a majority of independent members, an
independent expert to deliver a fairness opinion for transactions which are likely to
raise a conflict of interest or interfere with the equal treatment of the holders of the
targeted securities. Independent experts are, in practice, more often “boutique”
financial or accounting experts rather than mainstream banks.
o If there are different categories of securities, different prices for each category can
only be based on the characteristics of such categories.
o If, during a 12-month period preceding the takeover bid period (starting on the date of
the formal offer notice to the AMF), the bidder or persons acting in concert with the
bidder have acquired securities to which the takeover bid relates, then the offered
price must be at least equal to the highest price paid during this period. However, the

AMF may request or authorize the amendment of the proposed price if this is justified
by a manifest change in the target company’s characteristics or in the market for its
securities.

• A mandatory takeover bid is triggered under the following alternative conditions:
o a person or a group of persons acting in concert acquire 30% or more of the

share capital or voting rights of the target company;
o a person or a group of persons acting in concert holding between 30% and

50% of the total number of shares or voting rights of the target company
increases its shareholding by more than 1% of the total number of shares or
voting rights of the target company within a 12-month period; or
o if the AMF requires it, when a person or a group of persons acting in concert
controlling a listed company decides to dispose of the majority of the assets of
this company. The disposal is also subject to prior consultation of the ordinary
shareholders’ general meeting of the company.
• The mandatory takeover bid is unconditional and no condition precedent is allowed,

subject to the legal condition of the minimum acceptance level, see below.
• The mandatory takeover bid must be filed with the AMF within a reasonable period of
time from the triggering event, i.e., up to 4-6 weeks in practice.
• If there is a failure to file a mandatory takeover bid complying with applicable

requirements, the shares in excess of the 30% threshold will be automatically
deprived of voting rights and the AMF may request the issuance by a court of an
injunction to file the mandatory takeover bid.
• The AMF may grant an exemption from the requirement to conduct a mandatory
takeover bid in certain situations. However, the AMF has a discretionary power to
refuse to grant an exemption. A key factor in its decision making is the impact of the
transaction on the minority shareholders. The main exceptions to the takeover bid
obligation include situations where:
o the 30% threshold is crossed by a shareholder acting in concert with either:
 a person (or a group of persons acting in concert) holding the majority of the
target company’s share capital or voting rights, provided that such
shareholder(s) remain(s) predominant in the group acting in concert; or
 a person (or a group of persons acting in concert) holding between 30% and
50% of the target company’s share capital or voting rights, provided that (i)
such shareholder(s) maintain(s) a larger holding than the shareholder joining
the group acting in concert, and (ii) such shareholder(s) do(es) not cross
either of the triggering thresholds of 30% or 1% over a 12-month period.
However, only the latter threshold (1% over 12 months) is actually applicable
since the group already holds more than 30% of the target company’s shares
or voting rights;
o the threshold (30% or 1% over a 12-month period) is crossed temporarily,

i.e., where the crossing results from a transaction that is not intended to gain
or increase control of the company and lasts no longer than six months,
provided that the person (or a group of persons acting in concert) crossing

the threshold undertakes not to exercise the corresponding voting rights

(exceeding the threshold) prior to the resale of the relevant stake;
o the gratuitous transfer of securities between individuals;
o the stake is acquired within the framework of a subscription to a capital

increase with preferential subscription rights for the shareholders that has
been decided upon by the general shareholders’ meeting, i.e., a rights
offering;
o the stake is acquired within the framework of a subscription to a capital

increase by a target company in financial difficulties that has been decided
upon by the general shareholders’ meeting;
o the involuntary crossing of the threshold, i.e., reduction of the total number of
shares or voting rights of the company;
o the stake is acquired by a person (or a group of persons acting in concert)

holding more than 50% of the share capital or voting rights of the target
company;
o the stake is acquired within the framework of an acquisition of control, merger

or contribution of a company (i) which directly or indirectly holds more than
30% of the target, and (ii) of which the target does not constitute an essential
asset; and
o the stake is sold or otherwise disposed to individuals or companies belonging

to the same group.
• In terms of the price offered and the form of the consideration, the same rules apply
as in the case of a voluntary takeover bid. In addition:
o The mandatory offer price must at least equal either:
 the highest price paid by the bidder (or any person acting in concert with it)
during a period of 12 months preceding the triggering event of the takeover
bid, i.e., threshold crossing; or
 absent such previous transaction in the preceding 12 months, the minimum

price is set according to a multicriteria valuation.
o The AMF may either increase or decrease the minimum price in the event of a
significant change in the characteristics of the target or the market for its
securities, such as:
 an event materially altering the value of the target company that occurred
over the previous 12 months;
 the target company being distressed;
 the reference price relates to a complex transaction, i.e., including specific

covenants and representations and warranties.
o Whenever an independent expert must be appointed, the AMF will review the
offer price in light of the fairness opinion.
o The consideration offered must consist of cash.

o The legal minimum acceptance threshold is 50% of the total number of shares
or voting rights of the target company. If this minimum level is not reached,
the bid lapses with the following consequences:
 the voting rights attached to the shares held by the bidder in excess of the
30% threshold (or in excess of the shareholding of the bidder prior to the offer
where it was already holding between 30% and 50% of the target’s share
capital or voting rights) are suspended;
 the bidder is no longer permitted to acquire any shares in the target company
(even within the limit of 1%) unless it informs the AMF and initiates a new
takeover bid; and
 the suspended voting rights are only reinstated in the event that the new offer
is successful, i.e., it reaches the 50% minimum threshold.
4.3 Follow-on squeeze-out and delisting

Following a successful takeover bid, a bidder will be able to squeeze out the residual minority
shareholders if it holds, alone or in concert with others, at least 90% of the share capital and voting
rights of the target company. The squeeze-out is effected at the price offered in the takeover bid. In
order to effect a follow-on squeeze-out, the bidder should reserve the right to do so in its takeover bid
(see 7.1 below).
Concurrently with the completion of the squeeze-out, the shares of the target company will be delisted
from Euronext Paris.
5 Timeline
5.1 Friendly normal procedure
The table below contains a summarized overview of the main steps of a typical voluntary friendly
public takeover bid process under French law (without pre-bid acquisition of shares).
When the public takeover bid process is preceded by the acquisition by the bidder of a block of shares
representing more than 50% of the shares and voting rights of the target company, a so-called
“simplified procedure” will apply with certain significant discrepancies that are discussed in 5.2. below.
Step
• Preparation of the bid by the bidder (study, due diligence, financing and draft offer
document).
• Signing of an exclusivity agreement with the target and commitment to tender by
some key shareholders.
• Announcement of the transaction.

Step
2. Target company’s works council:

• Consultation of the target company’s works council (which has no veto right)

• Signature of the combination agreement by the bidder and the target company.
• Appointment of the ad hoc committee (composed of a majority of independent
directors) within the board of directors of the target.
• Appointment of the independent expert (if necessary) by the board of directors of
the target.
• The bidder files the preliminary offer document with the AMF (this filing is often
simultaneous with the filing of the preliminary response document by the target).
4. Responses from the target company:

• The board of the target company issues its opinion on the bid.
• The target company files the preliminary response document with the AMF
(containing the opinions of the works council and the board).
5. Review by the AMF:

• The AMF reviews and approves the offer document of the bidder.
• The AMF reviews and approves the response document of the target company.
6. Within two trading days of the approval of the bid by the AMF, publication of the final
documents (offer document and response document) and filing of the information
documents regarding the bidder and the target company.

• Start: the next trading day after step 6 above.
• Duration: 25 trading days for the normal procedure.
8. Publication of results (within nine business days of the end of the acceptance period).
9. Payment of the offered consideration by the bidder (typically three to five business days
after publication of the result).
10. Re-opening of bid if the bid was successful, i.e., if the minimum level threshold was
reached:
• Start: within 10 business days following publication of results.
• Duration: not less than 10 business days. There may be no re-opening of the bid if
the bidder has reached the 90% threshold (both in shares and voting rights) and
launches a squeeze-out procedure.
11. Publication of results of the re-opened offer (within nine business days of the end of the re-
opened acceptance period).
12. Payment of the offered consideration by the bidder (typically three to five business days
after publication of the result of the re-opened offer).
13. Squeeze-out (if the bidder acquired at least 90% of the share capital and voting rights of
the target company as a result of either the acceptance period or the re-opened

Step
acceptance period, at any time within the next three-month period, the bidder may enforce
a squeeze-out of the minority shareholders by notifying the AMF accordingly and making
the appropriate disclosure under the conditions set forth in 7.1 below). The squeeze-out is
typically completed within a few business days from the AMF notification.
Set out below is an overview of the main steps for a friendly public takeover bid in France.

Friendly public takeover bid (indicative timeline for a standard procedure*)
D + 26 +
Announcement A Day A + 20 D D+1 D+2 D + 26 D + 35 D + 40 D + 41 D + 50 D + 59 D + 64 3 months
Signing of the Signing of the Bidder and target AMF approves Bidder and target Opening of End of Publication of Payment of the Re-opening of bid End of re-opened Publication of Payment of the Squeeze-out and
exclusivity combination disclose and file offer document file with the AMF acceptance acceptance results offered if the bid was acceptance results offered delisting (subject
agreement agreement with the AMF, and response and make public period period consideration successful, i.e., if period consideration to the bidder
followed by respectively, the document and the documents 50% minimum holding more than
announcement of offer document makes them presenting their level threshold 90% of the target
Appointment of
the transaction and the response public legal, financial reached both in shares
the independent
document and accounting and voting rights)
expert by the
(including the characteristics
target’s board report of the (information
independent documents)
expert)
Consultation of the
target’s works council
Less than 1 month Minimum of 20 AMF review period (at least 25 trading days for Within 9 trading 3 - 5 trading Within 10 Minimum 10 Within 9 trading 3 - 5 trading Within 3 months
(subject to exemptions) trading days for the 5 trading days – generally normal procedure (can days days trading days trading days days of the end days following close of
expert’s review 10-15 calendar days) be extended to 35 (but usually of the re-opened offer
trading days) / 10 immediately acceptance
trading days for following period
simplified procedure payment of the
consideration)
* Periods referred to in the timeline are expressed in trading days unless otherwise stated

5.2 Friendly simplified procedure
If the bidder holds more than 50% of the shares and voting rights of the target company prior to the
bid, for example as a result of a pre-bid acquisition, the takeover bid will be entitled to a simplified
procedure. Two key differences to highlight compared to the normal procedure are:
• The target company must wait for the expiry of a 15-trading day period to file its draft
response document with the AMF, i.e., the initial filing by the bidder and the target cannot be
simultaneous. The purpose is to allow the board of the target to address the concerns raised
by the minority shareholders in the response document.
• The acceptance period minimum duration is 10 business days (and not 25 business days).
6 Takeover Tactics
Inside information is governed by the Market Abuse Regulation which is directly applicable in France.
A French listed company is obligated to immediately disclose all of its “inside information” to the
public.
instruments.
• Information shall be deemed to be of a “precise nature” if it indicates a set of circumstances or

an event which occurred or may reasonably be expected to occur and if it enables a
conclusion to be drawn regarding the possible effect of that set of circumstances or event on
the prices of the financial instruments or the related derivative financial instruments.
Disclosure may be delayed if the company considers that it is in its legitimate interests. The company
must promptly inform the AMF of any such delay following the actual disclosure and retain a record of
how it determined that the delay in disclosure was in its legitimate interests.
It is up to the target company to determine if certain information qualifies as “inside information”. This
will often be a difficult exercise, and a large gray area will exist as to whether certain events will need
to be disclosed or not.

In the event of a (potential) public takeover bid, the bidder is not required to inform the target company
or the public prior to filing the takeover bid documentation with the AMF, provided that such non-
disclosure is necessary to the preparation of the transaction and that secrecy can be maintained.

Insider dealing and market abuse are governed by the Market Abuse Regulation which is directly
applicable in France. Other applicable rules are set forth in both the Monetary and Financial Code and
the AMF General Regulation.

Any person who has knowledge of inside information should refrain from:
• using the information it possesses to acquire or dispose of, or to try to acquire or dispose of,
for its own account or for the account of a third party, either directly or indirectly, financial
instruments to which that information relates;
• disclosing such information to another person otherwise than in the normal course of its
duties, or for a purpose other than that for which the information was disclosed to it; and
• advising another person to buy or sell, or to have another person buy or sell on its behalf, on
the basis of inside information, the financial instruments to which such information pertains or
related financial instruments.
The sanction regime for insider dealing and market manipulation was modified recently. The
accumulation of administrative and criminal prosecutions has been replaced by a mechanism
implementing a distribution between them. Consequently, the general attorney and the AMF (which
are, respectively, the criminal and administrative prosecuting bodies) must consult each other prior to
any act of prosecution related to insider dealing or market manipulation. In accordance with such
mechanism, if either the general attorney or the AMF intend to prosecute then the relevant party must
first notify the other of such intention. The other party will then have a two-month period to confirm
whether it also intends to prosecute. Where the second prosecuting body also intends to prosecute,
the attorney general of the Paris court of appeal will decide which of the two prosecuting bodies
should proceed with the prosecution.
6.4 Pre-offer contractual arrangements

The bidder may acquire blocks of shares from the target’s significant shareholders before the launch
of its offer.
Alternatively, the bidder may approach the target’s significant shareholders to secure the tendering of
the blocks to its offer. Undertakings to tender must be disclosed to the public and to the AMF. They
must be carefully drafted to comply with the principle of fair competition between competing bidders
and, as such, will provide that they cease to be binding in the event of an AMF-approved competing
offer.
The bidder may also enter into a tender offer agreement with the target. Tender offer agreements are
common in French market practice. The board of the target may undertake to recommend the offer
provided that it acts in compliance with the corporate interests of the company. A matching right for
the bidder may be provided, subject to certain limitations and to the disclosure to the public.
Break-up fee arrangements with the target’s shareholders or the target itself are typical and must be
disclosed. They cannot be so high that they impede any counter-offer otherwise they would conflict
with the principle of fair competition between competing bidders or, when agreed with the target, be
regarded a misuse of corporate assets

company as a defense against a takeover bid. These mechanisms take into account the restrictions
that apply to the board and general shareholders’ meeting of the target company pending a takeover
bid.

A law dated 29 March 2014 (the “Florange Law”) abandoned the target company’s board neutrality
requirement for unsolicited bids, reversing the position adopted by France in 2006 to opt in under the
Takeover Directive. As a consequence, the board of the target company may take frustrating actions
against the takeover bid without prior shareholders’ approval, provided that such defense measures (i)
do not fall within the competence of the shareholders’ general meeting and (ii) are not contrary to the
corporate interest of the target company.
Certain provisions of the target company’s articles of association are unenforceable during an offer
period. These are:
• the provisions that restrict the transfer of shares, e.g., prior agreement or pre-emption
clauses, unless such provisions reflect a legal obligation; and
• the provisions that limit or suspend the voting rights.
Moreover, the company’s articles of association may provide that the provisions of external
agreements, i.e., shareholders’ agreements, providing for (i) the restriction of the transfer of shares,
(ii) the limitation of voting rights with respect to the collective decisions to be adopted in the context of
a takeover bid, and/or (iii) the granting of particular veto and political rights are not enforceable in a
takeover bid situation.
1. Capital increase • The completion of a capital increase requires an

(poison pill) express authorization by a majority of 662/3% of the
votes cast at a general shareholders’ meeting at which
at least 25% of the share capital is present or
board (authorized
represented (the 25% quorum does not apply to the
capital) with or without
second meeting that is convened if the 25% quorum
preferential subscription
was not reached at the first meeting, a 20% quorum
rights of the
requirement will apply instead).
shareholders.
• The authorization is valid for 26 months only, but can
be renewed. However, the company’s articles of
association (or the resolution itself as recommended by
proxies) may provide for the suspension of the board’s
authorization to increase capital during an offer period.
• The capital increase may not exceed a maximum cap
decided by the shareholders’ general meeting. No
limitation is provided for this cap, however the
shareholders’ general meeting has to fix a cap.
• However, if the capital increase is made without
preferential subscription rights, the cap may not exceed
20% of the company’s share capital in the context of a
private placement. With respect to a capital increase
without preferential subscription rights reserved to a
named person or a category of beneficiaries, the cap
decided by the shareholders’ general meeting is not
itself capped.
2. Share buyback • The completion of a share buyback requires an

express authorization by a majority of 50% of the votes
Share buyback to reduce
cast at a general shareholders’ meeting at which at
the floating shares that
least 20% of the share capital is present or represented
(the 20% quorum does not apply to the second


could be tendered to a meeting that is convened if the 20% quorum was not
hostile offer reached at the first meeting, no quorum requirement
will apply instead).
be renewed. However, the company’s articles of
association (or the resolution itself as recommended by
proxies) may provide for the suspension of the board’s
authorization to implement a share buyback during an
offer period.
be renewed.
• The target company cannot hold more treasury shares
in excess of 10% of its share capital at any one time.
• The amount that can be used to finance the share
buyback is capped at the amount of available
distributable profits and reserves.
• Buybacks to be made in compliance with corporate,
3. Acquisition or disposal This defense includes:

of assets
• the acquisition of new assets creating liabilities on the
An arrangement affecting company (the “fatman” defense); and
the assets of, or creating
• the disposal of particularly important assets of the
a liability for, the
company (the “crown-jewels” defense).
company which is
takeover bid.
4. Warrants on new • Requires a prior approval by a majority of 662/3% of the

shares votes cast at a general shareholders’ meeting at which
at least 25% of the share capital is present or
Warrants are issued prior
represented.
to the takeover bid in
favor of “friendly • The same restrictions as for capital increases apply for
person(s)” who can the issue of warrants on new shares, i.e., restrictions
exercise the warrants at with respect to the persons that can benefit from them
their option and and the maximum percentage of share capital that it
subscribe for new can represent.
shares.
5. Rights plans • The board of the target may decide to issue (for no
consideration) to all of its shareholders warrants giving
a right to shares in the target on favourable terms thus
diluting the bidder and making the transaction more
costly.
• This requires prior approval by a majority of 502/3% of
the votes cast at a general shareholders’ meeting. The
approval can either be granted ahead of the takeover

offer as part of the periodic issuance authorizations or
following the announcement of a takeover offer.
• Unlike US rights plans, the warrants will be issued to
any bidder’s pre-bid shares and they will be issuable
only in the event of a genuine takeover bid (meaning
they are not effective against creeping acquisitions).
6. Cross shareholdings • The target company owning more than 10% of the
bidder’s share capital prevents them from holding any
Acquisition of more than
shares in the target company.
10% of the voting rights
in the potential bidder, • Subject to sanctions for the directors, the bidder (if they
prohibits a bidder from hold a smaller stake in the target than the target’s stake
acquiring shares in a in the bidder) will be compelled to dispose the shares
target. held in the target.
• However, the acquisition of voting rights in the bidder
may need to be disclosed pursuant to applicable
transparency rules.
• Requires sufficient means to finance the acquisition.
• The prohibition of cross-shareholding only applies
between French companies.
7. Shareholders’ • A voting undertaking is only valid if (i) it is limited in

agreements time and matters, (ii) it is and remains at all times in the
interest of the company, and (iii) it complies with the
Shareholders agree to
mandatory provisions of French law.
prior agreement and pre-
emption clauses • The shareholders could be considered as “acting in
restricting the transfer of concert”. If so, disclosure obligations apply and, if they
shares. Shareholders hold more than 30% of voting rights, an obligation to
undertake to (consult make a mandatory takeover bid could be triggered.
with a view to) vote their
• Assumes a stable shareholder base or reference
shares in accordance
shareholders.
with terms agreed among
them. However, the • The provisions of the shareholders’ agreement must be
articles of association publicly disclosed.
may provide for the
suspension of the
provisions of
shareholders’
agreements restricting
the transfer of shares or
limit or suspend voting
rights.
8. Pooling the shares • Pooling the shares of several significant shareholders

into a holding company which will represent an
important stake of the target company’s shares could
ensure the implementation of a common policy
between shareholders.


• However, the pooling could result in such persons
acting in concert and crossing the 30% or 1%
thresholds.

Takeover
7.1 Squeeze-out
If, following the takeover bid (or its reopening), the bidder (together with the persons with whom it acts
in concert) holds 90% of the share capital and voting rights of the target company, it may force all
other holders of shares and, subject to additional threshold conditions, securities giving access to the
share capital to transfer their securities to the bidder at the price offered in the takeover bid.
Except following a successful voluntary offer, the enforcement of a squeeze-out is subject to the
delivery of a fairness opinion in respect of the squeeze-out price by an independent expert.

With respect to the acquisition of securities of the target company after a successful takeover bid,
there is no written provision restricting such acquisition, nor is there any rule concerning the price of
such subsequent acquisitions.
However, it is commonly accepted that a successful bidder may not launch a takeover bid for the
remaining shares of the target company at different price conditions than those offered during the
primary takeover bid for a period of 12 months following the successful primary takeover bid.
8 Delisting
Following a successful simplified takeover bid, the bidder will be able to squeeze out the residual
minority shareholders (see 4.3 above). Concurrently with the completion of the squeeze-out, the
shares of the target company will be delisted from Euronext Paris.

François-Xavier Naime, Stéphane Davin and Matthieu Grollemund in the Paris office are the most
appropriate contacts within Baker McKenzie for inquiries about public M&A in France.
François-Xavier Naime Stéphane Davin

Partner Partner
Paris Paris
francois-xavier.naime@bakermckenzie.com stephane.davin@bakermckenzie.com
33 1 44 17 53 31 +33 1 44 17 53 24
Matthieu Grollemund
Partner
Paris
matthieu.grollemund@bakermckenzie.com
+33 1 44 17 59 95

Germany
1 Overview
Since the introduction of the Takeover Act in 2002 and up until the end of the first quarter 2020,
approximately 540 public takeover offers involving a German target company have occurred. This
includes a number of hostile takeover attempts which, in most cases, were successful, e.g., Standard
Industries/Braas Monier, ACS/Hochtief, Schaeffler/Continental, Macquarie/Techem, Suzlon/Repower
and Bayer/Schering.
German companies are often technological leaders and often highly profitable. Accordingly, they have
been and will continue to be attractive takeover targets. Recently, there have been several successful
takeover offers and investments by Asian/Chinese bidders, e.g., Midea/Kuka and Shanghai
Electric/Manz.

The main rules and principles of German law relating to public takeover bids can be found in:
• the Act on the Acquisition of Securities and on Takeovers (“Takeover Act”); and
• several accompanying regulations, most importantly the Regulation Concerning the Contents
of the Offer Document, the Consideration for Takeover Bids and Mandatory Bids, and
Exemptions from Obligation to Publish and Launch a Bid (the “Bid Regulation”), all of which
entered into force at the beginning of 2002, but have been frequently revised.
The main body of the German takeover legislation reflects Directive 2004/25/EC of the European
remaining shares of the target company, and the powers of the board of directors). Additionally, the
underlying company laws have only been harmonized to a very limited degree. Accordingly, there are
still relevant differences in the national rules of the respective Member States of the EEA regarding
public takeover bids.

Germany, there are a number of additional rules and principles that are to be taken into account when
Parliament and of the Council of 15 December 2004 (last amended by Directive 2013/50/EU)
on the harmonization of transparency requirements in relation to information about issuers
whose securities are admitted to trading on a regulated market and amending Directive
2001/34/EC and related EU legislation. For further information, see 3.4 below.
rules). These rules are set forth in Regulation 596/2014 of the European Parliament and of
the Council of 16 April 2014 on market abuse (“Market Abuse Regulation”) and related EU
legislation. For further information, see 6.3 below.

offered in the public takeover bid consists of securities. These rules are based on Directive
2003/71/EC of the European Parliament and of the Council of 4 November 2003 (last
amended by Commission Delegated Regulation (EU) No 2017/1129) on the prospectus to be
published when securities are offered to the public or admitted to trading and amending
Directive 2001/34/EC and related EU legislation.
(d) Corporate (stock corporation) law, notably the provisions on a squeeze-out of minority
shareholders, but also more generally those on rights and obligations of the target company’s
corporate bodies.
(e) The general rules on the supervision and control of the financial markets.
(f) The rules and regulations regarding merger control.
These rules and regulations are not further discussed herein, or are only discussed to a very limited
extent.
2.3 Supervision and enforcement by the BaFin

Public takeover bids are subject to the supervision and control of the Federal Financial Supervisory
Authority (Bundesanstalt für Finanzdienstleistungsaufsicht or the “BaFin”). The BaFin is the principal
securities regulator in Germany.
The BaFin has a number of legal tools that it can use to supervise and enforce compliance with the
imposed in case of non-compliance.
The BaFin also has the power to grant (in certain cases) exemptions from the rules that would

The following general principles apply to public takeovers in Germany. These rules are partly based
on the Takeover Directive:
(a) all holders of securities of a target company of the same class must be afforded equivalent
treatment. Moreover, if a person acquires control of a company, the other holders of securities
must be protected;
(b) the holders of securities of a target company must have sufficient time and information to
enable them to reach a properly informed decision on the bid. The management board and
advisory board of the target company must give their views on the effects of implementation
of the bid on employment, conditions of employment and the locations of the company’s
places of business;
(c) the management board and advisory board of a target company must act in the best interest
of the company as a whole and must not deny the holders of securities the opportunity to
decide on the merits of the bid;
(d) the person or legal entity making the offer (the “Bidder”) and the target company must execute
the offer expeditiously;
(e) false markets must not be created in the securities of the target company, the Bidder
distorted;

(f) a Bidder must announce a bid only after ensuring that they can fulfil any cash consideration in
full, if such is offered, and after taking reasonable measures to secure the implementation of
any other type of consideration (“certain financing”); and
(g) a target company must not be hindered in the conduct of its affairs for longer than it is

Germany has long embraced foreign investment, imposing few limits on foreign investors and offering
them the same rights and benefits as domestic acquirers. In light of a number of large investments
that have led to increased wariness among the German public, particularly concerning Chinese
investments, Germany has strengthened and continues to strengthen its foreign investment review
laws through a number of consecutive reforms. A reform of the foreign investment restrictions in 2018
reduced the threshold for review from acquisitions of 25% of a company’s voting rights to acquisitions
of 10% for particularly sensitive target companies. In addition, the reform added media companies to
the list of particularly sensitive companies to which the 10% threshold applies. In 2019, the EU
enacted Regulation (EU) 2019/452 (EU Screening-Regulation), which will enter into force in October
2020, and create a common EU-wide regulatory framework on foreign investment review. Among
other coordination efforts, it obliges EU member states to take the impact of foreign investments on
other EU member states into account when reviewing foreign investments. In April 2020, the German
government decided to further strengthen its investment regime, especially the cross-sectoral FIR
regime. In 2019, the Ministry conducted 106 foreign investment reviews. In most of the acquisitions
considered sensitive, the government managed to conclude contracts with the parties to deter
potential threats deriving from foreign acquisitions.
In Germany, the Foreign Investment Review (“FIR”) falls into two categories:
(i) Cross-sector reviews (Sections 55-60 Foreign Trade and Payments Act – AWV); and
(ii) Sector-specific reviews (Sections 60-62 AWV).
(a) Cross-sector review
The Ministry may investigate any direct or indirect acquisition of at least 10% or 25% of the voting
rights in a German company by an investor outside the EU/EFTA, depending on the type of company.
The 10% threshold applies to particularly sensitive companies, such as those operating critical
infrastructure or sensitive digital technologies, but also includes certain media companies. In cases of
circumvention, investors resident in the EU may also be reviewed. The Ministry is currently entitled to
investigate the transaction if there are indications that a particular transaction can endanger public
order or security. According to the German government’s decision in April 2020, on the legislative
proposal currently under review, this evaluation benchmark for investigation would be lowered. The
new evaluation benchmark would provide for foreign investments to be reviewed and subject to
potential restrictions if they have a probable adverse effect (voraussichtliche Beeinträchtigung) on the
public order or security of Germany or another EU member state.
The law provides specific guidance on the interpretation of the term “public order or security”. A non-
exhaustive catalogue of industry sectors illustrates whether the acquisition by foreign investors is
potentially considered a threat to public order or security. These industries in particular relate to
“critical infrastructure”, i.e., an institution, facility or parts thereof that:
• belong to the energy, information technology, telecommunication, transport and traffic, health,
water, nutrition, finances and insurance sectors; and
• are of great importance to the functioning of the community as their failure or impairment
would result in serious supply shortages or considerable disruption of public safety.

Companies designing or modifying software for sectors that specifically serve the operation of critical
infrastructures would also be caught. The non-exhaustive catalogue also includes media companies
that contribute to the formation of public opinion, companies providing cloud-computing services,
companies entrusted with the task of monitoring telecommunications or producing technical
equipment in relation to this and companies producing components or services for telematics
infrastructure. The current legislative draft under review (as of April 2020) proposes to add companies
in the following technology sectors to the catalogue: artificial intelligence, robotics, semiconductors,
biotechnology and quantum technology.
For all acquisitions by non-EU/EFTA purchasers that belong to the sectors specifically referenced in
the catalogue, the Ministry has to be notified about the acquisition. Non-listed sectors do not fall under
a mandatory notification requirement, but can still be subject of an FIR.
Following the notification or the conclusion of the contract, the Ministry has a three-month deadline to
initiate investigations. The period of three months within which the Ministry has to decide on whether
to investigate a foreign transaction starts to run only when the Ministry gains positive knowledge of the
conclusion of such transaction. There is a limitation period of five years to investigate if the Ministry
claims that it was not aware of the conclusion of the contract unless the acquirer can prove otherwise.
According to the reform proposal agreed on by the German government in April 2020, acquisitions of
companies specifically referenced in the catalogue or shares thereof would be provisionally invalid
until the conclusion of the foreign investment review.
In order to obtain legal certainty the investor can apply to the Ministry for a certificate of non-objection.
The Ministry has two months to issue a clearance certificate following the application of the acquirer.
The clearance certificate is considered as granted if the Ministry fails to open an investigation during
that period.
In August 2018, for the first time, the German government decided to block the planned purchase of
German machine tool manufacturer Leifeld Metal Spinning AG by the Chinese investor Yantai Taihai
Group. The government took the precautionary measure on the basis that the potential purchase
would endanger German security interests even though the Yantai Taihai Group indicated at the last
minute that it would withdraw its offer. The German government also prevented the acquisition by the
State Grid Corporation of China of a 20% share of 50 Hertz, a German transmission system operator.
In this case, the government ensured that another EU investor invoked its right of first refusal in order
to prevent the transaction.
(b) Sector-specific review
The sector-specific review applies to investments in German target companies that are active in the
following sectors:
• weapons
• gears and engines for military utility vehicles
• certain products with IT security functions
• certain products on the export list
The Ministry may investigate any acquisition of at least 10% of the voting rights in such a company by
any investor outside of Germany. In cases of circumvention, domestic acquirers may also be
reviewed.
The Federal Ministry for Economic Affairs and Energy (BMWi) reviews whether fundamental security
interests of Germany are endangered. Such endangerment has to be:
• actual;

• sufficiently important; and
• affect fundamental public interests (ordre public).
Even in the case of key industries it may generally not be presumed that a fundamental interest of the
community — as laid down in the abovementioned ordre public clause — is generally and always
affected. Each acquisition must be individually examined to look at its the effect on supply to the
population to determine if a fundamental public interest is affected.
Acquisitions subject to the sector-specific review must be notified in writing to the Ministry by the
purchaser. The Ministry has a three-month deadline following the submission of the complete
notification to intervene.
In this context, the Ministry is entitled to:
(i) prohibit the transaction;
(ii) issue instructions or conditions in relation to the transaction; or
(iii) conclude a contract under public law to safeguard fundamental public interests.
There is a limitation period of five years if the Ministry claims that it was not aware of the conclusion of
the contract unless the acquirer can prove otherwise.

levels of shareholding within a German listed corporation:
Shareholding Rights
• The right to submit questions to the management board at general
• The right to request the nullity of decisions of general shareholders’
meetings for irregularities as to form, process or other reasons.
• The right to file/publish alternative suggestions with respect to a
certain item on the agenda of the shareholders’ meeting or with
respect to the election of new supervisory board members.
1% or shares • The right to apply for a judicial decision to be authorized to assert

representing EUR claims for damages against members of the company’s boards if
100,000 of its share no action has been taken prior to the expiration of a deadline and in
capital case of suspicion of severe wrongdoing or breach of the law.
• The right to file an application with the court for a special audit of
any matters relating to the formation of the stock corporation or the
management of the stock corporation’s business within the last 5
years if the shareholders’ meeting has refused to appoint a special
auditor.
• The right to apply for a special audit with the local court with regard
to the suspicion of any material invalidity of items on the balance
sheet.

Shareholding Rights
5% or shares • The right to demand the management board to convene a general

representing EUR shareholders’ meeting.
500,000 of its share
capital
• The right to file an action to set aside the resolution on the
appropriation of the net retained profits.
• The right to demand that the court shall appoint or remove a
liquidator, if important reasons exist therefore.
10% • The right to demand a separate vote with regard to the discharge of
management.
• The right to demand that the court appoint special representatives
to assert a claim for damages (particularly against members of the
management or supervisory board).
• The right to demand that the court removes a member of the
supervisory board for material cause.
• The right to veto waiver or settlement of claims against the
founders or the board members or the controlling shareholder.
More than 25% (at a The ability at a general shareholders’ meeting to block:
general
• changes to the corporate purpose of the company;
shareholders’
meeting) • any other changes to the articles of association, mergers, de-
mergers, capital increases, capital reductions and dissolution of the
company;
• the authorization of the management board to increase the
company’s share capital without further shareholder approval (the
so-called “authorized capital”);
• the authorization of the management board to enter into a
domination and/or profit and loss pooling agreement (see 7.4
below);
• the disapplication of the subscription right of existing shareholders
in case of share issues; and
• divestitures or outsourcing of substantial assets of the company if
certain further criteria are met.
More than 50% (at a The ability at a general shareholders’ meeting to:
general
• appoint and dismiss members of the supervisory board;
shareholders’
meeting) • appoint and dismiss statutory auditors to approve the annual
financial statements;
• resolve on the approval of the remuneration scheme submitted by
the supervisory board;
• grant discharge from liability to the members of both the
management and supervisory board; and

Shareholding Rights
More than 75% (at a The possibility to approve the measures set out under ‘More than 25% (at a
general general shareholders’ meeting)’ above.
shareholders’
meeting)
90% The possibility to force all other shareholders to transfer their shares
through a merger squeeze-out (provided that the 90% shareholder is also a
German stock corporation, see 7.1 below).
95% The possibility to force all other shareholders to transfer their shares for
cash compensation, a “squeeze-out” (see 7.1 below).

German law contains a number of rules that already apply before a public takeover bid is announced.
These rules impose restrictions and hurdles in relation to prior stake building by a Bidder,
announcements of a potential takeover bid by a Bidder or a target company, and prior due diligence
by a Bidder. The main restrictions and hurdles have been summarized below. Careful planning is
therefore necessary if a Bidder or target company intends to start up a process that is to lead towards

creating misleading rumors, is prohibited. In addition, the rules prohibiting insider trading may prevent
a Bidder that has inside information regarding a target company from building a stake or launching a
takeover bid. Certain exemptions apply under Article 9 of the Market Abuse Regulation, in particular
for inside information obtained in the conduct of a public takeover, provided that such inside
information is made public when the offer is launched.
3.4 Disclosure of shareholdings and financial instruments

Pursuant to these rules, if a Bidder starts building up a stake in the target company, it will be obliged
to announce its stake if the voting rights attached to it have passed an applicable disclosure threshold.
The relevant disclosure thresholds in Germany are 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and
75%.
Similar rules apply to the holding of financial instruments relating to shares in target companies.
When determining whether a threshold has been passed, a Bidder must also take into account the
voting securities held by the parties with whom it acts in concert or may be deemed to act in concert
(see 3.8 below), which includes affiliates. The parties could also include existing shareholders of the
target company with whom the Bidder has entered into specific arrangements, such as pooling or call
option agreements.

transparency. These rules include that a company must immediately announce all inside information.

However, the management board of the target company can delay such announcement if it believes
that a disclosure would not be in the best interest of the company. For instance, this could be the case
if the target’s management board believes that an early disclosure would prejudice the negotiations
regarding a bid. However, a delay of the announcement is only permitted if the non-disclosure does
not entail the risk that the public is misled and if the company can keep the relevant information
confidential.
3.6 Announcement of a public takeover bid

The offer procedure is generally started by the Bidder’s announcement of its decision to launch a
voluntary offer (for more detail, see 5.2 below).
3.7 Due diligence

The German public takeover bid rules do not contain specific rules regarding the question of whether
a prior due diligence can be organized, nor how such due diligence is to be organized. German stock
corporation law provides a general obligation for the management of a stock corporation to keep
information of the company confidential. Nevertheless, the concept of a prior due diligence or pre-
acquisition review by a Bidder is generally accepted in the market and by the BaFin as well, and
appropriate mechanisms have been developed in practice to organize a due diligence or pre-
acquisition review and to cope with potential market abuse and early disclosure concerns. These
include the use of strict confidentiality procedures and data rooms.

For the purpose of the German takeover bid rules, persons “act in concert”:
• if they collaborate with the Bidder, the target company or with any other person on the basis
of an express or silent, oral or written, agreement aimed at acquiring the control over the
target company, frustrating the success of a takeover bid or maintaining the control over the
target company;
with a view to have a lasting common policy in respect of the target company.
Subsidiaries are deemed to act in concert with the parent company.
shareholder acts in concert or is deemed to act in concert. For example, this is the case where a
mandatory takeover bids.
If one or more persons in a group of persons acting in concert acquire voting securities as a result of
which the group in the aggregate would pass the 30% threshold, the members of the group will have a
joint obligation to carry out a mandatory takeover bid, even though the individual group members do
not pass the 30% threshold. However, it is worth noting that such aggregation for the purpose of the
requirement of a mandatory takeover bid requires (a) a coordination on the exercise of voting rights in
the target company or (b) acting with the goal of permanently and significantly changing the
entrepreneurial direction of the target company.

There are three main forms of public bids in Germany:
• Voluntary bids
• (Voluntary) takeover bids
• Mandatory bids
Voluntary bids fall under a more liberal legal regime, while (voluntary) takeover bids are already
strictly regulated and mandatory bids are subject to the strictest level of regulation.
The main difference between the three types of offers relates to the principle of “acquisition of
control”. For the purpose of the Takeover Act, “acquisition of control” occurs if a Bidder acquires at
least 30% of the voting rights in a target company (“Control”). For purposes of determining whether
Control has been acquired, extensive attribution rules apply.
In voluntary bids, the acquisition of Control is not intended and does not occur. The Bidder makes an
offer to acquire a stake below 30% or already has control and merely increases their stake. In a
takeover bid, the acquisition of Control is the goal of the offer, i.e., the Bidder intends to acquire
Control through or in conjunction with the offer. In a mandatory bid, the acquisition of Control
precedes the offer and triggers an obligation to make the mandatory bid.
4.1 Voluntary bid

Voluntary bids are all offers not aimed at achieving Control. Basically, two different kinds of offers are
covered:
• Offers to obtain less than 30% of the voting rights in a target company to build up a non-
controlling stake.
• Offers to obtain further shares by a shareholder who already has Control, so-called add-on
offers. For example, such add-on offers could occur if a Bidder were to make a public offer to
increase its stake to 90% or even 95%, enabling the Bidder to squeeze out the remaining
minority shareholders.
The provisions of the Takeover Act on voluntary bids are less strict than those on takeover and
mandatory bids. For example, the Takeover Act does not restrict the Bidder’s choice of the type and
amount of consideration for a voluntary bid. In addition:
• unlike takeover and mandatory bids, voluntary bids do not have to extend to all shares of the
target company. The Bidder may set a maximum offer volume. This is strongly recommended
so that the Bidder avoids crossing the 30% threshold, which in turn would trigger an obligation
to make a mandatory bid. In case the offer is accepted for more shares than the maximum,
the volume of acceptances may then be reduced proportionally for each shareholder; and
• a voluntary bid may also be made subject to conditions. The only restriction is that the Bidder
may not have a direct influence on the fulfilment of these conditions.
4.2 (Voluntary) takeover bid

Takeover bids are offers made by a Bidder who does not yet have Control over the target company,
but aims to acquire Control over the target company through or in conjunction with the offer. Takeover
bids are voluntary offers. They must extend to 100% of the outstanding shares of the target company,
but otherwise benefit from a somewhat more flexible regime compared to the one applicable to
mandatory bids.

• Most importantly and unlike mandatory bids, takeover bids may be subject to the fulfilment of
certain conditions. In practice, the most frequently used condition (besides merger control
clearance) is a so-called minimum acceptance threshold (the Bidder can define a certain
acceptance rate, e.g., a minimum of 75% of the shares of the target company; if this threshold
is not met and the condition is not waived, the offer lapses).
• It is also possible to make a takeover bid subject to a material adverse change condition,
which will allow the Bidder to withdraw from the offer if certain clearly defined adverse events
occur. However, the Bidder must not be able to withdraw from the offer at their own discretion.
Therefore, conditions are only admissible if the Bidder has no direct influence on their
fulfilment and if they are so clearly defined that there is no room for interpretation as to
whether the conditions are met or not.
The Bidder can waive the conditions during the offer period. For example, a Bidder may waive the
minimum acceptance threshold.
4.3 Mandatory bid

concert (or persons acting for their account) directly or indirectly hold(s) at least 30% of the
(actual outstanding) voting securities of the target company.
A mandatory takeover bid is not required if the Bidder has obtained control on the basis of a
voluntary takeover bid or if the BaFin has granted an exemption. There are two different ways
in which a Bidder may be exempted even though they hold 30% or more of the voting rights.
Firstly, the BaFin may decide that some or all of the voting rights are not to be taken into
account when calculating whether the 30% threshold has been reached or not. However, this
exemption is only available if the Bidder has acquired the relevant voting rights by way of:
o inheritance, donation between near relatives;
o change of the legal form; or
o restructuring measures within the group of companies to which the Bidder belongs.
Secondly, upon written request, the BaFin may exempt the Bidder from the obligation to
submit a mandatory takeover bid in certain cases, which are provided for in the Bid
Regulation. The BaFin may provide such exemption at its own discretion. In particular, an
exemption will be considered if:
o the Bidder has acquired Control by way of inheritance or donation from someone who
is not a relative;
o the Bidder intends to recapitalize a target company in financial difficulties;
o the Bidder has only indirectly acquired Control through the acquisition of another
company (holding a controlling stake in the target company), and the book value of
the stake in the target company held by the other company amounts to less than 20%
of the entire book value of its assets;
o the Bidder has acquired the controlling stake only as a security;
o the acquisition of Control was triggered by a reverse share split of the target
company;

o another shareholder holds a higher stake in the target company than the Bidder;
o on the basis of the attendance at the last three general meetings of the target
company, it is unlikely that the Bidder will have more than 50% of the voting rights at
the next general meeting; or
o the Bidder’s stake has fallen below the 30% threshold immediately after it was
reached.
5 Timeline
takeover bid process under German law. The takeover bid process for a mandatory public takeover
bid is similar to the process set out below for a voluntary public takeover bid, with certain differences.
Step
• Preparation of the bid by the Bidder (due diligence, financing and draft offer
document).
• The Bidder approaches the target company and/or its key shareholders.
• Negotiations with the target company and/or its key shareholders.

• A significant step in the preparation of a takeover bid is the decision of the Bidder
to launch a voluntary offer (the “Takeover Decision”). The Bidder has to notify the
Takeover Decision to the BaFin and the target and publish it immediately (the
“Section 10 Notification”). Determining the point in time when the Takeover
Decision is taken can sometimes be difficult as it often coincides with the signing of
a binding agreement with the key shareholders and/or the target, but may also
occur earlier in the process.
• The publication of the Section 10 Notification marks the beginning of a four-week
deadline for the Bidder to prepare the offer document and to submit it to the BaFin
for review and approval.
3. After submission of the offer document by the Bidder, the BaFin has a period of 10
business days to review and approve or reject the offer document. The review period may
be (and is regularly) extended by the BaFin by up to five business days. The offer is usually
either expressly approved or rejected by the BaFin within the review period. If the BaFin
fails to react in the specified period, the offer will be deemed approved.
4. Following the BaFin’s approval of the offer document the Bidder must publish the offer
document on the internet and in the electronic version of the Federal Gazette
(elektronischer Bundesanzeiger).

• Start: after publication of the offer document.
• Duration: not less than four weeks and not more than 10 weeks. The acceptance
period will be extended (a) in the event of a competing offer with a longer
acceptance period, (b) if the target calls a general meeting or (c) if the offer is
amended in the last two weeks of the acceptance period.

Step
6. Publication of a “reasoned statement” on the offer by the management board and

supervisory board of the target company (without undue delay after publication of offer
document).
7. Publication of the number of shares held/tendered (weekly during the acceptance period
(daily during the last week of the acceptance period) and immediately after the end of the
acceptance period).
8. If a voluntary takeover offer was successful, i.e., unless a minimum acceptance threshold
was not reached: “Additional acceptance period” of two weeks.
9. Publication of results (immediately after the end of the additional acceptance period).
10. Payment of the offered consideration by the Bidder (depending on the structure chosen by
Bidder, there may be one or two settlements).
Set out below is an overview of the main steps for a takeover offer in Germany.

Start
process A Day A + 10 Day 0 Day X B (Day 28) B (Day 70) B - B1 +1 Day (X)
Announce the bid in case BaFin has 10 business Publish the offer Publication of a Earliest day offer can Latest day offer can Publish results Payment of consideration
of voluntary offer or days (plus up to 5 document on the “reasoned statement” on close and by which offer close and by which all to target shareholders
Additional acceptance
acquisition of control in business days extension) internet and in the the offer by the conditions (other than conditions must be (occurs a few business
period of 2 weeks if
case of mandatory offer to review and approve or electro nic version of management board and regulatory approvals) satisfied or waived. days after offer has
minimum acceptance
reject the offer document. the Federal Gazette supervisory board of the must be satisfied or closed, typically with
threshold condition (if
(elektronischer target company (without waived second settlement after
Review period may be any) was reached
Bundesanzeiger) undue delay after end of additional
(and is regularly)
publication offer acceptance period. At the
extended by the BaFin by
document) latest, offer settles after
up to 5 business days.
regulatory approvals are
The offer is usually either
granted)
expressly approved or
rejected by the BaFin
within the review period. If
the BaFin fails to react in
the specified period, the
offer will be deemed
approved Bid must be open for at least 28 days after publication 14 days
of the offer document

6 Takeover Tactics
A German listed company is obligated to immediately disclose to the public all “inside information” that
relates to it, including all material changes in information that has already been disclosed to the public.
instruments.

often be a difficult exercise, and a large gray area will exist as to whether certain events will need to
be disclosed or not.

In the event of a (potential) public takeover bid, the Takeover Act contains detailed provisions in
relation to public notifications and announcements that will have to be made by the Bidder at specific
times. These generally start with the obligation to announce the Takeover Decision through the
Section 10 Notification (see 5 above) or the obligation to announce an acquisition of Control. The
target may also be obligated to publish an approach by a Bidder, as this may be considered inside
information. Notifications and disclosures generally do not require prior approval by the BaFin, with
the exception of the offer document, but it is not uncommon to approach the BaFin prior to the
disclosure.

The basic legal framework regarding insider dealing and market abuse under German law is set forth
in the Market Abuse Regulation and the German Securities Trading Act (Wertpapierhandelsgesetz –
WpHG). As the framework is based on EU legislation, similar rules on insider dealing and market
abuse exist in other jurisdictions of the EEA.

As a general rule, the Takeover Act prohibits the management board of a target company from
carrying out any actions that could prevent the success of an offer from the time of publication of a
Takeover Decision or the acquisition of Control until the publication of the takeover result (non-
frustration rule). Certain exceptions apply, notably for actions of an ordinary and prudent manager,

actions with the approval of the supervisory board and actions upon authorization by the general
meeting.
Despite the non-frustration rule, the management of a target company can use certain strategies to try
to fend off a hostile takeover. The table below contains a summarized overview of the mechanisms
that can be used by a German target company as a defense against a takeover bid. For some
defense measures, there are (to some extent significant) concerns with respect to their legality (most
often under general stock corporation law) and/or effectiveness. Hostile takeovers have been the
exception in Germany so far. Therefore, defense measures are more often a matter of (controversial)
discussion in legal literature than in practice. Except for a few individual cases, case-law dealing with
defense measures is very rare.
1. Capital increase (poison • Requires an express authorization in the articles of

pill) association. To be adopted, it must obtain a
majority of 75% of the votes cast at a general
Capital increase from
authorized capital with or
without preferential • The authorization is valid for up to 5 years only,
subscription rights of the but can be renewed. The authorization may not
shareholders. exceed 50% of the existing share capital.
• If subscription rights of the shareholders are
excluded, the capital increase may not exceed
10% of the existing share capital or the amount
remaining available under the authorized capital.
• The issue price may not be significantly below the
current stock market price (in practice, this will
usually be at or above the bid price).
• Capital increase from company reserves requires
prior approval by general shareholders’ meeting
under German law. Might be used as defense
mechanism in case of foreign incorporated
company listed in Germany, e.g., Standard
Industries/Braas Monier.
2. Share buyback • Uncommon defense mechanism. Share buyback

needs to be in accordance with statutory rules,
which define very limited cases.
• Most common case is an express authorization by
a general shareholders’ meeting.
• The authorization is valid for up to 5 years only,
but can be renewed.
• The total of directly and indirectly acquired shares
may not exceed 10% of the existing share capital.
3. Sale of crown jewels • Measure has to be in the best interest of company,

and not in breach of the non-frustration rule.
An arrangement affecting the
assets of or creating a liability
for the company which is


takeover bid.
4. Convertibles/Options/ • Generally requires a prior approval by a majority of

Warrants on new shares 75% of the votes cast at a general shareholders’
meeting (unless articles provide for 50% majority,
Convertibles/Options/
which is possible in some cases, but not if
Warrants are issued prior to
subscription rights are excluded).
the takeover bid in favor of
“friendly person(s)” (without • If subscription rights are excluded, the rights to
preferential subscription rights acquire new shares may not exceed 10% of the
of the shareholders) who can existing share capital.
exercise their rights and
• The exercise price has to be determined when the
rights are issued in accordance with applicable
rules.
5. Frustrating actions • Measure has to be in the best interest of the

company, and not in breach of the non- frustration
rule.
acquisitions, disposals,
changes in indebtedness, etc.
6. Shareholders’ agreements • The shareholders are likely to be considered as

“acting in concert”. If so, disclosure obligations
Shareholders undertake to
apply and, if they jointly hold more than 30% of
(consult with a view to) vote
voting rights, an obligation to launch a takeover
their shares in accordance
bid will be triggered.
with terms agreed among
them. • Assumes a stable shareholder base or reference
shareholders.
7. Search for a competing • Generally admissible, since adding another Bidder

Bidder (a “white knight”) enables the target to guarantee the most favorable
terms of offer in the best interest of all
shareholders.
• Further actions to enhance the success of the
competing offer are inadmissible. It is, for
example, not allowed to issue shares from the
authorized capital, excluding the subscription right,
as a “jump start” for the competing Bidder.
Financial assistance rules under stock corporation
law prohibit the granting of financial support to the
competing Bidder for the acquisition of shares.
8. Limitations on share • Exceptional for listed companies (listed securities

transfers are in principle freely transferable; impact on share
liquidity).
Board approval or pre-
emptive restriction clauses in
the articles of association or
in agreements between
shareholders.

9. Complication of obtaining • Supervisory board nomination right exceptional for

control of supervisory listed companies.
board
• A staggered board is common, but supervisory
Rights for individual board members can be removed in a general
shareholders to appoint meeting with 75% majority (may be reduced to
supervisory board members, 50% majority in articles).
staggered terms of office of
board members.

Takeover
7.1 Squeeze-out
If, following the takeover bid or at a later stage, the Bidder (together with the persons with whom the
Bidder acts in concert) holds 95% or 90% of all voting rights, they can initiate a squeeze-out
procedure. German law provides three different squeeze-out procedures, namely under the Takeover
Act, under the Stock Corporation Act and under the Transformation Act (a so-called “merger squeeze-
out”). The rules applicable to each procedure differ, except that for all procedures the shares of all
other shareholders are transferred to the Bidder in exchange for cash compensation.
If, following a takeover bid, the Bidder (together with the persons with whom the Bidder acts in
concert) holds at least 95% of all voting rights, they can initiate a squeeze-out procedure under the
Takeover Act. A significant advantage of a squeeze-out under the Takeover Act is that in some cases
the amount of compensation to be paid to the minority shareholders is equal to the offer price. The
compensation is deemed to be adequate if at least 90% of the shares that were subject to the offer
have been tendered. In case the Bidder granted only a share-for-share consideration in the offer, the
Bidder, for the purpose of squeeze-out, has to offer an alternative cash compensation. If the 90%
target is not met, it is not recommendable to use the post-takeover squeeze-out procedure.
A squeeze-out under the Stock Corporation Act is more complex than under the Takeover Act,
particularly as the major shareholder has to prepare a specific report in anticipation of the general
meeting and the “fairness”, of the compensation has to be reviewed by an auditor appointed by the
court. Dissenting minority shareholders may successfully block the effectiveness of the squeeze-out
by court action at least for some time, and may claim for higher compensation.
A “merger squeeze-out” under the Transformation Act has the advantage that the majority
shareholder can implement a squeeze-out with a holding of only 90% or more of the registered
capital. The squeeze-out under the Transformation Act is subject to the condition that it is
implemented in connection with a statutory merger (Verschmelzung) between the majority
shareholder and the target, meaning that the resolution on the squeeze- out has to be adopted within
three months of the signing of the merger agreement. Furthermore, the squeeze-out under the
Transformation Act is only possible if the majority shareholder is a German stock corporation
(Aktiengesellschaft), a German partnership limited by shares (KGaA) or a European stock corporation
(SE).
7.2 Sell-out
If a Bidder was to be permitted to carry out a squeeze-out under the Takeover Act, i.e. the 95% post-
bid ownership referred to in 7.1, the security holders that did not accept the takeover bid shall have

the right to continue to accept the offer within an additional period of three months after the end of the
acceptance period.

If the Bidder and the persons acting in concert with the Bidder (i) directly or indirectly acquire any
securities that were subject to the takeover bid (ii) during the period of 1 year following the end of the
takeover bid period (iii) for a consideration which is higher than the consideration offered in the
takeover bid, the price difference will have to be paid to all security holders that tendered their
securities to the Bidder during the original takeover bid period. However, this rule does not apply to
the purchase of shares or securities on the stock market.
7.4 Domination agreements/Profit and loss pooling agreements

If the requirements for a squeeze-out are not fulfilled, a common post- offer integration measure under
German law is a domination agreement which may be entered into between the Bidder and the target
company. The target company becomes a “dependent company” dominated by the Bidder who can
give binding instructions which have to be followed by the management of the dependent company.
From the Bidder’s perspective the main advantage of such binding instructions is that the strict
standards of the maintenance of capital set out by the German Stock Corporation Act are reduced.
Once the domination agreement has become effective, the Bidder has far more options for refinancing
the prior offer. For example, the dependent company may transfer assets to the dominant
shareholder, whereas otherwise such a transfer would be prohibited as disguised distribution of
profits. As the dominating shareholder, the Bidder may also receive goods and services from the
dominated target company under preferential conditions.
Before a domination agreement becomes effective (with its registration at the commercial register of
the dependent company), the following major steps are required:
• A shareholder resolution by the shareholders of the target company with at least a 75%
majority of the share capital represented at the shareholders’ meeting.
• The domination agreement has to include an offer to acquire the shares of the target
company which are held by minority shareholders at a fair market price. If the dominating
shareholder is not a German stock corporation, the consideration must be in cash.
• The dominating shareholder has to pay a guarantee dividend to the remaining minority
shareholders of the target company.
• During the term of the domination agreement the dominating shareholder has to compensate
the target company for any annual loss it suffers.
In addition to a domination agreement, a profit and loss pooling agreement may be entered into. It is
concluded the same way as a domination agreement and is usually agreed upon at the same time.
The legal consequences of a profit and loss pooling agreement are similar to those of a domination
agreement. The main advantage of entering into a separate profit and loss pooling agreement is the
creation of a fiscal unity for tax purposes.
8 Delisting
New rules concerning the delisting of a company that is listed on a German stock exchange came into
force at the end of 2015 as a way to protect the interests of investors. Under the previously applicable
case law a delisting (or down listing) was possible without either a decision of the general meeting or
a takeover offer to the minority shareholders. Under the new rules a delisting is only admissible if an
offer is made to all remaining shareholders to sell their shares at a certain minimum price (in cash)
prior to the implementation of the delisting.

Manuel Lorenz and Christoph Wolf in Frankfurt and Andreas Lohner in Munich are the most
appropriate contacts within Baker McKenzie for inquiries about public M&A in Germany.
Manuel Lorenz Christoph Wolf

Frankfurt Frankfurt
manuel.lorenz@bakermckenzie.com christoph.wolf@bakermckenzie.com
+49 69 2 99 08 606 +49 69 2 99 08 245
Andreas Lohner
Munich
andreas.lohner@bakermckenzie.com
+49 89 5 52 38 133

Hong Kong
1 Overview
The market for the mergers and acquisitions of public companies in Hong Kong has been robust in
recent years.

2.1 Legal framework and key regulatory bodies
Public takeovers and mergers in Hong Kong are principally regulated by a number of rules and
legislation, including:
• The Hong Kong Code on Takeovers and Mergers (“Takeovers Code”), which applies to
takeovers and mergers affecting public companies in Hong Kong and companies and real
estate investment trusts with a primary listing in Hong Kong. It sets out the main rules and
principles relating to public takeovers and mergers in Hong Kong.
The Takeovers Code does not have the force of law. It is administered by the Executive
Director of the Hong Kong Securities and Futures Commission “SFC”, who may bring
disciplinary proceedings for breach of the Takeovers Code before the Takeovers and Mergers
Panel (“Takeovers Panel”). The Takeovers Panel can impose sanctions (including public
censure, public criticism, requiring licensed corporations and financial markets service
providers to cease acting for persons in breach, banning advisers from appearing before the
SFC or the Takeovers Panel for a stated period of time and requiring compensation to be paid
to holders or former holder of securities of listed companies).
• The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
and the Rules Governing the Listing of Securities on the Growth Enterprise Market
(collectively, “Listing Rules”), which apply to companies whose securities are listed on the
Main Board or the Growth Enterprise Market, as the case may be, of The Stock Exchange of
Hong Kong Limited (“Stock Exchange”). The Listing Rules set out the disclosure and approval
requirements in respect of transactions undertaken by the listed companies.
The Listing Rules do not have the force of law. They are enforced by the Stock Exchange’s
imposition of a wide range of sanctions, including private reprimand, public censure, referral
to the SFC and other relevant regulatory bodies, exclusion from the market for a stated period
and, ultimately, suspension or cancellation of a company’s listing (the latter being very rarely
applied).
• The Companies Ordinance (Chapter 622 of the Laws of Hong Kong), which regulates
compulsory acquisitions and schemes of arrangement for companies incorporated in Hong
Kong.
• The Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “SFO”),
which establishes a statutory disclosure regime whereby listed companies are required to
disclose inside information in a timely manner. It also regulates the disclosure of interests in
the securities of listed companies, insider dealing and other market misconduct in relation to
the listed securities and their derivatives.

The following general principles are set out in the Takeovers Code to ensure fair treatment for
shareholders who are affected by takeover and merger transactions:
(a) all shareholders are to be treated equally and all shareholders of the same class are to be
treated similarly;
(b) if control of a company changes, a general offer to all other shareholders is normally required;
(c) during the course of an offer or when an offer is in contemplation, information must be made
available to all shareholders, save for the furnishing of information in confidence by the target
company to a potential bidder or vice versa;
(d) a bidder should announce an offer after ensuring that it will be able to implement the offer in
full;
(e) shareholders should be given sufficient information, advice and time to reach an informed
decision on an offer. All documents relating to an offer must be prepared with the highest
possible degree of care, responsibility and accuracy;
(f) all parties involved in an offer should make full and prompt disclosure of all relevant
information and take precaution to avoid making statements which may mislead shareholders
or the market;
(g) rights of control should be exercised in good faith and oppression of minority shareholders is
unacceptable;
(h) directors of the bidder company and the target company should have regard to the interests of
their shareholders as a whole and not have regard to their personal or family shareholdings or
to their personal relationships with the companies;
(i) the target board should not take actions to frustrate a proposed offer or deny the shareholders
the opportunity to decide on its merits; and
(j) all parties involved in takeovers and mergers are required to cooperate to the fullest possible
extent with the SFC, the Takeovers Panel and the Takeovers Appeal Committee.

See 3.4 below.

The table below provides an overview of some of the different rights and powers that are attached to
different levels of shareholding in a Hong Kong incorporated listed company:
Shareholding Rights
• The right to receive dividends.
• The right to receive a distribution in a liquidation once the

creditors have been repaid.

Shareholding Rights
• The right to receive a copy of the documentation submitted to
general shareholders’ meetings, such as annual audited accounts
with the directors’ report and auditor’s report, circulars providing
further details on the resolutions to be proposed at the meetings
and notices of the meetings.
• The right to inspect the company’s registers such as registers of

members, directors, company secretaries and debenture holders,
its records of resolutions and meetings, and copies of certain
management contracts.
• The right to file a minority claim against the directors on behalf of

the company.
2.5% • The right to apply to the court for an order allowing the
shareholder to inspect the company’s records or documents.
• The right to propose resolutions to be dealt with at the general

shareholders’ meeting, to put additional items on the agenda of a
general shareholders’ meeting and to table draft resolutions for
items on the agenda.
5% • The right to require the directors to call a general shareholders’

meeting, and, upon the directors’ failure to do so, to call the
meeting.
• The right to apply to the court to cancel an alteration to the

objects provision in the articles of association.
10% • The right to call a general meeting by any two or more

shareholders holding 10% of the total voting rights at general
meetings, even if the company has no directors.
• The right to apply to the court to have a variation of class rights

(in the same class as the shareholder) set aside.
More than 25% (at a The ability at a general shareholders’ meeting to block resolutions
general shareholders’ proposed at the general meeting which require a 75% special majority.
meeting)

• to appoint and remove directors and auditors and to approve the
meeting)
remuneration;

directors’ report and auditor’s report);
• to change the articles in relation to the maximum number of

shares the company can issue;
• to approve capital increases;
• to authorize the provision of financial assistance for the

acquisition of the company’s own shares;

Shareholding Rights
• to approve certain transactions which require shareholders’
approval under the Takeovers Code, e.g., special deals and
frustrating actions, and under the Listing Rules, e.g., certain
notifiable transactions and connected transactions, a rights issue
that would increase the number of issued shares or the market
capitalization of the company by more than 50% and an open
offer where the securities are not issued under the authority of a
general mandate, provided that the shareholder is entitled to vote
according to the Takeovers Code and the Listing Rules (as the
case may be) (this is applicable to listed companies generally,
whether they are incorporated in Hong Kong or not); and
• to take decisions for which no special majority of 75% is required.
75% (at a general The ability at a general shareholders’ meeting:

shareholders’
• to change the company name, objects and articles;
meeting)
• to authorize a share buyback (not covered by the annual general
mandate granted at an annual general meeting of shareholders)
or a capital reduction;
• to sanction a variation of class rights;
• to approve takeover and privatization schemes (subject to the

votes cast against them not exceeding 10% of the total voting
rights attached to all disinterested shares) and delisting;
• to approve a whitewash waiver (see 3.5 below) under the

Takeovers Code (Note: Only independent shareholders may vote
on the relevant resolution);
• to approve an amalgamation; and
• to wind up the company or to declare that the company will

become dormant.
90% The possibility of forcing all other shareholders to sell their shares through
a public bid (a “squeeze-out”) (see 7.1 below).

The key issues and restrictions associated with the acquisition of a controlling stake in a listed
company in Hong Kong are summarized below. Some careful planning is therefore necessary if a
bidder or a target company intends to start a process that may lead to a public takeover bid.
Hong Kong laws and regulations contain a number of rules that already apply before a public takeover
bid is announced. These rules impose restrictions and hurdles in relation to prior stake building by a
bidder, prior due diligence by a bidder and announcements of a potential takeover bid by a bidder or a
target company.

3.3 Due diligence and non-disclosure undertaking

The Takeovers Code does not contain specific rules on whether or not prior due diligence can be
organized or how such due diligence is to be organized. Nevertheless, the concept of prior due
diligence or pre-acquisition review by a bidder is generally accepted by the market (and by the SFC
and the Stock Exchange as well), and appropriate mechanisms have been developed in practice to
disclosure concerns. These mechanisms include the use of strict confidentiality procedures and data
rooms.
The due diligence review typically covers financial, business, legal and operational aspects, whether
through the target company’s response to the bidder’s request for provision of information or through
information in the public domain obtained by the bidder, or both. The due diligence review should
seek to enable the bidder to understand and assess the obligations it will assume, the nature and
extent of the target company’s contingent liabilities, title to the target company’s assets, third party
consents and regulatory or industry approvals required, the potential growth of the target company
and litigations risks.
It is common for the target company, and important from the legal compliance perspective of the
target company, to secure, at an early stage, a non-disclosure undertaking from the bidder before
providing any non-public information relating to the target company for pre-acquisition review or
conducting any further discussions or negotiations of the terms of the public takeover bid. The target
company must, however, be mindful not to selectively disclose its inside information to the bidder. For
the definition of inside information, please see 3.9 below.
3.4 Investor rights and restrictions

Before building a stake in a listed company in Hong Kong, the bidder should, as part of its pre-
acquisition due diligence, ascertain if there is any merger control, foreign ownership control or
restrictions, or industry specific approval applicable to the industry in which the listed company
operates.
• Foreign ownership restrictions – There are generally no restrictions on foreign ownership of

shares in Hong Kong, except for companies in specific industries, such as broadcasting
licensees.
• Merger control regime – Mergers involving one or more parties that directly or indirectly own
or control a Hong Kong telecommunication carrier licensee are subject to Hong Kong’s
merger control regime.
• Industry specific restrictions – Specific regulated industries, such as banking, insurance,

securities, telecommunications and broadcasting industries, are subject to certain ownership
and control restrictions and approvals by the regulator of the relevant industry.
3.5 Methods of acquisition

The bidder can acquire a controlling stake in a listed company in Hong Kong by:
• purchasing existing shares from a shareholder of the company (a “Share Purchase”); or
• subscribing for new shares to be issued by the listed target company (a “Share Subscription”).
In a Share Purchase, the total number of shares of the listed company will remain unchanged after
the bidder’s acquisition and the consideration will go directly to the selling shareholder. If, as a result
of the Share Purchase, the bidder (either alone or in concert with others) holds 30% or more of voting
shares in the listed company, the bidder is required to make a general offer to all other shareholders
in the listed company.

In a Share Subscription, the total number of shares of the listed company will increase and the
shareholdings of all existing shareholders in the listed company will be diluted as a result of the
bidder’s acquisition. The subscription money will go directly to the listed target company. If, as a result
of the Share Subscription, the bidder (either alone or in concert with others) holds 30% or more of
voting shares (“30% threshold”) in the listed company, the bidder is required to make a general offer
to all other shareholders in the listed company unless the SFC waives the general offer obligation
(commonly referred to as the “whitewash waiver”). The bidder can make an application to the SFC for
a whitewash waiver, which will be subject to independent shareholders’ approval and compliance with
certain regulatory requirements.
3.6 General considerations

• Funding
If the bidder will be acquiring a stake which, as a result of the acquisition, will take it (either
alone or in concert with others) to the 30% threshold, or which will trigger the creeper rule (as
discussed in 4(a) below), the bidder must have committed funding to satisfy its acquisition of
the target company shares, as well as all the remaining shares in the offer, at the time of the
announcement of its firm intention to make an offer.
• Bidder is a listed company
If the bidder is a listed company, it should comply with any requirement under the listing rules
that may be applicable to it, such as reporting, disclosure and/or shareholders’ approval. In
the context of the Listing Rules, the application of such requirements will depend on the value
of the stake to be acquired and the size of the target company relative to that of the bidder.

Before, during and after a takeover bid, the normal rules regarding insider dealing and market
manipulation remain applicable. The rules provide, among other things, that manipulation of the target
company’s stock and futures price, e.g., by creating misleading rumors, is prohibited. In addition, the
rules on the prohibition of insider dealing prevent a bidder that has inside information regarding a
target listed company from dealing in securities of the target listed company (other than in relation to
launching the actual takeover bid). For the definition of inside information, please see 3.9 below. That
being said, stake building for the sole purpose of the takeover bid is an exception to the insider
dealing rule (see 6.1 below).

Under the SFO, if a bidder starts building up a stake in the Hong Kong listed target company, it will be
obliged to disclose its stake publicly by submitting a prescribed form electronically through the
Disclosure of Interests Online System with the Stock Exchange if the bidder’s interest in the voting
shares has passed an applicable disclosure threshold. The key applicable disclosure thresholds for a
bidder (who is not a director of the target company) are:
• Initial disclosure threshold: 5% interest (including an interest in the underlying shares of equity
derivatives).
• Subsequent disclosure threshold:
o increases or decreases in the interest across a percentage level, e.g., from 5.9% to
6.1%; or

o 1% short position, and subsequent increases or decreases in the short position

across a percentage level.
When determining whether or not a threshold has been passed, a bidder must also take into account
the interest (or short position) in voting shares held by (a) such bidder’s spouse and children under
the age of 18, (b) related trusts, (c) corporations in which the bidder controls one-third of voting rights
or the majority of its board of directors, and (d) parties who are regarded as its “concert parties” for the
purposes of the disclosure of interests regime in the SFO, e.g., other parties to an agreement to which
it is also a party that contains provisions for the acquisition by any one or more of them of interests in
voting shares in the target company and that imposes obligations or restrictions on any one or more of
them with respect to the use, retention or disposal of their interests in voting rights in the target
company acquired in pursuance of the agreement. The concept of “concert parties” for the purpose of
the disclosure of interests regime in the SFO is different from the definition of parties “acting in
concert” under the Takeovers Code. Please see 4.1 below for the definition of “acting in concert”
under the Takeovers Code.
3.9 Announcement by the target company

transparency. These rules include the requirement that a listed company must immediately announce
all inside information. The term “inside information” means specific information that is about:
• the listed company;
• a shareholder or officer of the listed company; or
• the listed securities of the listed company or their derivatives; and
is not generally known to persons who are accustomed or would be likely to deal in the listed
securities of the listed company but would, if generally known to them, be likely to materially affect the
price of the listed securities.
In practice, the question of whether or not a piece of information constitutes “inside information” is
determined by the board of directors of the listed company.
The facts surrounding a potential public takeover bid may constitute inside information. If so, the
primary obligation for making an announcement rests with the target company once its board has
been approached. There are specific circumstances where the board of the target company must
make an announcement, for instance, when a firm intention to make an offer is notified to the target
company’s board, or when the target company is the subject of rumor or speculation about a possible
offer or there is undue movement in its share price or share turnover volume.
3.10 Launch of a public takeover bid

No one is permitted to announce the launch of a public takeover bid until the announcement has been
approved by the SFC. This prohibition not only applies to a bidder, but also to the target company
(even if the target company has to announce the launch of a bid pursuant to the general disclosure
obligations described in 3.9 above).
Before the board of the target company is approached, the responsibility of making an announcement
normally rests with the bidder. A bidder that intends to announce a public takeover bid must first
inform the SFC of its intention and obtain the SFC’s permission to make the announcement. If there
are rumors or leaks that a bidder intends to launch a public takeover bid, the bidder must make an
announcement.

The majority of questions concerning interpretation of the Takeovers Code arise in relation to the
concept of persons “acting in concert”. For the definition of “acting in concert”, please see 4.1 below.
There are two common forms of takeover bids in Hong Kong:
• mandatory general offer; and
• voluntary general offer.
In Hong Kong, most public takeover bids are friendly rather than hostile because many public
companies in Hong Kong are either family-controlled or owned by shareholders with significant or
controlling stakes.
4.1 Mandatory general offer

• Definition of “control” and trigger points for a mandatory general offer
Under the Takeovers Code, “control” is deemed to mean a holding, or aggregate holdings, of
30% or more of the voting rights of a company.
A mandatory general offer to all shareholders of the target company must be made where:
o a bidder acquires shares which, when taken together with the shares already held by
the bidder (alone or in concert with others), represent 30% or more of the voting
rights of the target company; or
o a bidder holding not less than 30% and not more than 50% of the voting rights of the
target company acquires (either alone or in concert with others), in any period of 12
months, additional shares carrying more than 2% of the voting rights of the target
company. This is commonly known as the “creeper rule”.
• Concept of “acting in concert”
For the purpose of the Takeovers Code, a person “acts in concert” with the bidder if, pursuant
to an agreement or understanding (whether formal or informal), they actively cooperate,
through the acquisition of voting rights by either of them, to obtain or consolidate control of the
target company. Under the Takeovers Code, the definition of “acting in concert” is drafted in
broad terms so that it may apply in a broad range of situations, but it does set out nine
classes of persons who are presumed to be acting in concert unless the contrary is
established. Evidence that parties are “acting in concert” may be direct or, more likely, may be
inferred from circumstantial evidence where no single circumstance will necessarily be
determinative.
• Offer price of a mandatory general offer
o A mandatory general offer must be made in cash or be accompanied by a cash

alternative at not less than the highest price paid by the bidder (either alone or in
concert with others) for shares of that class during the offer period and within six
months before the commencement of the offer period. If the voting rights were
acquired for a consideration other than cash, the offer price must be determined by
an independent valuation.
o If, after an announcement of a firm intention to make an offer and during the offer
period, the bidder (either alone or in concert with others) purchases shares of the

target company at a price that is above the offer price, the bidder must increase the
offer price to the highest price paid for such shares.
• Proof of funding requirement
o Both the announcement of a firm intention to make an offer and the offer document
itself must include a confirmation from the bidder’s financial adviser that sufficient
resources are available to the bidder to satisfy full acceptance of the offer.
o In addition, the bidder’s financial adviser must provide written confirmation to the SFC
that it is satisfied that there are sufficient resources available to satisfy the bidder’s
obligations in respect of the offer.
• Conditions to a mandatory general offer
o Except with the consent of the SFC, all general offers must be conditional upon the
bidder having received acceptances which will result in the bidder (either alone or in
concert with others) holding more than 50% of the voting rights of the target
company. This is commonly referred to as the “acceptance condition”.
o Where the bidder holds more than 50% of the voting rights before the offer is made,
an offer must normally be unconditional.
• Listing status of the target company
If the bidder intends to maintain the listing status of the target company, the bidder should
observe the public float requirement of the Listing Rules. This requires that at least 25% (or a
lower percentage agreed by the Stock Exchange on initial listing) of the target company’s
securities must be in public hands.
4.2 Voluntary general offer

A voluntary general offer is an offer that a bidder voluntarily makes for all the shares of the target
company. Any bidder may make a voluntary general offer provided that, during the course of a
voluntary offer, it does not make any acquisition of voting rights in the target which triggers a
mandatory general offer as discussed in 4.1 above.
• Offer price of a voluntary general offer
o The offer price may be paid in cash, securities or a combination of the two.
o However, if the bidder (either alone or in concert with others) has acquired shares in
cash in the target company carrying 10% or more of the voting rights during the offer
period and within six months before the commencement of the offer period, the offer
price must be paid in cash, or accompanied by a cash alternative, at not less than the
highest price paid for such shares. The SFC also has the discretion to require cash to
be made available even where less than 10% has been purchased for cash in the six
months before the commencement of the offer period if the vendors are directors or
other persons closely connected with the bidder or the target company.
o On the other hand, if the bidder (either alone or in concert with others) has acquired
shares in the target company carrying 10% or more of the voting rights in exchange
for securities during the offer period and within three months before the
commencement of the offer period, such securities are required to be offered to all
other holders of shares of that class. Unless the vendor is required to hold the
securities received until either the offer has lapsed or the offer price has been posted
to accepting shareholders, the bidder will also be required to make an offer in cash or

to provide a cash alternative. In the case of a purchase in exchange for securities
from directors or persons closely connected with the bidder or the target company,
the SFC may require a securities offer on the same basis even where less than 10%
has been purchased or where the purchase was made more than three months
before the start of the offer period.
o The offer price may not be at a discount of more than 50% to the market price of the
shares of the target company (being the lesser of the closing price of the shares on
the day before the announcement of a firm intention to make an offer under the
Takeovers Code and the five-day average closing price prior to such day).
o If, after an announcement of a firm intention to make an offer and during the offer
period, the bidder (either alone or in concert with others) purchases shares of the
target company at a price that is above the offer price, the bidder must increase the
offer price to the highest price paid for such shares.
• Proof of funding requirement
o Where the offer consists of cash or any other assets except new securities to be
issued by the bidder, both the announcement of a firm intention to make an offer and
the offer document itself must include confirmation from the bidder’s financial adviser
that sufficient resources are available to the bidder to satisfy full acceptance of the
offer.
o In addition, the bidder’s financial adviser must provide written confirmation to the SFC
that it is satisfied that there are sufficient resources available to satisfy the bidder’s
obligations in respect of the offer.
• Conditions to a voluntary general offer
o A voluntary general offer may be made subject to any conditions except those which
depend on the bidder’s own judgment or the fulfilment of which is in its control or at its
discretion.
o Except with the consent of the SFC, all general offers must be conditional upon the
bidder having received acceptances which will result in the bidder (either alone or in
concert with others) holding more than 50% of the voting rights of the target
company. A voluntary general offer may be made conditional upon an acceptance
level of shares carrying a higher percentage of the voting rights, failing which the
bidder is entitled to withdraw the offer.
o However, when setting the acceptance level, if the bidder intends to maintain the
listing status of the target company, the bidder should observe the public float
requirement of the Listing Rules, which requires that at least 25% (or a lower
percentage agreed by the Stock Exchange on initial listing) of the target company’s
securities must be in public hands.
5 Timeline
As a general rule, the timeline for a mandatory general offer is similar to the timeline of a voluntary
general offer, with certain exceptions. The table below contains a timeline of a typical mandatory
general offer.

Step
Preparatory stage:
• Preparation of the bid by the bidder (feasibility study, due diligence and financing).
Announcement:
• The bidder makes an announcement of a firm intention to make an offer, setting out
the terms of the offer and other details required under the Takeovers Code. Once
such announcement is made, the bidder can no longer withdraw the bid (except
with the consent of the SFC and in certain limited circumstances, such as in the
event of a competing offer).
• Before an announcement of a firm intention to make an offer is made, there may be
circumstances where the bidder/potential bidder, the target company or the
potential vendor must make an announcement of a possible offer when, for
example:
o the target company is the subject of rumor or speculation about a possible
offer;
o there is undue movement in the target company’s share price or volume of
share turnover; or
o negotiations or discussions are about to be extended to include more than
a very restricted number of people.
Day 0:
Posting of an offer document or a composite document (combining the offer document and the
target board circular):
• within 21 days of the date of announcement of the terms of the offer (for cash
offer); or
• within 35 days of the date of the announcement of the terms of the offer (for
securities exchange offer).
Day 14:
Last day for posting of the target board circular if it is not combined in a composite document (or
not posted on the same day as the offer document on Day 0).
Day 21:
First permitted closing date if the target board circular is combined in a composite document (or
posted on the same day as the offer document).
Day 28:
First permitted closing date if the target board circular is not combined in a composite document (or
posted after the date on which the offer document is posted).
Day 39:
Last day for the target company to announce new material information (including trading results,
profit or dividend forecasts, asset valuations or proposals for dividend payments or for any material
acquisition, disposal or major transactions).

Step
Day 46:
Last day for revision of the offer if the offer has not by then become unconditional as to
acceptances.
Day 60:
Last day for the offer to become or be declared unconditional as to acceptances and such day
cannot be extended (except with the consent of the SFC and in certain limited circumstances, such
as in the event of a competing offer).
Last day for accepting shareholders to withdraw their acceptance.
Day 81:
Last day for all conditions to the offer to be fulfilled or the offer must lapse.
Payment of offer price:

The bidder must pay the offer price to accepting shareholders within seven business days of the
later of the date on which the offer becomes, or is declared, unconditional and the date of receipt of
a duly completed acceptance.
5.2 Competing bid

If a competing offer has been announced, both bidders will normally be bound by the timetable
established by the posting of the competing offer document. If a competitive situation continues to
exist in the later stages of the offer period, the SFC will normally require revised offers to be published
in accordance with an auction procedure, the terms of which will be determined by the SFC. That
procedure will normally require final revisions to competing offers to be announced by the 46th day
following the posting of the competing offer document, but will enable a bidder to revise its offer within
a set period in response to any revision announced by a competing bidder on or after the 46th day.
The SFC will consider applying any alternative procedure which is agreed between competing bidders
and the target board.
Set out below is an overview of the main steps for a mandatory general offer in Hong Kong.

Mandatory general offer (indicative timetable)
Start Payment of
process A Day Day 0 Day 14 Day 21 Day 28 Day 39 Day 46 Day 60 Day 81 offer price
Announce a firm Post an offer Last day for First day offer can First day offer can Last day for the Last day bidder Last day for the Last day to Last day to pay
intention to make document or a posting the target be closed if the close if the target target company to can revise the offer to become satisfy/waive all consideration to
an offer composite document board circular if it target board board circular is announce offer (if it has not or be declared conditions – offer accepting
(combining offer is not combined circular is not combined in a material new become unconditional as goes “wholly shareholders
documents and in a composite combined in a composite information unconditional as to acceptances unconditional” or
target board circular) document (or not composite document (or to acceptance) lapses
Last day for
posted on Day 0) document (or posted after the
N.B. Date of accepting
posted on Day 0) date on which the
publication of the shareholders to
offer document is
offer document/ withdraw their
posted)
composite document acceptance
and the date of
posting fall on two
different days due to
the requirement
under the HK Listing
Rules.
Within 21 days of the date Within 7 business

of the announcement of days of the later of
the terms of the (for cash the date on which the
offer); or offer becomes, or is
declared,
Within 35 days of the date
unconditional and the
of the announcement of
date of receipt of a
the terms of the offer (for
duly completed
securities exchange offer)
acceptance

6 Takeover Tactics
6.1 Stake building
Generally, a bidder may build its stake in the target company either by acquiring a large stake from a
substantial shareholder or by making direct purchases from the stock market, subject to the following
restrictions, obligations and requirements.
If and when the bidder possesses any inside information on a listed target, it must not deal in the
listed securities (or their derivatives) until the inside information is publicly announced. Otherwise, the
bidder will be deemed to have committed insider dealing. For the definition of inside information,
please see 3.9 above. However, if the bidder is about to launch a takeover bid, they are not restricted
from dealing in the listed securities (or their derivatives) for the sole purpose of the takeover bid.
Besides, an off-market transaction in the listed securities (or their derivatives) entered into directly
between the bidder and other parties, each of which is in possession of the same inside information,
is exempt from the insider dealing prohibitions.
Please see 3.8 above on the disclosure obligations on acquiring a shareholding in a Hong Kong listed
target company and the applicable disclosure thresholds.
If the stake building crosses the 30% threshold or the 2% threshold under the creeper rule contained
in the Takeovers Code (see 4.1 above), the bidder must make a mandatory general offer to all
shareholders to acquire the remaining shares not held by it or its concert parties.
If the bidder is a Hong Kong listed company, it may be subject to the disclosure and/or shareholders’
approval requirements under the Listing Rules, depending on the offer price and the size of the target
company compared to that of the bidder.
6.2 Deal protection methods

(a) Irrevocable commitments
A bidder may seek irrevocable commitments from shareholders of the target company with significant
or controlling stakes to accept the offer or to vote in favor of the resolution approving the scheme of
arrangement.
Under the Takeovers Code, a bidder may approach up to six sophisticated investors who have a
controlling stake in the target company to obtain an irrevocable commitment in connection with the
offer. In all other cases, the bidder must first obtain the SFC’s consent before making any approach to
any shareholder of the target company to obtain such an irrevocable commitment. The SFC would
normally impose conditions including that shareholders may only be approached within a limited
period that is pre-agreed with the SFC before an announcement of a firm intention to make an offer is
published. The bidder can only reveal to any shareholder who is approached information that is
already public or (where such approach is being made prior to the announcement of a firm intention to
make an offer) information that will be set out in the announcement of a firm intention to make an
offer. If an announcement of an offer or possible offer has been issued, there is normally no restriction
on the number of shareholders who may be approached, as long as they are not provided with any
non-public information. In case of a recommended offer, the SFC may adopt a more relaxed approach
on the number of shareholders who may be approached. The bidder must show the steps being taken
to prevent information being leaked, e.g., by obtaining signed confidentiality undertakings from the
shareholders being approached.
(b) Inducement/break fee
A bidder and the target company may agree an inducement or break fee payable by the target
company upon the occurrence of specified events which prevent the offer from proceeding or cause it
to fail, e.g., if the target board recommends a higher competing offer.

Under the Takeovers Code, such an inducement or break fee must be of minimal value (normally no
more than 1% of the offer value). The target board and its financial adviser must confirm to the SFC in
writing that they believe that the fee is in the best interests of shareholders of the target company. Any
inducement or break fee arrangement must be fully disclosed in the announcement of a firm intention
to make an offer and in the offer document. The SFC should be consulted in all cases where an
inducement or break fee, or any similar arrangement, is proposed.
6.3 Anti-takeover defenses

Under the Takeovers Code, once a bona fide offer has been communicated to the target board or the
target company has reason to believe that a bona fide offer may be imminent, the target board may
not take any action to frustrate a proposed offer or deny the shareholders the opportunity to consider
it without the shareholders’ approval in a general meeting or a waiver granted by the SFC. In
particular, the target board must not do or agree to do the following, unless consent from the SFC and
its shareholders is obtained:
• issue any shares;
• create, issue or grant, or permit the creation, issuance or granting of, any convertible
securities, options or warrants in respect of shares in the target company;
• sell, dispose of or acquire assets of a material amount;
• enter into contracts, including service contracts, other than in the ordinary course of business;
or
• cause the target company or any subsidiary or associated company to purchase or redeem
any shares in the target company or provide financial assistance for any such purchase.
As a result, the target board has limited anti-takeover defenses. Possible anti-takeover defenses
include:
• stating its views against the offer and its recommendation to the shareholders to reject the
offer in the target board circular;
• approaching other investors and, after consulting the SFC, proposing an inducement fee to
solicit a higher competing offer. Please see 6.2 above for requirements in respect of
inducement fees under the Takeovers Code; and
• seeking approval from its shareholders and the SFC to undertake frustrating actions.

Takeover
7.1 Squeeze-out
If, within four months following a takeover offer, the bidder (either alone or in concert with others)
holds 90% in number of the shares to which the takeover offer relates in the Hong Kong incorporated
target company (the “90% threshold”), the bidder can give a squeeze-out notice to compel
shareholders who have not accepted the takeover offer to sell the remaining shares to the bidder. A
shareholder can, however, apply to the court for an order stating that the bidder is not entitled to
acquire the shares or for an order varying the terms of the acquisition. Absent such an application, the
bidder is bound to acquire the remaining shares after giving the squeeze-out notice.
7.2 Sell-out
If, following a takeover offer, the bidder (either alone or in concert with others) holds shares in the
Hong Kong incorporated target company that reaches the 90% threshold, a shareholder who has not

accepted the takeover offer may, by a letter addressed to the bidder, require the bidder to acquire its
shares. Where the minority shareholder exercises its right to be bought out, the bidder is bound to
acquire the remaining shares.

If an offer is withdrawn or lapses before it becomes unconditional, the bidder is restricted, for a period
of 12 months, from launching a new offer or acquiring shares that trigger a mandatory general offer. In
addition, where a privatization offer has been unsuccessful, the bidder will normally be precluded from
buying any shares in the target company within 12 months after the offer lapses if the result would be
a delisting of the target company’s shares on the Stock Exchange (unless previously approved by
shareholders in accordance with the Listing Rules).
8 Delisting
8.1 Methods
The methods that can be used to delist and take a public company private in Hong Kong (commonly
referred to as “privatization”) are:
• scheme of arrangement;
• general offer plus compulsory acquisition, i.e., squeeze-out (see 7.1 above);
• general offer plus shareholders’ approval for delisting; and
• capital reorganization plus shareholders’ approval for delisting.
A scheme of arrangement is a court sanctioned arrangement with shareholders to cancel or transfer

to a bidder all the shares in the target company. The court may sanction and permit the scheme of a
Hong Kong incorporated listed company if a 75% majority of the voting rights of the shareholders
voting at the court-directed shareholders’ meeting vote in favor of the scheme at the meeting (and not
more than 10% of the total voting rights of all “disinterested shares” vote against the scheme at the
meeting). If the listed company concerned is not a Hong Kong incorporated company, the local laws
may also require the scheme to be approved by a majority in number of the shareholders voting at the
shareholders’ meeting (commonly referred to as the “headcount test”).
As a scheme of arrangement is implemented by the target company, it is not appropriate for hostile
bids.
The scheme of arrangement is the most commonly seen privatization method in Hong Kong. Some
reasons for this are the “all-or-nothing” nature of a scheme and the Hong Kong stamp duty savings
that may ensue from a scheme involving the cancellation of shares in the target company.
8.2 Delisting
In Hong Kong, following a successful privatization through a scheme of arrangement or a squeeze-out
discussed in 8.1 above, a Hong Kong listed company can voluntarily withdraw its listing on the Stock
Exchange.
A Hong Kong listed company can also voluntarily withdraw its listing on the Stock Exchange following
a general offer, a capital reorganization or in other specific circumstances. Such voluntary withdrawal
will be subject to shareholders’ approval and other regulatory requirements, depending on whether or
not the listed company has an alternative listing.
A listed company must give its shareholders notice of the proposed withdrawal of listing by way of an
announcement, and the intention not to retain the listing must be stated in a circular to the
shareholders.

8.3 Contacts within Baker McKenzie

Dorothea Koo, Christina Lee and Lawrence Lee in the Hong Kong office are the most appropriate
contacts within Baker McKenzie for inquiries about public M&A in Hong Kong.
Dorothea Koo Christina Lee

Hong Kong Hong Kong
dorothea.koo@bakermckenzie.com christina.lee@bakermckenzie.com
+852 2846 1962 +852 2846 1692
Lawrence Lee
Hong Kong
lawrence.lee@bakermckenzie.com
+852 2846 1980

Hungary
1 Overview
Hungary is politically and economically integrated into Europe and is a member of the European
Union, NATO and various other international organizations. Thanks to its central location between
Western and Eastern Europe, it provides access to almost the entire European market and, as a
consequence of the moderate wage rates, high level of education, investment-friendly legal rules and
taxation system, Hungary has become an ideal location to pursue various business investments.
The Hungarian public M&A market has been relatively slow in the last couple of years, with only a few
voluntary takeovers each year. Hostile takeover attempts are uncommon in Hungary.

The main rules and principles of Hungarian law relating to public takeover bids can be found in:
• Act CXX of 2001 on the Capital Market (“Capital Market Act”); and
• Act V of 2013 on the Civil Code (“Civil Code”).
The Hungarian takeover legislation is based on Directive 2004/25/EC of the European Parliament and
of the Council of 21 April 2004 on takeover bids (“Takeover Directive”). This directive was aimed at
harmonizing the rules on public takeover bids in the different Member States of the European
Economic Area (EEA). Be that as it may, the Takeover Directive still allows Member States to take
different approaches in connection with some important features of a public takeover bid (such as the
percentage of shares that, upon acquisition, triggers a mandatory public takeover bid on the
are still relevant differences in the national rules of the respective Member States of the EEA
regarding public takeover bids.

Hungary, there are a number of additional rules and principles that are to be taken into account when
on a regulated market and amending Directive 2001/34/EC and related EU legislation. For
rules). These rules are based on Regulation (EU) No 596/2014 of the European Parliament
and of the Council of 16 April 2014, on market abuse (“Market Abuse Regulation”) and related
EU legislation. For further information, see 6.3 below.
(c) The rules relating to the public offer of securities and the admission of these securities to
trading on a regulated market. These rules could be relevant if the consideration that is
offered in the public takeover bid consists of securities. These rules are based on Regulation
(EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the
prospectus to be published when securities are offered to the public or admitted to trading on

a regulated market, and repealing Directive 2003/71/EC (“Prospectus Regulation”) and

related EU legislation.
(d) The general rules on the supervision and control over the financial markets.
2.3 Supervision and enforcement by the National Bank of Hungary

Public takeover bids are subject to the supervision and control of the National Bank of Hungary. The
National Bank of Hungary is the principal securities regulator in Hungary.
The National Bank of Hungary has a number of legal tools that it can use to supervise and enforce
compliance with the public takeover bid rules, including administrative fines. In addition, in certain
specific cases, criminal sanctions could be imposed by the courts in case of non-compliance.

Foreign investments are not restricted in Hungary. Unless in the context of specific industries and
sectors, takeovers are not subject to prior governmental or regulatory approvals, and do not generally
fall under mandatory notification requirements, other than customary anti-trust approvals. Takeovers
may be subject to the conclusion of a notification procedure if the target company pursues certain
activities set out in Act LVII of 2018 on the screening of foreign investments harming Hungary’s
security interests (“Foreign Investment Screening Act”) and in Government Decree no. 246/2018. (XII.
17.) implementing the Foreign Investment Screening Act. Such activities include, among others: (a)
manufacture of weapons, parts of weapons, munition, military tools; (b) manufacture of dual use
products; (c) manufacture of certain classified equipment used by secret intelligence services; (d) data
processing by a financial institution operating the central credit information system and operation of
payment systems, excluding the operation in respect of payment transactions exclusively executed
with cash-substitute payment instruments; (e) if any of the following listed activities affect an activity
that is essential for the maintenance of vital societal functions, such as healthcare, preservation of life
and property of citizens, provision of economic and social public services where disruption would have
a significant impact, including: (i) transfer and distribution of electricity and system operation, and
electricity production by a power plant of at least 50 MW capacity; (ii) distribution, storage, transport of
natural gas and system operation; and (iii) outsourcing and development of the public water supply;
and (f) provision of electronic communications services.

The following general principles apply to public takeovers in Hungary. These rules are based on the
Takeover Directive:

distorted;
(e) an offeror must only announce a bid after ensuring that they can fulfil any cash consideration

levels of shareholding within a Hungarian listed corporation:
Rights Rights
One share • The right to attend, request information and vote at shareholders’
meetings.
• The right to obtain a copy of the documentation submitted to or
information in relation to the agenda items of the shareholders’
meetings.
at shareholders’ meetings.
• The right to request the nullity of decisions of shareholders’
meetings.
• The right to participate in or leave the company in connection with a
merger or demerger.
Shares representing • The right to request the board of directors or, subject to certain
1% of its share conditions, the court of registration to convene a shareholders’
capital meeting with specific predetermined agenda.
• The right to file a minority claim against the directors on behalf of
the company.
• The right to ask, subject to certain conditions, the court of
registration to appoint an auditor to check (i) the company’s last
financial statements, (ii) any business event or indebtedness
occurred as a result of the management activities in the last 2 years
or (iii) any payment by the company to a shareholder or group of
shareholders.
• The right to put additional items on the agenda of a shareholders’
meeting and to table draft resolutions for items on the agenda.
More than 25% (at a The ability at a shareholders’ meeting to block:

shareholders’
• any other changes to the articles of association, transformation of
meeting)
the company to a private company, transformation of the company
to another company form, mergers, de-mergers, capital reductions
and dissolution of the company;

Rights Rights
• the authorization to the board of directors to increase the
so-called “authorized capital”); and
subscription right of existing shareholders in case of share issues in
cash, or issues of convertible bonds or warrants.
More than 50% (at a The ability at a shareholders’ meeting:

shareholders’
• to appoint and dismiss directors or members of the supervisory
meeting)
board and to approve the remuneration and, as relevant, severance
package of directors;
remuneration;
• to approve the annual financial statements;
• to grant discharge from liability to the directors for the performance
of their mandate; and
• to take decisions for which no special majority is required (see,
inter alia, the matters listed in 3 above).
90% The possibility to force all other shareholders to sell their shares through a
public bid (a “squeeze-out”).

Hungarian law contains a number of rules that already apply before a public takeover bid is
planning is therefore necessary if a potential bidder or target company intends to start a process that
is to lead towards a public takeover bid.


disclosure threshold. The relevant disclosure thresholds in Hungary are 5% and multiples of 5% (10%,
15%, etc.) up to 90%, after which the potential bidder shall announce each additional 1% stake (91%,
92%, etc.). Listed companies may also apply a lower threshold than the initial threshold of 5%.

account the voting securities held by (i) the parties with whom it acts in concert or may be deemed to
act in concert (see 3.9 below), (ii) affiliates under the direct or indirect control of the bidder, (iii) close
relatives of natural person bidders, (iv) a third party for the benefit of the bidder or (v) the bidder as a
contractual security that allows the bidder to exercise voting rights.

a public takeover bid may constitute inside information. If so, the target company must also announce
these.

A bidder that intends to announce a public takeover bid must first inform the National Bank of Hungary
of its intention and the details of the bid, and obtain the National Bank of Hungary’s approval. In
addition, the bidder will, at that time, have to make the necessary filings for the actual launching of a
public takeover bid, since as soon as the public takeover bid is announced, it can normally no longer
be withdrawn, except in certain circumstances.

Whenever required for the good functioning of the markets, the National Bank of Hungary has the
right to request information from a person that could be involved in a possible public takeover bid.
This type of disclosure may be requested even if the takeover bid cannot yet be formally launched,
e.g., for practical purposes or due to merger control.
3.8 Due diligence

The Hungarian public takeover bid rules do not contain specific rules on whether or not a prior due
diligence can be conducted, nor how such due diligence is to be organized. Be that as it may, the
concept of a prior due diligence or pre-acquisition review by a bidder is theoretically accepted,
provided that it can cope with potential market abuse and early disclosure concerns. Measures to
address these may include the use of strict confidentiality procedures and data rooms.

For the purposes of the Hungarian takeover bid rules, persons “act in concert” if they collaborate with
the bidder, the target company or any other person on the basis of an express or silent, oral or written,
agreement aimed at acquiring the control over the target company or frustrating the success of a
takeover bid.
Affiliates are deemed to act in concert or to have entered into an agreement to act in concert.
shareholder acts in concert or is deemed to act in concert. For example, this is the case when a target
company is already controlled by a shareholder.
takeover bids. The members of the group will have a joint obligation to carry out a mandatory takeover
bid (even if individual group members do not pass the relevant threshold) if one or more persons in a
group of persons acting in concert acquire voting securities as a result of which the group in the
aggregate would pass either (i) the 33% threshold or (ii) the 25% threshold in circumstances where no
other person owns at least 10% of the voting rights.

There are three main forms of takeover bids in Hungary:
• a voluntary takeover bid, in which a bidder voluntarily makes an offer for a fixed number of
voting securities issued by the target company (and securities issued by the company
conferring the right to acquire voting securities of the target company);
of securities, it crosses (alone or in concert with others) a (i) 33% threshold or (ii) 25%
threshold in circumstances where no other person owns at least 10% of the voting rights; and
• a squeeze-out bid, in which a shareholder who 90% of the voting securities as a result of a
takeover bid can squeeze- out the remaining holders of voting securities. This can be
combined with a voluntary or mandatory takeover bid.
A bidder that intends to launch a takeover bid must engage an investment service provider, e.g., a
financial institution, and include a draft prospectus in its notification to the National Bank of Hungary,
as well as proof of certain funds.

• The bidder is free to make the takeover bid subject to merger control clearance, the prior
approval of the National Bank of Hungary and certain other conditions precedent, such as a
minimum acceptance level, a material adverse change condition or a force majeure clause. In
case of voluntary takeover bids the following restrictions also apply:
o no voluntary takeover bid may be submitted after the publication of a mandatory

takeover bid and before the last day of the acceptance period of such bid;
o the bidder, persons acting in concert with the bidder, or a third party acting on behalf
of either of the aforementioned parties may not launch another voluntary takeover bid
within six months following the conclusion of the original voluntary takeover bid;
o no counter-bid may be submitted; and
o if the number of shares offered in the declarations of acceptance exceeds the number
to which the takeover bid pertains, the bidder may only allocate the shares on a pro
rata basis (based on the face value of the shares offered).
• The bidder is, in principle, free to determine the form of consideration offered to the target
shareholders:
o the offered price may be paid in cash, securities or a combination of both;
o if there are different categories of securities, different prices per category can only be
due to the characteristics of such categories; and
o during the takeover bid period (starting on the date indicated in the bidder’s
announcement which must be published after the bidder has received the approval of
the National Bank of Hungary), the bidder or persons acting in concert with the bidder
may not acquire or commit to acquire securities to which the takeover bid relates.

concert (or persons acting for their account) intend to acquire, directly or indirectly, more than

25% (if no other person may own at least 10% of the voting securities) or more than 33% of
the (actual outstanding) voting securities of the target company.
• A mandatory takeover bid is unconditional. However, the bidder may retain the right not to
complete the transaction provided that, at the end of the acceptance period, the bidder would
not acquire more than 50% of the voting securities in the target as a result of the bid. If the
bidder wants to exercise such right it must include this condition in the prospectus.
• The main exceptions to the takeover bid obligation include situations where a stake of more
than 25% is acquired but other persons may own at least 10% of the voting securities.
• In terms of the price offered and the form of the consideration, the same rules apply as in the
o The mandatory offer price must at least equal the higher of (i) the highest price paid
or agreed to be paid by the bidder (or any person acting in concert with it) during a
period of 180 calendar days preceding the announcement of the takeover bid, (ii) the
weighted average trading price for the securities of the target company on the market
during the last 180 or, if available, 360 calendar days prior to the moment giving rise
to the public takeover bid obligation and (iii) the equity of the company per share.
o The consideration offered can consist of cash, securities or a combination of both.

Follow-on squeeze-out – a bidder will be able to squeeze out the residual minority shareholders at the
end of the takeover bid if it holds, alone or in concert with others, 90% of the voting securities of the
target.
Sell-out right if the bidder is not itself launching a squeeze-out – minority shareholders have a sell-out
right if, at the end of the takeover bid (or its reopening), the bidder holds, alone or in concert with
others, 90% of the voting securities of the target.
5 Timeline
takeover bid process under Hungarian law.
Step
prospectus).
The bidder engages an investment service provider.

• The bidder files the bid with the National Bank of Hungary. The filing must contain,
among other elements, proof of certain funds to pay the offer price and a draft
prospectus.

Step
• Simultaneously with the above, the bidder discloses the bid to the target company
and initiates its announcement by the target company. As of that moment, the bid is
public, the bidder can no longer withdraw the bid (except in certain limited
circumstances, such as in the event of a counter-bid or certain defensive actions by
the target company) and the powers of the board of the target company are limited.
• Counter-bids and higher bids can be filed (until 15 days prior to the expiry of the
acceptance period of the bid, at the latest).
3. The National Bank of Hungary will, within 10 business days, approve the draft bid that was
filed with it or request its modification. In the latter case, the National Bank of Hungary will
approve or reject the draft bid within three business days.
Consultation of and information to employees is conducted in parallel.

• The target’s board must also involve the employee representative bodies. If the
board has timely received the position of the employee representative bodies, this
must be attached to the response memorandum.
• The board must issue its response memorandum before the commencement of the
bid acceptance period.
• The board must also engage an independent financial expert to review and analyze
the bid. The report of the independent expert must be attached to the response
memorandum.
5. Publication of final prospectus after approval of the National Bank of Hungary (often
together with response memorandum).

• Start: two calendar days at the earliest but not later than five calendar days after
the approval of the prospectus by the National Bank of Hungary.
• Duration: not less than 30 calendar days and not more than 65 calendar days,
including any extension. (upon the bidder’s justified request, the National Bank of
Hungary may extend the time limit for acceptance as specified in the takeover bid
on one occasion, by a maximum period of 15 calendar days).
7. Payment of the offered consideration by the bidder within five business days of the end of
the acceptance period or of the receipt of the merger control clearance.
8. Squeeze-out or sell-out if the bidder acquired 90% of the shares:

• Squeeze-out – to start within three months following the expiry of the acceptance
period of the bid.
• Sell-out – within a term of three months following the expiry of the acceptance
period of the bid.

Set out below is an overview of the main steps for a public takeover bid in Hungary.
Start
process A Day A + 10 Day X X+5 X + 70 X + 75 X + 160
Launch the bid National Bank of Hungary Publication of final Launch of the End of the acceptance Payment of the offered Squeeze-out or sell-out if bidder
approves draft bid or prospectus without acceptance period period consideration acquired 90% of the shares:
• Bidder files the bid
requests its modification delay after approval
with the National • Squeeze-out – to start
of the National Bank
Bank of Hungary within three months
of Hungary (often
following the expiry of the
• Bidder discloses bid together with target
acceptance period of the
to target company board’s response
bid.
and target memorandum (in
announces bid case of a mandatory • Sell-out – within a term of
public takeover bid)) three months following the
• Counter-bids and
expiry of the acceptance
higher bids can be
period of the bid.
filed until 15 days
prior to the expiry of
the acceptance
period of the bid
10 business days 2-5 calendar days 30-65 calendar days 5 business days
within 3 months

6 Takeover Tactics
A Hungarian public company has the obligation to immediately disclose to the public all “inside
disclosed to the public.
instruments.
• Information shall be deemed to be “of a precise nature” if it indicates a set of circumstances

It is up to the target company to determine if certain information qualifies as “inside information”. This

In the event of a (potential) public takeover bid, the announcement of a potential takeover bid must be
made simultaneously with the submission of the takeover bid to the National Bank of Hungary for
approval. This announcement must notify the public that the takeover bid is still subject to the
approval of the National Bank of Hungary. Once the takeover bid is approved or rejected, the bidder
must immediately initiate the announcement thereon.

The basic legal framework regarding insider dealing and market abuse under Hungarian law is set
forth in the Market Abuse Regulation and certain other EU legislation; the latter being mainly
implemented by the Capital Market Act. As the framework is based on EU legislation, similar rules on
insider dealing and market abuse exist in other jurisdictions of the EEA.

that apply to the board and shareholders’ meeting of the target company pending a takeover bid.

1. Capital increase (poison • Requires an express authorization by the

pill) shareholders’ meeting and the approval of the
shareholders affected by the capital increase. The
approval of the affected shareholders must be given
board (authorized capital)
as regulated in the articles of association.
• The authorization is valid for a fixed term of a
maximum of 5 years, but can be renewed.
• The shareholders’ resolution authorizing the capital
increase must determine the maximum level of the
capital up to which the board may decide on the
increase.
• May not be utilized if the articles of association prohibit
the board from deciding on such defense mechanisms
following the announcement of the bid.
2. Share buyback • Requires an express authorization by the

Share buyback “with a
view to avoiding an • The authorization is valid for 18 month only, but can
imminent and serious be renewed.
harm” to the company.
• The total of directly and indirectly acquired shares may
not exceed 25% of the share capital.
• Buybacks to be made in compliance with corporate,
3. Shareholders’ • Assumes a stable shareholder base or reference

agreements shareholders.
Shareholders undertake • Not regulated in detail under Hungarian law.
to (consult with a view to)
vote their shares in
accordance with terms
agreed among them.
4. Preferential voting • Requires the issuance of preferential shares

shares incorporating multiple voting rights or veto rights.
• Inclusion of the rules applicable to the preferential
shares in the articles of association, by the founders
upon the establishment or by a majority of 75% of the
votes cast at a shareholders’ meeting.
5. Limitations on share • Inclusion in the articles of association requires an

transfers approval by a majority of 75% of the votes cast at a
emptive restriction • The articles of association must list the specific
clauses in the articles of conditions and circumstances when the board may
association or in refuse to approve the transfer.


agreements between • Exceptional for listed companies (listed securities are,
shareholders. in principle, freely transferable; impact on share
liquidity).

Takeover
7.1 Squeeze-out (call option of bidder)
If, within three months following the takeover bid, the bidder (together with the persons with whom the
bidder acts in concert) holds 90% of voting rights and the bidder indicated in their original takeover bid
that they are willing to utilize their call option, the bidder can force all other holders of shares to
transfer their shares to the bidder at the price which is the highest of (i) the price offered in the
takeover bid or (ii) the proportional value of the equity (per share) based on the last audited annual
financial statement of the company.
If the above conditions are met, the bidder must, within the three-month period after the conclusion of
the takeover bid, notify the National Bank of Hungary and announce to the public that they have
exercised the call option right and the conditions, including price, hand over process, etc., of the call
option. In addition, the bidder must put the purchase price of the shares to be acquired into escrow.
The company will cancel any shares which are not handed over within the period determined in the
announcement. The company will issue new shares in their stead and will transfer those shares to the
bidder.
7.2 Sell-out (put option of the remaining shareholders)

If, following the takeover bid, the bidder (together with the persons with whom they act in concert)
holds 90% of voting rights, then any remaining shareholders of the target company may request the
bidder to buy the shareholders’ shares at the price which is the highest of (i) the price offered in the
takeover bid or (ii) the proportional value of the equity (per share) based on the last audited annual
financial statements of the target company.
This right can be exercised in writing within 90 days following the expiry of the acceptance period of
the bid.
7.3 Restrictions on acquiring securities after the voluntary takeover bid

period
For six months after the end of the voluntary takeover bid period, the bidder and the persons acting in
concert with the bidder cannot submit a new voluntary takeover bid.
8 Delisting
The delisting of shares traded on a regulated market must be decided by a 75% majority vote at a
shareholders’ meeting at which shareholders holding at least 50%+1 of the voting rights are present
or represented. Shareholders with preferential voting shares representing multiple votes may only
have one vote in this particular decision. The shareholders whose shares are affected by the delisting
and who did not support the decision to delist may request the company, to purchase their shares at a
price determined on the basis of the relevant Capital Market Act rules, within 60 days of the adoption
of the shareholders’ resolution to delist.

Ákos Fehérváry, József Vági and Balázs Bibók in the Budapest office are the most appropriate
contacts within Baker McKenzie for inquiries about public M&A in Hungary.
Ákos Fehérváry József Vági

Budapest Budapest
akos.fehervary@bakermckenzie.com jozsef.vagi@bakermckenzie.com
+36 1 302 3330 +36 1 302 3330
Balázs Bibók
Budapest
balazs.bibok@bakermckenzie.com
+36 1 302 3330

Indonesia
1 Overview
Indonesia is characterized by strong domestic consumption that has helped it to weather the global
economic slowdown. Indonesia’s capital markets authority, known as the Financial Services Authority
(Otoritas Jasa Keuangan or the “OJK”) (previously known as the Capital Market and Financial
Institutions Supervisory Agency (Badan Pengawas Pasar Modal dan Lembaga Keuangan or the
“Bapepam-LK”)), has introduced rules to strengthen its supervisory and enforcement capacity over
Indonesia’s capital markets and to promote sound and transparent capital markets. The OJK’s actions
in rearranging the regulatory framework could bolster the investment climate, particularly in the capital
markets sector.

Indonesia’s jurisprudence is based on the European civil law system. Ongoing regulatory changes
mean that careful consideration is required of the issues that arise in mergers and acquisitions.
Indonesian law is constantly changing and many provisions in laws, are not always clear. In addition,
there will most likely be amendments to existing laws and regulations or new laws and regulations in
the near future.
2.1 Practice and regulatory procedure

The practices, procedures and policies of the relevant Indonesian government agencies, including the
Ministry of Law and Human Rights, Bank Indonesia, the OJK and the Capital Investment Coordination
Board (Badan Koordinasi Penanaman Modal or the “BKPM”) are as important in consummating a
transaction as the Indonesian laws governing M&A.
(a) Company Law and M&A regulations
The current Company Law was enacted in July 2007 and sets out a statutory framework for the
combination of businesses conducted through limited liability companies. The Company Law
promotes fair competition and the protection of minority shareholders in particular. It also considers
the interests of the company, its employees and society.
(b) Capital Markets Law
Where a merger or acquisition proposal involves a public company, the companies involved are also
required to comply with the general requirements of Law No. 8 of 1995 on Capital Markets (the
“Capital Markets Law”) and the regulations of the OJK.
The OJK issues new regulations on a regular basis as the capital market sector continues to mature.
The regulations can be accessed through the OJK’s website at http://www.ojk.go.id.
Since 31 December 2012, the functions, duties, and authorities of Bapepam-LK have been assumed
by the OJK. Existing laws and regulations relating to public companies and the capital markets remain
valid as long as they do not conflict with or have not been replaced by the regulations issued by the
OJK.
(c) Other laws
For M&A involving certain sectors/industries, public companies are also required to comply with the
specific laws and regulations governing those sectors/industries, e.g., banking, insurance,
broadcasting and telecommunications.

2.2 Types of transactions
The Company Law succinctly defines and differentiates between the concepts of merger,
consolidation, spin-off and acquisition.
• A merger is a lawful act executed by one or more companies to merge with an existing
company(ies), which causes the dissolution of the merging company(ies) but the continuing
existence of the surviving company.
• A consolidation is a lawful act executed by two or more companies to fuse together, forming a
new company, followed by the dissolution of both (or all) of the consolidating companies.
• A spin-off is a lawful act whereby either:
o all of the assets and liabilities of a company are transferred by law to two or more
companies and the transferring company is dissolved by law; or
o a part of the assets and liabilities of a company are transferred by law to one or more
companies and the transferring company still maintains its existence.
• An acquisition is a lawful act executed by a legal entity in the form of a company or other
entity, or by an individual, to take over all or a majority of a company’s shares, whether
existing or newly issued, which may cause a change in the control of the company. The
Company Law does not define the meaning of “control” but it is reasonable to assume that the
term refers to the capacity to determine, directly or indirectly, in any way, the management or
policies of the company concerned.
Acquisitions that do not fulfil the criteria of size and control fall outside the acquisition
requirements and procedures set out in the Company Law. Where there is a change in control
through the issuance of new shares by a company, this will be considered a change in control
initiated by management.
2.3 Public company considerations

Where one or more public companies are involved in a merger, consolidation, spin-off, acquisition or
other corporate action, then in addition to complying with the Company Law, the Investment Law and
other relevant laws, the more extensive corporate and disclosure requirements of the Capital Markets
Law must be followed. The regulations issued by the OJK and the Indonesia Stock Exchange (the
“IDX”) to regulate the merger, consolidation, spin-off or acquisition of public companies also need to
be followed.
There will be circumstances where the Capital Markets Law is not entirely clear, and thus further
case-by-case clarification or confirmation with the OJK would be required.
Apart from the normal takeover route, there are other avenues through which investors can acquire a
shareholding, including:
• acquisition of a shareholding through a rights issue;
• acquisition of a shareholding through a private placement; or
• acquisition of a shareholding through a debt-to-equity swap

As discussed above, public companies are regulated by the OJK (in addition to public companies, the
OJK also supervises the bank and non-bank financial institutions sectors). If public companies are
BKPM-approved investment companies, they will also fall under the jurisdiction of the BKPM.

Unless specifically provided under separate regulations, there are, in theory, no limitations on the
percentage of shares that can be held by foreigners in public companies as “indirect or portfolio
investment”. There is no specific definition of “indirect or portfolio investment”, but the understanding
is that this is a “non-controlling” investment. The extent of a shareholding will depend on issues such
as whether there is a larger Indonesian single shareholder and whether the foreign shareholder can
control the public company. Detailed advice based on the latest market practice and policy is required.
Please note that in certain sectors, such as retail and broadcasting, the regulations are contradictory,
giving rise to some uncertainty, and thus specific advice should be obtained.

3.1 Shareholding in listed companies
The following table describes the spectrum of “control” of public companies in Indonesia that investors
should consider:
Shareholding Key rights under the Company Law (subject to stricter provisions in the
Ownership articles of association)
One share • The right to file a lawsuit against the company if the shareholder has
been harmed by actions of the company which it considers unfair
and with no reasonable grounds, as a result of resolutions of the
general meetings of shareholders, board of directors’ meetings
and/or board of commissioners’ meetings of the company;
• The right to request the company to purchase its shares at a fair

price if the shareholder disagrees with certain actions taken by the
company which cause losses to the company or the shareholder;
• The right to access and inspect the register of shareholders, special

register, minutes of general meetings of shareholders, circular
resolutions, financial documents and other documents of the
company; and
• The right to request the dissolution of the company on the grounds

that it is impossible to continue the company’s operations.
At least 10% of the • The right to request that a general meeting of shareholders be
issued shares with convened;
voting rights
• The right to file a lawsuit on behalf of the company against the
board of directors, the board of commissioners, a member of the
board of directors or a member of the board of commissioners; and
• The right to request that an examination be conducted into the

company if there is “reason to suspect” that the company has
committed an unlawful act which is detrimental to the shareholders
or to third parties, or that the board of directors or the board of
commissioners of the company have committed unlawful acts that
are detrimental to the company, the shareholders or third parties.
At least more than • The right to appoint members of the board of directors and the
50% of the issued board of commissioners; and
shares with voting
• The right to approve an increase of paid up and issued capital.
rights

Shareholding Key rights under the Company Law (subject to stricter provisions in the
Ownership articles of association)
At least 66.7% of • The right to approve amendments to the articles of association of

the issued shares the company;
with voting rights
• The right to approve an increase of the authorized capital; and
• The right to approve a buyback or repurchase of shares and a

reduction of capital of the company.
At least 75% of the • The right to approve the submission of a bankruptcy petition to the
issued shares with court;
voting rights
• The right to approve the dissolution of the company; and
• The right to approve the transfer or encumbrance of all or more than

one-half of the company’s assets in one accounting year, either in
one or in a series of transactions.
3.2 Purchase of minority stakes

If a share purchase does not result in a change in the control of a public company, the sale and
purchase process may be carried out in the regular, cash or negotiated markets on the IDX. The
parties who intend to sell and/or purchase shares should instruct brokers that are registered members
at the IDX to do so, whereby the settlement of the transfer will be done through the C-BEST System in
the Indonesian Central Securities Depository (Kustodian Sentral Efek Indonesia).
Under the Capital Markets Law and OJK Regulation No. 11/POJK.04/2017 on Reporting of Share
Ownership in Public Companies (“Regulation 11/2017”), with regard to the ownership and the
changes of ownership of shares in a public company (i) each director or commissioner of the public
company holding any shares, directly or indirectly, in that public company; or (ii) each individual,
company, joint venture, association or organized group that has direct or indirect ownership of a
minimum of 5% of the paid up capital in the public company (“Reporting Party”), must report to the
OJK no later than 10 calendar days after the transaction date. Please note that there is no
shareholding threshold for the directors and commissioners. Consequently, even if a director or
commissioner only owns 1% shares in the public company, the obligation to make a disclosure under
Regulation 11/2017 will apply. A report must also be submitted after there is a change of at least 0.5%
of the paid up capital in the Reporting Party’s share ownership of the public company. Regulation
11/2017 allows the foregoing reporting to be made by a proxy. In such a case, the reporting must be
done by the proxy within five days of the date on which the transaction takes place.
Regulation 11/2017 provides a template to report shareholdings to the OJK. The report must include
the following information:
• Name, address and nationality of the Reporting Party
• Name of the public company whose shares are owned by the Reporting Party
• Number and percentage of shares, both before and after the transaction
• Number of shares purchased or sold
• Sale or purchase price
• Date of transaction

• Purpose of transaction
• Status of ownership, i.e., direct or indirect
Under Regulation 11/2017 and based on our discussions with officials of the OJK on a no-name
basis, if a direct/registered shareholder is not the ultimate beneficial owner of the shares, both the
direct/registered shareholder and the ultimate beneficial owner of the shares must now submit reports
to the OJK. The submission of the report by the registered owner will not eliminate the obligation of
the ultimate beneficial owner to submit its report and vice versa. In addition, if the ultimate beneficial
owner holds the shares through various layers of entities, each entity must also submit reports to the
OJK even though all of these reports are duplicative as they disclose the same share ownership.
3.3 Insider trading

Indonesian insider trading regulations are contained in Articles 95 to 99 of the Capital Markets Law
and are quite restrictive. Generally, Indonesian insider trading regulations provide that individuals who
obtain insider information due to their positions or professions, or due to business relationships with a
public company, are considered to be insiders for a period of six months after the relationship ceases.
“Insider information” means any material information of a price-sensitive nature that an insider has
and that is not yet available to the public.
Insiders in possession of insider information are prohibited from buying or selling securities of the
public company, or of other companies engaged in transactions with the public company. The
following individuals will be considered as insiders with respect to insider trading:
• Commissioners, directors or employees of a public company.
• Principal shareholder(s) of a public company (shareholders directly or indirectly holding 20%

shares of the public company).
• Individuals who, due to their position, profession or business relationship with a listed or
public company, are able to obtain inside information.
• Parties who, within the six months before the relevant date, fell into one of the above
categories.
4.1 Triggering a “Takeover”
Under OJK Regulation No. 9/POJK.04/2018 dated 27 July 2018 on Takeovers of Public Companies,
(“Regulation 9/2018”), a “takeover” of a public company is defined as an action directly or indirectly
causing changes to the controller(s) of the public company. The controller of a public company is
defined as the party(ies) that:
• owns more than 50% of the total issued and paid up share capital; or
• has the ability to directly or indirectly determine, in any manner whatsoever, the management
and/or the policies of the public company.
Regulation 9/2018 provides examples of documents or information evidencing control of the

management of public companies. These documents or information include:
• an agreement between the shareholders that provides a shareholder with more than 50% of
the voting rights in the public company

• a document that provides, or information that shows, the authority of a shareholder to regulate
the financial and operational policies of the public company based on the articles of
association or an agreement
• a document that provides, or information that shows, the authority of a shareholder to appoint
or dismiss most members of the Board of Directors and the Board of Commissioners
• a document that provides, or information that shows, that a shareholder has the majority
voting rights in the Board of Directors and Board of Commissioners meetings, and hence
controls the public company
• a document that provides, or information that shows, other authority that indicates control over
the public company
Any actions that result in a change in the controller(s) of a public company will trigger a takeover. An
increase in an investor’s shareholding, where the investor is already considered to be in control of a
public company, does not constitute a change in control requiring a tender offer to be made (please
see below).
4.2 Takeover to be followed by mandatory tender offer (an “MTO”)

Unless the takeover falls under an exemption, it must be followed by an MTO for all of the remaining
shares, except for the:
• shares owned by the selling shareholder(s);
• shares owned by another party(ies) that the acquirer has offered to purchase under the same
terms and conditions;
• shares owned by other parties that are also undertaking a (different) tender offer on the
shares of the target company (a competing tender offer);
• shares owned by the principal shareholder(s), i.e., shareholders directly or indirectly holding
20% shares of the public company; and
• shares owned by other controlling shareholders of the target company.
The MTO process must start within two working days after the takeover and must be implemented in
accordance with Regulation 9/2018. The timeline for an MTO is as illustrated below.
4.3 Requirement to divest

Under Regulation 9/2018, if, as the result of the MTO being made after the takeover, the new
controller owns more than 80% of the total paid-up capital of the target company, the new controller
must, within two years after the completion of the MTO, transfer some of its shares to the public so
that at least 20% of the total paid-up capital of the target company are owned by the public.
Regulation 9/2018 also stipulates that if, as a result of the takeover, the new controller owns more
than 80% of the total paid-up capital of the target company, the new controller must, within two years
after the completion of the MTO, transfer to the public at least the same amount of shares as it
purchased during the MTO so that these shares are owned by the public.
The distinction between these two scenarios is that, in the first, the new controller does not obtain
more than 80% in the initial takeover. In the latter scenario, the new controller does obtain more than
80% in the initial takeover.

4.4 Voluntary tender offers

A tender offer could be made without acquiring an initial controlling stake in a public company. Under
OJK Regulation No. 54/POJK.04/2015 on Voluntary Tender Offers, a voluntary tender offer (“VTO”) is
defined as an offer made through the mass media to acquire equity securities through the purchase or
exchange of other securities. Aside for acquiring shares, this VTO provision is also relevant for a “go
private” process, which is discussed below.
5 Timeline
The following is a typical indicative timeline for a takeover of a public company if an MTO is triggered.
No. Actions Indicative Timing
1. Closing of the takeover – Causes change of control in the D Day

public company.
2. Takeover announcement - The new controller (the acquirer) D + 1 Business Day

announces the takeover in at least one Indonesian daily (“BD”)
newspaper with national circulation (or, if the new controller is
also a public company, the IDX’s website) and submits to the
OJK information which contains:
• the number of acquired shares, price per share, the
total purchase price, name of the shareholders from
whom shares are being acquired, if the shares are
acquired from specific shareholder(s)/off-market, and
the new controller’s total ownership;
• the details of the new controller, including name,

address, phone number, email, line of business, board
compositions, capital structure and the line of business
(if the new controller is a legal entity);
• the purpose of the takeover (i.e., the purpose of

controlling the target company);
• a statement that the new controller is an Organized

Group, if applicable;
• the beneficial owner of the party who conducted the

takeover, if such party is not the beneficial owner;
• the affiliation between the controlling shareholder and

the target company, if applicable; and
• the details regarding the approval from the relevant

authority, if applicable.
3. Request to undertake the MTO - The new controller (the D + 3 BD

acquirer) submits cover letter, the text of the announcement of
the disclosure of information about the MTO, including the
necessary supporting documents, to the OJK and the target
company.
The text announcement should contain at least the following
information:

• background of the takeover
• information on the shares, covering:
o description of the number and percentage of

the acquired shares;
o the number and percentage of the target

company’s shares which are owned, directly
or indirectly, by the new controller, including
options to purchase or the right to obtain
dividends or any other benefits and also the
power to use the voting rights in the target
company’s general meetings, name of the
shareholders from whom shares are being
acquired (if the shares are acquired from
specific shareholder(s)/off-market), the
takeover price, total takeover value and date
of the takeover
• information on the new controller, covering:
o if the takeover is conducted by an individual,

the name, address, nationality and affiliation
relationship with the target company (if any)
o if the takeover is conducted by a party other

than an individual, the establishment date,
address, telephone number, email, business
activity, capital structure, composition of the
board of directors and board of
commissioners, composition of the
shareholders, beneficial owner, affiliation
relationship with the target company (if any)
and the explanation regarding the approval
and requirements from the relevant authority
(if any)
• details of the target company covering the name,

address, telephone number, email and business
activity
• the agreements or activities between the principal

shareholder or the existing controller and the new
controller that have material impact, if any
• terms and conditions of the MTO, covering:
o the purchase price along with the explanation

on how it is calculated
o the MTO period
o the payment terms


o the purchase mechanism
o the explanation regarding the approval and

requirements determined by the Government
which must be satisfied with respect to the
MTO, if any
• a list of names and addresses of institutions and/or

capital market supporting professions that are involved
in the MTO
• other material information:
o the details on the law suit regarding the

takeover, if any
o the statement that the new controller has

sufficient funds to complete the MTO and
information on the source of such funds
o the development plan for the target company
o any other material information so that the

disclosure of the information on the MTO is
not misleading
4. OJK approval – The OJK approves the request of the new X

controller (the acquirer) to announce and commence the MTO.
Note:
• During the assessment by OJK, the new controller (the
acquirer) must provide any documents/information
requested by the OJK within five business days.
• The prevailing regulations do not regulate how long

the OJK has to make comments on the disclosure of
information on the MTO.
5. MTO announcement – The new controller (the acquirer) X + 2 BD = A

announces the disclosure of information on the MTO in a daily
newspaper with national circulation (or the IDX’s website1).
The MTO announcement must include the same information
as the text announcement described in row 3 above.
6. Commencement of the MTO – The MTO must start at the A + 1 Calendar Day
latest one day after the MTO announcement. (“CD”)
7. MTO period – The MTO must be open for a fixed period of 30 A + 31 CD

days.
8. Settlement period – The MTO settlement must be completed A + 43 CD = S

within 12 days after the end of the MTO period at the latest.
1 This can only be done if the new controller is also a public company.

9. Report to the OJK – The new controller (the acquirer) reports S + 5 BD

the result of the MTO to the OJK after the settlement is
completed.

Set out below is an overview of the main steps for a mandatory public takeover offer in Indonesia.
Mandatory public takeover offer (indicative timeline)
Start
process A - 1 BD A Day A + 2 BD X Day X + 2 BD Day 1 Day 31 Day 43 Day 48
Closing of takeover Buyer announces Buyer submits OJK approved Buyer announces Offer Offer period Completion of Buyer reports result
causing change of takeover in national request to buyer’s request to mandatory offer in commences (at closes (must be settlement (within of the offer to OJK
control in the public newspaper and files commence commence national the latest 1 day open for 30 days) 12 days after the (no later than 5
company mandatory offer. newspaper. after the
information with mandatory takeover end of the offer business days after
Buyer must Includes material announcement)
FSA (OJK) offer to OJK and period) the settlement)
including number of target. Includes provide information (e.g.
acquired shares, supporting information identity of buyer,
details of new documents (e.g. requested by OJK information on
owner and purpose letter of sufficiency within 5 business target etc.)
of takeover of funds) days
Buyer may voluntarily 1 calendar day 30 calendar days 12 calendar days 5 business days
announce information
on the takeover
negotiations in
national newspaper

6 Takeover Tactics
While takeovers through a VTO are possible, they are not common in Indonesia since Indonesian
public companies generally have a controlling shareholder (who controls the majority of the shares
and may not be willing to sell their shares in the VTO). The more common takeover process would be
to negotiate directly with the existing controlling shareholders to acquire the controlling stake in the
public company. Unless exempted, these would then be followed by an MTO for all the remaining
shares (as described in 4.2 above). A new feature that was introduced under Regulation 9/2018 is
that no MTO is required where the control is acquired due to a takeover that has been disclosed in the
IPO prospectus of a public company, where the closing must be completed no later than one year
after the registration statement for the IPO becomes effective. Therefore, it is possible under
Regulation 9/2018 for an acquirer to avoid an MTO if the takeover is properly disclosed in the target
company’s IPO prospectus.

Takeover
Unlike many jurisdictions, in a public company takeover in Indonesia, the acquirer does not have a
right to squeeze-out or compulsorily acquire shares from minority shareholders.
8 Delisting
In Indonesia, there are no regulations on what is required in order to “go private”. As such,
consultation is required given that policy varies from time to time. The OJK, however, has a policy
requiring the following considerations to be addressed:
• A “go private” process must not contravene the public company’s articles of association and
the prevailing provisions of the Capital Markets Law. Going private can only be done following
a resolution of a general meeting of shareholders at which only independent shareholders can
vote, i.e. the main shareholder seeking to take the public company private cannot vote.
• The process must not harm public investors, particularly with respect to determining the price.
The share purchase/buyback process must be smooth and emphasis must be placed on the
public interest.
• In general, there cannot be more than 50 shareholders after going private but the OJK may
have discretion to increase this. In a recent example, the OJK agreed to increase the
threshold to 300 shareholders.
• Going private also includes a delisting from the IDX. In order to go private, the voluntary
delisting rules of the IDX, e.g. requiring the shareholders’ approval and tender offer, in
addition to the OJK’s policy, must be complied with.
• The result of the general meeting of shareholders resolving to go private must be reported to
the OJK and announced to the public at the latest at the end of the second working day after
the general meeting of shareholders approves the “go private” process, under, among other
things, OJK Regulation No. 31/POJK.04/2015 on Disclosure of Material Information or Facts
by Issuers or Public Companies.


Indah N Respati and Iqbal Darmawan in the Jakarta office are the most appropriate contacts within
Hadiputranto, Hadinoto & Partners* for inquiries about public M&A in Indonesia.
Indah N Respati Iqbal Darmawan

Jakarta Jakarta
indah.n.respati@bakernet.com iqbal.darmawan@bakernet.com
+62 21 2960 85124 +62 21 2960 8567
*Hadiputranto, Hadinoto & Partners is a member of Baker & McKenzie International, a Swiss Verein.

Italy
1 Overview
The Italian takeover market is well established and developed, with a strong regulatory framework
built around EU legislation. While levels of activity have not yet returned to those seen prior to the
global financial crisis, the market remains active, with 14 takeover bids launched and completed in
2019 (out of which, 6 on voluntary basis and 8 on a mandatory basis) for a total value of EUR 864.1
million (source: Borsa Italiana S.p.A.).

The main rules and principles of Italian law relating to public takeover bids can be found in:
• Legislative Decree No. 58, dated 24 February 1998, as amended and supplemented from
time to time (the Italian Financial Act – the “IFA”), Sections 101-bis - 112; and
• Resolution of the Italian Securities and Exchange Commission (Commissione Nazionale per
le Società e la Borsa or “CONSOB”) No. 11971, dated 14 May 1999, implementing the IFA,
as amended and supplemented from time to time (“CONSOB Resolution No. 11971/99”),
Sections 35 -50-quinquies.
The main body of the Italian takeover legislation is based on Directive 2004/25/EC of the European
Parliament and of the Council of 21 April 2004 on takeover bids (the “Takeover Directive”). This
the European Economic Area (EEA). Having said this, the Takeover Directive still allows Member
bid (such as the percentage of securities that, upon acquisition, triggers a mandatory public takeover
bid on the remaining securities of the target company and restrictions to the power of the board of
directors of the target company in connection with the takeover bid). Accordingly, there are still
significant differences in the national rules of the respective Member States of the EEA regarding

Italy, there are a number of additional rules and principles that are to be taken into account when
preparing or conducting a public takeover bid, including, most notably:
(a) the rules relating to the disclosure of significant shareholdings in listed companies (the so-
called “transparency rules”). These rules are based on Directive 2004/109/EC of the European
requirements in relation to information on issuers having securities admitted to trading on a
regulated market, as amended by Directive 2013/50/EU of the European Parliament and of
the Council of 22 October 2013, and supplemented by the Commission Delegated Regulation
(EU) 2015/761 of 17 December 2014, and related EU legislation. For further information, see
under 3.4 below;
(b) the rules relating to insider trading and market manipulation (the so-called “market abuse
rules”). These rules are mainly derived from Regulation (EU) No. 596/2014 of the European
Parliament and of the Council of 16 April 2014 on market abuse (the “Market Abuse
Regulation”) as well as Directive 2014/57/ EU of the European Parliament and of the Council
of 16 April 2014 on criminal sanctions for market abuse (the “Market Abuse Directive II”),
and related EU legislation. For further information, see under 6.3 below;

(c) the rules relating to the public offer of securities and the admission to trading of securities on a
regulated market. These rules would be relevant in circumstances where the consideration
offered in the public takeover bid consists of securities. These rules are mainly derived from
Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017
and related EU legislation;
(d) the general rules on the supervision and control of the financial markets; and
(e) the rules and regulations regarding merger control. These rules and regulations are not further
discussed herein.
It is also worth mentioning that the Law Decree No. 91 dated 24 June 2014 (the “2014
Competitiveness Decree”) introduced, among other things, the option for Italian listed companies to
grant increased voting rights (up to two votes per share) to shares that are kept for a minimum holding
period of at least 24 consecutive months (the “Increased Voting Rights Shares”). In the context of
takeover bids, if Increased Voting Rights Shares are outstanding, then the thresholds referred in 3.1
below must be read as referring to the aggregate number of voting rights attaching to the shares held
by the relevant shareholder (rather than to the mere percentage of the voting stock held). In other
words, if Increased Voting Rights Shares are outstanding, the profile to be looked at for the purposes
of takeover regulation is given by the actual voting powers exercisable by the shareholder and not by
the mere arithmetic participation to the share capital of a listed company.
2.3 Supervision and enforcement by CONSOB

Public takeover bids are subject to the supervision and control of CONSOB, which is the securities
regulator in Italy.
CONSOB has significant powers aimed at ensuring compliance with the public takeover bid rules,
including the power to impose administrative fines. In case of non-compliance, criminal penalties may
be imposed by the courts.
CONSOB also has the power (in certain cases) to grant exemptions from the rules that would

The following general principles apply to public takeover bids in Italy. These rules are based on the
Takeover Directive:
(a) all holders of the securities of the same class of the target company must be afforded
(b) the holders of the securities of the target company must be given sufficient time and
information to enable them to make a properly informed decision on the bid. In particular, the
board of directors of the target company must issue a statement where it gives its views on
the adequacy of the consideration offered and the effects of a successful completion of the
takeover on (i) the interests of the target company; (ii) employment and conditions of
employment at target company level; and (iii) continued operations at existing sites;
(c) a false market must not be created in the securities of the target company, the bidder or any
other company interested in the bid in such a way that the rise or fall of the prices of the
securities becomes artificial and the normal functioning of the markets is distorted; and
(d) the bidder can announce the bid only after ensuring that it will be able to fulfil in full its
obligations to pay the relevant consideration (either in cash or in kind).

No specific reforms to the takeover regulation in Italy have been recently proposed nor are expected.

In general terms, foreign investments are not subject to specific restrictions in Italy. It should be borne
in mind, however, that the Italian government has “special powers”, which give the Italian government
the ability to veto or impose conditions on a transaction involving a change of control over companies
that hold strategic assets in the following sectors: defense and homeland security, energy,
transportation, and telecommunications.
The Italian government may exercise its special powers if it determines that the transaction entails a
threat of a serious harm to the essential interests of national defense and homeland security, and to
the operation of networks and plants, and to the continuity of supplies in the energy, transportation
and communications sectors.
The prior authorization of the regulators is required in certain sectors such as insurance, banking and
aviation.

levels of shareholding held in the voting stock of an Italian listed company:
Shareholding Rights
One share • The right to receive a proportional part of the net profits of the
company, if any, and of the net assets of the company upon
winding-up.
• The right to attend and vote at shareholders’ meetings.

share-holders’ meetings.
• The right to submit questions (either orally at the meeting or in

writing prior to the meeting) to the directors and statutory auditors
at shareholders’ meetings.
• The right to petition for voidance of resolutions adopted by the

shareholders’ meetings where (i) the meeting has not been duly
called, (ii) the minutes of the meeting have not been drafted, and
(iii) the content of the resolution is impossible or illegal.
• The right to lodge a complaint with the statutory auditors.
• The right to examine the shareholders’ ledger and the book of the
minutes of shareholders’ meetings.
0.1% • The right to challenge a shareholders’ meeting resolution which

does not comply with the law or with the articles of association of
the company, provided that – at the concerned meeting – the
shareholders owning at least 0.1% of the voting stock were
absent or expressed a negative vote or abstained, unless the
articles of association set forth a lower percentage or exclude

Shareholding Rights
altogether the applicability of any percentage requirement for the
purpose of said challenge.
• The right to challenge a shareholders’ meeting resolution

approving the financial statements on the grounds that said
financial statements fail to comply with the provisions governing
the preparation thereof, in presence of a negative opinion, a
disclaimer or a qualified opinion expressing significant doubts on
the business continuity of the financial statements, issued by the
independent auditors.
2% The right to lodge a complaint concerning the company’s management

with the statutory auditors. In such case, the statutory auditors must
promptly investigate the matter and report to the shareholders’ meeting
or, in case of serious mismanagement, promptly call the shareholders’
meeting for urgent actions (unless the articles of association set forth a
lower percentage).
2.5% • The right to request that the agenda of the shareholders’ meeting
be supplemented and to submit proposals for resolution in
relation to items already included in the agenda of the
• The right to sue the directors and/or the statutory auditors for
damages caused to the company (unless the articles of
association set forth a lower percentage).
• The right to submit a list of potentials for the appointment of the

directors and the statutory auditors (unless the articles of
association set forth a lower percentage).
5% • The right to request that (i) the board of directors, or (ii) in case of
nonfulfillment by the board, the statutory auditors, or (iii) in case
of non- fulfilment by the statutory auditors, the court (petitioned
ad hoc), promptly call a shareholders’ meeting (unless the
articles of association set forth a lower percentage).
• The right to petition the court to take immediate action against

directors if there is well grounded suspicion of serious
mismanagement which may harm the company or one or more of
its subsidiaries (unless the articles of association set forth a lower
percentage).
• The right to oppose to the shareholders’ meeting resolution

aimed at (i) releasing directors and/ the statutory auditors from
their liabilities vis-à-vis the company, or (ii) settling a claim of the
company against the directors and/or statutory auditors, where a
proceeding has been initiated by the shareholders on behalf of
the company or by the company itself against the directors and/or
the statutory auditors (unless the articles of association set forth
a lower percentage).
• The right to challenge the resolution of a shareholders’ meeting

approving the financial statements on the grounds that said

Shareholding Rights
financial statements fail to comply with the provisions governing
the preparation thereof, in presence of a positive opinion on said
financial statements issued by the independent auditors
20% The right to pass a resolution to sue directors and/or statutory auditors for
damages caused to the company automatically causing the removal of
the relevant directors and/or statutory auditors from their offices.
33.33% (i.e., one-third The right to claim to be not sufficiently informed about the items on the
of the corporate agenda and, accordingly, the right to request that the meeting be
capital) adjourned with respect to such items for up to five days.
More than 50% The right to approve resolutions concerning the following matters in the
ordinary shareholders’ meeting:
• approval of the financial statements;
• appointment and removal of directors and determination of their

remuneration;
• appointment and removal of statutory auditors and determination

of their remuneration;
• appointment and removal of the external auditors;
• resolution on the liability of the directors and statutory auditors;

and
• any other matter attributed by law to the competence of the

ordinary shareholders’ meeting.
At least 66.6% The right to approve resolutions concerning the following matters in the
extraordinary shareholders’ meeting:
• amendments to the articles of association;
• appointment and replacement of the liquidators and

determination of powers granted to them; and
• any other matter attributed by law to the competence of the

extraordinary shareholders’ meeting.
95% The squeeze-out right (as defined under 7 below).

Italian law contains a number of rules that apply before a public takeover bid is announced. These
rules impose restrictions in relation to prior stake building by a bidder, announcements of a potential
takeover bid by a bidder or a target company, and prior due diligence by a potential bidder. The main
restrictions are summarized below. Some careful planning is therefore necessary if a potential bidder
or target company intends to start a process aimed at launching a public takeover bid.
3.3 Insider trading and market abuse

The basic legal framework regarding insider trading and market abuse under Italian law is set forth in the
Market Abuse Regulation and in the IFA and related regulation implementing such legislation.

With the above in mind, in principle, the rules on insider trading and market abuse remain applicable
before, during and after a public takeover bid, albeit that during a takeover bid additional disclosures
and restrictions apply in relation to trading in the securities of the target company. It should also be
noted that the rules on insider trading prevent a bidder that has inside information regarding a target
company (other than in relation to the actual takeover bid) from launching a takeover bid, unless the
bidder publicly discloses such inside information and also includes this in the offering document
(Documento di Offerta) concerning the bid.
With regard to the concept of “inside information” and for the purposes of the applicable disclosure
obligations, the Market Abuse Regulation provides for a definition thereof, whereby:
• “inside information” means information of a precise nature which has not been made public,
relating, directly or indirectly, to one or more issuers or to one or more financial instruments,
and which, if it were made public, would be likely to have a significant effect on the prices of
those financial instruments or on the price of related derivative financial instruments;
• information shall be deemed to be of a “precise nature” if it indicates a set of circumstances

which exists or which may reasonably be expected to come into existence, or an event which
has occurred or which may reasonably be expected to occur, where it is specific enough to
enable a conclusion to be drawn as to the possible effect of that set of circumstances or event
on the prices of the financial instruments or the related derivative financial instrument; and
• “information which, if it were made public, would be likely to have a significant effect on the
Usually, it is up to the management of a listed company to determine whether or not certain information
qualifies as “inside information”, which in certain circumstances, may prove to be a difficult exercise.

public takeover bid. Pursuant to these rules, if a potential bidder starts building up a stake in the target
company, it will be obliged to publicly disclose its stake when the voting rights attaching to its stake
pass the following thresholds: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50%, 66.6% and 90%.
The 2014 Competitiveness Decree also included a specific threshold of 5% for Italian listed
companies qualifying as small or medium-sized enterprises (“SMEs”). A listed company qualifies as
an SME when it shows (i) a turnover lower than EUR 300 million; or (ii) a market capitalization lower
than EUR 500 million.
In addition, Italian Law no. 172 of 4 December 2017, introduced an additional obligation in the event
that the stake exceeds the thresholds of 10%, 20% and 25%. In such cases, the party responsible for
the communication must disclose the business objectives it intends to pursue during the six months
following the acquisition of the relevant stake.
When determining whether a threshold has been passed, a potential bidder must also take into account
the voting securities held through nominees, fiduciaries or subsidiaries, respectively.

During a public takeover bid, the target company must continue to comply with the general rules
regarding disclosure and transparency, which include the obligation of the company to immediately
disclose to the public any inside information relating to itself, its securities and/or its subsidiaries, if
any. The facts surrounding the preparation of a public takeover bid may constitute inside information
and as such, be subject to disclosure. However, the board of the target company may delay the

disclosure if it believes that a disclosure would not be in the legitimate interest of the company. For
instance, this could be the case if the target’s board believes that an early disclosure would prejudice
the negotiations regarding a bid. However, a delay of the announcement is only permitted provided
that (i) an immediate disclosure is likely to prejudice the legitimate interests of the target company, (ii)
the delay of disclosure is not likely to mislead the public, and (iii) the target company is able to ensure
the confidentiality of that information.

The decision of a bidder to launch a voluntary public takeover bid (or the obligation of a bidder to
launch a mandatory public takeover) must be notified without delay to CONSOB by way of submission
of a notice (the “Initial Notice”). At the same time, the Initial Notice must be disclosed to the target
company and the public. No later than 20 days from the date of the Initial Notice, the bidder must file
with CONSOB an offering document (Documento di Offerta) for CONSOB’s approval and subsequent
publication. Should said deadline not be met, the offering document (Documento di Offerta) is declared
inadmissible by CONSOB and the bidder may not make a further bid on the same securities of the
target company for the following 12 months.

No put-up or shut-up rule applies in Italy. Nevertheless, if there are rumors or leaks that a (potential)
bidder intends (or may be required) to launch a public takeover bid – even though such (potential)
bidder has not yet publicly disclosed such intention (or requirement) – and the trading performance of
the securities involved is affected, CONSOB may request such (potential) bidder to disclose
information and documents in order to inform the general public.
3.8 Due diligence

Italian public takeover bid rules do not contain any specific rules regarding the conduct of pre-bid due
diligence on the target company. In general terms, such due diligence is accepted in the market and
also by CONSOB, although appropriate mechanisms must be put in place to avoid potential market
abuse and early disclosure implications. These include the use of strict confidentiality procedures and
data rooms.

For the purpose of the Italian takeover bid rules, the definition of persons acting “in concert” is set
forth in the applicable provisions of the IFA, which:
(a) provides a general definition of persons acting “in concert” as including persons who co-
operate on the basis of an agreement in order to (i) obtain, maintain or strengthen the control
over a target company, or (ii) hinder the success of a takeover bid launched with respect to a
target company. This is regardless of whether such agreement is express or tacit, oral or
formalized in a written form, valid and binding or invalid and with no effect;
(b) provides for a set of non-rebuttable presumptions, whereby persons meeting certain factual
requirements and/or carrying out certain conduct are conclusively deemed to be acting in
concert. Such persons are:
(i) the parties to an agreement, even if void, which:
(A) concerns the exercise of voting rights in companies with securities listed on a
regulated market or in their parent companies;
(B) imposes consultation obligations prior to exercising voting rights in companies

with securities listed on a regulated market or in their parent companies;

(C) restricts the transfer of securities (or of financial instruments that entitle their
holders to buy or subscribe for the same securities) in companies with
securities listed on a regulated market or in their parent companies;
(D) provides for the purchase of securities (or of financial instruments that entitle
their holders to buy or subscribe for the same securities) in companies with
securities listed on a regulated market or in their parent companies; and
(E) has, as its purpose or effect, the exercise of a dominant influence (as defined
in Section 2359 of the Italian Civil Code) on companies with securities listed on
a regulated market or on their parent companies.
(ii) an entity, its parent company and its subsidiaries;
(iii) companies subject to joint control; and
(iv) a company and its directors or general managers.
(c) delegates to CONSOB the authority to identify certain factual circumstances whereby persons
are presumed to be acting in concert, unless they are able to provide evidence to the
contrary. More specifically, according to CONSOB Resolution No. 11971/99:
(i) a party, their spouse, cohabiting partner, persons related by consanguinity or affinity,
and direct relatives and relatives up to the second degree, and children of their
spouse or cohabiting partner; and/or
(ii) a party and their financial advisers for transactions relating to the issuer, where said
advisers (or companies belonging to their group) have purchased securities of the
issuer outside the scope of their trading activity (as ordinarily carried out and at arm’s
length) on their own behalf, after their appointment or during the month prior to such
appointment,
are presumed to be acting in concert unless they can prove the contrary.
The concept of persons acting in concert is very broad, and in practice issues may arise in determining
whether or not persons actually act in concert. This is especially relevant in relation to mandatory
takeover bids. If the conditions and/or presumptions referred to above are satisfied and one or more
persons in a group of persons acting in concert acquire voting securities, as a result of which the
aforesaid group in the aggregate would pass the relevant triggering threshold, all members of the
group will be jointly and severally liable to launch a mandatory takeover bid, even though the single
member does not individually pass the relevant triggering threshold.
4.1 Types of takeover bids
There are two main forms of takeover bids in Italy:
(a) a voluntary takeover bid, in which a bidder voluntarily makes an offer for all or part of the
outstanding voting securities issued by the target company; and
(b) a mandatory takeover bid, in which an investor is required to make an offer for the purchase
of all outstanding voting securities of a listed target company if:
(i) as a result of an acquisition of voting securities of a listed company, such investor

crosses – alone or acting in concert with others – a threshold of 30% of the voting
securities of such company (“30% Threshold”), which threshold is reduced to 25% if
such company does not qualify as an SME and no other person owns a greater

participation (“25% Reduced Threshold”). The articles of association of a listed
company that qualifies as an SME may vary the aforesaid 30% threshold to a different
percentage ranging from 25% to 40% of the voting securities (“SME Threshold”);
(ii) the investor, who already holds (A) more than the 30% Threshold of a listed company
or, in case the listed company qualifies as an SME company, the applicable SME
Threshold, but (B), in all cases, less than 50% of the voting securities of such listed
company, directly or indirectly acquires more than 5% of the outstanding voting
securities of such listed company over any 12 month period;
(iii) the investor crosses the 30% Threshold (or the 25% Reduced Takeover Threshold or
the applicable SME Takeover Threshold, as the case may be) by acquiring voting
securities of another company (whether listed or not), the main assets of which consist
of the voting securities held in the listed target company.
With regard to the obligation to launch a mandatory takeover bid for any violation of the restrictions to
acquire voting securities in the target company after the takeover bid period, see under 7.4 below.
Generally speaking, in the context of a mandatory takeover bid:
• the bidder must address its offer without distinction to all the holders of voting securities;
• the consideration is determined according to criteria set forth in the law; and
• the bid is unconditional.
On the contrary, in the context of a voluntary takeover bid:
• the bidder is free to make the takeover bid;
• the bidder is in principle free to determine, among other things, the quantity of the voting
securities it intends to purchase and the consideration it intends to pay; and
• the bidder may subject the offer to certain conditions precedent.
While voluntary and mandatory takeover bids share some common features, they also present some
differences.
In particular, with regard to the similarities, in both scenarios:
• the offer, once launched, is irrevocable;
• the bidder must offer the same consideration to all the holders of voting securities of the same
class;
• prior to launching the offer, the bidder must ensure that it can fulfil the obligation to pay the
overall consideration assuming full acceptance of the offer;
• the bidder must immediately submit the Initial Notice to CONSOB (concerning the decision to
launch a voluntary takeover bid or the obligation to launch a mandatory takeover bid). At the
same time, the bidder must publicly disclose such decision or obligation;
• the bidder must file an offering document (Documento di Offerta) concerning the bid with
CONSOB for the latter’s approval within 20 days following the date of the Initial Notice
referred to under the point above;
• the board of directors of the target company must issue a statement where it gives its views
on the adequacy of the consideration offered and the effects of a successful completion of the

takeover on (i) the interests of the target company; (ii) employment and conditions of
employment at target company level; and (iii) continued operations at existing sites;
• transparency and fair conduct rules, as set forth by CONSOB Resolution No. 11971/99, apply
from the Initial Notice to CONSOB until the date set for payment of the consideration;
• the “best price rule” applies, i.e., if during the offer period of a takeover bid, the bidder or any
persons acting in concert with it acquire, directly or indirectly, outside of the bid voting
securities that are the subject of the bid at a price higher than the offered price, the offered
price must be revised to reflect such higher price; and
• following either a voluntary takeover bid or a mandatory takeover bid, if the bidder ends up
holding at least 95% of the voting securities of the target company, the so-called “sell- out
right” and the so-called “squeeze-out right” arise in favor of the bidder and the remaining
shareholders of the target company, respectively (see under 7 below).
4.2 Differences between voluntary and mandatory takeover bids

The main differences between a voluntary and a mandatory takeover bid are summarized in the
following table:
Mandatory takeover bids Voluntary takeover

bids
Consideration The minimum price must not be lower than Determined by the
the highest price paid by the bidder (and any bidder, except when the
person acting in concert) for voting securities best price rule applies.
of the target company in the 12 month
period prior to the Initial Notice.
If no purchases of voting securities of the
target company were made in the aforesaid
12 month period, the price must not be lower
than the weighted average trading price for
the voting securities of the target company
during the 12 months prior to the Initial
Notice.
Exceptions to the foregoing are regulated by
CONSOB.
Conditions precedent The offer is unconditional (except only for The offer may be subject
statutory conditions, such as merger to certain conditions
clearance, statutory approvals, etc.) (such as a minimum
acceptance level, MAC
clauses relating to the
target, war clause,
financial covenants, non-
insolvency clauses, etc.),
but may not be subject
to conditions whose
occurrence is solely
within the bidder’s
discretion.

bids
Acceptance period Between 15 and 25 trading days (but may Between 15 and 40
be reopened) trading days (but may be
reopened).
Pro rata rule N/A If only a specified

number of voting
securities are to be
purchased, the bid
should provide that
tenders will be accepted
on a pro rata basis if the
number of voting
securities tendered
exceeds the number of
voting securities to be
purchased.
Amendments to the N/A Only those amendments

bid which result in better
terms and conditions of
the bid, i.e., a greater
consideration offered,
are permissible.
Reductions in the
quantity of voting
securities to be
purchased are not
permitted.
Competing bids N/A Permissible up to five

trading days before the
end of the acceptance
period of the prior
takeover bid.
Exemptions The main exemptions to the obligation to N/A

launch a mandatory takeover bid apply in
the following cases:
• an investor comes to hold more than
30% of the voting securities as a result
of a takeover bid addressed to all the
shareholders;
• another shareholder or other
shareholders jointly hold more than 50%
of the voting rights of the target;
• the 30% Threshold (or the 25%
Reduced Threshold, where applicable)
is exceeded:
o in connection with a recapitalization
of the target company (or other


bids
intervention aimed at strengthening
the target company’s equity) and the
target company is in a documented
financial distress;
o by intragroup transfers;
o by exercising pre-existing
subscription, conversion or pre-
emption rights;
o and the investor undertakes to
transfer voting securities to unrelated
parties or to reduce the voting rights
in excess within 6 months and not to
exercise the voting rights attaching
to the excess securities;
o as a consequence of mergers or
spin- offs approved by the
shareholders’ meeting without the
contrary vote of the majority of the
attending shareholders, different
from, among other things, the
shareholder or shareholders which
jointly or individually hold an
absolute or relative majority
shareholding that is over 10% (the
so called “whitewash mechanism”);
o as a result of inheritance or
donations; and
o as a result of a voluntary takeover
bid for at least 60% of the voting
securities of the target company (the
so-called “Pre-emptive Bid”),
provided that:
 the bidder (or persons acting in
concert with it) has not
purchased more than 1% of the
voting securities of the target
company in the 12 months prior
to or during the Pre-emptive Bid;
 the effectiveness of the Pre-
emptive Bid has been made
subject to the condition
precedent of an approval of
shareholders of the target
holding a majority of the relevant
securities (excluding the
shareholding held by the bidder,
(ii) the (absolute or relative)

bids
majority shareholder where its
shareholding exceeds 10%, and
(iii) by persons acting in concert
with the bidder) (the so-called
“whitewash mechanism”); and
 CONSOB grants the exemption
after verifying satisfaction of the
conditions above.
Consequences of a • Statutory suspension of the voting rights None

failure to launch the attached to the all securities held by the
bid bidder (and any persons acting in
concert with it) in the target company;
• the voting securities exceeding the
relevant thresholds must be disposed of
within 12 months or, alternatively,
CONSOB may request the bidder to
launch a mandatory takeover bid and
set the price thereof; and
• administrative fines comprised between
EUR 25,000 and the total amount
payable by the bidder or which would
have been payable by the bidder had
the takeover bid actually been
implemented.
5 Timeline
As a general rule, the takeover bid process for a voluntary public takeover bid is similar to the process
that applies to a mandatory public takeover bid, with certain exceptions. Such process – from the initial
stage of the offer until the end of the acceptance period – will usually require at least 3 months.
Statutory conditions (especially merger control proceedings and state aid notifications) may further
delay the process.
The table below contains an overview of the main steps of a typical voluntary public takeover bid
process under Italian law.
Step Timing
1. Preparatory stage: T0 - x days
• Preparation of the bid by the bidder (study, due diligence,

financing, and drafting of offering document (Documento di
Offerta).

Step Timing
2. Disclosure of the decision to launch a bid: T0

• Initial Notice to CONSOB.
• The bidder must publicly disclose the decision to launch a
voluntary takeover bid.
• The boards of the target and the bidder must inform the
representatives of their respective employees or, where there are
no such representatives, the employees themselves.
• The bidder must send CONSOB proof of cash confirmation, i.e., T0 + 19 days
that sufficient funding is in place for the bidder to fully satisfy its
payment obligations in relation to the offered price.
3. Launching of the bid: T0 + 20 days
• Filing of the offering document (Documento di Offerta) with

CONSOB. Should deadline not be met, the takeover bid
document shall be declared inadmissible and the bidder may not
make a further bid on the same financial products of the target
company in the 12 months thereafter.
4. CONSOB approval of the offering document (Documento di Offerta): T0 + 35 days
• CONSOB issues its approval to the offering document

(Documento di Offerta) if it believes that such document allows
the addressees of the bid to form an informed opinion on the bid.
Should CONSOB request additional information from the bidder,
the time limit to issue its approval is suspended until such
information is received.
• The bidder must provide CONSOB with the requested additional
information by the deadline set forth by CONSOB, in any event
not exceeding 15 days from the request.
5. Publication of the offering document (Documento di Offerta) after T0 + 35 days

approval of CONSOB:
• The final approved offering document (Documento di Offerta)
must be submitted to CONSOB and the target company,
physically and in electronic format.
• The boards of the target and the bidder must inform the
representatives of their respective employees or, where there are
no such representatives, the employees themselves.
6. Statement on the bid by the target board: T0 + 39 days
• The board of directors of the target company must issue a

statement in which it gives its views on the adequacy of the
consideration offered and the effects of a successful completion
of the takeover on: (i) the interests of the target company; (ii)
employment and conditions of employment at target company
level, and (iii) continued operations at existing sites. Once issued,
such statement shall be communicated to the representatives of

Step Timing
the company’s employees or, where there are no such
representatives, directly to the employees.
7. Commencement of the acceptance period: T0 + 40 days
• Duration: between 15 and 40 days for a voluntary takeover bid.

• The term of the acceptance period is agreed upon with Borsa
Italiana S.p.A. (the Italian market operator that organizes,
operates and manages the Italian stock exchange).
• For the purposes of correctly implementing the bid and investor
protection, after consulting with the bidder and Borsa Italiana
S.p.A., CONSOB may extend the term of the acceptance period,
more than once, up to a maximum of 55 days.
• In the event that a shareholders’ meeting is called for the
purposes of obtaining the shareholders’ authorization for the
adoption of anti-takeover defense mechanisms (see under 6.4
below), such meetings shall be held in the last 10 days of the
acceptance period. In such a case, the acceptance period will be
extended so that it will expire after 10 days following the
• Amendments to the bid may occur until the day before the end of
the acceptance period. In such a case, the acceptance period will
be extended for at least three days following the disclosure of the
relevant amendment to the prior bid.
8. Closure of the acceptance period: T0 + 80 days

• If “insider bids” are launched by: (i) shareholders of the target
company owning voting securities in excess of the 30%
Threshold (or the 25% Reduced Threshold, where applicable); (ii)
parties to a shareholder agreement owning in aggregate voting
securities in excess of the 30% Threshold (or the 25% Reduced
Threshold, where applicable); (iii) directors of the target company;
or (iv) persons acting in concert with the parties listed under
points (i), (ii) and (iii) above, within the day following the payment
date, the acceptance period can be re-opened for five days.
9. Publication of the final results T0 + 84 days
10. Payment of the consideration offered by the bidder: T0 + 85 days

• If the bidder acquired at least 90% or 95% of the voting securities
of the target company, a period of time between 15 and 25 days
(to be agreed upon with Borsa Italiana S.p.A.) will start for the
exercise of the sell-out and squeeze-out rights respectively (see
under 7 below).

Set out below is an overview of the main steps for a voluntary public takeover bid in Italy.

Start Day 0 Day 19 Day 20 Day 35 Day 39 Day 40 Day 80 Day 84
process
Disclosure of decision Bidder submits to Launch of bid by filing Target issues Start of acceptance End of acceptance Publication of
CONSOB approves the
to launch bid: CONSOB proof of offer document with offer document statement on period (between 15 period (re-opened for 5 results
sufficient funding to CONSOB adequacy of offer and and 40 days). days if insider bids are
• notify Italian SEC satisfy its payment Approved offer effects on target launched)
(CONSOB) obligations under the If late, offer document is document must be interests, employment
• publicly disclose bid declared inadmissible submitted to CONSOB and operations
decision and bidder may not bid and target. Target and
• inform employee (on the same target bidder must inform
reps/employees products) for 12 months employee
reps/employees
Acceptance period may be

If CONSOB requires
extended:
additional information,
time limit for approval is • by CONSOB (up to 55
suspended. Bidder must days)
provide information by • if a shareholders’
deadline set by CONSOB meeting is called
(must not exceed 15 (acceptance period will
days) expire after 10 days)
• if bid is amended (for at
least 3 days)

6 Takeover Tactics
An Italian company is obligated to immediately disclose to the public all “inside information” that
relates to it, including all material changes in information that has already been disclosed to the public
(see under 3.3 above).

Pending a voluntary takeover bid, any other bidder (including a so-called “white knight”) may launch a
competing bid – up to five trading days before the end of the acceptance period of the prior takeover
bid – provided that it gives immediate notice to CONSOB of the decision to launch said bid and
publicly discloses such decision, as well as files the offering document (Documento di Offerta)
concerning the bid, with CONSOB no later than 20 days from the prior notice (see under 3.6 above).

In principle, the rules on insider trading and market abuse remain applicable before, during and after a
public takeover bid, albeit that during a takeover bid additional disclosures and restrictions apply in
relation to trading in listed securities (see under 3.3 above).

Anti-takeover defense mechanisms in Italy are subject to the applicability of three main rules:
(a) Passivity rule (or board neutrality rule)
The board of directors of the target company must abstain from adopting any action or having the
company involved in any transaction that may adversely affect the achievement of the goals of a
pending takeover bid, unless such action and/or transaction has been approved by the ordinary or
extraordinary shareholders’ meeting respectively (depending on their respective areas of attributed
decision-making powers). However, the articles of association of the target company may allow the
board of directors to derogate, wholly or in part, from the passivity or board neutrality rule (opt-out
system).
The passivity (or board neutrality rule) applies from the date of the Initial Notice until the end of the bid
or until the bid expires. The mere search for other bids (“white knights”) is not subject to such rule.
The following table summarizes the main anti-takeover defense mechanisms that, if adopted or
engaged in pending a bid, must be authorized by the shareholders of the target company, unless the
articles of association state otherwise:
Purpose of the defense Mechanism
(a) To increase the overall consideration to • Capital increases.

be offered by the bidder
• Share buybacks.
• Conversion of non-voting securities

into voting securities.
(b) To significantly vary the business • Mergers, demergers, split-ups, spin-

characteristics of the target company offs, reorganizations.
• Sale of core assets (crown jewels).
• Purchase of non-core assets.

Purpose of the defense Mechanism

• Increase in indebtedness.
• Joint-ventures or acquisitions of other

companies that trigger antitrust
approvals.
(c) To prevent the successful conclusion • Launch of a takeover bid for the
of the bid securities of the bidder.
• Lawsuits against the bidder.
• Hostile advertising campaigns against

the bidder.
(b) The breakthrough rule
The articles of association of the target company may set forth the following provisions (opt-in
system):
(i) any limitations on the transfer of securities envisaged in the articles of association
shall have no effect on the bidder;
(ii) any limitations on voting rights envisaged in the articles of association or

shareholders’ agreements in cases where a shareholders’ meeting is called to
authorize the actions or transactions referred to above under the passivity or board
neutrality rule, shall have no effect on the bidder; and
(iii) any limitations on voting rights envisaged in the articles of association or

shareholders’ agreements or any special rights in relation to the appointment or
removal of the directors or members of the management body or supervisory board
envisaged in the articles of association shall have no effect at the first shareholders’
meeting of the target company following the end of the bid, called to amend the
articles of association or to remove or appoint the directors, if as a result of the
takeover bid the bidder comes into possession of at least 75% of the voting securities
The breakthrough rule applies for the entire duration of the acceptance period. As a result of the
foregoing, other common anti-takeover defense mechanisms (such as clauses in the articles of
associations aimed at hampering the renewal of the board by the bidder – including those providing for
(i) a staggered board, (ii) supermajorities in case of appointment or removal of directors, (iii) rights of
appointment and removal of directors specifically granted to holders of particular categories of
securities – or clauses in shareholders’ agreements aimed at restricting the right to vote or the
freedom to transfer the securities) are ineffective in the context of a takeover bid if the articles of
association of the target company so provide.
(c) The reciprocity rule
The passivity (or board neutrality) rule and the breakthrough rule shall not apply to takeover bids
launched by entities not subject to such rules or equivalent rules, or by a company or entity controlled
by such entities. In other words, should the bidder not be subject to the passivity or board neutrality rule
and/or the breakthrough rule (by operation of law or due to specific provisions of its articles of
association), any anti- takeover defense mechanism may be adopted by the board of directors of the
target company. However, under Italian law, the authority to adopt any such defensive measures by

the board of directors of the target company must be expressly granted by the shareholders’ meeting at
least 18 months prior to the date of the Initial Notice.

Takeover
7.1 Squeeze-out
The right of the bidder to squeeze-out, i.e., to force all the holders of the outstanding voting securities to
transfer such securities to it, arises if:
• following a takeover bid (either voluntary or mandatory) over the entire voting stock of the
target company (“Global Takeover Bid”), the bidder (alone or in concert with others) comes to
hold at least 95% of the voting securities of the target company; and
• the bidder has stated in the offering document (Documento di Offerta) the intention to avail
itself of such right.
The right to squeeze-out must be exercised within three months following the expiry of the acceptance
period of the bid, by paying the same consideration offered in the prior takeover bid. The transfer
becomes effective when notice of the deposit of the consideration with a bank is given to the target
company, which must then make the relevant entries in the shareholders’ ledger.
7.2 Sell-out
The right of the minority shareholders to sell-out, i.e., to demand the bidder to acquire their voting
securities, arises if:
• following a Global Takeover Vid, the bidder (alone or in concert with others) comes to hold at
least 95% of the voting securities of a listed company; or
• any investor comes to hold more than 90% of the voting securities of a listed company and
the same investor does not restore the minimum free float of the same voting securities
required to ensure their regular trading within a term of three months following the date on
which the 90% threshold has been crossed.
If any of the thresholds indicated above are reached solely as a result of a Global Takeover Bid and, in
the case of a voluntary Global Takeover Bid, the bidder has purchased in such bid at least 90% of the
voting securities, the price paid to such sell-out minority shareholders must be equal to the price
offered in the relevant takeover bid and take the same form as that of the takeover bid except that the
holder of the voting securities may request full payment in cash.
If the 90% threshold is not reached solely as a result of a Global Takeover Bid, the price is determined
by CONSOB, which will also take into account any previous bid price or the market price in the six
month period prior to (i) the Initial Notice, or (ii) the acquisition that caused the relevant threshold to be
crossed.
If the price is equal to the offer price of a prior takeover bid, the commitment of the bidder to acquire the
voting securities of the holders exercising their sell-out right may be effected by means of reopening
of the terms of the takeover bid. Conversely, where the price is determined by CONSOB, the bidder
must send CONSOB details for the determination of the price together with a statement by the target’s
independent auditors concerning the fairness of such details.

In the event a bid is intended to represent only the first step of a corporate reorganization process that
will be followed by a merger, the bidder must disclose – in the Initial Notice and in the offering

document (Documento di Offerta) – such intention to carry out a merger following the conclusion of the
bid. In doing this, the security holders of the target company can make a more informed decision as to
whether to accept the offer and tender their securities

During a term of 12 months following the end of a Pre-emptive Bid, where the bidder and the persons
acting in concert with the bidder have acquired 25% or more of the voting securities of the target
company (or more than 30% if the target is a SME), the bidder and the persons acting in concert with
the bidder may not acquire, directly or indirectly, more than 1% of the voting securities to which the
Pre-emptive Bid applied (including acquisitions made through forward contracts expiring at a date
later than 1 year). If such prohibition is violated, i.e., more than 1% of the voting securities are
purchased in the 12 months following completion of the Pre-emptive Bid, the bidder will be obliged to
launch a mandatory takeover bid for the outstanding voting securities of the target. The bidder will
also be obliged to launch a mandatory takeover bid over the outstanding voting securities of the target
in the event that the target company approves a merger or a spin- off in the 12 months following the
end of an Pre-emptive Bid.
8 Delisting
As a general rule, CONSOB may not oppose the delisting of an Italian company that is listed on an
Italian financial market organized, managed and operated by Borsa Italiana S.p.A., provided that
sufficient protection has been given to the investors in and the security holders of the company that is
going private. Traditional schemes through which a company may go private and be delisted include:
Global Takeover Bids without restoration of the minimum free float; mergers or spin-offs of a listed
company in a non- listed company; conversions of listed securities in non-listed securities; and
buybacks that reduce the free float below the minimum level. Shareholders who do not agree to the
delisting may exercise their withdrawal rights.

Pietro Bernasconi, Raffaele Giarda and Ludovico Rusconi are the most appropriate contacts within
Baker McKenzie for inquiries about public M&A in Italy.
Pietro Bernasconi Raffaele Giarda

Milan Rome
pietro.bernasconi@bakermckenzie.com raffaele.giarda@bakermckenzie.com
+39 02 7623 1494 +39 06 4406 3224
Ludovico Rusconi
Milan
ludovico.rusconi@bakermckenzie.com
+39 02 7623 1325

Japan
1 Overview
In recent years, the Japanese M&A market has continued to see a steady flow of public M&A
transactions by way of tender offers. A tender offer is a public offer to acquire securities in a listed
company from its shareholders. Most of the tender offers in Japan are conducted with the support of
the target’s board of directors and hostile offers are relatively uncommon in Japan. Having said that,
since 2019, we have seen a rise in the number of hostile offers. This recent trend may be partly
attributable to (i) the recent reform of the Corporate Governance Code (see 2.5 below), which has
placed more pressure on listed companies to maximize value for shareholders, and (ii) a change in
the perception of Japanese people against hostile offers, which were considered culturally taboo in
the past.
Acquisition of Japanese listed companies by foreign strategic and financial investors is not
uncommon. The rules for tender offers in Japan are well established but include very detailed and
complicated regulations. The bidder is strongly recommended to consult local legal counsel when
planning for an acquisition of a Japanese listed company.

The main rules of Japanese law relating to public tender offers can be found in the Financial
Instruments and Exchange Act (Act No. 25 of 13 April 1948, the “FIEA”). The FIEA underwent major
reform in 2006, introducing, among other things, stricter thresholds for mandatory offers, enhanced
disclosure and an offeror’s obligation to accept all offers tendered under certain conditions. The
tender offer rules were first introduced in 1971 and were modelled on the US tender offer rules. The
current tender offer rules in Japan still have some similarity to its equivalent under the US Securities
Exchange Act of 1934.
The FIEA is supplemented by the Order for Enforcement of the Financial Instruments and Exchange
Act (Cabinet Order No. 321 of 30 September 1965, the “Order”), and the Cabinet Office Ordinance for
Disclosure Required for Tender Offer for Share Certificates, etc. by Person Other than Issuer
(Ordinance of the Ministry of Finance No. 38 of 26 November 1990, the “Tender Offer Ordinance”),
which set forth detailed requirements for the implementation of tender offers.

While the aforementioned legislation contains the main legal framework for public tender offers in
Japan, there are a number of additional rules and principles that are to be taken into account when
preparing for or conducting a public tender offer, such as:
(a) The rules regarding rights of shareholders and the duties of the board of directors of the target
under the Companies Act (Act No. 86 of 26 July 2005, the “Companies Act”). The
shareholder’s right to demand disclosure of the target’s shareholder registry is important in
both friendly and hostile tender offers. The general framework regarding the duties of the
target’s board of directors applies when the target’s board expresses its opinion regarding the
bidder’s tender offer.
(b) The disclosure and delisting rules in the listing rules of the stock exchange on which the target
stock is listed. Please see 3.4 and 6.1 for the disclosure requirements and see 8 for the
delisting of the target’s stock.
(c) The insider trading, market manipulation and other unfair trade regulations under the FIEA.
Please see 3.5, 6.1, 6.2 and 6.3 below.

(d) The laws and regulations regarding foreign investment restrictions. Please see 2.4 below.
(e) The laws and regulations regarding merger control in Japan and overseas jurisdictions. These
rules are not discussed herein.
(f) The laws and regulations regarding securities transactions in foreign jurisdictions, such as the
US securities regulations. These may especially be relevant when the target has a substantial
number of foreign investors among its shareholders. Appropriate solutions have been
developed in practice to deal with specific situations in this aspect. These are not further
discussed herein.
2.3 Supervision and enforcement by the Financial Services Agency

Public tender offers are subject to the supervision and control of the Commissioner of the Financial
Services Agency. The Financial Services Agency is the principal securities regulator in Japan. In
practice, the Director-General of the Kanto Financial Bureau is delegated with certain supervisory
powers relating to public tender offers. The Securities and Exchange Surveillance Commission is in
charge of monitoring securities markets.
The Commissioner has a number of legal tools that it can use to supervise and enforce compliance
with the public tender offer rules, including administrative fines and administrative monetary penalties.
In addition, criminal penalties can be imposed by the courts in case of non-compliance.

Foreign investments are not restricted in Japan and are only subject to reporting upon completion (as
opposed to prior authorization), unless they relate to certain specific sensitive activities as defined in
the Foreign Exchange and Foreign Trade Act (Act No. 228 of 1 December 1949, the “FEFTA”). As a
general rule, the purchase by a foreign investor of 10% or more of the listed shares of a Japanese
public company conducting sensitive activities requires prior notice (“Prior Notice”) by the foreign
investor to the Ministry of Finance (the “MoF”) and other relevant ministers of Japan through the Bank
of Japan (“BoJ”).
In connection with this, three series of amendments have recently been made to the FEFTA and its
subordinate legislation. These came into force on 1 August 2019 (“August 2019 Amendment”), 26
October 2019 (“October 2019 Amendment”) and 8 May 2020 (“May 2020 Amendment”). The May
2020 Amendment is subject to a one month transition period until 7 June 2020. On the expiry of the
transition period, the new regime under the May 2020 Amendment (including the new 1% threshold
and new exemptions therefrom) will become fully applicable to foreign investors. The summary in
this section is current only as of 8 May 2020.
The August 2019 Amendment has expanded the scope of foreign investments in sensitive activities
for which a Prior Notice is required to include cybersecurity related activities, i.e., production of
devices/components related to information processing, production of software related to information
processing and services related to communication. As the result, the following are considered
sensitive activities:
• manufacture or mechanical repair of • vaccine manufacturing

weapons, aircraft, space exploration,
nuclear power and products related to • security guard
those industries
• agriculture, forestry and fisheries
• electricity, gas and heating supply
• petroleum
• telecommunications
• leather manufacturing

• broadcasting • air transportation
• water supply • marine transportation
• railway • cybersecurity related activities*
• passenger carriage
*Note that the May 2020 Amendment has slightly narrowed the scope of the cybersecurity related activities that fall within the sensitive activities.
In summary, software related services, data processing services and internet user support services provided by a company that (i) do not fall
within any of the “core sensitive activities” (as explained blow) and (ii) are conducted (A) for the benefit of its affiliates who do not conduct any of
the sensitive activities or (B) in conjunction with the company’s non-sensitive activities (without specific demand by a third party who conducts any
of the sensitive activities) have been excluded from the sensitive activities.
The October 2019 Amendment has expanded the definition of “inward investment” to include certain
activities such as (i) the acquisition of 10% or more of the total voting rights (as opposed to the total
shares) of a listed company, (ii) entry into an agreement for the joint exercise of 10% or more of the
total voting rights of a listed company, and (iii) an undertaking to exercise 10% or more of the total
voting rights of a listed company.
The May 2020 Amendment has, among other things, (i) lowered the aforementioned threshold of 10%
to 1% whilst certain new exemptions from the requirement of the Prior Notice have become available
to foreign investors, (ii) introduced the concept of “core sensitive activities” to which stricter restrictions
will be applicable (whether a certain sensitive activity is deemed as “core sensitive activity” or not is
determined based on the criteria set out in the relevant subordinate legislation concerning the May
2020 Amendment) and (iii) introduced a new system of “exemption certificate” available to foreign
sovereign wealth funds and public pension funds, the details of which are as follows:
(a) foreign financial institutions (including but not limited to security houses, banks, insurance
companies and investment management business operators) that hold a license or are
registered under Japanese laws, or are subject to foreign financial regulations and
supervisions by the competent foreign authorities equivalent to those under Japanese laws,
will be exempted from any requirement of the Prior Notice in regard to not only the new 1%
threshold but also the former 10% threshold;
(b) general foreign investors (other than sovereign wealth funds and public pension funds) will be
exempted from the requirement of the Prior Notice in regard to not only the new 1% threshold
but also the former 10% threshold in the event that such foreign investors (i) intend to acquire
shares in a listed company whose sensitive activities do not include any of the core sensitive
activities, (ii) are not and will not be appointed as a director or other statutory officer (and its
closely related person is not and will not be appointed to such positions), (iii) will not submit
proposals to shareholders meetings to transfer or dissolve the business that corresponds to
the company’s sensitive activities, and (iv) will not have access to non-public technical
information concerning the business that corresponds to the company’s sensitive activities
designating a specific deadline (such conditions from (ii) to (iv), the “Exemption Conditions”);
(c) general foreign investors (other than sovereign wealth funds and public pension funds) will be
exempted from the requirement of the Prior Notice in regard to the new 1% threshold only,
i.e., the former 10% threshold is still applicable, in the event that such foreign investors (i)
intend to acquire shares in a listed company whose sensitive activities include any of the core
sensitive activities, (ii) satisfy all of the Exemption Conditions, (iii) are not and will not be
involved in any committee that makes material business decisions concerning the company’s
core sensitive activities, and (iv) will not make any written proposal to the board of directors
requesting answers or certain actions concerning the company’s core sensitive activities
(such conditions (iii) and (iv), “Additional Conditions”);

(d) foreign sovereign wealth funds and public pension funds will be exempted from the
requirement of the Prior Notice in regard to not only the new 1% threshold but also the former
10% threshold in the event that such foreign sovereign wealth funds and public pension funds
(i) have obtained the exemption certificate from the MOF, (ii) intend to acquire shares in a
listed company whose sensitive activities do not include any of the core sensitive activities
and (iii) satisfy all of the Exemption Conditions; and
(e) foreign sovereign wealth funds and public pension funds will be exempted from the
requirement of the Prior Notice in regard to the new 1% threshold only, i.e., the former 10%
threshold is still applicable, in the event that such foreign sovereign wealth funds and public
pension funds (i) have obtained the exemption certificate from the MOF, (ii) intend to acquire
shares in a listed company whose sensitive activities include any of the core sensitive
activities, (iii) satisfy all of the Exemption Conditions and (iv) satisfy all of the Additional
Conditions.
The MoF will take into account the following factors when determining whether to grant the exemption
certificate to foreign sovereign wealth funds and public pension funds:
(a) whether forms of investments by such funds are purely for the purpose of obtaining
economical profits; and
(b) investment decisions of such funds are made independent from the foreign governments etc.
In connection with the distinction between “core sensitive activities” and other sensitive activities, on 8
May 2020, the MoF published a list of listed companies that categorizes (i) companies which engage
in any of the core sensitive activities, (ii) companies which engage in sensitive activities other than
core sensitive activities and (iii) companies which do not engage in any sensitive activities. The list is
available at: https://www.mof.go.jp/international_policy/gaitame_kawase/fdi/list.xlsx. It should be noted
that this list was prepared for reference purposes only, meaning it is a foreign investor’s own
responsibility to conduct the analysis on such categorization based on the criteria set out in the
relevant subordinate legislation concerning the May 2020 Amendment.
Where the Prior Notice is required, a foreign investor may not make an investment for a period of 30
days after the acceptance of the notice by the BoJ. In practice, this period is normally shortened to
two weeks if the proposed investment does not attract any concern about Japan’s national security,
public order or public safety. In addition, where such Prior Notice is required, the foreign investor must
file an execution report through the BoJ within 45 days after the acquisition occurs.
If the MoF and other relevant ministers of Japan require more time to assess whether the investment
is likely to impair national security, impede public order or compromise public safety, the waiting
period can be extended up to five months, during which period the ministries may order the foreign
investor to discontinue or modify the proposed investment.
Where no Prior Notice is required for an investment in a listed company engaging in sensitive
activities by virtue of any of the exemptions mentioned above, (i) a general foreign investor must file
an after-the-fact report through the BoJ within 45 days after its shareholding in the listed company
reaches each of the 1%, 3% and 10% thresholds (and any further acquisition after 10%) and (ii) a
foreign financial institution must file an after-the-fact report through the BoJ within 45 days after its
shareholding in the listed company reaches the 10% threshold (and any further acquisition after 10%).
For the sake of completeness, where no Prior Notice is required due to the reason that a listed
company does not engage in any sensitive activities, a foreign investor must file after-the-fact report
through the BoJ within 45 days after its shareholding in the listed company reaches 10% (and any
further acquisition after 10%).
Please note that the May 2020 Amendment has also expanded the definition of “inward investment” to
capture certain additional activities by a foreign investor that do not necessarily entail a purchase of

shares in a listed company. Such additional activities include consent to the proposal at the
shareholders meeting of a listed company engaging in any of the sensitive activities where a foreign
investor owns 1% or more of the total voting rights of that listed company (i) to appoint itself or its
“closely related person” as a director or other statutory officer of a listed company (regardless of
whether such proposal is made by itself or a third party) or (ii) to transfer or dissolve the business that
corresponds to the company’s sensitive activities (only if the proposal is made by such foreign
investor). This means that even after a foreign investor has legally acquired 1% or more of the shares
in a listed company in compliance with the requirement of the Prior Notice (or in reliance on available
exemptions therefrom), such foreign investor must file another Prior Notice before giving consent to
the aforementioned proposals.
Further, Japanese laws regulating specific business activities restrict investments by a foreign
investor or set the upper limit of holding ratio by foreign nationals. The major industries to which these
rules apply include the following:
• Airlines: Foreign investors are not permitted to acquire one-third or more of the voting rights
in Japanese airline companies.
• Broadcasting: Foreign investors are not permitted to acquire 20% or more of the voting rights
in general broadcasting and communications companies and other similar companies.
• Telecommunications: Foreign investors are not permitted to acquire one-third or more of the
voting rights of Nippon Telegraph and Telephone Corporation.
2.5 Corporate Governance Code

Japan introduced the Corporate Governance Code in 2015. While this code’s primary purpose is to
enhance the corporate governance of Japanese listed companies in relation to the general principle to
secure shareholder rights and effective equal treatment of shareholders, it does include a
supplemental principle that requires a listed company to clearly explain the position of the board on a
tender offer and not to take measures that would frustrate shareholders’ rights to sell their shares in
response to a tender offer. The Corporate Governance Code was amended in 2018, which was the
first amendment since 2015, with the aim to further promote sustainable growth and increase the
corporate value of Japanese listed companies over the mid to long-term.
2.6 Introduction of Fair M&A Guidelines

Japan introduced the Fair M&A Guidelines (“Fair M&A Guidelines”) in June 2019. The Fair M&A
Guidelines provide for the best practice to protect the interests of the general shareholders of a listed
target by requiring the target company and the acquirer (as applicable) to implement various
measures to ensure the fairness of the transaction (“Fairness Ensuring Measures”) where the acquirer
is (i) a controlling shareholder, or (ii) a management member of the target, which inherently entails the
risk that the best interests of the general shareholders are not fairly represented by the board of
directors of the target due to an existence of a structural conflict of interests. The Fair M&A Guidelines
also clarify that the best practice recommended by the Fair M&A Guidelines needs to be taken into
account when implementing a transaction where a similar structural conflict of interests exists.
The Fairness Ensuring Measures set out in the Fair M&A Guidelines include (i) establishment of an
independent advisory board to evaluate the transaction, (ii) obtaining expert advice from independent
external advisors, (iii) allowing (and not agreeing on the deal protection measure that may prevent)
market checks, (iv) setting a majority of minority condition in the proposal, (v) enhancing information
disclosure to the general shareholders and transparency of the process, and (vi) avoiding
coerciveness. The relevant target company and the acquirer are not necessarily required to
implement all of such Fairness Ensuring Measures and may elect to adopt all or some of such
measures by taking into account the degree of structural conflict of interests between the acquirer and
the general shareholders and any other specific circumstances.

2.7 Reforms
The tender offer regulations under the FIEA as well as the Order and the Tender Offer Ordinance are
subject to continuous changes by the Japanese government in order to secure fair and proper tender
offers in the Japanese market. The bidder should check the latest tender offer regulations before
making a tender offer and pay attention to upcoming changes that may affect its potential tender offer.

The table below provides an overview of the different rights and powers that are attached to different levels of
shareholding within a Japanese listed company:
Shareholding Rights
One share • The right to attend and vote at the general meeting of
shareholders.
• The right to ask questions and to make proposals at the general
meeting of shareholders.
• The right to commence an action for the rescission or nullity of a
resolution at the general meeting of shareholders.
• The right to commence an action on behalf of the company to
pursue the liabilities of directors and company auditors.
• The right to demand the suspension of unlawful or unfair
issuance of new shares, merger, stock swap or company split.
• The right to demand commencement of special liquidation
procedures.
• The right to demand inspection of financial statements.
1% • The right to propose agenda items at the general meeting of

shareholders.
• The right to request a court appointed inspector to investigate the
convening and resolution procedures for the general meeting of
shareholders.
3% • The right to demand an extraordinary general meeting of

shareholders.
• The right to demand to inspect the books, records and relevant
documents of the company.
• The right to request a court to review a majority decision not to
remove a director for wrong-doing.
• The right to demand court-supervised inspection of the
company’s operation and finances.
10% The right to request a court to review dissolution of the company for
unavoidable reasons.
One-third plus one Negative control – the ability to veto special resolutions at the general
share meeting of shareholders.

Shareholding Rights
Majority The ability to pass an ordinary resolution at the general meeting of

shareholders:
• to appoint and dismiss directors and company auditors;
• to approve financial statements (in cases where the board may
not approve them due to qualified audit reports or other reasons);
• to reduce the capital reserve; and
• to appoint an inspector to investigate documentation submitted to
the shareholders’ meetings.
Two-thirds The ability to pass a special resolution at the general meeting of

shareholders:
• to approve a merger, business transfer, stock swap or company
split;
• to amend the articles of incorporation;
• to reduce stated capital; and
• to dissolve the company.
90% • Special Controlling Relationship – the right to request other

shareholders and holders of stock options to sell their shares and
stock option.
• The ability to implement a merger, stock swap or company split
without approval of the general meeting of shareholders.
3.2 Methods of acquisition of listed companies

In addition to the public tender offers that are regulated in Japan, including exchange offers, there are
alternative methods of acquisition of listed companies in Japan. These include the acquisition of new
shares through third party allotment, merger (gappei) and stock swap (kabushiki koukan) under the
Companies Act. These alternative measures are also subject to the disclosure requirements under the
FIEA and the stock exchange rules, insider trading and market manipulation rules, merger control and
foreign securities regulations. The bidder should carefully consider the pros and cons, as well as the
suitability of these alternative measures under the specific circumstances concerned. These
alternative methods are not further discussed herein.
3.3 Disclosure of shareholding

Under the FIEA, an investor is required to file a substantial shareholding report within five business
days after it becomes a beneficial holder of more than 5% of the outstanding shares of a listed
company. Further, an amendment report to the substantial shareholding report is required to be filed
within five business days if the shareholding percentage in the listed company increases or decreases
by 1% or more. When determining whether or not a threshold has been passed, the shares held by
certain related persons or persons with whom the investor has entered into certain agreements, e.g.,
voting agreements, must also be counted towards the shareholding percentage.
3.4 Timely disclosures by the target company and the bidder

The target company and the bidder, if a listed company in Japan, must continue to comply with the
normal disclosure rules under the FIEA and the applicable stock exchange rules. Please see 5 for the

disclosure requirements in relation to public tender offers in Japan. If any disclosure is made by the
target prior to or during the tender offer period, the bidder should consider whether or not such
disclosure has any impact on the documentation for the tender offer. For instance, if the target files a
quarterly financial report containing material information, e.g., changes to the target’s directors, during
the tender offer period, an amendment to the tender offer registration statement may need to be filed
by the bidder. Furthermore, if the bidder is a listed company, its decision to launch a tender offer must
be announced in a timely manner in accordance with the rules of the relevant stock exchange.
3.5 Insider dealing and market manipulation

Before, during and after a tender offer, the normal rules regarding insider dealing remain applicable.
The FIEA defines inside information which is subject to the insider trading rules thereunder. In
addition to inside information relating to the target company or its group companies or certain major
shareholders, the bidder’s decision to conduct or cancel a tender offer or other acquisition of 5% or
more of the outstanding shares of a listed company is regarded by the FIEA as another category of
inside information (see 6).
The FIEA prohibits, among other things, market manipulation, spreading rumors or using fraudulent
means for the purpose of trading or affecting the market price of the target’s stock.
3.6 Due diligence

The Japanese public tender offer rules do not contain any specific rules regarding whether or not, or
how, a prior due diligence can be organized. The concept of a prior due diligence by a bidder is
generally accepted in the market, and appropriate mechanisms have been developed in practice to
organize a prior due diligence and to deal with insider trading rules.
3.7 Anti-takeover measures

Some Japanese listed companies have introduced anti-takeover measures to deal with unsolicited
offers. Japanese listed companies are required to disclose anti-takeover measures. The common
approach regarding anti-takeover measures in Japan is to request the bidder to provide sufficient
information so that the board or the shareholders may properly evaluate the contemplated offer before
the target carries out anti-takeover measures that would dilute the bidder’s shareholding or otherwise
frustrate the bidder’s offer. Please see 6.4 for more details on common anti-takeover defense
mechanisms in Japan. If the target can implement anti-takeover measures, the bidder should carefully
review such measures and plan in advance before approaching the target or commencing a tender
offer.
4.1 Mandatory tender offer requirement
The general Japanese regulatory approach relating to tender offers is that they are required only
where:
(a) the target company is a company obligated to file annual securities reports under the FIEA;
and
(b) the bid falls into one of the circumstances described below.
Since all Japanese listed companies are obligated to file annual securities reports, it is important that
if a person intends to obtain control of a listed company by purchasing shares in such company, they
need to consider whether the Japanese tender offer rules under the FIEA (the “Tender Offer Rules”)
will apply. Where the requirements are met, the bidder is required to launch a tender offer to all
shareholders at the same price.

In general, if a bidder intends to purchase shares and such other equity types of securities, e.g., share
options (shinkabu yoyakuken) and bonds with share options, of the target in the following
circumstances, such purchases may only be made through a tender offer in compliance with the
Tender Offer Rules:
(a) The bidder proposes to purchase shares in excess of 5% of the total number of voting rights
of the target from more than 10 shareholders in a period of 61 days (the “61-day Aggregation
Period”) through off-market trading.
(b) The bidder proposes to purchase shares with the result that the bidder will hold shares in
excess of one-third of the total number of voting rights of the target, irrespective of the number
of shareholders involved through off-market trading and/or on-market non-auction trading.
(c) The bidder proposes to purchase shares, within a three-month time frame, of 10% or more of
the total number of voting rights of the target in aggregate through any or, a combination of,
off- market trading, on-market trading and/or subscription of new shares and at least 5% (of
the total number of voting rights of the target) of such share purchase is via off-market trading
and/or on-market non-auction trading, with the result that the bidder holds shares in excess of
one-third of the total number of voting rights of the target.
(d) The bidder already holds more than one-third of the total number of voting rights of the target
and wishes to purchase further shares in excess of 5% of the total number of voting rights in
the target through on-market auction trading after the launch of a tender offer by a third party.
For the avoidance of doubt, although the FIEA does not specify the type of trading for the
purchase of further shares in circumstance (d), any purchase through off-market trading
and/or on-market non- auction trading (whether in excess of 5% or not) by a bidder who
already holds more than one-third of the total number of voting rights in the target shall always
simultaneously trigger the above circumstance (b), and as such, circumstance (d) is
considered to target only on-market auction trading.
In addition, if the bidder seeks to acquire shares with the result that the bidder will hold two-thirds or
more of the total number of voting rights, the bidder will be required to make the offer to purchase to
all shareholders and purchase all tendered shares from all offerees.
Under the Tender Offer Rules, any shares in the target owned by “Persons in a Special Relationship”
with the bidder must be aggregated with the shares acquired by the bidder in the target for purposes
of the foregoing tender offer thresholds. “Persons in a Special Relationship” include the following:
(a) where the bidder is an individual, persons having a special relationship are: (i) that person’s
relatives (that is, that person’s spouse, relative by blood and relatives by marriage to the first
degree of kinship (“Relatives”)) and (ii) corporations (and their directors and officers) in which
the individual owns 20% or more of the total number of voting rights, together with the
individual’s Relatives;
(b) where the bidder is a corporation, persons having a special relationship are: (i) the bidder ‘s
directors and officers; (ii) corporations (and their directors and officers) in respect of which
20% or more of the shares are owned by the bidder (including the shares owned by any
subsidiary corporation, i.e., a corporation in which the bidder owns more than 50% of the total
number of voting rights) and (iii) individuals of corporations (and their directors and officers)
who own 20% or more of the total number of voting rights of the bidder (including the shares
owned by any subsidiary of such corporations); and
(c) persons who enter into an agreement with the bidder to jointly acquire or transfer shares, or
exercise rights, such as voting rights, to which they are entitled as shareholders, or who enter
into an agreement to transfer or acquire such shares to or from each other after purchasing
the company’s shares.

4.2 Purchases excluded from the application of the tender offer requirement
In general, purchases made on the Financial Instruments Exchange Markets are exempted from the
Tender Offer Rules (subject to certain limited exceptions mentioned in 4.1(b) and (c) above). In
addition, purchases of shares in the following circumstances are excluded from the operation of the
Tender Offer Rules:
(a) Exercise of share options and others – Purchases made by the exercise of share options,
exercise of rights to allot shares, exercise of rights to subscribe to new shares granted in a
rights issue and conversion of shares into another class of shares by shareholders are
excluded.
(b) Acquisition by parent – Purchases by the parent of the target from 10 or fewer shareholders
during the 61-day Aggregation Period with the result that the parent will hold less than two-
thirds of the total number of voting rights are excluded.
(c) Transactions within a group – Purchases of shares from Persons in a Special Relationship or
affiliated companies are excluded under certain conditions.
(d) Consent by all shareholders – The Tender Offer Rules are not applicable if the total number of
shareholders is less than 25 and all the shareholders agree in writing to the purchase of
shares without conducting a tender offer. Please note, however, that if the ratio of
shareholding after the purchases with such consent will result in two-thirds or more, such
purchases are only exempt when either (i) the approval of the meeting of the holders of the
classes of shares or (ii) the written consent of all holders of the class of shares (only if the
number of such holders is less than 25) is obtained for all classes of shares other than the
class of shares to be acquired.
(e) Others – Acquisition of shares by enforcing a security interest in respect of the shares,
acquisition through merger, share swap, corporate split or acquisition of all or part of a
business are all not subject to the Tender Offer Rules. In addition, certain types of periodic
acquisitions by officer shareholding or employee shareholding associations that fulfil certain
preconditions, as well as some other acquisitions under exceptional situations, are also
exempted.
4.3 Purchase price

The purchase price under a tender offer must be the same for all shareholders. However, it is possible
to structure the offer to give shareholders a choice of two or more different payment alternatives, e.g.,
cash or securities. Under the Tender Offer Rules, other than cash, consideration may also take the
form of shares and other securities. However, in Japan, it is most common for the bidder to use cash
as the form of consideration. Each type of payment structure must be the same for all of the offeree
shareholders.
There is no legal rule in relation to the price level in Japan, but the common valuation process is as
follows:
(a) The bidder performs its valuation of the target and provides for the rationale behind the
determination of such offer price in the tender offer registration statement.
(b) The target obtains its own valuation from an independent third party appraiser to examine
whether the price offered by the bidder is fair and reasonable. The target’s position statement
will contain the directors’ recommendation as to whether or not the target’s shareholders
should tender their shares in the tender offer.

4.4 Minimum and maximum acceptance condition
The offer may be subject to a minimum acceptance condition if the condition is explicitly included in
the tender offer registration statement in advance. If the minimum acceptance condition is satisfied,
the bidder will be bound to purchase the number of specified shares at the very least. If the tender
offer is under-subscribed, the bidder, by virtue of having attached the condition to the offer, may
withdraw the bid. The offer may also be subject to a maximum acceptance condition if the condition is
included in the tender offer registration statement in advance. The bidder, however, is not permitted to
include a maximum acceptance condition if, after the acquisition, it intends to hold two-thirds or more
of the target’s voting shares. If the bidder receives acceptances in excess of the amount stipulated in
the maximum acceptance condition, the bidder will be permitted to refuse to acquire the excess
shares on a pro-rata basis.
4.5 Amending purchase conditions

Although the bidder is, as a rule, free to amend its purchase conditions, it may not make amendments
to certain conditions that are clearly detrimental to the offerees, such as reducing the purchase price,
reducing the projected number of shares to be purchased or shortening the tender offer period, except
where the target implements certain anti-takeover defenses.
4.6 Prohibition on independent purchase by the bidder

Subject to certain limited exceptions, the bidder and any Persons in a Special Relationship must not
purchase shares in the target other than through a tender offer during the tender offer period.
4.7 Withdrawal of a tender offer

Under the Tender Offer Rules, a bidder’s withdrawal of a tender offer is strictly restricted. A bidder
may withdraw the tender offer only upon the occurrence of any of the following:
(a) certain corporate decisions, such as merger, sale of substantial assets, dissolution,
bankruptcy and exercise of the anti-takeover defense made by the target or its subsidiary
(being limited to decisions announced on or after the day of the public notice of commencing
a tender offer);
(b) corporate decisions to maintain the anti-takeover defense made by the target;
(c) the occurrence of certain material events in relation to the target, such as bankruptcy, the
filing for an injunction order seeking the cessation of the target’s business, an administrative
order to cease the operation of the business, the termination of the business relationship with
a major customer, damage sustained from a disaster, the commencement of litigation, or the
delisting of shares (being limited to events that occurred on or after the day of the public
notice of commencing a tender offer);
(d) if any governmental permit necessary for the acquisition of the shares in the target specified
in the tender offer registration statement has not been granted before the last day of the
tender offer period;
(e) any events provided under the Tender Offer Ordinance which are deemed to be equivalent to
items of (a) through (d) above; or
(f) any major changes to the situation of the bidder, such as its bankruptcy.
On the other hand, an offeree may cancel its agreement to sell shares in connection with a tender
offer at any time during the tender offer period. Furthermore, the bidder cannot claim compensatory or
punitive damages as a result of the cancellation of the agreement by an offering shareholder, and the
bidder will be liable for the cost of returning to the offeree any shares delivered to the custody of a
securities company or a bank.

5 Timeline
The table below contains a summarized overview of the main steps of a typical friendly tender offer
under Japanese law:
Step
• Preparation of the bid by the bidder (study, due diligence, financing, draft of tender
offer registration statement and the public notice of commencing a tender offer).
• Retaining a local securities company to handle the procedures for the custody and
return of shares tendered and the payment of the purchase price in the tender offer
process.
• Informal consultation with the Kanto Financial Bureau in relation to the contents of
the tender offer registration statement (although this is not a legal requirement, two
to three weeks prior consultation is practically required before the tender offer
registration statement is formally filed with the MoF).
• Internal approval of launching the tender offer by the bidder.
• Internal approval of the contents of the target’s position statement by the target.
• Press release regarding the tender offer by the bidder (if applicable) and the target
on the day immediately before the formal launch of the tender offer.

• The bidder publishes the public notice of commencing a tender offer via the
Electronic Disclosure for Investors’ NETwork (“EDINET”), followed by a public
notice in a nationwide daily newspaper generally reporting domestic current events.
As of that moment, the bidder can no longer withdraw the tender offer (except in
the certain limited circumstances mentioned in 4.7 above).
• The bidder files the tender offer registration statement via EDINET with the MoF on
the same day as the date of the notice of commencement of tender offer above.
• The bidder forwards a copy of the tender offer registration statement to the target
and other persons who have launched a tender offer to the same target (if any).
• The bidder delivers a tender offer prospectus to each shareholder who wishes to
sell shares either in advance or at the same time of such sale.
• Counter-bids and higher bids can be filed.
3. Filing of target position statement by the target’s board:

• The target files the position statement via EDINET within 10 business days after
the public notice of commencing a tender offer was made (although in a friendly
tender offer, the target normally files the target position statement on the same day
as the date of the notice of commencement of tender offer by the bidder). The
target may include, in the same statement, inquiries addressed to the bidder and
(ii) if the tender offer period is less than 30 business days, a request that the tender
offer period be extended to 30 business days.

Step
• The target forwards a copy of the position statement to the bidder and other
persons who have launched a tender offer to the same target (if any).
4. Tender offer period:

• Start: immediately after the notice for commencing a tender offer was made.
• Duration: not less than 20 business days but not more than 60 business days.
5. Amendment to purchase conditions:

• If the bidder wishes to amend the purchase conditions of the tender offer during the
tender offer period, it must notify such amendment via EDINET followed by making
a public notice in a nationwide daily newspaper generally reporting domestic
current events and filing the amended tender offer registration statement.
6. Publication of results:
• The bidder makes a public announcement regarding the tender offer result (or
publishes a notice of the tender offer result via EDINET followed by a public notice
in a nationwide daily newspaper generally reporting domestic current events) on
the day following the last day of the tender offer period.
• The bidder files the report of the tender offer result via EDINET with the MoF on the
same day as the public announcement (or public notice) of the tender offer result
above.
• The bidder forwards a copy of the report of the tender offer result to the target and
other persons who have launched a tender offer to the same target (if any).
• The bidder delivers a purchase notice to the tendering shareholders promptly upon
the close of the tender offer period.
7. Payment of the offered consideration by the bidder (usually within five business days of end
of the tender offer period).
Set out below is the overview of the main steps for a public friendly takeover offer in Japan.

Set out below is the overview of the main steps for a public friendly takeover offer in Japan.
Public friendly takeover offer (indicative timeline)
Start
process Day 0 Day (X) Day 10 Day 60 Day 61 Day 65
Launch of bid. Bidder submits Start of tender offer period Target board files position End of tender offer Publication of results. Bidder: Payment of offered
notice of commencing offer (immediately after notice statement via EDINET (within period consideration by bidder
• makes pubic announcement (or
(which is to be published commencing tender offer is 10 business days after public (usually within 5 business
publishes notice via EDINET
effective from Day (X)) via published) notice commencing tender offer days of end of tender offer
and in nationwide newspaper)
Electronic Disclosure for is published) and forwards copy period)
Bidder: on the day following the last
Investors’ NETwork to bidder(s)
day of the tender offer period
(EDINET) and in nationwide • files offer registration
Bidder must from time to time
newspaper statement with Ministry of • Files report with Ministry of
notify any amendments to
Finance (via EDINET) Finance (via EDINET) and
purchase conditions:
• forwards copy of forwards copy to target
statement to target • via EDINET and in
• Delivers purchase notice to
• sends offer prospectus to nationwide newspaper
tendering shareholders
shareholders wishing to
• by filing amended tender
sell shares
offer registration statement
Counter/higher bids can be
filed
Duration of tender offer period is not less than 20 business days and not more
than 60 business days

6 Takeover Tactics
A Japanese listed company is obligated under the stock exchange rules to disclose to the public in a
timely manner all “inside information” that relates to it, including all material changes to information
that has previously been disclosed to the public.
• “Inside information” generally means information that has not been made public, relating,
directly or indirectly, to issuers of financial instruments which, if it were made public, would be
likely to have a significant effect on the prices of those financial instruments or on the price of
related derivative financial instruments. One of the characteristics of the Japanese insider
trading rules is that the inside information which will give rise to the prohibition of insider
dealing is specified by the statute.
• Article 166, Paragraph 2 of the FIEA defines the term “Material Facts” and lists out the events
constituting Material Facts, the knowledge of which will trigger the prohibition on dealing in the
relevant company’s financial instruments. Those Material Facts can be categorized into the
followings four groups:
(i) certain corporate actions decided by the decision-making body of a listed company or
its subsidiaries, such as a merger, share swap, company split, transfer of shares with
change in a subsidiary and business alliance;
(ii) certain factual circumstances that occurred in a listed company or its subsidiaries,
such as material damage caused by disaster or business operations, material
litigation or change in the major shareholders;
(iii) change in forecasts of sales, ordinary profits and net profits of a listed company or its
subsidiaries; and
(iv) general catch-all.
The general catch-all set out in (iv) above means any material facts other than those referred to in (i),
(ii) and (iii) which have an important bearing on the management, business or property of a listed
company or its subsidiaries and may have a material influence on the investment decisions of
investors. It is up to the holder of inside information to determine if certain information qualifies as a
Material Fact covered by the general catch-all. This will often be a difficult exercise, and a large gray
area will exist as to whether certain events constitute a Material Fact or not.
• Article 167 of the FIEA also stipulates that the knowledge of a tender offer or a buyout of 5%
or more of the issuer’s shares by others (the “Tender Offer and Similar Accumulated
Purchase”) constitutes inside information, the knowledge of which will give rise to the
prohibition on dealing in the relevant company’s financial instruments.
• Even if information falls under any of the above, if such information is deemed as having an
insignificant impact on the investment decisions of investors pursuant to the standards set
forth in the Cabinet Office Ordinance on Restrictions on Securities Transactions, etc.
(Ordinance of the Ministry of Finance No. 59 of 8 August 2007), such information does not
constitute a Material Fact.
6.2 Insider dealing regulations

The basic legal framework regarding insider dealing and market abuse under Japanese law is set
forth in Article 166 and Article 167 of the FIEA.

Under Article 166, a person who becomes aware of a Material Fact (a “Corporate Insider”) is
prohibited from buying or selling the financial instruments of the issuer before such information
becomes publicly available by the issuer through a public announcement.
Similarly, under Article 167, a person who becomes aware of a Tender Offer and Similar Accumulated
Purchase contemplated by others (a “Tender Offer Insider”) is prohibited from buying or selling the
financial instruments of the relevant company unless:
(i) such information is disclosed by such competing bidder through a public announcement;
(ii) the Tender Offer Insider discloses in its own tender offer announcement the information about
the Tender Offer and Similar Accumulated Purchase contemplated by such competing bidder,
including the name of the competing bidder, timing and certain other matters regarding such
contemplated Tender Offer and Similar Accumulated Purchase; or
(iii) six months have passed after the Tender Offer Insider was informed of such contemplated
Tender Offer and Similar Accumulated Purchase.
6.3 In the event of a public tender offer

In the event that a bidder contemplating launching a tender offer obtains, during due diligence or by
other means, information constituting a Material Fact in relation to the target, the bidder may not
launch the tender offer before such Material Fact is disclosed by the target, otherwise the bidder, as a
Corporate Insider, would violate the insider dealing regulations described above.
If this is the case, the bidder has no choice but to request the issuer to disclose such Material Fact
before the launch of the tender offer.

company as a defense against a takeover. Among the measures below, the most popular mechanism
is the advance warning type rights plan utilizing share options which have a discriminatory exercise
condition attached that prevents the hostile bidder from exercising takeover rights.
1. Advance warning type rights plan • A pre-condition for the issuance of the
Share Options with Discriminatory
An outline of the typical advance
Terms under this type of plan is that the
warning type rights plan is as follows:
corporate value of the target company
• Advance warning is provided by would be reduced if it were not for the
target company disclosing the issuance of the new share options
details of the rights plan; under the plan.
• When a hostile takeover is • The legality of an advance warning type
imminent from a party who rights plan depends on:
holds or will hold more than a
o the specific conditions
set percentage (usually 20%), in
surrounding the decision to
accordance with the advance
issue the new share options;
warning, the target company will
request the hostile bidder to o the content of the new share
provide the necessary options;
information relating to the
o the issuance procedures; and
hostile bidder, the purpose of
the takeover and the proposed o other individual circumstances.

management policies after the • Even if the plan on its face appears to
takeover; be legal, upon implementation, the
procedures must be properly carried out
• The board of directors of the
or the issuance of the new share
target company examines and
options may be judged to be illegal.
analyzes the hostile takeover
proposal according to the
submitted information;
• If the board of directors
determines (in the case where
an independent adviser is
retained, its recommendation
will be taken into account) that
the hostile bidder triggers the
defense measures, all
shareholders are allocated new
share options which have a
discriminatory condition
attached that prevents the
hostile bidder from exercising
the rights (the “Share Options
with Discriminatory Terms”); and
• All shareholders, other than the
hostile bidder, acquire new
shares at a price lower than the
current market price, thereby
diluting the share ownership
ratio of the hostile bidder.
2. Allotment of share options with • This counter measure can be introduced

discriminatory terms without even after the target company becomes
advance warning aware of the existence of a potential
hostile bidder, however the courts are
This method is intended to lower the
likely to use a stricter standard to decide
share ownership ratio of the hostile
the legality of this anti-takeover defense
bidder through the allotment of share
method compared to the Advance
options without contribution to all
Warning Type Rights Plan.
shareholders. There will be a
discriminatory condition that the hostile • This method was used in the hostile
bidder cannot exercise its rights and takeover for Bull-Dog Sauce by Steel
which allows the other shareholders to Partners in 2007. Bull-Dog Sauce
acquire shares at a discounted price. decided to allot the Share Options with
Discriminatory Terms without
contribution by a special shareholders’
resolution and also offered a monetary
consideration corresponding to the
value of the share options to Steel
Partners, which was prohibited from
exercising Share Options with
Discriminatory Terms. The Supreme


Court decided that this defense
measure was reasonable.
• Although, under the general principles
of the Companies Act, the board of
directors has authority to determine the
allotment of share options, the approval
of the shareholders’ meeting is
considered to be a requirement to make
this method legal and valid given the
court ruling of the Bull-Dog Sauce case
above.
3. Issuance of new shares or share • For the board of directors to be able to

options by third party allotment issue the shares in this manner, without
the necessity of a shareholders’
New shares or share options are issued
resolution, the shares cannot be issued
at a discount prior to the takeover in
at a considerable discount.
favor of friendly person(s).
• It was traditionally considered that an
This method dilutes the shares owned
issuance of new shares or share options
by the party engaged in the takeover.
was unfair, and therefore invalid, in
The board of directors will approve the
cases where the primary purpose for
issue of new shares or share options to
issuing the new shares or share options
a third party.
was to dilute a shareholder’s share
ownership, i.e., no specific use for the
target company of the funds being
raised. However, the recent trend of
court rulings illustrates that even if the
purpose is to dilute a hostile bidder’s
share ownership, the court judges the
fairness of the issuance by taking into
consideration that the hostile bidder is
an “abusive bidder” (akin to
“greenmailers”) whose intention is to
acquire the shares for its own benefit
without due regard to the sound
management of the target company.
4. Traditional “cross- shareholding” • Although traditional cross-shareholdings

(mochiai) arrangement have been reduced significantly in
recent years, they remain a strong
In Japan, cross- shareholding
barrier to prevent acquisition by a
traditionally refers to a mutual
hostile bidder.
shareholding relationship through a
network of companies on the mutual
understanding that these shares are not
to be traded. Such friendly shareholders
within the network generally support the
incumbent management from whom
they earn business, rather than a hostile
bidder.

5. Veto rights for certain shareholders • The current stock exchange rules in
Japan permit shares of this nature as
The issuance of a class of shares with
long as they do not significantly infringe
special veto rights (often referred to as
the interests of shareholders and
“golden shares”) to a friendly
investors.
shareholder.
• These golden shares are permitted by
These “golden shares” include the right
the stock exchange only in cases where
to veto resolutions at a company’s
certain national policy reasons exist. To
general shareholders’ meeting relating
date, there has only been one listed
to significant matters such as the
company in Japan that had golden
election and removal of directors.
shares.

Takeover
7.1 Squeeze-out by Special Controlling Shareholder
If, following the tender offer, the bidder holds (by itself and/or through its 100% direct or indirect
subsidiaries) 90% or more of the total number of voting rights (such shareholder hereinafter referred
to as the “Special Controlling Shareholder”), the Special Controlling Shareholder can force all other
holders of voting securities and securities conferring the right to voting securities to transfer their
securities to it subject to the approval of the board of the target company. Any of the security holders
who are dissatisfied with the price offered by the Special Controlling Shareholder are entitled to
statutory appraisal rights.
7.2 Alternative squeeze-out mechanisms

Even if the bidder fails to obtain 90% of the voting rights, it is still possible to effect the squeeze-out by
using either of the following methods if the bidder controls more than two-thirds of the total number of
voting rights. The implementation of these methods requires shareholder approval and a court order,
which means that this process is more time-consuming.
(a) Share consolidation squeeze-out
A share consolidation squeeze-out can be implemented by a special resolution of the target’s

shareholders. A special resolution is adopted by a two-thirds majority vote of the shareholders present
at a shareholders’ meeting. In this squeeze-out scheme, subject to the special resolution by the
shareholders, the target will conduct the stock consolidation at such a consolidation ratio that the
number of shares held by each of the minority shareholders (other than the bidder) is reduced to less
than one whole share, i.e., fractional shares. Thereafter, pursuant to the Companies Act, the target,
on behalf of the minority shareholders, may sell all of such fractional shares to the bidder at the
market price, the fairness of which must be endorsed by a court order.
(b) Call option squeeze-out
A Call option squeeze-out can also be implemented by a special resolution of the target’s
shareholders. In this squeeze-out scheme, subject to the special resolution by the shareholders, the
target will convert all its shares into class shares subject to a call option by amending its articles of
incorporation. The target will exercise such call option and issue new shares of a different class at an
exchange ratio so that the number of shares newly issued to each minority shareholder (other than
the bidder) in exchange of the existing shares is reduced to less than one whole share, i.e., fractional
shares. Thereafter, as with the share consolidation squeeze-out (see 7.2(a)), the target will sell all of

such fractional shares to the bidder at the market price, the fairness of which must be endorsed by a
court order.
As a result of (a) and (b) above, only the bidder will remain as the sole shareholder and all other
minority shareholders will receive cash equivalent to their shareholding. The shareholders who are
dissatisfied with the price offered by the bidder are entitled to statutory appraisal rights.
Before the amendment of the Companies Act in 2014, the share consolidation squeeze-out option
above was not used because of the lack of statutory appraisal rights granted to minority shareholders.
This was believed to be imperative for the protection of minority shareholders who are compelled to
sell their shares. However, the amended Companies Act introduced appraisal rights for dissenting
shareholders to a share consolidation. In fact, the share consolidation squeeze-out has become more
popular than the call option squeeze-out option (where a squeeze-out by a Special Controlling
Shareholder is not available). This is due to the simplicity and legal stability of the share consolidation
squeeze-out option.
7.3 Squeeze-out via merger or other corporate reorganization

A squeeze-out can also be implemented via a cash-out merger, share swap or other corporate
reorganization (collectively, a “Cash-out Reorganization”) between the bidder and the target with a
special resolution by the shareholders of the target (or if the bidder is already a Special Controlling
Shareholder, with the resolution of the board of directors of the target). Prior to the tax reform
implemented in 2017 (the “2017 Tax Reform”), such Cash-out Reorganization was rarely used for
effecting a squeeze-out because if cash consideration was used in a Cash-out Reorganization the
reorganization was automatically treated as tax-disqualified resulting in a recognition of built-in gain
/loss of assets owned by the target. However, after the implementation of the 2017 Tax Reform, the
different tax treatment of each squeeze-out method (referred to in 7.1 and 7.2 above and the Cash-
out Reorganization) has been eliminated if the bidder owns at least two-thirds of the total number of
voting rights in the target prior to the squeeze-out. As a result, the Cash-out Reorganization has
become a practically “usable” option to squeeze-out the minority shareholders while in practice either
the squeeze-out by Special Controlling Shareholder or the share consolidation squeeze-out
mentioned above is still commonly used due to its simplicity and legal stability.
8 Delisting
Listed companies in Japan may be privatized or delisted by way of a tender offer followed by a
squeeze-out of all the remaining shares. The stock exchange rules provide for the delisting criteria
and the implementation of any of the squeeze-out methods above meet such delisting criteria.

Hideo Norikoshi, Akifusa Takada, Jiro Toyokawa and Tetsuo Tsujimoto in the Tokyo office are the
most appropriate contacts within Baker McKenzie for inquiries about public M&A in Japan.
Hideo Norikoshi Akifusa Takada

Tokyo Tokyo
hideo.norikoshi@bakermckenzie.com akifusa.takada@bakermckenzie.com
+81 3 6271 9471 +81 3 6271 9478
Jiro Toyokawa Tetsuo Tsujimoto

Tokyo Tokyo
jiro.toyokawa@bakermckenzie.com tetsuo.tsujimoto@bakermckenzie.com
+81 3 6271 9457 +81 3 6271 9713

Kazakhstan
1 Overview
Kazakhstan has a less developed securities market compared to that of the US, UK or other Western
states. The securities and public M&A legislation in Kazakhstan is still developing and in some cases
uncertain.
There have only been a few M&A transactions in the market in recent years. The M&A market was
affected by the global economic downturn of 2008. In 2014 and 2015, Kazakhstan experienced
another economic slowdown sparked by falling oil prices, the Ukrainian crisis and uncertainty
surrounding the Russian economy. Also, it remains to be seen how the COVID-19 pandemic will
affect the market in 2020 and beyond.
Kazakhstan’s stock exchange (“KASE”) was established in December 1993. There are 203
companies listed on the KASE. These are mostly financial organizations such as banks and insurance
companies or state companies that are owned by a controlling-interest investor or the government.
In addition, in 2018, the newly created Astana International Financial Center (“AIFC”) started
operating in Kazakhstan. The AIFC is essentially a free financial zone situated in Nur-Sultan,
Kazakhstan’s capital, having its own English-law based regulatory framework. The AIFC has its own
stock exchange, the Astana International Exchange (“AIX”). There are 53 companies listed on the
AIX. The summary set forth below is based on the laws of Kazakhstan, excluding the laws and
regulations of the AIFC and AIX.

2.1 Main Legal Framework
There is no unified takeover code in Kazakhstan. Regulations concerning the acquisition of
companies whose shares are listed on a stock exchange can be found in several laws and
regulations, including the following:
• the Law of the Republic of Kazakhstan on Securities Market, dated 2 July 2003;
• the Law of the Republic of Kazakhstan on Joint Stock Companies, dated 13 May 2003;
• the rules relating to insider dealing and market manipulation;
• the rules relating to disclosure and transparency of listed companies;
• the rules of the KASE relating to securities trading on a stock exchange; and
• the rules regarding merger control. These rules are not further discussed herein.
The rules and regulations that contain provisions on the acquisition of public companies are discussed
below.
The Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market
(“Agency”) is the principal securities regulator in Kazakhstan. The Agency has certain legal tools that
it can use to supervise and enforce compliance with the relevant rules, including imposition of
administrative fines. In certain aggravated cases, criminal liability may be imposed by the court.
Additionally, the court may invalidate a transaction that contravenes legal requirements.
As there is no unified regulation of public takeovers, the relevant laws and regulations do not
expressly state the principles on which they are based, i.e., there is no formal set of regulated
principles such as equivalent treatment of all shareholders found in certain other jurisdictions.


Kazakhstani law imposes certain limited foreign ownership restrictions that apply to companies
operating in particular industries. Thus, for example, Kazakhstan’s Law on National Security restricts
foreign ownership in certain Kazakhstani telecom service providers. Namely, foreign individuals and
legal entities are prohibited from managing and/or operating any trunk lines in Kazakhstan without
setting up a legal entity in Kazakhstan. Similarly, foreign entities are prohibited from owning, directly
or indirectly, 20% or more of the shares in Kazakhstani mass media companies.
Any acquisition of 10% of the voting shares in a Kazakhstani bank requires prior approval by the
Agency. Foreign shareholders holding 10% or more of a bank’s shares must meet a required
minimum rating. Companies established in certain listed countries, e.g., the British Virgin Islands, are
prohibited from owning any shares in Kazakhstani banks. Similar restrictions apply to certain other
regulated Kazakhstani financial institutions, such as insurance/reinsurance firms and investment
portfolio managers.
Restricted/sensitive activities also include activities operated by a company included in the list of
“strategic objects” approved by the Government of Kazakhstan, as well as gas, hydrocarbons and
other sources of energy. As a result, acquisition of shares in such companies operating in such areas
is subject to prior Government consent requirements.
Different types of entities are subject to their own set of rules governing the process and timing for
obtaining the required government consent.

levels of shareholding in a Kazakhstani listed company.
Shareholding Rights
• The right to obtain information about the company and its
operations, including a copy of financial statements of the
company.
• The right to obtain excerpts from the Central Securities
Depository (or nominee holder) to confirm its ownership right to
securities.
• The right to submit at the general shareholders’ meetings
nominees for election to the board of directors of the company.
• The right to request invalidation of decisions of the general
shareholders’ meetings, board of directors and executive body
for irregularities as to form, process or other reasons.
• The right to submit questions to the company and receive a
response within 30 days.
• The right to receive pro rata share of assets of the company
upon its liquidation.

Shareholding Rights
• The pre-emptive right to purchase the newly issued shares of
the company and other securities convertible into shares of the
company.
• The right to vote at the general shareholders’ meetings
regarding changing the number or type of shares.
5% • The right to put additional items on the agenda of a general

• The right to file a liability claim against the directors for
irregularities as to entering into large transactions and related
party transactions.
• The right to file a liability claim seeking invalidation of a related
party transaction if the value of the transaction is equal to or
greater than 10% of the balance value of the company’s assets
where the court determines that there has been a fraud by an
officer of the company or where the value of the assets
acquired/disposed of by the company is not comparable with
the market value as determined by a Kazakhstani licensed
appraiser.
• The right to obtain information about annual remuneration of
each particular member of the board of directors or
management board of the company if both (i) the court
determines that such member of the board of
directors/management board deliberately mislead the
company’s shareholders with a view to unlawfully receive
income from the company for itself or its affiliated entities, and
(ii) it is proven that actions in bad faith of such member of the
board of directors/management board resulted in loss for the
company.
10% • The right to request the board of directors to convene an

extraordinary general shareholders’ meeting or, if the board of
directors refuses to convene an extraordinary meeting, to apply
to the court seeking an order to convene such meeting.
• The right to request the convening of a board of directors’
meeting.
• The right to conduct an audit of the company (at its own
expense).
More than 25% The ability at a general shareholders’ meeting to block:

• the approval of the code of corporate governance and changes
thereto;
• the voluntary reorganization (merger, de-merger, etc.) or
liquidation of the company;
• the authorization to increase the company’s share capital or to
change the class of the company’s authorized shares to
another class; and

Shareholding Rights
• the amendment of the methodology of valuation of shares used
in case of the company’s buyback of shares on a non-organized
securities market.
More than 50% The ability at a general shareholders’ meeting:

• to amend the charter (by-laws) of the company;
• to determine the terms and process of securities conversion;
• to authorize the issuance of securities convertible into equity;
• to approve the exchange of issued and outstanding shares to
another class of shares and determine the terms and process of
such share exchange;
• to appoint and dismiss members of the counting commission;
• to appoint and dismiss directors and to approve the
remuneration and compensation of costs of directors;
• to appoint statutory auditors;
• to approve dividend distribution and determine the amount of
dividends per one voting share;
• to take decisions on voluntary share delisting;
• to approve acquisitions or disposals of shares (participatory
interest) in legal entities if the value of transaction represents at
least 25% of the value of the company;
• to determine the form of a notice to shareholders to convene a
general shareholders’ meeting and authorize publication of
such information in mass media;
• to approve an agenda of a general shareholders’ meeting;
• to determine the process of disclosure of information about the
company to the company’s shareholders;
• to approve the issuance and annulment of a “golden share”;
• to approve a large transaction for disposal of property with a
value of 50% or more of the value of the company; and
• to take decisions on other matters referred to the competence
of the general shareholders’ meeting as a matter of law or the
charter (by-laws) of the company.

Kazakhstani law prohibits a person who has “inside information” from dealing with securities listed on
a stock exchange. “Inside information” is defined broadly to include information that:
• is not known to third parties; and
• is capable of affecting the price of securities and financial instruments, if disclosed.

There are certain limited exceptions from this definition. In particular, the following information is not
considered to be inside information:
• information based on publicly available data, including research data, forecasts and price
appraisals, prepared with the purpose of making an investment decision or recommendation
concerning a securities transaction;
• information received from mass media;
• unreliable information from unknown sources disseminated among a wide range of persons;
and
• assumptions about the current or planned activities of the company.
The company is required to announce inside information immediately. In general, this means within a
term ranging from three business days to 15 calendar days, depending on the type of information.
Kazakhstani law prohibits “market manipulation”, which is defined as conducting actions aimed at:
• setting or maintaining prices at a level deviating from the level that would have prevailed as a
result of free and fair operation of the market; or
• creating an artificial or false appearance of securities trading.
Disseminating false or misleading market information and exerting direct or indirect pressure on other
market participants with the purpose of changing their market behavior is also prohibited.
Failure to comply with the above legal restrictions is an administrative and criminal offense in
Kazakhstan. In addition, such a failure may lead to invalidation of the relevant securities transaction
by a court in Kazakhstan.
3.3 Due diligence

Kazakhstani law does not contain any specific rules on whether and how a prior due diligence with
respect to a publicly listed target company can be organized. Accordingly, there are no restrictions
prohibiting a target company from allowing a bidder to obtain more information about it through a due
diligence process.
However, if the bidder becomes aware of inside information, the target company should announce
such information before the bidder proceeds with the acquisition of the company. If there are several
bidders intending to place a bid, the relevant information should be provided to all of them.

A bidder that intends (acting alone or with its affiliates) to acquire 30% or more of the voting shares of
a company in the secondary market must send a prior written notice to the target company. The
notice must disclose information about the number of shares to be acquired and the purchase price
for such shares.
Following the acquisition, the bidder must make a mandatory tender offer to other shareholders to buy
their shares.
A bidder that acquires 10% or more of the voting shares of a company becomes affiliated with the
company for the purposes of Kazakhstani law. As such, the bidder must periodically disclose
information about itself and its affiliates to the company. The relevant information will then be
published in the mainstream media, i.e., on the company’s website and the website of the financial
reporting depository.


As previously mentioned, a publicly listed company must immediately disclose inside information.
“Inside information” is defined broadly and there is no exhaustive list of information that constitutes
“inside information”. Therefore, determination of whether or not the facts surrounding an intended
acquisition of a company is “inside information” should be made on a case-by-case basis after careful
consideration of all the relevant circumstances. If the relevant information constitutes inside
information, then the company should announce this.
In addition, a publicly listed company is subject to general reporting and disclosure requirements
under Kazakhstani law. For example, the company is required to publish on the website of the
Depository of Financial Statements (www.dfo.kz) certain information, including:
• corporate events, including resolutions adopted by the board of directors and shareholders’
meeting;
• information on the total / aggregate remuneration paid to the members of the company’s
management board in the preceding year;
• a list of the company’s affiliated entities;
• changes in the company’s shareholding structure where such changes affect the
shareholders owning 10% or more of voting shares;
• the company’s annual financial statements along with an auditor’s report;
• methodology of valuation of shares when the shares are bought back by the company off
exchange (OTC);
• changes in the list of companies in which the company has 10% or more of shareholding
interest; and
• changes introduced to the company’s securities prospectus.
The following information must be regularly supplied to the KASE:
• the company’s annual financial statements for each completed financial year;
• audit reports relating to the company’s annual financial statements;
• interim financial statements for each completed quarter of the current financial year;
• information on the shares and the company’s shareholders, including information on the
number of authorized shares, number of issued and outstanding shares, number of shares
which are encumbered and/or blocked, number of shares which are bought back by the
company, entities who hold 5% or more of the company’s shares, etc.;
• information on the company’s affiliated persons; and
• the company’s insider list with the specification of persons who have access to inside
information.
Any significant information which can affect the company, the price of its securities or the interests of
investors must be disclosed to the KASE. Such information includes but is not limited to:
• information on changes in the structure of the company’s management bodies;
• information on claims filed against the company with a value equal to or greater than 10% of
the company’s assets;

• information on the performance of financial obligations in the amount of 10% or more of the
company’s assets;
• information on intended new issues of the company’s securities;
• information on the intention of the company to sell or place its shares constituting 5% or more
of the total number of the company’s issued and outstanding shares;
• information on the intention of the company to buy back its own voting shares constituting 5%
or more of the total number of the company’s issued and outstanding shares;
• information on the intention of the company to enter into a (i) major transaction or (ii)
transaction in which the company has an interest which involves disposal or acquisition of
assets with a value equal to or greater than 10% of the total balance value of the company’s
assets;
• information on the admission of the company’s securities for circulation on markets outside
Kazakhstan (issuance and placement of ADRs, GDRs, Eurobonds, etc.); and
• information on awarding a rating to the company or its securities, and information on the
revocation of such rating.
3.6 Mandatory tender offer

The mandatory tender offer rule is triggered if a bidder (acting alone or together with its affiliates) has
acquired 30% or more voting shares of a company in the secondary market. In such event, the bidder
must make a mandatory tender offer to the remaining shareholders (the offer must be made within 15
business days of acquisition).
The bidder’s offer cannot be conditional and the price of the offer must not be less than the market
price.
If the company’s existing shareholders accept the offer, the bidder must pay for the shares offered by
such existing shareholders within 30 business days after the shareholders accept the offer. Any failure
by the bidder to make such an offer will result in the bidder being obligated to reduce its shareholding
to not more than 29%.
The mandatory tender offer extends to foreign investors.
3.7 Minority shareholders’ rights

Kazakhstani law contains the following protections for the minority shareholders’ rights:
• shareholders holding, alone or together, 5% of the company’s shares have the right to sue
directors and managers of the company for mismanagement of the company;
• if the company’s general shareholders’ meeting takes a decision to delist the company’s
shares, a shareholder who voted against delisting or who did not participate in the general
meeting has the right to require the company to buy back their shares (the buyback is subject
to certain restrictions);
• if the company’s board of directors’ or general shareholders’ meeting takes a decision on the
company entering into an interested party transaction or a major transaction, a shareholder
who does not agree with such decision has the right to require the company to buy back their
shares (the buyback is subject to certain restrictions); and
• cumulative voting for the election of the members of the board of directors.

A takeover in Kazakhstan may be conducted by way of a tender offer. As was previously mentioned,
there is no takeover code in Kazakhstan. Thus, many issues arising in connection with a takeover are
not specifically regulated under Kazakhstani law.
For example:
• there is no definition of the term “control” for the purposes of takeover deals;
• there are no rules as to how and when a bid must be made public;
• there is no requirement to prepare a prospectus or submit it to the Agency (or any other
authority) for approval;
• the bidder, in principle, is free to determine the price and form of consideration. The offered
consideration may be paid in cash, securities or a combination of both. However, where a
bidder makes a mandatory tender offer, the price of the tender bid must be no less than the
market price;
• the bidder is free to make the bid subject to conditions precedent, including a minimum
acceptance level, and regulatory and corporate authorizations. However, where a bidder
makes a mandatory tender offer, the bid must be unconditional;
• there are no creeper rules; and
• there are no concepts of recommended and hostile offers or tender offers.
The bidder may effect the acquisition on a stock exchange or outside of a stock exchange. Where the
deal is effected outside of a stock exchange, the above issues may be determined by the bidder on its
own (based on its agreement with the shareholders) as there are no specific legal restrictions.
Where the transaction is settled through a stock exchange, the rules of the relevant stock exchange
will apply.
Under Kazakhstani law, there is no concept of a “fiduciary duty.” Thus, a majority shareholder does
not owe any particular duties to the minority shareholders in terms of abuse of its dominant position.
5 Timeline
As a general rule, an acquisition of a publicly listed company can take between six months and one
year in Kazakhstan. In particular, the preparatory stage, including due diligence and negotiations, is a
lengthy process and may take several months. Obtaining the regulatory approvals required for the
acquisition, such as merger control approval, can also be time-consuming in practice.
6 Takeover Tactics
There are no specific rules on takeover tactics. This includes maintaining secrecy until the bid is made
or anti-takeover defense mechanisms.
See 3.2 and 3.3 above for market abuse and due diligence rules.

Takeover
Kazakhstani law allows a shareholder acquiring (alone or with its affiliates) at least 95% of the voting
shares in a company to gain ownership of the remaining shares in that company. In such case, the

majority shareholder is entitled to force minority shareholders to sell their shares at a market price.
The majority shareholder is entitled to exercise such right within 60 business days of acquisition.
Minority shareholders must sell (and transfer) their shares within 60 calendar days of the publication
of a respective “squeeze-out” notice on the website of the Depository of Financial Statements. The
share transfer will need to be registered in the books of the Central Securities Depository (or the
nominee holder) in order to be effective; the law states that such registration can be effected based
upon a “buy order” from the majority shareholder, without the need for the seller’s “sell order.”
The squeeze-out extends to foreign investors. However, it does not extend to certain state-controlled
companies, i.e., the sovereign wealth fund “Samruk-Kazyna” and its group companies. It is unclear in
what particular cases the exemption applies, i.e., when Samruk-Kazyna group companies acquire
shares in a target company versus when an investor acquires a majority stake in Samruk-Kazyna
group companies.
8 Delisting
A company can be delisted based upon a resolution of the general shareholders’ meeting. The
resolution is taken by a simple majority of votes of the shareholders, provided that no less than 50%
of the shareholders attend the meeting.
Delisting from the KASE requires approval from the KASE Listing Commission. In certain cases, e.g.,
when delisting can significantly affect the investors’ rights and interests, the decision of the Listing
Commission may be postponed, i.e., the Commission may state that the decision will not enter into
legal force until after expiration of a certain period of time. This period should not be longer than six
months.

Curtis B. Masters in the Almaty office is the most appropriate contact within Baker McKenzie for
inquiries about public M&A in Kazakhstan.
Curtis B. Masters
Almaty
curtis.masters@bakermckenzie.com
+7 727 3300500

Luxembourg
1 Overview
The following M&A transactions have been conducted in Luxembourg in the past few years:
• Voluntary takeover bid in 2017 by Group SE, a Luxembourg company whose shares are
admitted to trading on the regulated market of the Frankfurt stock exchange.
• Voluntary takeover bid in 2017 by Pegas Nonwovens S.A. (Pegas), a Luxembourg company
whose shares were, at the announcement of this bid, admitted to trading on the regulated
market of the Prague stock exchange and the Warsaw stock exchange.
• Mandatory takeover bid in 2017 by Orco Property Group S.A. (OPG), a Luxembourg company
whose shares are admitted to trading on the regulated market of the Luxembourg Stock
Exchange (“LSE”).
• A derogation from mandatory takeover rules in 2016 to KSG Agro S.A., a Luxembourg
company whose securities are admitted to trading on the regulated market of the Warsaw
Stock Exchange.
• Voluntary takeover bid in 2016 by Braas Monier Building Group S.A., a Luxembourg company
whose shares are admitted to trading on the regulated market of the Frankfurt Stock
Exchange.
• Mandatory takeover bid in 2016 by Orco Property Group S.A., a Luxembourg company whose
shares are admitted to trading on the regulated market of the LSE.
• A derogation from mandatory takeover rules was granted in 2016 to Olbis Investments LTD
SA, a Panama company whose shares are admitted on the Warsaw Stock Exchange,
because both the purchaser and the seller are controlled by the same person.

The main rules and principles of Luxembourg law relating to public takeover bids can be found in the
Law of 19 May 2006 on takeover bids.
The Law of 19 May 2006 on takeover bids applies only to shares listed on the regulated market of the
LSE and Luxembourg issuers of shares listed on a regulated market operating in the European
Economic Area (EEA). The law does not apply to takeover bids launched for shares of open-ended
undertakings for collective investment operating on the principle of risk spreading. It does not apply to
takeover bids for securities issued by the Member State’s central banks.
The main body of the Luxembourg takeover legislation is based on Directive 2004/25/EC of the
European Parliament and of the Council of 21 April 2004 on takeover bids (“Takeover Directive”). This
directive was aimed at harmonizing the rules on public takeover bids in the different Member States of
the EEA. Be that as it may, the Takeover Directive still allows Member States to take different
approaches in connection with some important features of a public takeover bid (such as the
percentage of shares that, upon acquisition, triggers a mandatory public takeover bid on the
remaining shares of the target company, and the powers of the board of directors). Accordingly,
relevant differences remain in the national rules of the individual Member States of the EEA regarding

Luxembourg, there are a number of additional rules and principles that are to be taken into account
Parliament and of the Council of 15 December 2004 on transparency requirements in relation
to information about issuers whose securities are admitted to trading on a regulated market,
transposed in Luxembourg in the Law of 11 January 2008. For further information, see 3.4
below.
rules). These rules are based on Regulation (EU) No 596/2014 of 16 April 2014 on Market
Abuse (“Market Abuse Regulation”) transposed in Luxembourg in the Law of 23 December
2016. For further information, see 6.3 below.
offered in the public takeover bid consists of securities. The rules are based on Directive
2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the
offering document to be published when securities are offered to the public or admitted to
trading and amending Directive 2001/34/EC and related EU legislation.
(d) The law of 21 July 2012 on squeeze-outs and sell-outs of securities of Luxembourg
companies admitted or formerly admitted to trading on a regulated market, or which have
been the object of a public offer.
(e) The general rules on the supervision and control of the financial markets.
(f) The rules and regulations regarding merger control. These rules and regulations are not
(g) The rules and regulations regarding the Commission de Surveillance du Secteur Financier
(“CSSF”).
(h) The rules and regulations regarding commercial companies, such as the law of 10 August
1915 on commercial companies (“Company Law”).
(i) The rules and regulations regarding companies listed on the LSE, such as the law of 24 May
2011 on the exercise of certain rights of shareholders in general meetings of listed
companies, implementing Directive 2007/36/EC on the exercise of certain rights of
shareholders in listed companies.
2.3 Supervision and enforcement by the CSSF

Public takeover bids are subject to the supervision and control of the Commission de Surveillance du
Secteur Financier (“CSSF”). The CSSF is the principal securities regulator in Luxembourg.
The CSSF has a number of legal tools that it can use to supervise and enforce compliance with the
imposed by the courts in case of non-compliance.
The CSSF also has the power to grant (in certain cases) exemptions from the rules that would

The CSSF is competent to supervise a bid if the offeree company has its registered office in
Luxembourg and if the securities of that company are admitted to trading on the regulated market
operated by the LSE. If the offeree company’s securities are not admitted to trading on a regulated
market in the Member State in which the company has its registered office, the authority competent to
supervise the bid shall be that of the Member State on the regulated market of which the company’s
securities are admitted to trading. In respect of governing law and competent authorities, matters
relating to the consideration offered in the case of a bid for all the remaining shares in the company,
particularly the price, matters relating to the bid procedure, the information on the offeror’s decision to
make a bid, the contents of the offer document and the disclosure of the bid, shall be dealt with in
accordance with the rules of the EEA Member State of the regulated market where the shares are
listed. In matters relating to the information to be provided to the employees of the offeree company
and in matters relating to company law, the percentage of voting rights which confer control and any
derogation from the obligation to launch a bid for all the remaining shares in the company, the
applicable rules and the competent authority shall be those of the EEA Member State in which the
offeree company has its registered office.
In addition, in accordance with Article 2 (2) of the law of 23 December 1998, establishing a financial
sector supervisory commission, the CSSF is the competent authority for the supervision of the LSE.
As a result of this provision, the CSSF has authority to review the information memorandum relating to
the acquisition of all or part of the shares of a company incorporated in a non-EU member state and
admitted to trading on the LSE.

Foreign investments are not restricted in Luxembourg. Unless in the context of specific industries and
sectors, takeovers are not subject to prior governmental or regulatory approvals.

The following general principles apply to public takeovers in Luxembourg. These rules are based on
the Takeover Directive:
distorted;
(e) an offeror must announce a bid only after ensuring that they can fulfil any cash consideration

levels of shareholding within a Luxembourg listed public limited company (société anonyme) whose
shares are admitted to trading on a regulated market operating in the EEA:
Shareholding Rights
One ordinary share • The right to attend and vote at general shareholders’ meetings.
• The right to submit questions to the directors at general
shareholders’ meetings on subjects already on the agenda (10%
shareholding required if the shares of the company are not
admitted to trading on a regulated market operating in the EEA).
5% The right to put additional items on the agenda of a general shareholders’

meeting and to table draft resolutions for items on the agenda (10%
shareholding required if the shares of the company are not admitted to
trading on a regulated market operating in the EEA).

• The right to request the board of directors to postpone a general
shareholders’ meeting that has commenced.
25% (at a general The ability to require the dissolution of the company if the ratio of the
shareholders’ meeting) company’s statutory net equity to the company’s share capital has
dropped below 25%.
• any changes to the articles of association, mergers, de-mergers,
meeting)
capital increases, capital reductions and dissolution of the
company;
company’s share capital without further shareholder approval
(the so-called authorized capital); and
subscription right of existing shareholders in case of share issues
in cash, or issues of convertible bonds or warrants.

• to appoint and dismiss directors and to approve their
meeting)
remuneration;
remuneration;
• to grant discharge from liability to the directors and statutory
auditor for the performance of their mandate; and

Shareholding Rights
• to take decisions for which no special majority is required (see,
among other things, 1-6 above).
95% The possibility to force all other shareholders to sell their shares through
a public bid (a “squeeze-out”).

Luxembourg law contains a number of rules that already apply before a public takeover bid is
announced. These rules impose restrictions and hurdles in relation to prior stake building by a bidder
and prior due diligence by a potential bidder. The main restrictions and hurdles have been
summarized below. Some careful planning is therefore necessary if a potential bidder or target
company intends to start up a process that is to lead towards a public takeover bid.

below. The rules include, amongst other things, that manipulation of the target’s stock price, e.g. by
prevent a bidder that has inside information regarding a target company, other than in relation to the
actual takeover bid, from launching a takeover bid.

disclosure threshold. The relevant disclosure thresholds in Luxembourg are 5%, 10%, 15%, 20%,
25%, 33 1/3%, 50% and 66 2/3%. Several listed companies have also opted in their articles of
association to apply a lower threshold than the initial threshold of 5% for consistency with the market
practice of the jurisdiction where the shares are listed.
arrangements (such as call option agreements).

However, the board of the target company can delay the announcement if it believes that a disclosure
would not be in the legitimate interest of the company. For instance, this could be the case if the
target’s board believes that an early disclosure would prejudice the negotiations regarding a bid. A
delay of the announcement, however, is only permitted provided that the non-disclosure does not
entail the risk of the public being misled, and that the company can keep the relevant information
confidential.

Prior to the public announcement of the takeover bid to the CSSF (see 6.2), no one is permitted to
announce the launching of a public takeover bid. This prohibition not only applies to a bidder, but also
to the target company, even if the target company has to announce the launch of a bid pursuant to the
general disclosure obligations described in 3.5.
A bidder that intends to announce a public takeover bid must first inform the competent securities
market authority, i.e., the CSSF if the shares are listed on the regulated market of the LSE, of its
intention and then make the announcement. In addition, the bidder will at that time have to make the
necessary filings for the actual launching of a public takeover bid, since as soon as the public
takeover bid is announced, it can normally no longer be withdrawn, except in certain circumstances.
If there are rumors or leaks that a (potential) bidder intends to launch a public takeover bid, the CSSF
could ask for more information on the bidder’s intent. See 3.7 for more information. This could lead to
an early disclosure, and possibly an acceleration of the preparations by a bidder, as it could be forced
by the CSSF to make an announcement as to its intentions.

(a) Early disclosure demanded by the CSSF – Whenever required for the good functioning of the
markets, the CSSF may request that a person that could be involved in a possible public
takeover bid make an announcement without delay or, if the latter person does not make such
disclosure, to make the announcement itself. This type of disclosure is often made when the
takeover bid cannot yet be formally launched, e.g., for practical purposes or due to merger
control, but an announcement is nevertheless appropriate.
(b) Put-up or shut-up – Luxembourg law does not provide an express “Put-up or shut-up”
mechanism to force a person to make an announcement regarding whether or not it intends to
carry out a public takeover bid. However, under the general supervisory powers of the CSSF
and transparency laws, the CSSF could require that the potential bidder disclose its
intentions.
3.8 Due diligence

The Luxembourg public takeover bid law does not contain specific rules regarding the question of
whether or not a prior due diligence can be organized, or how such due diligence is to be organized.
Be that as it may, the concept of a prior due diligence or pre-acquisition review by a bidder is
generally accepted in the market and also by the CSSF. Appropriate mechanisms have been
market abuse and early disclosure concerns. These include the use of strict confidentiality procedures
and data rooms.

For the purpose of the Luxembourg takeover bid rules, persons “act in concert”:
• if they collaborate with the bidder, the target company or with any other person on the basis of
an express or silent, oral or written, agreement aimed at acquiring control over the target
company, frustrating the success of a takeover bid or maintaining control over the target
company;

The concept of persons acting in concert is very broad and, in practice, many issues can arise when
determining whether or not persons act in concert. This is especially relevant in relation to mandatory
takeover bids. If one or more persons in a group of persons acting in concert acquire voting securities,
as a result of which the group in the aggregate would pass the 33 1/3% threshold, the members of the
group will have a joint obligation to carry out a mandatory takeover bid, even though the individual
group members do not pass the 33 1/3% threshold.
There are three main forms of takeover bids in Luxembourg:
• a voluntary takeover bid, in which a bidder voluntarily makes an offer for all the voting
securities issued by the target company (and securities issued by the company conferring the
right to acquire voting securities of the target company);
of securities, it crosses (alone or in concert with others) a threshold of 33 1/3% of the voting
squeeze out the remaining holders of voting securities. This can be combined with a voluntary
or mandatory takeover bid.

• The bidder is free to make the takeover bid subject to merger control clearance and, subject
to prior approval by the CSSF, certain other conditions precedent, such as a minimum
acceptance level, a material adverse change condition or a war clause.
o There is no minimum price for a voluntary takeover bid, but the legal rules provide
that the terms of the takeover bid, including the price, must be such that they could
reasonably be expected to allow the takeover bid to succeed.
o If, during the takeover bid period (starting on the date of the formal offer notice to the
CSSF), the bidder or persons acting in concert with the bidder acquire or commit to
acquire securities to which the takeover bid relates at a higher price, then the offered
price must be raised to that higher price.

concert (or persons acting on their account), as a result of an acquisition of voting securities,
directly or indirectly holds more than 33 1/3% of the (actual outstanding) voting securities of
the Luxembourg target company.

• The main exceptions to the takeover bid obligation include the situations where the stake of
more than 33 1/3% is acquired as a result of a voluntary takeover bid. Luxembourg law does
not expressly provide other exemptions. Any other exemption is subject to the prior approval
of the CSSF. According to publicly available information, the CSSF has granted exemptions in
the following circumstances:
o the person(s) who ultimately control(s) the Luxembourg target company do(es) not
change;
o subscription of shares by underwriters in connection with a secondary offering of

shares of a listed company;
o with respect to the control over special acquisition purpose companies where the
interests of the minority shareholders are sufficiently protected, taking into account
the transparency of the acquisition operation and the relating arrangements, the
ensuing possibility for shareholders to act knowingly, the provisions regarding the
related voting procedures and the possibility of an unlimited de facto exit for the
shareholders.
o The mandatory offer price must at least equal the highest price paid by the bidder (or
any person acting in concert with it) during a period of 12 months preceding the
announcement of the takeover bid.
o The consideration offered can consist of cash, securities or a combination of both. A

cash alternative must be offered (in an amount corresponding to the cash value of the
consideration securities at the time of the filing of the takeover bid with the CSSF) if
(i) the consideration does not consist of liquid securities that are admitted to trading
on a regulated market in Luxembourg or elsewhere in the EEA, or (ii) during a term of
12 months prior to the announcement of the mandatory public takeover bid or during
the takeover bid period, the bidder (or a person acting in concert) acquired securities
in consideration of a payment in cash (or agreed to make such cash payment) to
which at least 5% of the voting rights in the target company are attached.
o The CSSF has the power to allow or require an amendment of the price.

shareholders at the end of the takeover bid if it holds, alone or in concert with others, 95% of
the voting securities of the target, and can exercise 95% of the voting rights.
• Follow-on sell-out right – minority shareholders have a sell-out right if, at the end of the
takeover bid (or of its reopening), the bidder holds, alone or in concert with others, 90% of the
voting rights of the target.
5 Timeline
takeover bid process under Luxembourg law with respect to Luxembourg companies whose shares
are listed on the regulated market of the LSE. In other circumstances, for example when the shares of
the Luxembourg company are only listed on an EEA regulated market operating outside Luxembourg,

the CSSF will share jurisdiction with the securities market authority of another EEA Member State and
the process described below will change.
Step
offering document).
2. Disclosing the decision of the bidder to launch a bid:

• The bidder gives notice of its decision to launch the bid to the CSSF and then
discloses its decision to the public.
• Within 10 business days, the bidder files the bid with the CSSF. The filing must
contain, amongst other elements, proof of certain funds to pay the offer price and a
draft offering document.
• Within 10 business days, the CSSF requests additional information (see 3. below).
As of that moment, the offering document is public and the bidder can no longer
withdraw the bid (except in certain limited circumstances, such as in the event of a
counter-bid or certain defensive actions by the target company) and the powers of
the board of the target company are limited.
• Counter-bids and higher bids can be filed.
3. Review and approval of the bidder’s offering document by the CSSF within 30 business
days. Consult with and provide information to employees, in parallel.

• In practice, the target’s board will involve the works council. If the board has timely
received the position of the works council, this must be attached to the response
memorandum.
• Following approval of the offering document by the CSSF, the board shall promptly
issue its response memorandum.
5. Publication of the offering document after approval of the CSSF.

• Start: Immediately after the publication of the offering document, at the earliest.
• Duration: Not less than two weeks and not more than 10 weeks.
• The CSSF may grant a derogation in order to allow the bidder to call a general
meeting of the shareholders to consider the bid. Where the bidder acquires control
of the target company, the shareholders that did not accept the bid until the closing
of the acceptance period have the opportunity to accept this bid within fifteen days.
7. Publication of results and, when relevant, whether or not the bidder waives the conditions
precedent to the bid (as soon as practicable after the end of the acceptance period).
8. Payment of the offered consideration by the bidder (in accordance with the terms described
in the offering document).

Step
9. Sell-out period if the bidder acquired 90% of the shares within three months following the
expiry of the acceptance period of the bid.
10. Squeeze-out period if the bidder acquired 95% of the shares. Squeeze-out option to be
exercised within three months following the expiry of the acceptance period of the bid.
11. Publication of results of the squeeze-out/sell-out (as soon as practicable at the end of
additional three month period).
12. Payment of the offered consideration by the bidder (in accordance with the terms described
in the offering document).
Set out below is an overview of the main steps for a voluntary public takeover in Luxembourg.

Start
process A Day A + 10 business days A + 40 business days A + 6 months A + 9 months A + 12 months
Launch of the bid. Bidder: Bidder submits draft • Approval of bidder’s • End of acceptance • End of sell-out • Payment of the offered
offer document to the offering document by period (after no less period; or consideration by the
CSSF the CSSF than 2 weeks and no bidder
• notifies Commission • End of squeeze-out
more than 10 weeks)
de Surveillance du • Publication of the period • Publication of results of
Secteur Financier offering document • Publication of results squeeze-out/sell-out
(CSSF); and
• Target board issues
• discloses bid to the response
public (after notifying memorandum
CSSF) • Start of acceptance
period
Review by the CSSF within Within 3 months Within 3 months

30 business days

6 Takeover Tactics
A Luxembourg company whose shares are admitted to trading on a regulated market has the
obligation to immediately disclose to the public all “inside information” that relates to it, including all
material changes in information that has already been disclosed to the public.
instruments.

often be a difficult exercise and a large gray area will exist as to whether certain events will need to be
disclosed or not.

The Luxembourg takeover bid rules provide that no announcement can be made of a potential
takeover bid unless prior notice has been given to the CSSF.

The basic legal framework regarding insider dealing and market abuse under Luxembourg law is set
forth in Regulation (EU) No 596/2014 of 16 April 2014 on Market Abuse (supplementing, as of 3 July
2016, the law of 9 May 2006 on market abuse, as amended). The same regulation applies in the other
jurisdictions of the EEA.
relation to trading in listed securities

The implementation of anti-takeover defense mechanisms is subject to the prior approval of the
general meeting of shareholders, if the articles of association of the target company require such
approval.

1. Capital increase • Requires an express authorization in the

articles of association by a majority of three
Capital increase by the board
quarters of the votes cast at a general
(authorized capital) without
shareholders’ meeting at which at least 50% of
preferential subscription rights of
the share capital is present or represented (the
the shareholders.
50% quorum does not apply to the second
meeting that is convened if the 50% quorum
was not reached at the first meeting).
• The authorization is valid for up to 5 years, but
can be renewed.
2. Share buyback • A share buyback that is not done “with a view

to avoid imminent and serious harm” requires
Share buyback “with a view to
an express authorization from the general
avoid imminent and serious harm”
shareholders’ meeting (no quorum and simple
to the company.
majority of votes cast).
• The amount that can be used to finance the
share buyback is capped at the amount of
available distributable profits and reserves.
• Buybacks to be made in compliance with
corporate transparency and market (abuse)
rules.
3. Sale of crown jewels • Even though it is not expressly required by

Luxembourg law, if the transaction results in a
change in fact of the purpose of the company,
assets of, or creating a liability
prior approval by the general shareholders’
for, the company, which is
meeting, by a majority of two-thirds of the
triggered by a change in control
votes cast at a general shareholders’ meeting
or the launch of a takeover bid.
at which at least 50% of the share capital is
present or represented, is required (the 50%
quorum does not apply to the second meeting
that is convened if the 50% quorum was not
reached at the first meeting).
4. Warrants on new shares • Requires only a decision of the target

company’s board if the authorized capital
Warrants are issued prior to the
permits the issuance of warrants as takeover
takeover bid in favor of “friendly
defense. Prior approval, by a majority of two-
person(s)” (without preferential
thirds of the votes cast at a general
subscription rights of the
shareholders’ meeting at which at least 50% of
shareholders) who can exercise
the share capital is present or represented, is
the warrants at their option and
required (the 50% quorum does not apply to
the second meeting that is convened if the
50% quorum was not reached at the first
meeting).

5. Frustrating actions • Only transactions that have sufficiently

progressed already (prior to receipt of
notification of a takeover bid) may be
acquisitions, disposals, changes
implemented by the target’s board.
in indebtedness, etc.
• Other transactions require shareholders’
approval after the takeover bid has been
notified to the target if it is required pursuant to
the articles of association of the target
company, provided such requirement has
been approved by the general meeting of
shareholders of the target company.
6. Shareholders’ agreements • A voting undertaking is only valid if it is limited

in time.
Shareholders undertake to
(consult with a view to) vote their • The shareholders could be considered as
shares in accordance with terms “acting in concert”. If so, disclosure obligations
agreed among them. apply and if they hold more than 33 1/3% of
voting rights, any subsequent acquisition of
shares will trigger an obligation to launch a
takeover bid.
• Assumes a stable shareholder base or
reference shareholders.
7. Veto rights for certain • Requires an express inclusion in the articles of

shareholders association by a majority of three quarters of
the votes cast at a general shareholders’
Clauses providing for nomination
meeting at which at least 50% of the share
rights by a reference shareholder
capital is present or represented (the 50%
or similar governance
mechanisms.
• Requires reference shareholder(s).
8. Limitations on share transfers • Inclusion in the articles of association requires

an approval by a majority of three quarters of
Board approval or pre-emptive
the votes cast at a general shareholders’
restriction clauses in the articles
meeting at which at least 50% of the share
of association or in agreements
capital is present or represented (the 50%
between shareholders.
• Limitations have to be, and must remain at all
times, in the interest of the company and must
be limited in time.
• Prior approval clauses can only be invoked
against a bidder provided that a refusal of
approval is motivated on the basis of a non-
discriminating application of approval rules.


• Shareholders could be considered as “acting
in concert”. If so, see “Shareholders’
agreements” above.
• Exceptional for listed companies (listed
securities are in principle freely transferable;
impact on share liquidity).
9. Multiple listings • Should make the takeover more difficult,

particularly if one or more of these markets is
Listing of the shares on several
located outside of the EEA.
stock exchanges.

Takeover
7.1 Squeeze-out
If, following the takeover bid (or its reopening), the bidder (together with the persons with whom the
bidder acts in concert) holds 95% of the share capital with voting rights and 95% of the voting
securities, they can force all other holders of voting securities and securities conferring the right to
voting securities to transfer their securities to the bidder at a fair price. The consideration offered in
the takeover bid is presumed to be fair.
This type of summarized squeeze-out bid is not subject to the rules and procedures that would
otherwise apply to a stand-alone squeeze-out procedure outside the framework of a voluntary or a
mandatory public takeover bid.
In the event of a summarized squeeze-out, the takeover bid will be reopened at the squeeze-out price
during the three months following the expiry of the acceptance period of the bid. Securities that are
not tendered to the bidder at the expiry of the reopened bid are deemed to be automatically acquired
by the bidder.
7.2 Sell-out
If, following the takeover bid (or its reopening), the bidder (together with the persons with whom the
bidder acts in concert) holds 90% of the share capital with voting rights, the security holders that did
not accept the takeover bid shall have the right to demand that the bidder acquires their voting
securities and securities conferring the right to voting securities on the terms of the takeover bid. This
right can be exercised by means of a registered letter with confirmation of receipt to the bidder (or the
intermediary appointed by the bidder for this purpose) within a term of three months following the
expiry of the acceptance period of the bid.
8 Delisting
To delist a Luxembourg company, a request must be made to the LSE. To make its decision, the
board of the LSE takes into account the interests of the market, the investors and the issuer. The
intention to delist the shares must be fully disclosed in any takeover bid document and must be
discussed with the LSE in advance. Following the takeover bid, the target’s board can decide to delist,
after having notified the LSE.
The CSSF may oppose a delisting of a Luxembourg company that is listed on the LSE in the interest
of protecting investors. In particular, the CSSF may oppose a delisting of a Luxembourg company

(even if the company no longer has a relevant free float) if minority shareholders did not have the
opportunity to sell their shares at a fair price.

Jean-François Findling is the most appropriate contact within Baker McKenzie for inquiries about
public M&A in Luxembourg.
Jean-François Findling
Luxembourg
jean-francois.findling@bakermckenzie.com
+352 26 18 44 207

Malaysia
1 Overview
The current M&A market in Malaysia is soft due to a bearish economy, driven by a combination of
global and domestic factors including the coronavirus (COVID-19) pandemic, the continuing US-China
trade war, the Russian-Saudi oil price war and domestic political uncertainty. To date, the FBM KLCI
has tumbled to a 11 year low, in line with global selloff as fears of a global pandemic materialise. In
addition to the weakening Ringgit and falling stock prices, potential investors also remain cautious as
Malaysia continues to be beleaguered by political and policy uncertainties. A week long political
impasse in late February 2020 which ultimately resulted in the collapse of the Pakatan Harapan
Government led to the appointment of a new Prime Minister and a new cabinet. This came days after
the introduction by the former Pakatan Harapan government of an emergency stimulus package
(“2020 Stimulus Package”). On 27 March 2020, the new Prime Minister announced an enhanced
stimulus package worth RM 250 billion (approximately US$ 58 billion), dubbed the “Prihatin” package,
which included the RM20 billion (US$ 4.6 billion) allocated under the 2020 Stimulus Package. Under
the “Prihatin” package, RM100 billion (approximately US$ 23.1 billion) will be used to support
businesses (with special focus on easing access to financing and at lower interest rates for small and
medium enterprises (SME) to cope with cash flow problems) and RM128 billion (approximately 29.5
billion) will be allocated towards public welfare (with initiatives including cash-payments to households
and individuals earning below certain monthly incomes).
The implementation of the Restriction of Movement Order, has had significant ramifications for
Malaysian deals and business operations. A prohibition on mass gatherings and the closure of
business premises coupled with a shutdown of all but essential services has created transaction
uncertainty for deals generally but has also hit sectors such as hospitality, retail, aviation and tourism.
Companies with cash flow difficulties may be forced to implement retrenchment exercises and
consumer spending will inevitably be affected.
Regional private equity houses are expected to be key drivers of M&A, as foreign-currency
denominated funds are well placed to take advantage of better valuations against the Ringgit. With a
sluggish economic outlook, sellers will have to demonstrate that they are serious and credible. Sellers
will need to carry out a more stringent vendor due diligence and prepare their target company for a
serious go-to-market sale strategy. This could potentially lead to a more realistic valuation of
businesses, creating more attractive opportunities for investors.
In addition, the M&A market is also expected to benefit from the continuing corporate restructuring
exercises and consolidation strategies as companies look to unlock value, hive off non-core assets
and seek efficiencies.

Malaysia’s public takeover rules are modelled after those of the United Kingdom, Australia and Hong
Kong, where the primary rules governing public takeover bids are found in a non-statutory code of
conduct.
The main rules and principles of Malaysia law relating to public takeover bids can be found in:
(a) Malaysian Code on Take-Overs and Mergers 2016 (“Code”) and the Rules on Take-Overs,
Mergers and Compulsory Acquisitions 2016 (“Rules”);
(b) Bursa Malaysia Securities Berhad (“Bursa Malaysia”) Main Market Listing Requirements
(“Listing Requirements”);

(c) The Malaysian Companies Act 2016 (the “Companies Act”); and
(d) The Capital Market and Services Act 2007 (the “CMSA”).
The Code and Rules apply to takeovers and mergers of:
(i) corporations, real estate investment trusts and business trusts with a primary listing of
their equity securities and units on Bursa Malaysia; and
(ii) Malaysian unlisted public companies with more than 50 shareholders and net assets
of RM15 million or more.
The Code and Rules apply whether the bidders are natural persons, corporations or unincorporated
bodies, and whether resident in Malaysia or not.

Malaysia, there are a number of additional rules and principles that are to be taken into account when
(a) The rules relating to the disclosure of significant shareholdings in listed companies – These
rules are based on the Companies Act and CMSA. For further information, see also 3.4
below.
(b) The rules relating to insider dealing – These rules are found in the Listing Requirements and
the CMSA. For further information, see also 3.3 below.
securities on a regulated market – These rules could be relevant to the extent the
consideration that is offered in the public takeover bid consists of securities. These rules are
found in the Listing Requirements and CMSA.
(d) Foreign investments regulation – There is no overriding legislation, policy or regulatory body
imposing restrictions on foreign investment in Malaysia. However, foreign equity restrictions
are imposed on a sectoral basis, in particular, strategic industries such as banking, insurance,
aviation, energy and infrastructure, by the relevant industry regulator through the grant of and
administration of operating licenses. Approval from such a regulator may be required in
connection with a takeover offer. For example, the approval of Bank Negara Malaysia is
required if a financial institution changes its shareholding by 5% or more. If a mandatory offer
requires the approval of a sectoral regulator, the bidder must ensure that all the necessary
approvals are obtained as soon as practicable before dispatching the offer document. If the
necessary approvals cannot be obtained in time, an application can be made to the Securities
Commission for an extension of time to dispatch the offer document.
2.3 Supervision and enforcement by regulatory bodies

Public takeover bids are subject to the supervision and control of the following regulatory authorities:
(a) Securities Commission – The Securities Commission administers and enforces the Code and
the Rules. It has wide rule-making and enforcement powers, including regulating takeovers
and mergers of companies; and ensuring compliance with the provisions of securities laws.
(b) Companies Commission of Malaysia (“Companies Commission”) – The Companies

Commission administers and enforces the Companies Act.
(c) Bursa Malaysia – Bursa Malaysia is the Malaysian stock exchange and supervises listed
companies.

(d) Licensing authorities – Most industry sectors are regulated in Malaysia and require a license
to conduct business.

The following general principles apply to public takeovers in Malaysia. These rules are based on the
Code:
equivalent treatment; moreover, if a person acquires control of a company, the other holders
to enable them to reach a properly informed decision on the bid;
distorted;
(e) an offeror must announce a bid only after ensuring that they can fulfil in full any cash
consideration, if such is offered, and after taking all reasonable measures to secure the

(a) The table below provides an overview of the different rights and powers that are attached to
different levels of shareholding within a Malaysia-listed corporation:
Shareholding Rights
5% • Substantial shareholding level which requires the holder to

disclose its substantial shareholding to the company, the
Securities Commission and Bursa Malaysia.
• Any change in interest and cessation of substantial

shareholding is also required to be disclosed.
Over 10% The holder may block compulsory acquisition.
Over 25% The holder may block special resolutions of the company.
33% Threshold for triggering a mandatory offer.
Over 50% A mandatory offer ceases to be conditional.
75% The holder can ensure special resolutions are passed.

Malaysia law contains a number of rules that already apply before a public takeover bid is announced.
that is intended to lead towards a public takeover bid.

remain applicable. The relevant provisions in the CMSA and Listing Requirements prohibit an
individual in possession of non-public material price-sensitive information from (a) communicating the
information to a third party who is likely to deal in the securities or (b) dealing in the securities.
The rules include, among other things, that manipulation of the target company’s stock price, e.g., by
For further information on the rules on insider dealing and market abuse, see also 6.3 below.

threshold. The relevant disclosure threshold in Malaysia is 5%.
in concert (see 3.8 below). These include its affiliates, financial or professional advisers and directors.
The parties could also include existing shareholders of the target company with whom the potential
bidder has entered into specific arrangements, such as call option agreements or voting undertakings.

transparency. These rules require a company to immediately announce all inside information (for
further information on inside information, see also 6.1 below). The facts surrounding the preparation of
a (potential) public takeover bid may constitute inside information. If so, the target company must
announce this. However, the board of the target company can delay the announcement if it believes
that a disclosure would not be in the legitimate interest of the company. This could, for instance, be
the case if the target company’s board believes that an early disclosure would prejudice the
negotiations regarding a bid. A delay of the announcement, however, is only permitted provided that
the non-disclosure does not entail the risk that the public is misled, and that the company can keep
the relevant information confidential. Where the target company is the subject of rumors or
speculation about a possible bid, or there is significant movement in its share price or share turnover,
the target company must immediately make an announcement.


(a) Bidder’s obligations
(i) Announcement of firm intention – A bidder who makes or triggers the obligation to
undertake a takeover offer must immediately announce this via a press notice within
one hour of incurring the obligation. The press notice must be published in at least
three national daily newspapers. One public announcement must be published in
Bahasa Malaysia (the national language of Malaysia) and another must be published
in English. The bidder must also send written notice of the same to the:
• target’s board or its designated advisor;
• Securities Commission; and
• Bursa Malaysia (if the bidder or the target is listed).
(ii) Triggering circumstances for a holding announcement – Before the target’s board is
approached, if there is an untoward movement or increase in the volume of share
turnover of the target and there are reasonable grounds to conclude that the actions
of the potential bidder have contributed to the situation, the potential bidder must
make a brief announcement as to whether there is a takeover offer or a possible
takeover offer. Such holding announcements are typically necessitated due to:
(A) Negotiations or discussions being extended to include more than a very

restricted number of people (for example, when the bidder wishes to
approach a wider group of people to arrange financing or to seek irrevocable
commitments).
(B) Negotiations between a controlling shareholder and the bidder when:
(1) the bidder becomes the subject of rumors or speculations about a

possible takeover offer before the bidder approaches the target’s
board;
(2) there is an unusual movement in the price of the target’s voting

shares or voting rights;
(3) there is a significant increase in the turnover volume of the voting

shares or voting rights of the target; and
(4) there are reasonable grounds to conclude that the actions of the
controlling shareholder have contributed to the situation.
(C) A sale and purchase agreement for the acquisition of voting shares or voting
rights being signed, which will lead to the bidder triggering a mandatory offer
obligation.
Following the holding announcement, the bidder must:
(A) Announce its firm intention to make a takeover offer or confirm that it will not
be making a takeover offer within two months from its first preliminary
announcement unless the Securities Commission has granted an extension of
time under the Code. Once the bidder has made a takeover announcement,
the bidder must proceed with the offer and cannot withdraw unless permission
is obtained from the Securities Commission.

(B) Submit the offer document to the Securities Commission for its consent within
four days of the date of announcement.
(C) Post the offer document (as approved by the Securities Commission) within
21 days of the date of announcement to the target’s board and shareholders,
and holders of convertible securities.
(iii) Restrictions – After announcing that it does not intend to make a takeover offer, the
bidder (or persons acting in concert (“PAC”)) cannot do any of the following for six
months:
(A) Announce a takeover offer of the target.
(B) Acquire voting shares or voting rights which would trigger a mandatory offer
obligation.
(C) Procure an irrevocable commitment to acquire shares of the target which

would trigger a mandatory offer obligation.
(D) Make any statement which raises or confirms the possibility that a takeover
offer may be made for the target.
(E) Take any steps in connection with a possible takeover offer for the target.
(b) Target’s obligations
(i) Triggering circumstances for holding announcement – After being approached by the
bidder, which may or may not lead to an offer, the primary responsibility for making a
holding announcement as to whether there is a possible takeover offer will normally
rest with the target’s board. The target’s board should also keep a close watch on its
share price and volume of share turnover.
(ii) Additional triggering circumstances for a holding announcement – The target must
also make an announcement when:
(A) The company is the subject of rumors and speculations, or is subject to

unusual price movement or turnover volume of its voting shares or voting
rights, whether or not there is a firm intention to make an offer.
(B) Negotiations or discussions of a possible takeover are extended to include

more than a very restricted number of people.
(C) The target’s board is aware that there are negotiations or discussions
between a potential offeror and the holder(s) of more than 33% of the voting
shares or voting rights of the target.
(D) The target’s board approaches the bidder to acquire a controlling stake in the
target and:
(1) the target becomes the subject or rumors and speculations about a
possible takeover offer before the bidder makes an approach to the
target’s board;
(2) there is unusual movement in the price of the target’s voting shares;
(3) there is a significant increase in the turnover volume of the target’s

voting shares; and

(4) the number of bidders to be approached is to be increased to include

more than a very restricted number of people.
(iii) Announcement of firm intention – The target’s board must, within one hour of
receiving notice from the bidder, make an announcement to the public through a
press notice or to Bursa Malaysia (if the company is listed). The announcement must
also be sent to all of the target’s shareholders within seven days of receiving the
notice.
3.7 Due diligence

Due diligence in a takeover offer, whether hostile or recommended, is limited. This is due to a
combination of insider trading laws (see 3.3 above) and the fact that a takeover offer cannot easily be
withdrawn once announced. Due diligence is generally limited to information in the public domain.
Where a bidder plans to acquire a controlling block of shares in the target from a controlling
shareholder, it can as part of that arrangement conduct due diligence enquiries on information relating
to the target that is in the possession of that shareholder. In practice, the ability of the bidder to
conduct due diligence on the target’s records can be limited, as the other substantial shareholders of
the target can resist. The target must give similar information to another bona fide potential bidder that
makes a competing takeover offer, at that bidder’s request (see 3.5 above).
The following information is in the public domain for a public-listed company:
(a) Information lodged at the Companies Commission, including:
(i) the company’s constitution; and
(ii) corporate forms, such as the forms for the return of allotment of shares and
notification of change in the register of directors, managers and secretaries.
(b) Information lodged pursuant to the Listing Requirements, including:
(i) announcements;
(ii) annual audited accounts;
(iii) quarterly financial reports;
(iv) circulars to shareholders;
(v) annual reports; and
(vi) prospectuses.
(c) Analysts’ research reports, which may include information on the target’s:
(i) industry sector;
(ii) potential earnings;
(iii) future business prospects; and
(iv) expected price range for its shares.

For the purpose of the Malaysia takeover bid rules, persons “act in concert” if:
(a) pursuant to an agreement, arrangement or understanding, they cooperate to acquire jointly or

severally voting shares of a company for the purpose of obtaining control of that company; or
(b) pursuant to an agreement, arrangement or understanding, they cooperate to act jointly or

severally for the purpose of exercising control over a company.
mandatory general offers. If one or more persons in a group of persons acting in concert acquire
voting securities as a result of which the group in the aggregate would pass the 33%-threshold, the
members of the group will have a joint obligation to carry out a mandatory general offer, even though
the individual group members do not pass the 33%-threshold.
The main methods of acquiring control of a public company in Malaysia are:
(a) Takeover offer – The shareholders of the target are asked to accept an offer that has been
made by a bidder. This is the most common method of obtaining control. There are two types
of offer:
(i) Voluntary offer – This is where an offer is made voluntarily and simultaneously to all
the shareholders of the target to acquire their shares in the target.
(ii) Mandatory offer – This occurs when an acquirer is entitled to exercise control or
meets certain takeover thresholds. Typically, the bidder signs a share purchase
agreement to purchase a block of shares which, in turn, triggers the general
requirement for an announcement.
(b) Scheme of arrangement – The company collaborates with the bidder for the bidder to take
over the target. The target’s shareholders will then vote on a takeover proposal put to them by
the collaborating parties. The target’s assets or shares are transferred to the bidder under a
statutory court process (section 366, Companies Act) or other relevant applicable legislation.
This method is commonly used by financial institutions and insurance companies to transfer
obligations owed to account and policyholders. A scheme of arrangement is now included
within the definition of a takeover under the Rules.
(c) Acquisition of assets and liabilities – The target sells its assets and liabilities to the bidder
through an ordinary resolution of the target’s shareholders (requiring an approval of over 50%,
unless it is a major disposal or as otherwise set out in the company’s constitution). This
controversial method has led to certain public-listed entities being taken over and privatized.
4.2 Voluntary takeover offer

In a voluntary takeover, the offer document must include a condition that makes the takeover offer
conditional on the bidder receiving acceptances that result in the bidder holding an aggregate of more
than 50% of the target’s voting shares. In computing the level of acceptances for a voluntary offer, the
bidder must not aggregate the voting shares of its PAC unless such persons are joint offerors.

The bidder can set a higher acceptance threshold (but the threshold must be more than 50%). This is
especially significant when the bidder wants to compulsorily acquire the voting shares from minority
shareholders during the compulsory acquisition process.
In addition, the bidder cannot impose a condition the fulfilment of which depends on either:
(i) an event that is within the control or is a direct result of the bidder’s or PAC’s action; or
(ii) the subjective interpretation or judgment of the bidder or its PAC.
If a voluntary offer is contemplated, a memorandum of understanding or undertaking should only be

obtained, in limited circumstances, from key shareholders before making a takeover offer. This is
because the mandatory general offer requirements are triggered by arrangements entered into by a
bidder that would result in its holding more than 33% of the voting rights in a company. The Rules
provides that a voluntary offer becomes a mandatory offer if the bidder or PAC acquires voting shares
or voting rights (other than through acceptances) that trigger an obligation to make a mandatory offer.
Once a takeover offer has been announced, it is common for the bidder to seek undertakings from
key shareholders to secure their acceptance of the offer. The requirement to make a public
announcement is triggered in certain circumstances, including when a bidder intends to seek
irrevocable commitments. In that case, the bidder must make the announcement. The offer document
should disclose undertakings.
However, unless approved by the Securities Commission, the bidder or its PAC are not permitted to
make arrangements with selected shareholders, if such arrangements have favorable conditions
which are not being extended to all of the target’s shareholders either:
(i) during a takeover offer;
(ii) when a takeover offer is reasonably in the bidder’s contemplation. This is a question of fact to
be determined by the Securities Commission; or
(iii) during the six-month period following the close of a takeover offer.
Note also that where the takeover offer is successful, there are also restrictions on the ability of an
offeror to acquire further securities on more favorable terms than the previous takeover offer, within 6
months immediately after the close of the takeover offer.
4.3 Mandatory takeover offer

No condition can be attached to a mandatory offer other than the condition that the offer is subject to
the bidder having received acceptances which would result in the bidder and its PAC holding in
aggregate more than 50% of the target’s voting shares (see above, “Voluntary takeover offer”). No
other condition can be attached.
If the bidder has acquired, already holds or is entitled to acquire more than 50% of the target’s voting
shares when the offer is made, the offer shall be unconditional (unless approved by the Securities
Commission).
The bidder must make a mandatory takeover offer for voting shares when the bidder (or PAC):
(i) Acquires, holds or exercises control of more than 33% or more of the target’s voting shares
(or is entitled to do so).
(ii) Already holds between 33% and 50% of the target’s voting shares and then acquires more
than 2% of the target’s voting shares in any six-month period.

(iii) Acquires 33% or less of the target’s voting shares and the Securities Commission exercises
its discretion to trigger the mandatory general offer requirements. The mandatory general
offer requirements are triggered in cases where despite the bidder and its PAC holding 33%
or less of the target’s voting shares, the Securities Commission has established that the
bidder or PAC has, in fact, obtained control of the target (more than 33% of the target’s voting
shares). The Securities Commission can apply certain qualitative and quantitative tests to
determine whether control has been obtained. The Securities Commission can also require
confirmation from the bidder and target, the bidder’s and target’s boards and their respective
advisers.
An exemption from the mandatory general offer requirements can also be obtained from the
Securities Commission, depending on the circumstances of the case.
5 Timeline
As a general rule, the takeover bid process for a mandatory general offer is similar to the process that
applies to a voluntary general offer, with certain exceptions.
The table below contains a summarized overview of the main steps of a typical voluntary general offer
process under the Code.
Step
1. Announcement day (T):

• The bidder must immediately announce the proposed takeover offer by press
notice, within one hour of incurring the obligation to make a takeover offer.
• The bidder must also send written notice of the announcement to the target’s board
or its designated advisor, the Securities Commission and Bursa Malaysia (if the
bidder or the target is listed).
• The target’s board must inform the public (by way of press notice) or Bursa
Malaysia (if the target is listed) within one hour of receiving the written notice.
• The offer period begins on the date of the press notice or notice of takeover offer
(whichever is earlier) and expires on either:
o the first closing date of the takeover offer; or
o the date when the offer lapses or is withdrawn (if this is a later date).
2. T plus 4:
• The bidder submits the draft offer document to the Securities Commission for
consent.
3. T plus 7:
• The target’s board notifies all of the target’s shareholders that it has received notice
of the takeover offer.

Step
4. T plus 21:
• The bidder posts the offer document (as consented to by the Securities
Commission) to the target’s board and shareholders (“D”).
5. D plus 10:
• Within 10 days of posting the offer document, the target’s board issues a circular
with comments, opinions and information on the takeover offer to the target’s
shareholders.
• The independent adviser posts its circular to the target’s board and shareholders
6. D plus 21:
• For at least 21 days from the posting of the offer document, the bidder must keep
the takeover offer open.
• If the bidder revises their offer, the offer must be kept open for at least another 14
days from the date of the posting of the revised offer to the target’s shareholders.
• The bidder must also make an announcement of the revised offer to the public by
way of press notice and Bursa Malaysia (if the target is listed).
7. D plus 46:
• The bidder cannot revise the offer after 46 days from the date of posting of the offer
document (if a competing bid is made during the offer period, the posting of the
offer document is deemed to be the day on which the competing takeover offer
document was posted).
8. D plus 60:
• Within 60 days of posting of the offer document, the takeover offer lapses if the
bidder has not acquired more than 50% of the voting shares.
• This is the last date to close the offer if the offer becomes (or is declared)
unconditional due to acceptances (50% condition has been fulfilled) before D plus
46.
9. D plus 74:
• This is the last date to close the offer if the offer becomes or is declared
unconditional as to acceptances after D plus 46.
10. D plus 81:

• For voluntary offers, this is the last day to fulfil all conditions attached to the offer
(other than the acceptance condition).
11. D plus 95
• For voluntary offers, this is the last day to close the offer.
Set out below is an overview of the main steps for a voluntary public takeover in Malaysia.

Start A + 21
process A Day A+4 A+7 (D) D + 10 D + 21 D + 46 D + 60 D + 74 D + 81 D + 95
• Bidder announces Bidder submits the Target dispatches Bidder posts offer • Target issues a • First closing Bidder cannot • Takeover offer Last date to close For voluntary offers For voluntary offers
proposed takeover draft offer written notice to document (as circular with date revise the offer lapses if bidder the offer if the offer - last day to fulfill all - last day to close
offer by press document to the shareholders that it cleared by the comments and after 46 days (from has not becomes (or is conditions (other offer
• If bidder revises
notice Securities has received notice Securities information on D) received declared) than acceptance
offer, the offer
Commission for of the takeover Commission) to takeover offer acceptances for unconditional after condition)
• Offer period must be kept
clearance offer target’s board and to its more than 50% D + 46
begins on earlier open for at least
shareholders shareholders of the voting
of (i) the date of another 14 days
shares
the press notice or • Independent from the date of
(ii) notice of adviser posts its the posting of • Last date to
takeover offer, and circular (as the revised offer close the offer if
expires on either: cleared by the to the target’s the offer
o the first closing Securities shareholders becomes (or is
date of the Commission) to declared)
takeover offer; the target’s unconditional
or board and before D + 46
shareholders
o the date when
the offer
lapses or is
withdrawn (if
this is a later
date)
21 days within 10 days
at least 21 days
46 days

6 Takeover Tactics
A person who is in possession of “inside information” that relates to any securities listed on Bursa
Malaysia is prohibited from:
(a) acquiring or disposing, or entering into an agreement for or with a view to the acquisition or
disposal of, such securities;
(b) procuring, directly or indirectly, an acquisition or disposal of, or the entering into an agreement
for or with a view to the acquisition or disposal of such securities dealing in those securities;
or
(c) communicating (directly or indirectly) the insider information to another person if it knows or
ought reasonably to know that the other person would or would be likely to deal in those
securities or procure a third person to deal in those securities.
This difficulty generally arises when a bidder is given the opportunity to conduct due diligence on the
target company before a (potential) takeover bid is made. In the event that inside information is
unearthed during due diligence, the same inside information should be disclosed to the public before
a takeover bid is made. This will be in many circumstances a difficult exercise, and a large grey area
will exist as to whether certain information constitutes inside information.

A bidder who makes or proposes a takeover offer must immediately make an announcement of its
firm intention via a press notice. The press notice must be published in at least three national daily
newspapers.
Before an approach has been made to the target company or following an approach to the target
company, if the target company is the subject of rumor or speculation about a possible bid, or there is
undue movement in its share price or a significant increase in the volume of share turnover, and there
are reasonable grounds for concluding that it is the potential bidder’s actions which have directly
contributed to the situation, a holding announcement is required to be made.

The basic legal framework regarding insider dealing and market abuse under Malaysia law is set forth
in the CMSA.
relation to trading in listed securities. See 3.3 and 6.1 for more information.
6.4 Stake building

Although stake building is possible, a potential bidder should be aware that it will incur an obligation to
publicly disclose its interests in the target when it holds 5% or more of the voting shares (and each
change in percentage level thereafter). In addition, a mandatory general offer is triggered if a potential
bidder acquires 33% or more of the securities of a public company. This obliges the potential bidder to
make an offer for all the remaining securities at the highest price paid by it within six months of a
mandatory general offer.
In addition, a stake building exercise will make it more difficult for a potential bidder to invoke the
squeeze-out mechanism of minority shareholders, as shares acquired during stake building before
launch of the takeover bid cannot be taken into account in determining if the squeeze-out threshold of
90% is met.

Arrangements by way of an irrevocable undertaking to sell shares are not uncommon in Malaysia.
Under this arrangement, a potential bidder is given the assurance that it will receive a certain level of
acceptances for its bid. Typically, a potential bidder will seek to receive undertakings in respect of just
over 50% of the total voting rights of the target company.
6.6 Break fees

It is not common to agree to a break fee in the event of an unsuccessful bid and there is no specific
provision addressing break fees in the Code.
However, the Companies Act provides that a break fee cannot be paid by the target, as this would be
providing financial assistance for the purpose of, or in connection with, the purchase of its own
shares.

Without an ordinary resolution passed in a shareholder meeting, the target’s board cannot take any
action to frustrate an offer during the offer period or if it has reason to believe that a bona fide
takeover offer is imminent. A shareholder meeting is required to:
(a) Issue any shares.
(b) Issue or grant options in relation to any shares.
(c) Create, issue or permit the issue or subscription of any shares.
(d) Sell, dispose of, agree to sell or acquire the target’s assets in a material amount.
(e) Enter into contracts for and on behalf of the target (or allow contracts to be entered into),
otherwise than in the target’s ordinary course of business.
(f) Dispose of any asset or liability that is a condition of the takeover offer.
(g) Sell treasury shares into the market.
(h) Cause the target or any of the target’s subsidiaries or associated companies to:
(i) purchase or redeem shares in the target; or
(ii) provide financial assistance for any such purchase or redemption.
However, a shareholder meeting is not required if any of the proposed actions were done pursuant to:
(i) A bona fide contract entered into before receipt of the takeover offer which was not designed
to frustrate the target’s takeover offer or change the target’s activity.
(j) An obligation or other special circumstance which the Securities Commission approves in
writing.

Takeover
7.1 Squeeze-out
Once a takeover offer has been made, the bidder can compulsorily purchase the shares from the
remaining minority shareholders if the bidder acquires 90% of the nominal value of the shares of that
class for which the offer has been made, within four months of making that offer. This excludes any

shares already held by the bidder and its PAC at the date of the takeover offer. This squeeze-out can
also be exercised in respect of convertible securities.
A minority shareholder can require the bidder to acquire its shares on the terms of the takeover or
other terms that may be agreed if both:
(a) the bid has been accepted by the holders of at least 90% in value of all the shares; and
(b) the offer period has not expired.
7.2 Sell-out
If the takeover bid results in the bidder or its nominees holding 90% or more of the total number of
issued shares of the target company, the shareholders who have not accepted the offer have a right
to require the bidder to acquire their shares on the same terms as those offered under the offer.
7.3 Restrictions to acquire securities after the takeover bid period

Unless approved by the Securities Commission, where a general offer has been announced or posted
but is withdrawn or lapses, the bidder and its concert parties are prohibited, within a period of 12
months from the date such offer is withdrawn or lapses, from either announcing the offer or possible
offer for the target company or acquiring any voting rights of the target company if the bidder or its
concert parties would thereby become obliged to make a mandatory general offer under the Code.
In addition, unless approved by the Securities Commission, neither the bidder nor its PAC may, within
six months of the closure of any previous offer made by it which became or was declared
unconditional in all respects, make a second offer to, or acquire any securities from, any shareholder
in the target company on terms better than those made available under the previous offer.
8 Delisting
Following a mandatory or voluntary general offer, if the bidder exercises its squeeze-out rights, an
application is made by the listed target company to Bursa Malaysia for confirmation of delisting.
Delisting of a company can be effected by the stock exchange or voluntarily by the target. Bursa
Malaysia will automatically suspend trading in the target’s shares when less than 10% of the shares
are held by shareholders other than the bidder.
Bursa Malaysia will also delist the target in respect of the shares which have been the subject of a
compulsory purchase resulting in the bidder emerging as the sole shareholder of the target company.
However, in cases where the bidder has not managed to obtain acceptances amounting to 90% of the
issued shares of the target held by others prior to the commencement of the takeover offer but has
succeeded in making its offer unconditional, it will be necessary for the target to request delisting from
the stock exchange, i.e., Bursa Malaysia.
A listed company cannot request delisting unless:
(a) The company convenes a general meeting to obtain approval from its shareholders and
sends a circular, in the prescribed form, to the shareholders. A separate meeting and circular
may be necessary for holders of any other class of listed securities.
(b) The resolution for withdrawal is approved by a 75% majority of the shareholders (or holders of
any other class of listed securities) present and voting either in person or by proxy at the
meeting. The proportion of shareholders or holders objecting to the withdrawal at that meeting
must not be more than 10% in value.
(c) The shareholders (or holders) are offered a reasonable cash alternative or other reasonable
alternative for their shares (exit offer).

(d) An independent adviser has advised and made recommendations to the shareholders in
connection with the:
(i) listing withdrawal; and
(ii) fairness and reasonableness of the exit offer.
If the bidder has achieved acceptances rendering the offer unconditional, but is unable to exercise a
compulsory purchase, the bidder will have to launch a second takeover offer to satisfy the exit offer
requirement.

Brian Chia and Stephanie Phua in the Kuala Lumpur office are the most appropriate contacts within
Wong & Partners* for inquiries about public M&A in Malaysia.
Brian Chia Stephanie Phua

Kuala Lumpur Kuala Lumpur
brian.chia@wongpartners.com stephanie.phua@wongpartners.com
+60 3 2298 7999 +60 3 2298 7895
*Wong & Partners is a member of Baker & McKenzie International, a Swiss Verein.

Mexico
1 Overview
There are two securities exchanges in Mexico: the Mexican Stock Exchange (Bolsa Mexicana de
Valores; www.bmv.com.mx and, as of 25 July 2018, the Institutional Stock Exchange (Bolsa
Institucional de Valores; www.biva.mx). Securities of both Mexican and foreign issuers can be listed
and traded on both Stock Exchanges. The Mexican equity market is highly concentrated and the top
five companies by market value make up approximately 49% of the index. The index is weighted
heavily in favor of export companies as exports account for approximately one-third of Mexico’s gross
domestic product.
Recently public M&A activity has slowed and only one hostile takeover has been attempted, which
failed after a Supreme Court of Justice case. This was the proposed acquisition of control by Grupo
Mexico of Grupo del Pacífico in which the Supreme Court of Justice ruled that publicly listed
companies may adopt necessary – albeit not absolute – corporate measures to deter hostile
takeovers.

2.1 Key regulatory bodies
The main regulatory body of the Mexican securities market is the National Banking and Securities
Commission (Comisión Nacional Bancaria y de Valores; or the “CNBV”). The CNBV must approve a
public M&A transaction and has the powers and authority to enforce the regulatory framework
applicable to takeover bids, including the imposition of fines. In addition, commercial litigation may be
pursued by affected parties and criminal penalties may be imposed by the courts.
Depending on the value, antitrust or sector considerations, takeovers and M&A transactions in the
Mexican securities market will also be subject to scrutiny by other regulatory bodies. For example, if
the transaction exceeds the antitrust thresholds or is suspected of having anticompetitive effects, the
Mexican Antitrust Commission’s (Comisión Federal de Competencia Económica) prior clearance will
be required; if the transaction is in a specifically regulated sector, such as telecommunications,
antitrust clearance would be required from the Federal Telecommunications Commission (Comisión
Federal de Telecomunicaciones); and if the transaction entails an investment in excess of the yearly
threshold defined for such purposes, or is effected in a sector of the economy which has not yet been
liberalized, then approval by the Foreign Investment Commission (Comisión Nacional de Inversiones
Extranjeras) will be required.
2.2 Legislation and rules

Pursuant to Mexican law, the regulation of securities issuers and markets, including public M&A
transactions, is a reserved matter which may only be regulated by the federal legislature and,
consequently, state legislatures cannot legislate on the subject.
The regulatory framework applicable to public M&A transactions (both voluntary and hostile) is as
follows:
• The Securities Market Law (Ley del Mercado de Valores).
• The National Banking and Securities Commission Law (Ley de la Comisión Nacional Bancaria
y de Valores).
• General rules applicable to the issuers of traded securities and other participants in the
securities market (Disposiciones de carácter general aplicables a las emisoras de valores y a
otros participantes del mercado de valores), issued by the CNBV.

• General rules applicable to the entities and issuers supervised by the CNBV that contract
external audit services of basic financial statements (Disposiciones de carácter general
aplicables a las entidades y emisoras supervisadas por la Comisión Nacional Bancaria y de
Valores que contraten servicios de auditoría externa de estados financieros básicos).
• Internal rules of the Mexican Stock Exchange (Reglamento interior de la Bolsa Mexicana de
Valores) and the Institutional Stock Exchange (Bolsa Institucional de Valores).
• Federal commercial and civil legislation, such as the General Law on Business Entities (Ley
General de Sociedades Mercantiles), securities and commercial market practices (usos
bursátiles y mercantiles) and the Federal Civil Code (Código Civil Federal).
• The Commerce Code (Código de Comercio).
• The General Law of Negotiable Instruments and Credit Operations (Ley General de Títulos y
Operaciones de Crédito).
• Other specialized laws may apply to the transaction, such as the Federal Antitrust law (Ley
Federal de Competencia Económica).

• Equal treatment: all security holders must be treated equally, regardless of the class or series
of securities they hold.
• Continuity of minority protection rights: minority security holders are afforded a number of
statutory minority protection rights (further discussed below) in connection with the
appointment of directors, call for shareholders’ meetings, opposition and deferral of adoption
of resolutions and responsibility of administrators. Additionally, the by-laws of the issuer can
provide for additional rights. The statutory minority protection rights are not affected by a bid.
• Disclosure and information: all security holders must be equally and sufficiently informed in a
timely fashion in order to make an educated decision on the bid, and are entitled to receive
the offering memorandum, information related to previous arrangements or understandings,
the board of directors’ opinion, the independent advisor’s opinion and any other information
containing material terms and conditions of the offeror’s bid.
• Board and officers duty of loyalty and diligence: the members of the board of directors, those
individuals appointed to participate in any of the committees of an issuer and the officers of
the issuer have an absolute duty of loyalty and care, and shall act in the best interest of the
issuer and its equity holders as a whole.
• Mandatory cash-out or squeeze-out: minority shareholders cannot be forced to sell their

securities in the target company, even if the intent of the bidder is to acquire the control or the
totality of the securities of the target.

Foreign investments are not restricted in Mexico and are only subject to reporting upon completion (as
opposed to prior authorization), unless they relate to certain specific activities.
The purchase by a foreign investor of a direct or indirect controlling interest in a Mexican public
company conducting sensitive activities (as set out below),requires the prior approval of the Ministry
of Economy and the National Commission of Foreign Investment, i.e., before final completion of the
transaction. In relation to non-Mexican investors incorporated in Mexico, the requirement for prior
approval is triggered by crossing a certain percentage threshold of the share capital or voting rights.
The following are the foreign investment threshold percentages per sensitive activity:

• Up to 10% in cooperative production companies.
• Up to 49% in (i) companies that manufacture and commercialize or distribute explosives,

firearms, cartridges, ammunitions and fireworks, not including the acquisition and use of
explosives for industrial and extraction activities nor the preparation of explosive compounds
for use in said activities; (ii) printing of newspapers for circulation solely throughout Mexico;
(iii) series “T” shares in companies owning agricultural, ranching and forestry lands; (iv) fresh
water, coastal and exclusive economic zone fishing not including fisheries; (v) integral port
administration; (vi) port pilot services for inland navigation under the terms of the law
governing the matter; (vii) shipping companies engaged in commercial exploitation of ships for
inland and coastal navigation, excluding tourism cruises and exploitation of marine dredges
and devices for port construction, conservation and operation; (viii) supply of fuel and
lubricants for ships, airplanes and railway equipment; (ix) broadcasting (this maximum foreign
investment will be subject to the reciprocity between each country where the investor or
economic agent who exercises control is from, directly or indirectly); and (x) regular and non-
regular national air transport service, international air transport service, non-regular air taxi
mode and specialized air transport service.
Foreign investment participation limits in the activities and companies mentioned above may not be
exceeded directly nor through trusts, contracts, partnerships or by-law agreements, pyramid schemes
or other mechanisms granting any control or a higher participation than the limit stated.
Foreign investment participation greater than 49% in port services in order to allow ships to conduct
inland navigation operation, such as towing, mooring and barging; shipping companies engaged in the
exploitation of ships solely for high-seas traffic; concessionaire or permissioned companies of air
fields for public service; private education services for pre-school, elementary, middle school, high
school, college or any combination; legal services; construction, operation and exploitation of general
railways and provision of public railway transportation services are activities that require prior
authorization from the National Commission of Foreign Investment.
The following the activities are reserved for the Mexican government: (i) exploration and extraction of
oil and other hydrocarbons; notwithstanding the foregoing, the Federal Government through the
National Hydrocarbons Commission (also known as CNH) is authorized to award and execute
agreements with private entities for the exploration and extraction of hydrocarbons; (ii) planning and
control of the national electric system, as well as the public services of transmission and distribution of
electricity; (iii) generation of nuclear energy; (iv) radioactive minerals; (v) telegraph; (vi)
radiotelegraphy; (vii) postal service; (viii) bank note issuing; (ix) mining of coins; (xi) control,
supervision and surveillance of ports, airports and heliports; and (xii) any others as expressly provided
by applicable law.
The following activities are reserved for Mexicans or Mexican companies with a foreigners’ exclusion
clause: (i) domestic land transportation for passengers, tourism and freight, not including messenger
or courier services; (ii) development banks; and (iii) rendering of professional and technical services
as prescribed by applicable legal provisions.
Foreign investors may not participate directly in the activities and companies mentioned above nor
through trusts, contracts, partnerships or by-law agreements, pyramid schemes or other mechanisms
granting any control or participation.

3.1 Shareholders’ rights in publicly traded companies
Shareholding Rights
One share of the capital • In the absence of the minimum number of members of the
stock of the publicly traded audit committee and when the board of directors has not
company (the “Company”) appointed any interim members according to the provisions
of Article 24 of the Mexican Securities Law, any
shareholder may request the chairperson of the board to
call, within a term of three calendar days, a general
shareholders’ meeting which shall make the corresponding
appointment. In the event the call is not made within this
period, any shareholder may appear before the judicial
authority of the Company’s legal domicile to request such
court to call the shareholders’ meeting. In the event that
the meeting cannot be convened or, if convened, the
appointment is not made, the judicial authority of the
Company’s legal domicile, upon request and proposal by
any shareholder, shall appoint the corresponding directors,
who shall hold office until the general shareholders’
meeting makes the final appointment.
• To call for a general shareholders’ meeting when (i) none
have been held during the last 2 preceding tax years, or (ii)
when the ones held during such period have not discussed
the matters set forth in Article 181 of the General Business
Entities Law.
• To attend and vote at general shareholders’ meetings,
except in those cases when the CNBV has authorized the
Company to issue limited-voting rights shares, restricted-
voting shares or non-voting shares (i) not exceeding 25%
of the outstanding capital of the Company or such higher
percentage authorized by the CNBV and provided that
such shares shall be converted into ordinary shares within
5 years after placement, or (ii) in excess of 25% of the
outstanding capital of the Company on the basis of the
holder’s nationality.
• To have access, at the Company’s offices, to the
information and documents related to each of the items
included in the agenda of the relevant shareholders’
meeting, free of charge and at least 15 calendar days
before the date of the meeting.
• To prevent the general shareholders’ meeting from
considering any issues submitted in the agenda under the
heading of general issues or another analogous concept.
• To be represented at the shareholders’ meetings, by
persons who evidence their representation by means of
proxy forms prepared by the Company and made available
to such shareholders through stock exchange

Shareholding Rights
intermediaries or at the Company, at least 15 calendar
days before such meeting.
• To enter into shareholders’ agreements, as provided in
Article 16 of the Securities Market Law.
5% or more (at a general To veto a resolution approving measures intended to prevent the
shareholders’ meeting) acquisition of shares that will transfer the control of the Company
to third parties or to the existing shareholders, whether directly or
indirectly (poison pill actions).
5% or more of the capital The filing of any liability action resulting from acts or omissions of
stock of the Company (with management or the members of the surveillance committees of the
or without voting rights) Company.
For each 10% of the capital • To appoint and revoke the appointment of a member of the
stock of the Company board of directors at a shareholders’ meeting.
• To request, from the chairperson of the board of directors
or of the audit and corporate practices committees, the
calling of a general shareholders’ meeting.
• To request the deferment of the vote on any issue with
respect to which they consider themselves insufficiently
informed. The deferment will be in place for three calendar
days and will not require the issuance of a subsequent call
notice for the meeting to be reconvened.
20% or more of the capital To oppose in court, individually or in the aggregate, the resolutions
stock of the Company of the general shareholders’ meetings with respect to which they
have voting rights, including those with limited or restricted voting
rights.
75% or more of the capital Constitutes quorum to hold an extraordinary shareholders’ meeting
stock of the Company whereby any of the following resolutions, among others, may be
adopted pursuant to the affirmative vote of 50% or more of the
capital stock of the Company: change in the corporate purpose;
transformation; merger; and split-off.
95% or more of the capital To request the cancellation of the registration of the securities of
stock of the Company the Company in the National Securities Registry.
3.2 Use of NDAs and due diligence

Publicly traded companies have continuing disclosure obligations and, therefore, the following
information must be made available to the general public:
• Reports concerning corporate actions.
• Quarterly reports, including financial statements, and the observations and analysis of the
administration regarding the operations’ results and the financial condition of the Company.

• Annual audited financial statements. The opinion of the independent auditors must comply
with international audit norms. For foreign issuers the opinion must comply with audit norms of
their home country).
• Annual reports regarding the activities of the audit committee and the corporate practices
committee.
• Reports concerning mergers, split-offs, acquisitions or sales of assets.
• Reports of relevant events.
• Reports concerning policies and operations.
• Reports about the positions maintained by the Company in derivatives.
• Any other information determined by the CNBV.
Additional documentation or information may be requested and must be delivered to the offeror in a
public M&A transaction, provided it does not entail the disclosure of non-public material information
breaching the restrictions established under the Securities Market Law. It is common practice to
execute a non-disclosure agreement prior to the delivery of information to an offeror.

See 3.1.
3.4 Method of acquisition

As further discussed in 4 (Effecting a Takeover), a publicly traded company may be acquired via a
public tender offer, whereby the totality or a part of the stock of the publicly traded company is
acquired by the offeror, either through a friendly takeover or a hostile takeover. Hostile takeovers are
extremely rare in Mexico.
Friendly takeovers are either voluntary or mandatory public tender offers, recommended by the board
of directors of the publicly traded company. The minimum term of any public tender offer shall be 20
business days. The offer must be allocated proportionally, regardless of the time of acceptance. The
offeror may change the terms of its offer before its completion if the new terms are more favorable for
the offerees or if it was so established in the corresponding brochure. If the CNBV considers the
amendments to the terms of the offer to be significant, the term for the offer must be extended for an
additional period of at least five business days. In any case, the public must be informed of such
amendments to the offer through the same means pursuant to which the offer was originally made.
The offerees that had accepted the offer shall have the right to decline in the event of significant
amendments.
The procedure and requirements for mandatory tender offers must be followed when the offeror
intends to acquire or attain, directly or indirectly, 30% or more of the common stock of a publicly
traded company, through one or several simultaneous or successive transactions. In such event, the
following rules apply:
• The offer shall be extended to the different series of shares of the Company, including those
with limited or restricted voting rights and non-voting shares.
• The consideration offered must be the same, regardless of the class or type of shares.
• The offer shall be made for (i) the percentage of the capital stock of the Company equivalent
to the proportion of common stock intended to be acquired, with respect to the total number of
shares or for 10% of such capital, whichever is greater, provided that the acquisition does not

imply the offeror taking control; or (ii) 100% of the capital stock when the buyer intends to
acquire control (unless the CNBV has authorized a smaller percentage).
• The buyer shall indicate the maximum number of shares the offer covers and, if applicable,
the minimum number on which such acquisition is conditioned.
For the purposes of the Securities Market Law, “control” means the capacity of one person or a group
of persons to carry out any of the following:
• To impose, directly or indirectly, any decision at a general shareholders’ meeting (or

equivalent body) or to appoint or remove the majority of the directors (or their equivalent).
• To hold ownership rights allowing a person to directly or indirectly exercise voting rights in
excess of 50% of the capital stock of a Company.
• To dictate, directly or indirectly, the management, strategy or principal policies of a Company,

either through the ownership of securities, by virtue of an agreement or otherwise.
Any acquisitions contravening these requirements shall be null and void and the persons involved
shall be liable vis-à-vis the other shareholders, who may be indemnified for losses and damages.
3.5 Insider dealing rules

See 6.1.

(a) Initial disclosure threshold: any person or group of persons acquiring, directly or indirectly, in
the stock exchange or over the counter, through one or several transactions, simultaneously
or successively, shares of a publicly traded company resulting in an ownership interest equal
to or greater than 10% (but not exceeding 30%), must disclose such circumstance to the
investing public the next business day following the acquisition. Furthermore, such person or
group of persons shall inform of its intention of whether or not to acquire a significant
influence in the publicly traded company.
(b) Subsequent disclosure thresholds
(i) Related parties of publicly traded companies who directly or indirectly increase or
decrease their capital interest by 5% through one or several simultaneous or
successive transactions must disclose such circumstance to the investing public the
next business day following the acquisition, as well as their intent to acquire or not a
significant influence (or increasing it) in such publicly traded companies.
(ii) Any person or group of persons who, directly or indirectly, own 10% or more of the
shares of a publicly traded company, as well as the members of the board of directors
and relevant executive officers of such persons, must inform the CNBV, and the
investing public when applicable, of the acquisitions or sales made of such securities.
(c) Aggregation of interests of “concert group”
“Group of persons” as used under the Securities Market Law, means those individuals or legal
entities having an agreement amongst each other to aggregate their interests to take
decisions in concert. It is presumed, unless otherwise demonstrated, that the following
constitute a “group of persons”:
(i) Any individuals related either by blood, marriage or civil kinship up to the fourth
degree, the spouse and concubine.

(ii) Entities belonging to the same consortium (group of entities linked by one individual or
a group of persons having control over the same) or corporate group (group of entities
organized under direct or indirect capital stock participation structures, in which the
same company maintains control over such entities), and the persons having control
over such entities.
3.7 Minority shareholders’ rights

The Securities Market Law establishes minimum percentages as to minority shareholders’ rights.
These minimum percentages may be further decreased in the Company’s by-laws, thereby
broadening these protections to holders of fewer shares.
Please refer to the table in 3.1 for further information on minority shareholders’ rights provisions under
the Mexican Securities Law.

When an offeror intends to acquire or attain, directly or indirectly, 30% or more of the common stock
of a Company, a mandatory tender offer must be carried out and the offer shall be made for the
percentage of the capital stock of the Company equivalent to the proportion of common stock
intended to be acquired, with respect to the total number of shares or for 10% of such capital,
whichever is greater, provided that the acquisition does not imply the offeror taking control.
When the offeror intends to acquire or attain, directly or indirectly, control, a mandatory tender offer
must be carried out and the offer shall be made for 100% of the capital stock (unless the CNBV
authorizes a smaller percentage).
This section addresses a scenario where the offeror intends to maintain the listing of the public
company after completion of the transaction. See 8 (Delisting) for information on the privatization
process where a delisting is contemplated.
There are two main forms of tender offer in Mexico:
(i) a voluntary tender offer, in which an offeror voluntarily makes an offer for all the voting
securities issued by the Company; and
(ii) a mandatory tender offer, which an offeror is required to make if, as a result of an acquisition
of securities, it surpasses a 30% threshold of the voting securities of the target.
An offeror that intends to launch a tender offer must include a draft prospectus and offer notice with its
notification to the CNBV, among other transaction documents.
4.1 Voluntary tender offer

As discussed in 3.4, the offeror is free to make the tender offer subject to prior approval from the
CNBV. The offeror is free to determine the price and the form of consideration offered to the target
shareholders:
(a) The minimum term of the offer must be 20 business days.
(b) The allocation of the offer must be pro rata among shareholders, regardless of the
acceptance term.
(c) The offer may be amended at any time prior to its conclusion, as long as the amendments
improve the conditions originally offered to the shareholders. The offer may be extended for a
minimum of five additional business days if the aforementioned amendments are deemed

relevant by the CNBV. Any persons who accepted the offer before the amendments were
made may revoke their acceptance without any liability.
(d) The offeror is forbidden from executing, directly or indirectly, any transaction with the
securities that are subject to the offer, from the time the offer was made until its conclusion.
4.2 Mandatory tender offers

As discussed in 3.4, a mandatory tender offer is triggered as soon as a person or group of persons
acting in concert as a result of an acquisition of voting securities, holds (directly or indirectly) more
than 30% of the (actual outstanding) voting securities of the target company. In addition to those
requirements applicable to voluntary tender offers, the following apply:
(a) the offer will have to be made to all series of shares of the target company, including those
with limited voting or without voting rights;
(b) the consideration offered must be the same for all securities;
(c) (1) in the event the offeror intends to limit its ownership interest to a percentage that does not
imply control of the target company, the offer shall consist of an offer to purchase (i) the
percentage of the shares which equals the proportion of shares intended to be acquired
regarding the total amount of the shares or (ii) 10% of the capital stock of the target company,
whichever is greater; and
(2) in the event the offeror intends to acquire control of the target company, the offer shall
consist of an offer to purchase 100% of the shares issued by the issuer, provided that the
CNBV may grant certain exceptions for a lower percentage of shares offered while
considering the rights of the minority shareholders. The request filed before the CNBV must
include an approval from the target company’s board of directors;
(d) the offer must include the maximum number of shares offered and the condition of minimum
shares to be acquired. If all of the shares of the Company are acquired, the offeror must make
sure that the target company has two remaining shareholders, as required under the General
Law on Business Entities;
(e) the offeror is not allowed to offer any additional consideration, premium or surcharge to the
recipients of the offer that may be deemed excessive and could be seen as an inducement,
provided that consideration paid as a result of agreements related to the offer (which contain
certain affirmative or negative covenants favoring the target company), which have been
previously approved by the target company’s board of directors and disclosed to the public,
are allowed; and
(f) in the event the individual or group of persons that has placed an offer regarding an target
company also holds at least 30% of the shares issued by another public company such
individual or group of persons will not need to carry out a mandatory tender offer regarding
the shares of the issuer when the offer represents less than 50% of the consolidated assets of
the issuer for which the offer was placed. Notwithstanding the foregoing, the CNBV may allow
the following transactions without having to authorize a mandatory tender offer:
(i) Acquisitions at market price resulting from a redistribution of shares of common stock
among members of a same group of individuals or legal entities, whether or not such
group prevails, provided that the acquiring parties have been shareholders of the
Company for more than 5 years and that the group of individuals or legal entities who
maintain control as a result of the acquisition had held a significant percentage of the
capital stock during such term.

(ii) Capital stock decreases pursuant to which the equity interest of an individual or legal
entity, or group of individuals or legal entities, results in 30% or more of the total
shares of common stock.
(iii) When the feasibility of the issuer as a going concern is at risk and the shares of
common stock are acquired as a consequence of capital increases or corporate
restructurings such as mergers, purchases and sales of assets and liabilities, and
capitalization, provided that there is a favorable opinion from the issuer’s board of
directors, previously approved by the corporate practices committee.
(iv) An attachment and distribution of collateral on shares, whether in or out of court,

resulting from a past-due debt in which collateral is granted in favor of financial
entities, even when such entities acted as trustees.
(v) Acquisitions by inheritance, bequest or donation, of a spouse, concubine or male

concubine, as well as from individuals related by blood, marriage or civil kinship up to
the fourth degree.
(vi) Transactions that are consistent with the protection of the interests of the minority
shareholders of the issuer.
5 Timeline
As a general rule, a takeover tender offer process for a mandatory tender offer is similar to the
process that applies to the voluntary tender offer, with certain exceptions. The table below contains an
overview of the main steps of a typical voluntary tender offer process under Mexican law.
Steps and Timeline
• Preparation of the tender offer (study, due diligence, financing, draft prospectus
and offer notice).
• The offeror approaches the target and/or its key shareholders.
2. The offeror files the offer with the CNBV. The filing can be public or confidential.
3. Review and approval of prospectus of the offeror by the CNBV.

Approval: Four to eight weeks.
4. Publication of the prospectus after approval by the CNBV.
5. Launch of the acceptance period. Duration: not less than 20 business days.
6. Opinion from the board of directors, regarding (i) the price of the offer; and (ii) any conflict
of interests, must be filed within 10 business days from the date the offer is launched. The
term may be increased or decreased by the CNBV.
7. Publication of results: one business day after the end of the offer period.
8. Payment of the offered consideration by the offeror: One business day after the end of the
offer period.

Steps and Timeline
9. Squeeze-out or sell-out: Tender offer for a period of 180 days upon request from the
CNBV.
10. Publication of results: One business day after the end of the offer period.
11. Payment of the offered consideration by the offeror: One business day after the end of the
offer period.
Set out below is an overview of the main steps for a voluntary tender offer in Mexico.

Voluntary tender offer (indicative timeline)
Start
process A Day D day D +10 E Day E+1 S Day S + 180 S + 181
Offeror files the • Publish the Opinion from End of offer • Publication of Squeeze-out or End of tender • Publication of
offer with the prospectus board of period results sell-out: Tender offer period results
Comisión Nacional after directors offer for a period
• Payment of • Payment of the
Bancaria y de approval by regarding (i) of 180 days upon
the offered offered
Valores (CNBV). the CNBV price of the request from the
consideration consideration
Filing can be public offer; and (ii) CNBV
• Launch by the offeror
or confidential any conflict of
acceptance
interests
period
10 business days
4 to 8 weeks at least 20 business days 180 days 1 business day

6 Takeover Tactics
6.1 Insider dealing
For the purposes of the Securities Market Law, it is deemed that certain individuals of the Company
have access to insider information. The burden of proof is on such individuals. Such individuals shall
not:
• enter into or instruct the execution of transactions, directly or indirectly, in relation to any kind
of securities issued by the Company or any negotiable instruments representing any such
securities (including options or derivatives having, as underlying, the aforementioned
securities or instruments, all of which are hereinafter referred to as “shares” or “securities”),
the quotation or price of which may be influenced by such information, as long as it is
classified as inside information;
• provide or disclose the information to any third party, except when by reason of employment,
position or commission, the individual to whom it is provided or transferred must know such
information; or
• make recommendations concerning any kind of securities issued by the Company, the
quotation or price of which may be influenced by such information, as long as it is classified
as inside information.
The restricted individuals are:
• the members and the secretary of the board of directors, the examiners, the chief executive
officer and other relevant officers, as well as the managing directors and the external auditors
of the Company or entities controlled by it;
• the individuals who directly or indirectly hold 10% or more of the shares representing the
capital stock of the Company;
• the members and the secretary of the board of directors, examiners, the chief executive
officer and other relevant officers, the managing directors and external auditors, or any
persons equivalent to the foregoing, of any entities that directly or indirectly hold 10% or more
of the capital stock of the Company;
• the members and secretary of the board of directors, examiners, the chief executive officer
and other officers immediately below the latter, the statutory comptroller, managing director
and agents, or any persons equivalent to the foregoing, of stock exchange intermediaries or
of any individuals or legal entities providing independent or personal subordinated services to
the Company, in any relevant event constituting privileged information, as well as of the legal
entity, which may or may not have the nature of an issuer, that had some relation or financial,
administrative, operational, economic or legal link with the Company to which the relevant
event in question is attributed to, or to those who participated in any nature with the act,
event, or happening relative to said event;
• the shareholders who directly or indirectly hold 5% or more of the capital stock of financial
entities, when these act as issuers;
• the shareholders who directly or indirectly hold 5% or more of the capital stock of the holding
companies of financial groups, as well as those who directly or indirectly hold 10% or more of
the capital stock of other financial entities, when all of them are members of the same
financial group and at least one of the members of the group is the issuer;

• the members and the secretary of the board of directors, the chief executive officer and other
officers immediately below the latter, the statutory comptroller and the managing directors of
any holding companies of financial entities mentioned in the preceding paragraph;
• the individual or group of individuals who have a significant influence on the issuer and, as the
case may be, on the companies composing the corporate group or consortium to which the
issuer belongs;
• the individuals that have decision-making powers over the issuer; and
• the individuals or legal entities that trade securities deviating from their historical market
investment patterns and who reasonably could have had access to inside information through
any of the individuals mentioned above. The individuals who have reasonable access to
insider information are, in general, certain family members, partners, associates and co-
owners, as well as any person who had contact with any of the referenced individuals.
Most of such restricted individuals are, in general, not allowed to acquire, directly or indirectly, any
securities issued by an issuer to whom they are “related”, during a term of three months from the last
transaction executed on the Company’s securities.
Publicly traded companies are required to establish guidelines, policies and control mechanisms in
connection with transactions carried out by their directors, executive officers and employees who, by
virtue of their employment, position or commission, have or may have access to insider or confidential
information related to any processes for the registration of securities with the National Securities’
Registry, public offerings, acquisition or transfer of shares held by the same issuers, or transactions
ordered by the investing public.
Anyone who, being under legal or contractual obligation of confidentiality, reserve or secrecy,
provides or transfers insider information to a third party, may be subject to administrative, civil and
criminal liability, which carries an imprisonment term of 3-15 years.
6.2 Information to be disclosed

Publicly traded companies must disclose, to the CNBV and the stock exchange, certain information
regarding the operations of the Company, including, without limitation, corporate and financial
information. See 3.2.
6.3 Due diligence and market abuse rules

In Mexico, there is no obligation to provide due diligence information to a potential offeror. Thus, this
situation could be used by a target company to delay or inhibit a takeover. However, the common
practice is for the target company to provide due diligence information to a potential bidder if the
proposed transaction is friendly. If the proposed transaction is hostile, the offeror will have to rely on
the Company’s publicly available information.
Furthermore, the Securities Market Law establishes provisions to prevent abuse practices dealing
with privileged information. See 6.1.

Hostile public M&A transactions are permitted in Mexico. However, in practice, such acquisitions are
uncommon. Furthermore, in the proposed recent hostile acquisition of control by Grupo Mexico of
Grupo Aeroportuario del Pacífico, the Supreme Court of Justice ruled that publicly listed companies
may adopt necessary albeit not absolute corporate measures to deter hostile takeovers as long as
such measures do not create an obstacle to friendly takeovers. This sets a non-binding court
precedent that may impact the viability of hostile takeovers.

The most effective and most used anti-takeover defense mechanisms are found in the by-laws of
publicly traded companies and by means of measures similar to “poison pills” through a capital
increase. However, it is not permissible to establish a provision that completely deters the acquisition
of a target company. In this regard, the principal provisions that cannot be established in the by-laws
of a publicly traded company are the following:
• Restrictions of any nature on the transfer of the shares of a target company. As an exception,
it is possible to require the pre-approval of the board of directors for the acquisition of
securities of a Company over and above a certain percentage. For these purposes, the
criteria that should be followed by such board of directors to issue a resolution shall be
included, along with the term for the issuance of such resolution, which shall not exceed three
months.
• Provisions that establish causes for the exclusion of a shareholder or restrictions on the
exercise of the rights of a shareholder to be excluded from the Company.
• Provisions that increase or decrease the economic rights of a shareholder.
• Provisions that restrict friendly takeovers.

In Mexico, it is common for parties of a friendly acquisition transaction to agree penalty clauses in the
event the deal is not closed or terminated by either party due to breach of an exclusivity covenant.

Takeover
7.1 Squeeze-out
Minority shareholders of a publicly traded company cannot be obligated to sell their securities. A
squeeze-out is, therefore, voluntary on the part of the minority shareholders who may elect, or decide
not to elect, to sell their shares in the Company.
In the event there is a shareholders’ resolution adopted by at least 95% of the shares that form the
corporate capital of the Company to approve an offer aimed to implement a squeeze-out of minority
shareholders, regardless of the type of security they hold, the Company will then make a public offer
pursuant to the following:
(a) The offer must be exclusively addressed to the shareholders or to the holders of instruments
representing the issuer’s shares, which are not part of the group of individuals or legal entities
in control of the issuer at the time of the application filed with the CNBV.
(b) The offer must be made at least at the highest value between the quotation value and the
book value of the shares (in this latter case, according to the last quarterly report submitted to
the CNBV and the stock exchange before the beginning of the offer), adjusted, when such
value has been modified, according to criteria applicable for the determination of relevant
information, in which case the most recent financial information that the issuer has must be
considered and a certification from an authorized executive officer of the issuer must be
submitted with respect to the determination of the book value.
(c) The stock market quotation value shall be the weighted average price per trading volume
during the last 30 days in which the shares were traded, before the start of the offering, during
a term not to exceed six months. In case the number of days when the aforesaid shares were
traded during the established term was less than 30, the actual days in which they were in
fact traded shall be considered. If there was no trading during such period, then the book
value shall be considered.

(d) In the event that the issuer has more than one series of shares listed, the average mentioned
in the preceding paragraph shall be calculated for each series that is intended to be
cancelled, and the average that turns out to be greater shall be considered as the quotation
value for all series.
(e) The Company must transfer the necessary funds to acquire the minority shares to a special
purpose trust, during a period of six months.
(f) The individual or legal entity, or group of individuals or legal entities, who have control over
the issuer at the time when the CNBV required the issuer to launch the offer, shall be jointly
liable with the issuer for the consummation of the transaction.
(g) The CNBV may order, at the expense of the issuer, that a valuation be carried out by an
independent expert to determine the price of the offer when this is considered essential to
protect the interests of the general public.
7.2 Sell-out
If, as a result of a mandatory or voluntary tender offer for less than 100% of the shares, less than 12%
of the shares are held by the general public, the offeror will be forced to extend the offer for the
remaining shares or, within 30 days, launch a second offer for 100% of the shares in the same
conditions as the first offer. As stated above, the minority shareholders are not required to sell their
securities.

If the squeeze-out is carried out with a view to subsequently carrying out a corporate merger through
which the offeror absorbs the target company, the 95% threshold referred to in 7.1 is required.
8 Delisting
As a general rule, the CNBV must approve a delisting of a Company that is listed on the Mexican
Stock Exchange or the Institutional Stock Exchange.
The CNBV will customarily not allow a delisting of a Mexican issuer (even if the issuer no longer has a
relevant float) unless a squeeze-out or sell- out has been carried out, pursuant to the rules set forth
herein. In the event an issuer is up to date with its reporting obligations and 95% of the outstanding
securities issued by the issuer approve a delisting, the CNBV will authorize it pursuant to a tender
offer as set forth in 7.1. above, and considering the following:
• The number of investors that would have participated in the offer.
• The percentage of the capital owned by such investors.
• The particularities of investors that did not participate in the offer and, the circumstances of
why they abstained from accepting the offer.
The CNBV may provide certain exemptions to the obligations set forth above when it is justified by the
reduced number of securities held by the general public. In any case, the trust mentioned in 7.1(e)
above must be created.


Jorge Ruiz in the Juarez office and Gaspar Gutiérrez Centeno, Lorenzo Ruiz de Velasco and
Alejandro Pérez-Serrano in the Mexico City office are the most appropriate contacts within
Baker McKenzie for inquiries about public M&A in Mexico.
Jorge Ruiz Lorenzo Ruiz de Velasco

Juarez Mexico City
jorge.ruiz@bakermckenzie.com lorenzo.ruizdevelasco@bakermckenzie.com
+52 65 6629 1306 +52 55 5279 2942
Gaspar Gutiérrez-Centeno Alejandro Pérez-Serrano
Mexico City Mexico City
gaspar.gutierrez- alejandro.perez-serrano@bakermckenzie.com
centeno@bakermckenzie.com +52 55 5351 4131
+52 55 5279 2909

The Netherlands
1 Overview
Over the course of recent years, the Netherlands has enjoyed an active public M&A landscape which
has attracted international attention. This is because the Netherlands is considered a favorable venue
for international companies due to its corporate legal system. Consequently, there are many large
non-Dutch companies operating internationally that are either headed by a Dutch entity listed on
NYSE Euronext Amsterdam (“Euronext Amsterdam”) or have chosen the Netherlands for their
international headquarters, e.g., Fiat Chrysler Automobiles, LyondellBasell, Ferrari, Mylan and the
Airbus Group. The reasons for choosing a Dutch parent company or the Netherlands as the HQ
location differ but the following factors are considered key: the Netherlands’ favorable tax regime, its
efficient infrastructure (with Schiphol Airport as a global hub), an excellent professional services
sector (including industry), high-levels of education, its reliable and neutral judicial system and, last
but not least, its stable political climate. All companies – including those with Dutch origins – listed on
Euronext Amsterdam boast a highly international shareholder base. In general, a large majority of the
shareholders of Dutch listed companies are located outside of the Netherlands.
Whether an international group is headed by a Dutch or foreign legal entity which has its listing in the
Netherlands, the Dutch public offer rules will apply. The entire process of a (potential) public offer is
subject to Dutch law. Even if the players are non-Dutch, their conduct during a public offer will be
driven by Dutch law. Recent events indicate that, in such situations, Dutch corporate law attracts
international attention from the investment community as well as from the media. This is particularly
the case with respect to some specific Dutch legal features such as the anti-takeover foundations (an
independent special purpose entity under Dutch law), which can hamper hostile offers. Examples
include PPG’s interference with AkzoNobel and the takeover attempt by Kraft Heinz to acquire
Unilever.
The following sections set out various aspects of a public offer and other methods of acquisitions for
securities, e.g., shares and bonds, admitted to trading on a regulated market in the Netherlands.

2.1 Competent authorities
The Dutch Authority for the Financial Markets (Autoriteit Financiële Markten) (the “AFM”) is the
authority that supervises the operation of the financial markets in the Netherlands and is responsible
for ensuring that: (i) no public offer is made without an approved public offer document, (ii) such offer
document is made publicly available and (iii) there is compliance with the rules and regulations
relating to the public offer and the process.
The Enterprise Chamber of the Amsterdam Court of Appeal (Ondernemingskamer van het
Gerechtshof te Amsterdam) (the “Enterprise Chamber”) has jurisdiction over squeeze-out procedures
designed for public offers and mandatory offers. In addition, the Enterprise Chamber is the competent
court in “inquiry procedures” (enquêteprocedures), the scope of which is so broad that it has become
the preferred corporate litigation venue for, among others, offerors, (major) shareholders or the target
company in hostile situations, including shareholders’ activism.
2.2 Applicable legislation

The public offer rules are primarily based on the European Directive (2004/25/EC) on public offers.
The main public offer rules are set out in the Dutch Financial Supervision Act (“FSA”), the Public Offer
Decree (“Decree”), certain exemption decrees (together with the FSA and the Decree, the “Public
Offer Rules”) and several policy regulations of the AFM. In addition, Book 2 of the Dutch Civil Code
(“DCC”), the Dutch Corporate Governance Code, the Works Councils Act and the SER Resolution
concerning the Merger Code may also apply in a public offer process.

Several Dutch listed companies have issued depositary receipts for shares (“DRs”), in particular those
that are also listed in the United States. Most provisions of the DCC and practically all of the Dutch
Public Offer Rules apply to (holders of) DRs. Please note that where reference is made to shares or
securities, DRs are also included.
2.3 The Dutch corporate governance system

Historically, the Dutch corporate governance system of legal entities has been based on a two-tier
board management system, which means that a Dutch listed company should have two separate
corporate bodies: (i) a management board, which consists of the managing directors; and (ii) a
supervisory board, which consists of the supervisory directors. The management board’s task is to run
the company and determine its strategy, whereas the supervisory board’s task is to supervise and
advise the management board. A managing director is similar to the Anglo-American executive
director and the supervisory director bears similarities to the non-executive director in the Anglo-
American context.
However, it is possible to combine both corporate bodies into one and have a “one-tier” board
management board. A one-tier board consists of both executive directors (similar to managing
directors in the two-tier board system) and non-executive directors (similar to supervisory directors in
the two-tier board system). Since 2010, the one-tier board system has been incorporated in Dutch
statutory law. The one-tier board system has become increasingly popular, and is, not surprisingly,
often the management board system of international groups of non-Dutch origin.
The tasks, duties and responsibilities of (the members of) the management board and supervisory
board are included in the DCC. Furthermore, the Dutch Corporate Governance Code (“Code”) applies
to Dutch public limited companies listed on a regulated market. The Code contains principles and best
practice provisions that regulate relations between the boards and the shareholders. Compliance with
the Code is based on the “comply or explain” principle, which means that the company either applies
the principles or deviates from them. Any deviations from the principles and best practice provisions
must be specifically disclosed in writing (in a separate chapter of the company’s annual report) setting
out why and to what extent a particular principle does not apply.
The DCC’s principle of “collective responsibility” is also relevant. Pursuant to this principle, each
managing director (or, in a one-tier board, the executive and non-executive directors) is responsible
for the general course of business and proper management of the company and is therefore jointly
and severally liable for any improper performance by the board or any board member of their duties
(onbehoorlijk bestuur).
2.4 General principles applicable to public offers

(a) Market transparency
Pursuant to the principle of market transparency, access to information on a target company should
be equal for all investors. By doing so, instances of insider trading occur less frequently and
disclosure irregularities are prevented. This principle is implemented in the Market Abuse Regulation
(No 596/2014 EC) (the “MAR”) and Dutch regulations on market abuse (together the “Market Abuse
Rules”) and applies to companies listed on Euronext Amsterdam. The Market Abuse Rules prescribe
that listed companies have to publicly disclose inside information that, if made public, would be likely
to have a significant effect on the share price (“Inside Information”). For a further explanation on the
obligations under the MAR, see 2.5.
(b) Level playing field
The offer should be addressed to all shareholders of the same class or category, and under the same
terms and conditions to maintain a level playing field between the shareholders.

2.5 MAR
The MAR came into force on 3 July 2016. One of the main objectives of the MAR is to establish a
more uniform interpretation of the European Union market abuse framework.
The MAR contains:
(a) specific requirements when, among other things, a company is considering whether to
disclose Inside Information in connection with a contemplated public offer, prior to the public
announcement of such transaction to its (major) shareholders, i.e., market soundings;
(b) an obligation to inform the AFM if a company has used the option to delay the public
disclosure of Inside Information pursuant to an exemption. The notification should be made
immediately after the public disclosure of Inside Information. When requested by the AFM,
companies must also provide a written explanation on how the exemption requirements to
benefit from the exemption have been met (see 3.2); and
(c) stringent requirements as to the information to be disclosed in the insider lists, such as the
obligation to include the date and time at which a person obtained, and ceased to have,
access to Inside Information.
2.6 Alternative methods of acquisition

Other methods to acquire (an interest in) a target company or its business include the following:
(a) Asset deal – In an asset deal, a party acquires the business, i.e., the assets and liabilities, of
the target company. The advantage of this method is that the party can choose which assets
and liabilities it wishes to acquire and acquire full control over the business, which enhances
deal certainty. If the transaction concerns the entire or materially all of the target company’s
business, its shareholders’ meeting must approve the contemplated transaction. This method
is often used when: (i) the market capitalization of the target company is significantly higher
than the value of the business; (ii) there is uncertainty as to the acceptance threshold when a
public offer is made; (iii) more favorable from a tax point of view; or (iv) a public offer would
encounter major regulatory restrictions.
(b) Legal merger – In a legal merger, one company can disappear into the other or the two
companies can form a new legal entity in which they will both disappear. In case both
companies disappear, the shareholders of these entities will receive listed shares of the new
legal entity. Prior to a legal merger, the shareholders’ meetings of both companies must
approve the merger. Legal mergers can be either domestic or between companies
incorporated within the European Economic Area (the “EEA”). Shareholders who voted
against a cross-border merger in the relevant shareholders’ meeting have the possibility of
exiting in return for a cash-out. For instance, the EUR 32 billion Ahold/Delhaize merger (listed
on Euronext Amsterdam and Euronext Brussels, respectively) is a prime example of a cross-
border legal merger. This method offers a great level of deal certainty and is considered to be
specifically suitable for mergers of equals.
(c) Share purchase deal of a subsidiary – A party may also choose to acquire the business of a
target company through a share purchase deal whereby a subsidiary of such target company
is acquired. The subsidiary holds and operates the entire business of the target company.
2.7 No governmental prior approval

Foreign investments are not restricted in the Netherlands. Therefore, takeovers are not subject to
prior governmental or regulatory approvals other than customary anti-trust approvals.


3.1 Acquisition of shares of a company listed in the Netherlands
Investors can acquire shares in a company which is listed on a regulated market in the Netherlands
through a variety of methods. Such methods include: stock market purchases, OTC transactions and
one-on-one block purchases. Depending on the size of the shareholding in the company, an investor
must publicly disclose its shareholding. The AFM should be notified when a substantial holding or
short position consequently reaches, exceeds or falls below a threshold. This can be caused by the
acquisition or disposal of shares by the shareholder or because the issued capital of the issuing
institution is increased or decreased. The thresholds are: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%,
50%, 60%, 75% and 95%.
3.2 Confidentiality, due diligence and insider dealings

The pre-offer negotiations between the target company and the offeror are usually kept confidential,
so as not to frustrate the offer at a precarious stage. In a friendly offer situation, the offeror will
typically conduct a high level due diligence. Simultaneously, the offeror and the target company will
start negotiating the terms of the offer. These terms will be incorporated in the merger protocol. Due
diligence and offer negotiations will be preceded by the signing of NDAs.
As described in 2.4, the principle of market transparency requires the disclosure of any Inside
Information in order to prevent interference with the target company’s share price and to reduce the
opportunity to conduct insider dealings. Inside Information must be disclosed to the public by the
target company as soon as possible. The disclosure of Inside Information may be delayed by a target
company at its own discretion, on its own responsibility, if all of the following conditions are met:
(i) immediate disclosure is likely to prejudice the legitimate interests of the target company;
(ii) the delay of disclosure is not likely to mislead the public; and
(iii) the target company must be able to ensure the confidentiality of the information.
If one of these three conditions is not met, the Inside Information has to be made public.
If an issuer has delayed the disclosure of Inside Information, it must inform the AFM immediately after
the Inside Information has been disclosed to the public that the disclosure of information was delayed
and, if requested by the AFM, shall provide a written explanation detailing how the conditions as set
out above were met.
Furthermore, any company with securities listed within the EEA must maintain an insider list. This sets
out all persons who have access to Inside Information and who are working for the company pursuant
to a contract or otherwise performing tasks through which they have access to Inside Information.
In order to prevent insider dealing, a standstill agreement with the target company is usually entered
into. Such standstill obligations can also be combined with an NDA.
4.1 Types of offers
• Full offer – an offer for the entire issued share capital of a listed company. This is the most
commonly used form of public offer;
• Partial offer – an offer to acquire less than 30% of the voting rights of a target company;

• Tender offer – an offer whereby the shareholders are invited by the offeror to state, on an
individual basis, the consideration which they wish to receive in exchange for their shares.
The offeror may only acquire less than 30% of the voting rights of a target company; and
• Mandatory offer – an offer whereby the offeror is required to make an offer for all remaining
shares of the target company if the offeror has acquired 30% or more of the voting rights in
the target company.
Certain situations are exempted from the requirement to make a mandatory offer. These include,
among others, a shareholder having a 30% interest in the company prior to an IPO. If a shareholder
that has a 30% interest in the company is able to reduce its shareholding within the so-called “30-day
grace period”, it will not be required make a mandatory offer.
4.2 Launching the offer

In a friendly offer situation, the offer process usually starts with a joint public announcement by the
offeror and the target company. The announcement will contain the intention to make an offer. Such
announcement usually follows once the offeror and the target company have executed the merger
protocol.
The first public announcement in a friendly or hostile offer marks the formal announcement of the offer
and, from the moment the announcement is made, strict rules on the disclosure of information about
the offer apply. In addition, a timetable within which the offer must be made and completed will
commence. This first public announcement is also referred to as the “initial announcement”.
Under the Public Offer Rules, the offeror is not allowed to make an offer for securities listed on a
regulated market in the Netherlands before having an offer document approved by the AFM or a
similar supervisory market authority in another EU/EEA Member State. The definition of securities as
defined under the FSA includes shares, DRs, rights equivalent to transferable shares, bonds and
other transferable debt instruments.
The offer document must at least touch upon the following information, as worked out in the Decree:
• The offer price, including a substantiation thereof.
• The conditions to completion of the offer, such as:
o the offer acceptance threshold, usually somewhere between 80% and 95%;
o regulatory approvals (anti-trust);
o no competing offer;
o no withdrawal of the target company board’s support;
o no material adverse change; and
o no court orders or investigations having been started that hinder the offer or make it
impossible to complete.
• The tender acceptance period (aanmeldingsperiode), during which shareholders can tender
their securities. For a full offer, the tender acceptance period has to be between eight and 10
weeks. For a partial or tender offer, this period can be between two and 10 weeks. The tender
acceptance period for a full, partial or tender offer can be extended only once, for a period
between two and 10 weeks.
• Rationale behind the offer and the strategic plans for the target company post-acquisition.
• Financial information about the offeror and the target company.

• If a fairness opinion has been obtained, this must be included in the offer document.
• In the case of a friendly offer, the main terms of the merger protocol must be described in the
offer document.
4.3 Conditional and unconditional offers

The conditions to the completion of an offer must be announced no later than at the launch of the
offer, i.e., when the approved offer document has been made publicly available. As previously
mentioned, these conditions must be included in the offer document. If it becomes clear that one or
more of the conditions will not be met, e.g., the acceptance threshold has not been met, the offeror
must make a public announcement describing the possible consequences for the offer. In such case,
the offeror can decide to not declare the offer unconditional or waive those conditions and declare the
offer unconditional. A mandatory offer should be unconditional and can therefore not be made
dependent on the fulfilment of such conditions.
The offer cannot be withdrawn once the offer document is made publicly available. Amendments to or
revisions of the offer are not possible, unless the AFM has given its approval, e.g., in case of errors, if
it concerns an extension of the offer acceptance period or a change in the offer price. The offeror
must complete the offer unless one of the offer conditions has not been met.
4.4 Offer price

The offer price can be in cash or securities, or a combination thereof. If it concerns a mandatory offer,
the consideration can be cash and securities, albeit that if it includes securities, these must be liquid
and traded on a regulated market. Furthermore, the offer price in a mandatory offer must be “fair”
(billijk). A fair price is defined as the highest price that the offeror, or persons acting in concert with the
offeror, has paid for the same kind of securities in the year prior to the announcement of the
mandatory offer. If the offeror did not acquire any securities in the year prior to the announcement of
the mandatory offer, the average share price as quoted on the stock exchange during that preceding
year will be deemed “fair”.
4.5 The certain funds announcement

The offeror has to publish a “certain funds” announcement when the offer document is submitted to
the AFM for approval (at the latest). The certain funds announcement must include a detailed
description setting out the manner in which the offeror has secured the payment of the offer price. The
certain funds announcement does not have to be approved by the AFM and there is no requirement to
demonstrate that the offeror has the necessary funds in place, for example, by submitting a
commitment letter to the AFM.
4.6 Informative EGM

No later than on the sixth business day before the expiry of the tender acceptance period, the target
company must hold an extraordinary general meeting of shareholders, during which the offer will be
discussed with the target company’s shareholders. There will not be a vote on the offer, as such.
However, the shareholders’ meeting is requested to vote on certain matters relating to the post-offer
period and integration (e.g. the amendment of the articles of association, the change of the
management board’s composition, the pre-wired asset sale and liquidation).
4.7 Friendly versus hostile takeovers

Most public offers in the Netherlands are friendly and have the consent of or are recommended and
supported by, the management board of a target company. A friendly public offer is generally more
successful than a hostile or unsolicited public offer. At the beginning of a friendly offer, the offeror and
target company will usually enter into a non-disclosure agreement (“NDA”) and a standstill agreement,
upon which the terms of the merger protocol will be negotiated and due diligence will be conducted.

Furthermore, the boards of the target company recommend the public offer to the shareholders for
acceptance. However, during a hostile offer, the offeror will not be given the opportunity to perform
due diligence and its offer will not be recommended. In a hostile situation, the boards of the target
company may seek to eliminate the hostile offer by invoking a defense measure or seeking an
alternative offeror.
In its judgment of 29 May 2017 (AkzoNobel v. Elliot), the Enterprise Chamber ruled - in line with case
law - that the determination of the strategy of a company and its enterprise is an affair of the
management board under supervision of the supervisory board. This also applies to the company’s
response to a (hostile) takeover proposal. The management board does not have an obligation to
consult with its shareholders prior to its response to the bidder. However, the board of management
remains accountable to shareholders for its decision-making conduct.
4.8 Competing offers

In the event of a serious competing offer, the management board of the target company is obligated to
at least consider such offer and, under certain circumstances, provide the competing offeror with
similar information as provided to the friendly offeror. In practice, the merger protocol will usually
define under what circumstances a competing offer is considered a superior offer. If a competing offer
is superior, the boards of the target company may revoke their support for the friendly offer and
choose to support and recommend the superior offer. If the target company chooses a superior offer,
this may trigger the payment of a break fee, see 6.5.
5 Timeline
Set out below is an indicative timeline for a public offer.

Public offer (indicative timeline)
Start
process A Day A + 28 A + 84 A + 94 Day 0 Day 3 Day 63 Day 67 Day 73 Day 76 Day 79 Day 93
First Interim Announce (i) AFM approves Publication of Start of tender Target Informative End of tender Announce Settlement End of
announcement announcement submission of offer offer acceptance company must EGM of the acceptance whether the optional post-
of public offer of when offeror draft offer document document period publish a target period offer is offer tender
should submit document to “position company on declared acceptance
offer to AFM for AFM and (ii) statement”. the offer unconditional period
approval certainty of
funds
12 weeks 10 business 6 business days 1-3 business 8 – 10 weeks 3 business days 3 business 2 weeks
days (Subject days (Optional one time extension of 2 – 10 days (Optional
to extension if weeks) post-offer
AFM requires tender
supplementary acceptance
information) period)
4 weeks 6 business
days

6 Takeover Tactics
6.1 Stakebuilding
One of the most important aspects of a successful offer is securing its outcome. Therefore, in the
preparation of a public offer, stakebuilding is key to strengthening the position of the offeror and, to
the extent possible, securing a fruitful outcome.
When an offeror considers stakebuilding, the following should be taken into account:
• The Market Abuse Rules – The offeror may not acquire securities in the target company if it is
in the possession of Inside Information. Knowledge about its own intention to make an offer is
not considered to be Inside Information. However, if the offeror engages in negotiations with
the target company with respect to a contemplated public offer, and this information is not
available in the public domain, the offeror is considered to be in possession of Inside
Information. This prevents the offeror from acquiring securities in the target company. While
carrying out due diligence, stakebuilding is considered to be a complex matter, even though it
is not prohibited as such. This is due to the fact that, if due diligence results in the offeror
having access to Inside Information on the target company, the offeror would be prohibited
from acquiring such shares. Therefore, stakebuilding commences the day that the initial joint
announcement about the offer has been made.
• Transparency and disclosure rules – If the offeror acquires a substantial holding in the target
company, it is required to forthwith notify the AFM of such substantial holding. A substantial
holding is defined as the holding of at least 3% of the shares or the ability to vote on at least
3% of the total voting rights in relation to such shares. Any person who directly or indirectly
acquires or disposes of an interest in the share capital or voting rights of the target company
must give notice to the AFM without delay if, as a result of such acquisition or disposal, the
percentage of capital interest or voting rights held by such person reaches, exceeds or falls
below the following thresholds: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75%
and 95%. The AFM maintains a public register in which all shareholders with a substantial
holding are registered.
When the offeror acts in concert with a third party by means of an agreement, the interests of
the parties acting in concert must be aggregated for the purpose of determining whether a
disclosure obligation exists.
Furthermore, any shares of the target company which are purchased in the period between
the initial announcement of the offer and the launch of the offer through the publication of the
offer document must be included in the offer document. In addition, during the period of the
offer, i.e., from the launch of the offer until it has been declared unconditional, the offeror must
notify the AFM of the shares it acquired in the target company. The AFM makes such
information public.
6.2 Put-up or shut-up rule

A target company wishing to obtain clarity on the intentions of a potential offeror can request the AFM
to order that party to make a clear public statement as to whether it intends to launch an offer or not.
This request can be made if the potential offeror has given the impression that it is preparing a public
offer by certain of its actions or disclosures, but has not clarified its intentions. These actions or
disclosures should be more substantive than rumors, but do not need to consist of detailed
information indicating a public offer. The AFM will make a put-up or shut-up request if the potential
target company is negatively affected by any uncertainty surrounding the potential offer.
If the potential target company’s request for an order is granted, the party that gave the impression of
preparing an offer must clarify its position within six weeks of receiving such order from the AFM. If

the potential offeror announces its intention to make a public offer on the target company, the Public
Offer Rules will apply. If the potential offeror withdraws, the shut-up rule applies. This results in the
potential offeror being prohibited from making a public offer for six months following such withdrawal.
6.3 Irrevocable undertakings by major shareholders

Another effective means to secure a successful offer is to obtain an undertaking from major
shareholders of the target company to tender their shares in the target company to the offeror
(“Irrevocable Undertakings”). Usually, major shareholders are approached before any intention to
make an offer has been publicly disclosed. This means that Inside Information is shared with a third
party. However, the MAR permits Irrevocable Undertakings to be obtained from major shareholders,
provided that the willingness of such shareholders to tender their shares is reasonably required for the
decision to make the offer. Approaching major shareholders in this way is known as taking market
soundings. Furthermore, as these shareholders will gain access to Inside Information, non-disclosure
and standstill agreements are usually entered into with such shareholder before it is approached to
enter into an Irrevocable Undertaking.
6.4 Protective measures

Under Dutch law, it is possible for companies to protect themselves against hostile takeovers. The
most common protective measure is the issuance of protective preference shares to an independent
special purpose foundation. Although this mechanism cannot be used to block a possible hostile
public offer altogether, the foundation will hold such a significant shareholding that it will impede the
offeror in acquiring, to a great extent, full control over the company. The independent foundation may
only hold more than 30% in the listed company for a maximum period of 2 years from when the hostile
public offer is first announced. Following this period, the independent foundation must make a public
offer.
Another protective measure is the issue, by a Dutch listed company, of all its shares to a foundation,
which in turn issues DRs to the shareholders. The holders of DRs do not have the right to vote on the
underlying shares, as the foundation holds the voting rights on these shares. In a period when there is
no hostile situation, the foundation is required to issue proxies for a shareholders’ meeting to those
holders of DRs that have so requested.
Furthermore, priority shares are occasionally issued to one or more shareholders. The priority shares
could, for example, be issued to the controlling shareholder of the company pre-IPO or to a “friendly”
foundation, i.e., a foundation whose board of directors are the same as that of the listed company.
Priority shares are a separate class of shares to which certain special controlling rights are attributed.
6.5 Break fees (protecting the deal)

It is common practice for parties to agree on a break fee in the merger protocol. A break fee is a
penalty to be paid by the target company or the offeror (reverse break fee) if, under certain specific
circumstances, the offer is unsuccessful, e.g., the target company accepts a competing offer or the
offeror fails to obtain regulatory approval for the offer. Dutch law does not provide for rules on the
requirements for a break fee. Nevertheless, the rule of thumb is that a break fee of approximately 1%
of the deal value is considered reasonable.

Takeover
7.1 The squeeze-out procedure
If the offeror has acquired at least 95% of the issued shares in the target company, it may initiate
statutory squeeze-out proceedings. Dutch statutory law provides for two different squeeze-out
procedures, a general squeeze-out procedure and a specific squeeze-out procedure following a public

offer. The two proceedings are similar, but there is one distinct difference in relation to the squeeze-
out price.
Under the public offer squeeze out rules, a shareholder holding at least 95% of the shares and voting
rights can initiate a squeeze-out procedure in order to acquire the remaining shares. In the event that
the shares are divided into separate classes of shares, the shareholder initiating the procedure can
only do so if it holds 95% of the shares and voting rights in each class. The squeeze-out procedure is
started by a shareholder holding at least 95% of the shares and voting rights filing a claim with the
Enterprise Chamber within three months after the offer acceptance period and the post-acceptance
period has passed. In the public offer squeeze-out procedure, if following the public offer the
shareholder acquired at least 90% of the shares that were subject to the voluntary public offer, the
offer price will be considered a fair price payable to the minority shareholders. In the general squeeze-
out procedure, this is not necessarily the case.
In this context, if the squeeze-out procedure is initiated shortly after the public offer, there will be no
difference between the determination of the squeeze-out price in a normal or in a public offer
squeeze-out as in both cases it will be the offer price. This will apply even more when none of the
minority shareholders oppose the offer price.
7.2 Alternative methods

In addition to squeeze-out proceedings, the offeror can choose between several alternative methods
to ultimately gain full control over the target company. Minority shareholders that have not registered
their shares under the offer can, after completion thereof, be diluted by way of asset deals, liquidation
of the target company, legal mergers and restructurings. Notwithstanding the aforementioned, use of
the aforementioned methods is not permitted with the sole purpose of squeezing out the remaining
shareholders. There should always be a business rationale for using one of these methods, which
must be properly disclosed in the offer document.
8 Delisting
After the offeror has acquired at least 95% of the shares in the target company, it may decide to delist
the target company from Euronext Amsterdam. For obvious reasons, a delisting would be desirable
for the offeror in order to allow integration and avoid the need to comply with regulations applicable to
listed companies. Delisting requires termination of the listing agreement with Euronext Amsterdam.
After obtaining a positive decision from Euronext Amsterdam on the application for delisting, the
delisting will take place on the 20th trading day after publication of the decision.

Rebecca C.J. Kuijpers-Zimmerman and Denise Ozmis in the Amsterdam office are the most
appropriate contacts within Baker McKenzie for inquiries about public M&A in the Netherlands.
Rebecca C.J. Kuijpers-Zimmerman Denise Ozmis

Amsterdam Amsterdam
rebecca.kuijpers-zimmerman@bakermckenzie.com denise.ozmis@bakermckenzie.com
+31 20 551 7117 +31 20 551 7512

People’s Republic of China

1 Overview
In the PRC, public takeovers are quite frequent. A purchaser can acquire the equity of a public
company by way of a voluntary or mandatory tender offer, a direct or indirect acquisition by
agreement, on the primary market, or on a secondary market such as the Shanghai stock exchange
or the Shenzhen stock exchange. The PRC regulates public takeovers under the laws and regulations
described in 2 below. Since takeover by way of a tender offer has more requirements in terms of
procedures and disclosure, the following focuses on this type of takeover.

The main rules and principles governing public takeover bids can be found in:
• Law of the People’s Republic of China on Securities (“Securities Law”);
• Measures for the Administration on Acquisition of Listed Companies (as amended on 20

March 2020) (“Acquisition Measures”)
• Measures for the Administration of Material Asset Reorganization of Listed Companies.
The Securities Law sets out the general rules on public takeover bids and provides the disclosure
requirements. The Acquisition Measures provide additional specific regulations for public takeover
bids.
2.2 Other rules

While the Securities Law and Acquisition Measures contain the main legal framework for public
takeover bids in the PRC, additional rules should be followed when preparing or conducting a public
takeover bid. These include:
(a) The four opinions issue by the China Securities Regulatory Commission (“CSRC”), the
governing body of public companies, which set out guidance for some provisions in the
Acquisition Measures; and
(b) The Guidelines on Public Takeovers, which regulate public company takeovers of public
companies listed on the Shenzhen stock exchange.
2.3 Supervision and enforcement by the CSRC

Public takeover bids are subject to the supervision and control of the CSRC. The CSRC is the
principal securities regulator in the PRC.
The CSRC has a number of legal tools to supervise and enforce compliance with the public takeover
bid rules. It can conduct regulatory talks, issue warning letters, order suspension or cessation of the
acquisition, or take other regulatory measures.

The following principles apply to public takeovers in the PRC:
(a) Shareholders of the same type of shares should be treated equally during a tender offer;
(b) The minority shareholders must be protected, including by the use of mandatory tender offers
and the prohibition of insider trading; and

(c) A duty to disclose shareholdings upon reaching certain thresholds.
2.5 Foreign investment provisions

(a) Industry-related restrictions
The PRC National Development and Reform Commission (“NDRC”) and the PRC Ministry of
Commerce (“MOFCOM”) jointly promulgated the Catalogue of Encouraged Foreign
Investment Industries (2019) (the “Catalogue”), effective as of 30 July 2019, which set out a
list of industries in which foreign investment is encouraged. On 30 July 2019, the NDRC and
MOFCOM jointly released the Special Administrative Measures for Access of Foreign
Investment (Negative List) (2019) (“Negative List”), which lists industries that are restricted or
prohibited for foreign investment.
Foreign investment into restricted industries is subject to an approval requirement while

foreign investors are not allowed to invest in any prohibited industries such as compulsory
education, press and publishing, radio and television broadcasting, transmission, production
and operation.
All foreign investment should be carried out by reporting the investment information to the
relevant commercial authorities based on the Foreign Investment Law, effective as 1 January
2020. Detailed requirements for reporting are stipulated in the Measures for the Reporting of
Foreign Investment Information with effect from 1 January 2020.
(b) Foreign investment in A-share listed companies
Foreign investors must obtain the A-share stock of A-share listed companies either by way of
strategic investment or by obtaining QFII or RQFII qualifications. Strategic investment by
foreign investors is subject to the Measures for the Administration of Strategic Investment in
Listed Companies by Foreign Investors (“Measures”, effective as of 31 January 2006, and
partially revised in 2015) and must be approved by the MOFCOM. It is expected that the
Measures will be revised in the near future.

Shareholding disclosure rules apply before, during and after a public takeover bid.
According to these rules, a bidder must announce a change in shareholding in the target company if it
exceeds the applicable disclosure thresholds. The relevant disclosure thresholds are 5% and each
increase or decrease of 1% of its stake.
When calculating its shareholding stake, the bidder must include shares held by the parties with
whom it acts in concert or may be deemed to act in concert (see 3.4 below).
3.2 Target company disclosures

The target company must continue to comply with the general rules on disclosures. For example,
before a shareholder announces the change of its stake, the relevant information is disseminated in
certain media or if the transaction in the shares of the company is seen as abnormal, the target
company must make an announcement in a timely manner.
3.3 Due diligence

When the bidder intends to acquire the target company shares via a tender offer, the bidder must
engage a financial adviser to conduct due diligence. Meanwhile, the target company’s board of

directors shall conduct an investigation into the bidder and engage an independent financial adviser to
issue professional opinions.

Persons “act in concert” when:
• there is an equity control relationship between the investors;
• the investors are controlled by the same subject;
• an investor’s directors, supervisors, or senior management personnel take the posts of

directors, supervisors, or senior management personnel of another investor;
• an investor is an equity participant of another investor, which may have a major impact on the
major strategy of the equity participating company;
• a legal person or any other organization other than the bank or a natural person provides the
capital financing for the investor to obtain relevant shares;
• there is a partnership, cooperation, joint operation, or other economic interest relationship

between the investors;
• a natural person holding more than 30% stake in an investor holds shares in a listed company
also held by the investor;
• any person who assumes the post of a director, supervisor, or senior manager in an investor
holds shares in a listed company also held by the investor;
• a natural person holding more than 30% stake in an investor, or a director, supervisor, or
senior manager in an investor, and their parents, spouses, children, children’s spouses,
spouses’ parents, siblings, sibling’s spouses, spouses’ siblings and their spouses hold shares
of the same listed company with the investor;
• a director, supervisor, or senior manager in a listed company holds shares of the company
concerned concurrently with the aforementioned relatives, or holds shares of the company
concerned concurrently with an enterprise directly or indirectly controlled thereby or by the
aforementioned relatives;
• a director, supervisor, or senior manager, and staff members of a listed company and the
legal person or other organization under its control holds the shares of the company
concerned; or
• there are other affiliations between the investors.
The concept of persons acting in concert is especially relevant in relation to disclosure duties and
mandatory takeover bids. A group of persons acting in concert will be required to carry out a
mandatory takeover bid if that group acquires 30% of the shares in the target company and continues
acquiring more of the target company’s shares even though no individual group member holds more
than 30%, unless it meets the conditions for “exemption from adopting a tender offer” as prescribed in
Chapter VI of the Acquisition Measure..

(a) Voluntary tender offer
The bidder can voluntarily adopt a tender offer to all shareholders for all or part of their
shares.
(b) Mandatory tender offer
A mandatory tender offer is triggered in the following situations:
• A person or group of persons acting in concert as a result of an acquisition of shares,

holds directly or indirectly more than 30% of the shares of the target company and
continues to increase the shareholding;
• A person plans to acquire more than 30% of a target company by way of an

agreement (the part of the shares exceeding the 30% shall be acquired by tender
offer); and
• A person who is not a shareholder but who has equity interests in a listed company
through investment, agreement and other arrangements exceeds 30% ownership of
the target company’s issued shares.
4.2 Exemption from adopting a tender offer

The bidder may be exempt from the tender offer requirement if:
• the share transfer is conducted between different subjects under the control of the same
actual controller and will not result in change of the actual controller of the target company;
• (i) the target company faces severe financial difficulty; (ii) the reorganization plan for saving
the company as proposed by the purchaser is approved by the general meeting of
shareholders of that company; and (iii) the purchaser undertakes not to transfer its shares
within 3 years;
• the gratuitous transfer, change, or merger of state-owned assets carried out upon approval of
the government or the administrative department of state-owned assets causes the equity
held by a person in a listed company to exceed 30% of the issued shares of that company;
• a listed company repurchases shares from specific shareholders according to the determined
price approved by the general meeting of shareholders, which results in a reduction of share
capital, thereby rendering the shares held by the person in the company exceeding 30% of
the issued shares of that company;
• the shares held by a person in a listed company exceeds 30% of the issued shares of that
company due to the issuance of new shares to such person by the listed company upon
approval by the non-affiliated shareholders of the general meeting of shareholders, the
investor commits not to transfer such new shares issued to itself within 3 years and the
general shareholders’ meeting approve the exemption from tender offer by the investor;
• the equity held by a person in a listed company reaches or exceeds 30% of the issued shares
of that company and, after 1 year from such occurrence, the increase of shares in that
company within each 12 month period does not exceed 2% of the issued shares of that
company;

• the equity held by a person in a listed company reaches or exceeds 50% of the issued shares
of that company and the investor continuing to increase its shareholding does not affect the
status of the company as a listed company;
• the lawful engagement in underwriting, loans and other businesses by a securities company,
bank, or other financial institution causes the equity held by that securities company, bank, or
other financial institution to exceed 30% of the issued shares in a listed company, and that
securities company, bank, or other financial institution has conducted no act and has no intent
to actually control the company and instead proposes to transfer the relevant shares to non-
affiliated parties within a reasonable time;
• the equity held by a person in a listed company exceeds 30% of the issued shares of that
company due to inheritance;
company due to share repurchase in accordance with a securities repurchase securities
agreement, and the voting rights of the subject shares is not transferred during the term of the
agreement;
company due to the recovery of the voting rights of the preferred shares held by the person in
accordance with the law; or
• other circumstances determined by the CSRC apply.
4.3 The price and the proportion of shares in a tender offer

• If a bidder acquires the shares of a listed company by a tender offer, the proportion of shares
to be acquired shall not be lower than 5% of the issued shares of that listed company.
• The bidder is in principle free to determine the price and the form of consideration offered to
the target shareholders:
o The offered price may be paid in cash, securities or a combination of both, except in
the following circumstances:
(1) The purchaser shall pay the acquisition price in cash if a bidder sends a
general tender offer (i) for the purpose of delisting a listed company or (ii) due
to its failure to meet the condition for exemption from adopting a tender offer;
or
(2) If the bidder elects to pay the takeover price in transferable securities, it shall
also offer the shareholders of the target company a cash alternative to
choose.
o The offered price for the same share class shall not be lower than the highest price
paid by the bidder for that share class within six months before the brief
announcement is made of the tender offer.
o Shareholders that hold the same share class shall be treated equally.

5 Timeline
The table below contains an overview of the main steps in a tender offer process under PRC law.
Step
• The purchaser prepares the tender offer report.
• Engage a financial adviser.
• Notify the target company.
• Issue a brief announcement on the summary of the tender offer report.
• Provide at least one of the following arrangements as a guarantee:
(i) if the purchaser pays the acquisition price by cash, it should deposit not
less than 20% of the total purchase price into the bank designated by the
securities depository and clearing institution. If the purchaser pays the
acquisition price by securities listed in a securities exchange, the purchaser
should place all the securities to be used for the payment in the custody of
the securities depository and clearing institution, except where the listed
company issues new shares;
(ii) bank letter of guarantee for the price required for the tender offer; or
(iii) written commitment issued by the financial adviser for taking joint and
several guarantee liability.
2. Purchaser publicly announces the tender offer report:

• The purchaser should make a tender offer report within 60 days after the
announcement of the tender offer. Otherwise, the purchaser should notify the
target company thereof on the working day following the expiry of the time limit and
make an announcement thereof. It should then make an announcement every 30
days until the public announcement of the tender offer report is made.
• The period of acquisition agreed upon in the tender offer shall not be less than 30
days and shall not exceed 60 days, except for any occurrence of competing tender
offers.
• Within the acceptance period agreed upon in the tender offer, the purchaser shall
not cancel its tender offer.
• Within 15 days before the tender offer expires, the purchaser shall not change the
tender offer except for any occurrence of competing tender offers.
• Competing tender offers can be made before expiry of the time limit of the first
tender offer.
3. The duties of the target company’s board of directors are to:

• Conduct due diligence on the bidder and engage an independent financial adviser
to give professional opinions.
• Publicly announce the report on the tender offer and the professional opinions of
the independent financial adviser within 20 days after the bidder announces the
tender offer report.

Step
4. Once the shareholders agree to accept the tender offer, the shareholders:
• must entrust a securities company to process the relevant formalities for
preliminary acceptance;
• may not transfer the shares under temporary custody of a securities registration
and settlement institution during the period of the tender offer; and
• may withdraw the acceptance of the tender offer prior to three trading days before
the tender offer’s expiration.
5. Purchase the shares:

• The purchaser should purchase the shares upon expiration of the tender offer
period.
• If the number of such shares exceeds the planned number of shares, the
purchaser shall, according to the same proportion, acquire the shares of the
holders who have accepted the tender offer.
• In the event that the purpose of the acquisition is to delist the target company, the
purchaser shall, pursuant to the conditions agreed upon in the tender offer,
purchase all the shares of the shareholders who have preliminarily accepted the
tender offer.
• A purchaser that fails to meet the condition for exemption from adopting a tender
offer and issues a general tender offer shall purchase all of the shares held by the
target company’s shareholders that have preliminarily accepted the tender offer.
6. Within three trading days after the tender offer expires, the securities company shall apply
to the securities registration share transfer registration, and release the temporary custody
of the shares that exceed the planned proportion.
The purchaser shall make a public announcement on the result of the present tender offer.
7. If the target does not meet the listing conditions after the tender offer (see 8 below), the
listing of the shares of the listed company shall be terminated. The shareholders who still
hold shares of the target company have the right to sell their shares to the purchaser within
the reasonable period specified in the tender offer report.
8. The target company shall announce the results within 15 days after expiration of the period
of acquisition.

Set out below is an overview of the main steps for a tender offer in the People’s Republic of China.
Tender offer (indicative timeline)
Start
process A Day A+60 A+80 T Day T+3 T+15
Announce tender Bidder publicly Target’s board of Expiry of tender offer Securities company Target company
offer announces directors publicly period and purchase applies to securities publishes results
tender offer announces report on of shares depository and clearing
report the tender offer and institution for share
the professional transfer and clearing,
opinion of an transfer registration and
independent financial release of custody for
advisor shares
Buyer makes public
announcement on the
result of the tender offer
Tender offer report Agreed tender offer period must not be less than 30 days from Three trading days
should be made within publication of tender offer report nor more than 60 days after expiry of tender
60 days after (except where there are competing offers). Buyer cannot offer period
announcement of offer change the tender offer within 15 days before tender offer
expires (except where there are competing offers)
Target shareholders Within 15 days after expiry of tender offer period

entrust a securities
company to process
relevant formalities for
acceptance of tender offer
Shareholders cannot
transfer the shares under
custody of the securities
registration during the
tender offer period

6 Takeover Tactics
In public takeovers, there are limitations on the board of directors of a public company.
The Acquisition Measures state that:
“[D]ecisions made and measures taken by the board of directors of the target company regarding the
acquisition shall be conducive to maintaining the rights and interests of the company and its
shareholders. Improper barriers shall not be established to the acquisition by abusing powers, no
financial assistance in any form shall be provided to the purchasers by using the resources of the
company, and the lawful rights and interests of the company and its shareholders shall not be harmed.”
Moreover, if the purchaser acquires the public company in a tender offer, after the purchaser makes a
brief announcement but before the tender offer is completed, the target company may continue to
conduct normal business activities and implement resolutions made by the shareholders’ general
meeting. However, the board of directors of that company shall not do anything, without approval of
the general shareholders’ general meeting, to cause a major impact on the company’s assets, debts,
rights and interests, or business operations by disposing of the company’s assets, causing it to invest
in other companies, adjusting its main business, providing guarantee or taking out loans, or by any
other means. During the tender offer period, the directors of the target company shall not resign.
These limitations on the public company’s board of directors restrict its takeover defense
mechanisms.
company as a defense against a takeover bid:
1. Poison pill • The issued securities should be

approved by the general shareholders’
The target company issues securities to
meeting.
dilute the purchaser’s shares.
• This should meet the conditions for the
public issuance of securities.
• The CSRC must approve the decision

of the company to issue securities.
2. Share buyback • The share buyback is only allowed to:

(1) reduce the registered capital; (2)
Share buyback from the target
merge with another company that holds
company’s shareholders, other than the
its shares; (3) acquire its own shares for
purchaser, to decrease the number of
employee stock ownership plans or
issued shares and increase the share
equity incentives; (4) acquire a
price.
shareholder’s shares if the shareholder
objects to a resolution made at the
general meeting on the merger or
division of the company; (5) acquire its
own shares to convert any of its
corporate bonds that are convertible
into shares; (6) maintain its value and
the rights and interests of shareholders.
• In item (1) , more than two-thirds of

shareholders with voting rights must

approve the capital decrease at a
shareholders’ general meeting.
• In items (3), (5) and (6), the company

may, pursuant to its articles of
association or according to the
authorization granted by the general
meeting, proceed with such acquisition
upon a resolution adopted at a meeting
of the board of directors that is attended
by at least two-thirds of all directors.
3. Sale of crown jewels • Requires prior approval by the

An arrangement affecting the assets of
or creating a liability for the target
company. It is triggered by a change in
control or the launch of a takeover bid.
4. White knight • As long as the target company does not

violate the Acquisition Measures, this
Target company invites a friendly
defense mechanism is allowed.
purchaser to acquire the target
company to end the original purchaser’s
takeover bid or to drive up the price.
5. Golden parachute • PRC law does not explicitly prohibit it,

but the target company’s board of
An agreement to compensate senior
directors may not violate the limitations
managers if the control of the target
in the Acquisition Measures.
company changes.
6. Cross shareholding • PRC law does not explicitly prohibit this.

Cross shareholding means a public
company owns shares in another public
company. Once one of the companies
faces a hostile takeover, the other
company provides assistance to help
defend against this.
7. Staggered board provision • PRC law does not explicitly prohibit this.
A staggered board means a board of • In the Company Law of the People’s
directors whose members are grouped Republic of China, the board of
into classes. Each class represents a directors should have between 5 and 19
certain percentage of the total number members, and the term of the board of
of board positions. During each election directors shall be specified in the
term, only one class is open to company’s articles of association,
elections, thereby staggering subject to a maximum member term of
appointments to the board. 3 years. However, the law does not
state that the term for each board of
directors must be the same.


• The staggered board provision can be
specified in the company’s articles of
association.
• It requires more than two- thirds of all

shareholders with voting rights to
approve the articles of association at a

Takeover
Upon expiration of the tender offer period but before the completion of the acquisition act, if the
distribution of shares of the target company does not meet the listing conditions then shareholders
who still hold shares in the target company have the right to sell their shares to the purchaser within a
reasonable period as specified in the tender offer. No other rule allows squeeze-out of the minority
shareholders after the completion of the takeover.
8 Delisting
The listing of a company shall be terminated by the stock exchange if it no longer meets the listing
requirements as a result of the takeover. This will be the case if its publicly-offered shares are less
than 25% of its total shares, or the percentage of publicly-offered shares is less than 10% of its total
shares if its total share capital exceeds CNY 400 million.
9 Contacts within FenXun

Baker McKenzie and FenXun Partners became the first international and PRC law firms to enter into a
Joint Operation in the China (Shanghai) Free Trade Zone in April 2015.
Yingzhe Wang, Sue Liu, Zhi Bao and Guangshui Yang are the most appropriate contacts for inquiries
about public M&A in the People’s Republic of China.
Yingzhe Wang Zhi Bao

FenXun Beijing FenXun Beijing/Shanghai
wangyingzhe@fenxunlaw.com baozhi@fenxunlaw.com
+86 10 5649-6088 +86 10 5649-6066
Sue Liu Guangshui Yang

FenXun Beijing FenXun Beijing
liuyuhua@fenxunlaw.com yangguangshui@fenxunlaw.com
+86 10 5649-6060 +86 10 5649-6009

Peru
1 Overview
1.1 Peruvian economy
In the past decade, Peru has undergone a sustained and remarkable economic development,
becoming one of the fastest growing jurisdictions while maintaining a low inflation rate. However, in
the past few years, growth has been affected mainly by international circumstances rather than local
factors.
The successful growth of Peru was caused by solid economic policies introduced by the various
democratically-elected governments, sustained productivity growth, private investment and its
integration into the world economy. These factors helped to reduce poverty and strengthen the middle
class, turning Peru into a popular place to invest in Latin America.
The macroeconomic development of Peru during the period from 2003 to 2013 was impressive, with a
real gross domestic product (GDP) annual growth rate that averaged 6.6% (the highest rate in Latin
America). However, in 2014, growth reached only 2.4%, improving at the end of 2015 to 3.3%. The
slowdown was caused by external factors that lead to a decrease in real exports and foreign capital
flows, as well as a reduction in the price of ores exported by Peru. After that, the growth rate
experienced a slight increase, reaching 3.9% in 2016, before slowing down again in 2017 to 2.5%,
rising in 2018 to 4.0% and then crunching once more to 2.3% in 2019. This last period was
characterized by the political uncertainty caused by the constitutional shut down of the Congress and
ongoing investigations against important political and business figures as part of Operation Lava Jato.
Despite that being a low figure, Peru was the second fastest growing economy in Latin America
during 2019, only behind Colombia, and has the economy with the lowest risk in the region, according
to reports of the Peruvian Central Bank.
With a new provisional Congress already elected at the beginning of 2020, and despite awaiting new
presidential and parliamentary elections in 2021, the International Monetary Fund projected in 2019
that the economy will slightly recover and grow at a rate of 3.25% during 2020. However, the outbreak
of the COVID-19 virus worldwide might affect the growth estimates projected.
1.2 The Peruvian securities market

As of December 2019, there were 260 companies registered in the Peruvian Public Capital Markets
Registry (Registro Público del Mercado de Valores) with either debt or equity securities listed on the
Lima Stock Exchange.
The Lima Stock Exchange also participates in the Latin America Integrated Market (Mercado
Integrado Latinoamericano or the “MILA”), which attempts to integrate the stock exchange markets of
Colombia, Chile, Peru and Mexico under one trading platform. Trading on the Lima Stock Exchange is
primarily done on a new electronic trading system called Millennium, which became operational in
May 2015 and has the support of the London Stock Exchange.
The stock market capitalization of companies listed on the Lima Stock Exchange in the last 5 years
reached its peak in 2017 at US$ 162,455 million, decreasing to US$ 142,226 million by the end of
2018, and decreasing once more to a current amount of US$ 138,076 million.


2.1 Main and complementary legal framework
The main rules and principles of Peruvian law relating to public takeover bids can be found in:
• The Peruvian Securities Market Law, approved by Supreme Decree 093-2002-EF, as

amended (Texto Único Ordenado de Ley de Mercado de Valores).
• Tender Offer Regulations approved by CONASEV Resolution N° 009-2006-EF-94.10, as

amended (Reglamento de Oferta Pública de Adquisición y de Compra de Valores por
Exclusión).
In addition, there are a number of other regulations that need to be taken into account when
considering a public takeover bid, as they are of general application and contain certain definitions
that the main regulations refer to. These are the:
• Corporations Law approved by Law N° 26887, as amended (Ley General de Sociedades).
• Economic Group Regulations approved by SMV Resolution N° 019-2015-SMV/01

(Reglamento de Propiedad Indirecta, Vinculación y Grupos Económicos).
• Market Abuse Regulations approved by SMV Resolution Nº 005-2012-SMV-01, as amended

(Reglamento contra el Abuso de Mercado - Normas sobre Uso Indebido de Información
Privilegiada y Manipulación de Mercado).
2.2 Supervision and enforcement by the Capital Markets Superintendency

The Securities Market Law regulates certain securities matters such as transparency and disclosure,
corporate takeovers, capital markets instruments and operations, broker-dealers and credit-rating
agencies. The Peruvian Capital Markets Superintendency (Superintendencia del Mercado de Valores
or the “SMV”), formerly known as the National Supervisory Commission for Securities and Companies
(Comisión Nacional Supervisora de Empresas y Valores or “CONASEV”), is a governmental entity
that reports to Peru’s Ministry of Economy and Finance with functional, administrative, economic,
technical and budgetary autonomy. The SMV has broad regulatory powers, including reviewing,
promoting and making rules regarding the securities market, supervising its participants and
approving the registration of public offerings of securities (including public tender offers).
The SMV supervises the securities markets and the dissemination of information to investors. It also
(i) governs the operation of the Peruvian Public Capital Markets Registry, (ii) regulates mutual funds,
publicly placed investment funds and their respective management companies and broker- dealers,
(iii) monitors compliance with accounting regulations by companies under its supervision as well as
the accuracy of financial statements, (iv) registers and supervises auditors who provide accounting
services to those companies registered with the SMV, and (v) registers and supervises public
offerings, exchange offers and tender offers (including takeover bids), among other types of public
offerings, and in each case, monitors compliance with applicable regulations.
The SMV is also in charge of enforcing the securities markets’ rules and regulations and has the
power to impose fines or disqualify entities from participating in the securities markets.
In the case of acquisitions that violate the tender offer rules, the SMV may impose the following
sanctions:
• Administrative sanctions constituting fines between 1 and 700 “tax units”. One tax unit is set
by the tax authorities as PEN 4,300 in 2020.
• Suspend the voting rights of the acquired securities.

• Require the acquirer to sell the acquired securities in the market.
However, to the extent that the SMV determines that it would be more beneficial for the market, the
SMV can, at the request of the acquirer, allow the offeror to launch a tender offer for 100% of the
securities.
The SMV also has the power to grant exemptions to certain tender offer regulations that would
otherwise apply in a public takeover bid.
2.3 Foreign Investments Restrictions

Foreign investments are not restricted in Peru. The Peruvian Constitution grants foreign and local
investors the same rights over their investments. Accordingly, the acquisitions of shares in Peruvian
companies are freely permitted, both through the stock market and over the counter operations.
Hence, the purchase by a foreign investor of a direct or indirect controlling interest in a Peruvian
public company would not trigger any requirement to obtain governmental authorizations.

The following principles apply in general to public takeovers launched in Peru. They are based on the
Securities Market Law, the Corporations Law and the Tender Offer Regulations:
(i) Shareholders must have absolute and free control over the shares they own. Any rules
established in a company’s by-laws that limit the transfer of shares or give preferential
acquisition rights to current shareholders, are considered void. The company cannot
recognize shareholder agreements that violate these principles.
(ii) Any decision taken in a general shareholders’ meeting that damages the interests of the
company as whole, directly or indirectly benefiting one or more shareholders, can be judicially
challenged by any shareholder, regardless of its interest in the company.
(iii) The board of directors must act with diligence, loyalty and in the best interest of the company
as a whole, without favoring any particular shareholder. The board will be held liable for any
decision adopted that violates applicable laws, the company’s by-laws, abuses its powers, is
made with negligence or willful misconduct, or conflicts with the interest of the company.
(iv) Any act, omission, conduct or practice that violates market integrity and transparency is
forbidden, such as (a) trading, or placing orders to trade, that give a false or misleading
perception of the volume of, or demand for, one or more securities: (i) raising, reducing or
maintaining the price of such securities to an abnormal or artificial level, or (ii) increasing or
reducing the level of liquidity of such securities; (b) trading using fictitious devices or any other
devices in order to deceive or mislead investors; (c) insider trading; (d) improper disclosure of
inside information to another person; and (e) misuse of information that is not generally
available but would affect an investor’s decision.
(v) All shareholders of the target company must be properly informed of the terms, conditions,
advantages and disadvantages of the bid. For such purpose, the board of directors must
issue a report assessing the merits of the proposal, and all shareholders must be granted
access to such report.
(vi) An offeror must, before launching a bid, ensure that it will be able to fulfill its obligations by
grating guarantees to secure the total amount of the consideration offered.
(vii) During the tender offer period, an offeror is not allowed to acquire common shares or any
other securities that may grant voting rights in the open market, either through the Lima Stock
Exchange or over-the-counter.

(viii) Finally, Peruvian tender offer regulations aim to ensure equal treatment among all
shareholders of the target company, regardless of the number of voting shares each
shareholder may have, as well as ensure a minimum level of disclosure and protection and
fair treatment of all shareholders.

The table below provides an overview of the different rights and powers that attach to different holding
percentages in a listed corporation in Peru:
Shareholding Rights
One share • Right to participate in the distribution of dividends and

shareholder equity resulting form the liquidation of the
company. However, pursuant to Article 232 of the Peruvian
Corporate Law, the right to collect past-due dividends (i) in
the case of corporations (sociedades anónimas) other than
publicly-held companies (sociedades anónimas abiertas),
expires 3 years after the date on which the dividend
payments was due, and (ii) in the case of companies that are
publicly held companies (sociedades anónimas abiertas),
expires 10 years after the date on which the dividend
payment was due.
• Right to attend and vote at a general shareholders’ meeting
or special shareholders’ meeting, as applicable.
• Right to supervise the way in which the management
conducts its business, in the manner set forth in applicable
laws and the company’s by-laws.
• Right to request all information related to a shareholders’
meeting that has been called; provided, however, that the
board is entitled to reject such request if it considers that
such disclosure may jeopardize the company or its
businesses.
• Right to exercise preemptive or accretion rights in connection
with newly issued shares as part of a capital increase on a
pro rata basis, unless (i) in the case of corporations
(sociedades anónimas), it is otherwise agreed to by holders
of 100% of the voting shares, (ii) in the case of publicly-held
companies (sociedades anónimas abiertas), it is otherwise
agreed to by holders of 40% or more of the company’s
outstanding voting shares, provided that the capital increase
does not favor, directly or indirectly, certain shareholders to
the detriment of others, (iii) the capital increase results from
a conversion of debt to common shares, and (iv) the capital
increase results from a corporate reorganization.
• Right to exercise redemption rights if the company (i)
changes its corporate purpose, (ii) changes the place of
organization to a foreign jurisdiction, or (iii) other cases
contemplated by the applicable laws and/or the company’s
by- laws.

Shareholding Rights
• Right to judicially challenge decisions of the general
shareholders’ meeting when it is contrary to the Corporations
Law or any other applicable law, the company’s by-laws, the
interests of the company as a whole and in benefit of one or
more shareholders, or when such decision can be annulled
pursuant to the Corporations Law or the Peruvian Civil Code.
• Right to propose to the general shareholder’s meeting the
removal of a member of the board in case such member has
a conflict of interest with the company.
• Right to request to a notary public or a judge to call the
annual mandatory shareholders’ meeting when such
shareholders’ meeting has not been summoned within the
time and for the purposes set forth in the company’s by-
laws.
• Right to file damage claims against any member of board
unless the damage has been caused to the company as a
whole.
• Right to obtain a certified copy of minutes from a
shareholders’ meeting, even if the shareholder has not
attended.
• For corporations (sociedades anónimas) and for publicly-
held companies (sociedades anónimas abiertas): quorum
required in the second call to install a general shareholders’
meeting and discuss simple matters such as removal of
members of the board, order of audits, approval of financial
statements or distribution of dividends.
• Only for publicly-held companies (sociedades anónimas
abiertas): quorum required in the third call to install a general
shareholders’ meeting and discuss complex matters: (i) a
change in the by- laws, (ii) capital increase or reduction, (iii)
the issuance of obligations, (iv) the sale in a single act of
assets with an accounting value that exceeds 50% of the
company’s share capital, (v) a merger, division,
reorganization or transformation, and (v) the company’s
dissolution and/or liquidation.
5% or more (of existing • Only applicable for publicly-held companies (sociedades

share capital with right to anónimas abiertas): right to request the board to convene the
vote) general shareholders’ meeting and, if the board fails to do so
within 15 days following such notification, request a public
notary or a judge to call it.
• Request information regarding the company’s operations, to
the extent the information requested is not deemed
confidential information and/or its disclosure does not cause
damage to the company.

Shareholding Rights
20% or more (of existing Request the distribution of dividends in a percentage that does not
share capital with right to exceed 50% of the annual net profits.
vote)
25% (of existing share • Only for corporations (sociedades anónimas): request the
capital with right to vote) board to convene the general shareholders’ meeting and, if
the board fails to do so within 15 days following such
notification, request a notary public or a judge to call it.
• Request all documents related a shareholders’ meeting that
has been called; the board cannot reject the request as long
as such shares are represented at the meeting.
• Request once to postpone a summoned shareholder’s
meeting for no less than three and no more than five days.
• Request the attendance of a notary public in a shareholders’
meeting.
25% (of existing share Only for publicly-held companies (sociedades anónimas abiertas):
capital with right to vote) quorum required in the second call to install a general shareholders’
meeting and discuss complex matters: (i) a change in the by-laws, (ii)
capital increase or reduction, (iii) the issuance of obligations, (iv) the
sale in a single act of assets with an accounting value that exceeds
50% of the company’s share capital, (v) a merger, division,
reorganization or transformation, and (v) the company’s dissolution
and/or liquidation.
33.33% Exercise corporate liability actions against board members, provided

that: (i) the petition comprises indemnities in favor of the company as
a whole, and (ii) the shareholders that promote the action have not
approved anything in the contrary in the shareholders’ meeting.
40% (of existing share Only for publicly-held companies: approve that shareholders shall not
capital with right to vote) exercise pre-emptive rights to subscribe to new common shares in a
share capital increase, provided that the capital increase does not
favor, directly or indirectly, certain shareholders to the detriment of
others.
50% (of existing share • For corporations (sociedades anónimas) and for publicly-
capital with right to vote) held companies (sociedades anónimas abiertas): quorum
required in the first call to install a general shareholders’
meeting and discuss simple matters such as removal of
members of the board, order of audits, approval of financial
statements or distribution of dividends. For corporations
(sociedades anónimas), the company’s by-laws may
establish higher quorum requirements and majorities, but not
lower.
abiertas): quorum required in the first call to install a general
shareholders’ meeting and discuss complex matters: (i) a
change in the by- laws, (ii) capital increase or reduction, (iii)
the issuance of obligations, (iv) the sale in a single act of
assets with an accounting value that exceeds 50% of the

Shareholding Rights
company’s share capital, (v) a merger, division,
reorganization or transformation, and (v) the company’s
dissolution and/or liquidation.
50% + one share • Only for corporations (sociedades anónimas): take decisions
(represented at a general on simple matters, such as removal of members of the
shareholders’ meeting) board, order of audits, approval of financial statements or
distribution of dividends. For corporations (sociedades
anónimas), the company’s by-laws may establish higher
quorum requirements and majorities, but not lower.
abiertas): take decisions on both single and complex matters
at a general shareholders’ meeting.
50% + one share (of • Only for corporations (sociedades anónimas): take decisions
existing share capital with on complex matters such as (i) a change in the by-laws, (ii)
right to vote) capital increase or reduction, (iii) the issuance of obligations,
(iv) the sale in a single act of assets with an accounting value
that exceeds 50% of the company’s share capital, (v) a
merger, division, reorganization or transformation, and (v)
the company’s dissolution and/or liquidation. For
corporations (sociedades anónimas), the company’s by-laws
may establish higher quorum requirements and majorities,
but not lower.
60% (of existing share • Only for corporations (sociedades anónimas): quorum
capital with right to vote) required in the second call to install a general shareholders’
meeting and discuss complex matters: (i) a change in the by-
laws, (ii) capital increase or reduction, (iii) the issuance of
obligations, (iv) the sale in a single act of assets with an
accounting value that exceeds 50% of the company’s share
capital, (v) a merger, division, reorganization or
transformation, and (v) the company’s dissolution and/or
liquidation. For corporations (sociedades anónimas), the
company’s by-laws may establish higher quorum
requirements and majorities, but not lower.
66.66% (of existing share Only for corporations (sociedades anónimas): quorum required in the
capital with right to vote) first call to install a general shareholders’ meeting and discuss
complex matters: (i) a change in the by-laws; (ii) capital increase or
reduction; (iii) the issuance of obligations; (iv) the sale in a single act
of assets with an accounting value that exceeds 50% of the
company’s share capital; (v) a merger, division, reorganization or
transformation; and (v) the company’s dissolution and/or liquidation.
For corporations (sociedades anónimas), the company’s by-laws
may establish higher quorum requirements and majorities, but not
lower.
3.2 Restriction and careful planning

Peruvian law contains a number of rules that apply even before a public takeover bid is publicly

announcements of a potential takeover bid or a target company, among others. The main restrictions
and hurdles have been summarized below. Some careful planning is therefore necessary if a potential
bidder or target company intends to start up a process intended at launching a public takeover bid.

Any undisclosed public tender offer or the intention to launch a public takeover bid is deemed inside
information by the Peruvian Securities Market Law and Market Abuse Regulations. Therefore, while
the tender offer has not yet been announced to the market, all persons that have knowledge of it must
refrain from misusing such information and keep that information strictly confidential. The Peruvian
Securities Market Law and the Market Abuse Regulations consider that the information is misused
when a person: (i) reveals the information to third parties, (ii) recommends operations to others based
on such information, and (iii) uses the information to directly or indirectly benefit themself or third
parties. In addition, such rules prohibit, among other things, manipulating the target’s stock price, e.g.,
by creating misleading rumors of a potential takeover bid.
3.4 Due diligence

Peruvian Tender Offer Regulations do not contain specific rules regarding whether or not a prior due
diligence may be conducted, nor how such due diligence shall be conducted. Nevertheless, a prior
due diligence or pre-acquisition review is generally accepted in practice (and by the SMV), and
appropriate mechanisms have been developed to conduct a due diligence or pre-acquisition review
and to mitigate potential market abuse and early disclosure concerns. These include the use of strict
confidentiality procedures and data rooms.
3.5 Disclosure of shareholding

Although it is not standard practice for a Peruvian company to include a provision in its by-laws
governing the ownership threshold above which share ownership must be disclosed. Under the
current Economic Groups Regulations, listed companies must inform the SMV of the members of its
economic group and a list of its holders of common shares that hold more than a 0.5% share interest,
as well as any change to such information.
In addition, the Securities Market Law establishes that listed companies must inform the SMV and the
Lima Stock Exchange of any transfer of its common shares made by any person or entity who directly
or indirectly owns 10% or more of the company’s total share capital or by any person or entity who
directly or indirectly becomes owner of, or is no longer an owner of, 10% or more of the total share
capital of a listed company.
3.6 The concept of “substantial interest”

The obligation to launch a tender offer is triggered when a person or group of persons (acting in
concert) intends to acquire or has acquired a “substantial interest” in a target company (see 4 below).
According to Peruvian Tender Offer Regulations, a substantial interest is acquired by a person or
group of persons (acting in concert) when the purchase (i) will result in such person or group of
persons (acting in concert) beneficially owning (directly or indirectly) at least 25% of the outstanding
shares with voting rights of a company in one or a series of transactions, or (ii) allows such person to
(a) appoint a majority of the directors of the target company or (b) amend the by-laws of the target
company. Ownership thresholds of 50% and 60% also trigger certain rights to appoint a board
member or control the company in general. When a person reaches or surpasses each of the 25%,
50% and 60% thresholds the obligation to launch a tender offer is triggered. This means that it is
possible to move in between thresholds without triggering the obligation to launch a tender offer. For
instance, if a person already owns 26% and increases its ownership to 47%, that will not trigger an
obligation to launch a tender offer.

3.7 Calculation of indirect ownership
If an interest is acquired indirectly through an intermediate company, the following methods are used
to determine whether the acquisition qualifies as an acquisition of substantial interest in the target
company and, therefore, if such indirect acquisition triggers the obligation of the acquirer (or
acquirers) to launch a subsequent mandatory tender offer or to otherwise sell the shares indirectly
acquired in the target company.
In cases where a person (A) acquires more than 50%, e.g., 57%, of the voting shares of an
intermediate company (B), such person is deemed to acquire the percentage owned by the
intermediate company (B), e.g., 60% in another company. This triggers the tender offer regulations in
respect of the third company (C).
A
57%
B A owns 60% in C
60%
C G
In cases where a person (A) acquires less than 50%, e.g., 23%, of the intermediate company (B), the
indirect participation is calculated by multiplying such percentage by the percentage owned by the
intermediate company (B), i.e., 76% in another company (C). This could trigger the tender offer
regulations in respect of company C. In this example, company A does not meet the 25% threshold of
outstanding shares with voting rights and, therefore, no mandatory tender offer would be triggered by
company A in respect of either company B or company C.
A
23%
A owns 17.48% in C
B
76%

Pursuant to the Tender Offer Regulations, a person or group of persons acting in concert that
acquires or intends to acquire a “substantial interest” (see 3.6) will be jointly liable to carry out a
mandatory takeover bid, even though each individual group member does not surpass the required
threshold to establish a “substantial interest” or otherwise have the power to (i) appoint a majority of
the members of the target company’s board of directors, or (ii) amend the by-laws of a target
company.
3.9 Irrevocability
Peruvian laws provide that once the tender offer has been announced, such offer cannot be
withdrawn, even in the case of a voluntary takeover bid.
3.10 Guarantees
An offeror must, prior to launching a bid, ensure that it will be able to fulfill its obligations in the offer by
grating guarantees to secure the total amount of the consideration offered. If the consideration offered
is (i) in cash or in securities to be issued by the target company or the offeror, as applicable, the

guarantee must be granted for the total amount of such consideration and it may be in cash, a letter of
credit or any other type of guarantee; provided, however, that such guarantee is unconditional,
irrevocable and enforceable upon demand, and (ii) to be paid with previously issued securities, the
offeror shall evidence that it is the legal owner of all the securities offered in exchange, and such
securities are blocked in the account of the respective broker-dealer under which securities are
registered or otherwise evidence that such securities will be available to pay the consideration offered
in full.
3.11 Exemptions
There a number of exceptions in which there is no obligation to launch a tender offer even though a
substantial interest in a target company has been acquired. The main exemptions are the following:
(a) Prior written consent from all shareholders with a right to vote.
(b) When substantial interest is acquired as a consequence of a reorganization among

companies of the same economic group, as long as such reorganization does not alter the
ultimate control of the economic group.
(c) When substantial interest is acquired by a broker-dealer as a result of its fulfilment of an

underwriting obligation.
(d) When shares are acquired by a depository for the purposes of subsequently issuing ADRs
(American Depository Receipts), GDRs (Global Depository Receipts) or similar securities.
(e) When an ADR, GDR or similar security is acquired, unless the acquirer exercises the right to
vote the underlying shares or requests delivery of such underlying shares.
(f) When substantial interest is acquired through an initial public offering.
(g) When substantial interest is acquired through a conversion of debt into capital stock under a
bankruptcy procedure.
(h) When substantial interest is acquired through the exercise of pre-emptive rights.
(i) When substantial interest is acquired through the assignment of shares to a trust, as long as
the trustee is a local financial entity or a foreign bank classified as a first in class by the
Peruvian Central Bank and the trustor or originator maintains the right to vote of those shares.
Peruvian securities regulations include mandatory takeover rules applicable to the acquisition of a
substantial interest in a company that has at least a class of shares with voting rights registered with
the SMV (a “Target Company”). The Securities Market Law and the Tender Offer Regulations require
any person, who directly or indirectly acquires in one or a series of transactions a substantial interest
in a Target Company to launch a tender offer (Oferta Pública de Adquisición) (a “Mandatory Tender
Offer”). In addition, a person who directly intends to acquire in a substantial interest in one or a series
of transactions is also required to launch a Mandatory Tender Offer prior to acquiring the substantial
interest, unless such person acquires the substantial interest (i) indirectly, (ii) in a public secondary
offering of securities, (iii) in a single transaction, or (iv) in no more than a series of four consecutive
transactions in a period of three consecutive years. Any tender offer launched prior to acquiring a
substantial interest so long as you do not fall in the situations described in items (i), (iii) or (iv) is
referred to herein as a “Voluntary Tender Offer”.
Except for Voluntary Tender Offers and cases where the Mandatory Tender Offer is launched prior to
acquiring substantial interest in a Target Company, the tender offer is required to be launched at the

earlier to occur of (i) four months from the date on which the requirement to launch the tender offer is
triggered, i.e., the date on which the substantial interest is acquired, and (ii) five calendar days from
the date the valuation entity files the valuation report referred to below (the “Valuation Report”).
This mandatory procedure has the effect of alerting other shareholders of the Target Company and
the market that a person or a group of persons acting in concert has acquired a significant percentage
of the Target Company’s voting shares, and gives them the opportunity to sell their voting shares at
the price offered by the offeror. The offeror is required to launch a tender offer unless: (i) shareholders
representing 100% of the voting rights give consent in writing to transfer all or part of the common
shares to the offeror; (ii) voting shares are acquired by a depositary in order to subsequently issue
ADRs, ADSs or similar securities; or (iii) voting shares are acquired by means of exercising pre-
emptive rights.
4.2 Number of securities

Except for Voluntary Tender Offers and cases where the Mandatory Tender Offer is launched prior to
acquiring substantial interest in a Target Company, Mandatory Tender Offers must be launched for at
least the number of shares resulting from the following formula:
[x/y] x [1-z] = minimum number of shares to be tendered
Where:
x = Percentage of securities acquired in the Target Company over the last three years.
y = Percentage of securities owned by third parties before the transaction(s) which

triggered the tender offer.
z = Percentage of securities owned after the transaction that triggered the tender offer.
4.3 Consideration offered

In a Mandatory Tender Offer, the price offered for the tender of securities must be the greater of (x)
the actual price paid in the acquisition of the substantial interest and (y) the price determined in the
Valuation Report by a valuation entity appointed by a special committee (the “Appointing Committee”)
comprised of three SMV officers and one representative appointed by the Target Company who has
no voting rights in the Appointing Committee. There is no regulatory period for the appointment of the
valuation entity by the Appointing Committee. However, in practice the Appointing Committee takes
approximately one month to appoint the valuation entity. The valuation entity is required to value the
target company for purposes of determining the minimum purchase price per share and file the
Valuation Report with the SMV within 30 calendar days from its appointment; provided, however, that
such period may be extended by the Appointing Committee at the request of the valuation entity.
In determining the minimum price of the shares, the valuation entity must use international valuation
practices and the following criteria: (i) the book value of the Target Company, (ii) the liquidation value
of the Target Company, (iii) the Target Company’s valuation as an ongoing business, (iv) the average
price of the Target Company’s voting shares during the immediately prior six months, and (v) in case
there has been a public tender offer over the Target Company’s voting shares during the previous
year, the price offered in that public tender offer. After applying all of the foregoing criteria except
where any of such criteria cannot be applied – the valuation entity must provide the minimum
purchase price for purposes of the Mandatory Tender Offer based on the criteria that, in its sole
discretion, is most appropriate for such purposes.

In cases where the tender offer is a Voluntary Tender Offer, there are no minimum prices that must be
complied with and there no is no legal requirement to appoint a valuation entity for purposes of
valuing the shares.
4.4 Tender offer period

If the tender offer is a Voluntary Tender Offer, the period during which the tender offer is open can be
determined by the offeror, provided such period is not less than 20 trading days. This period can be
extended once by the offeror with no less than four business days’ prior notice for a period that shall
not exceed 20 additional trading days.
If the tender offer is a Mandatory Tender Offer, the tender offer period must be of at least 20 trading
days and not more than 40 trading days.
Once launched, both the Voluntary Tender Offer and the Mandatory Tender Offer cannot be
withdrawn by the offeror.
4.5 Procedure
Regardless of whether there is a Mandatory Tender Offer or a Voluntary Tender Offer, the offeror
must notify the Target Company, the SMV and the Lima Stock Exchange of the proposed tender offer.
The tender offer period begins the day after all such entities have been notified of the tender offer.
Such notification must include (i) a prospectus, (ii) evidence of the guarantees granted by the offeror,
(iii) any governmental or administrative prior authorization, if applicable (e.g., in the case of financial
institutions), (iv) a draft of the tender offer notice to be published in the Lima Stock Exchange Bulletin
(during the tender offer period) and in a local newspaper, and (v) powers of attorney granted by the
offeror to its representatives, if applicable.
Once the foregoing documents have been filed with the SMV, the SMV may comment on the
information submitted within five business days from the filing date. The offeror has three business
days to address the comments.
4.6 Board of directors’ report

During the first seven days following commencement of the tender offer, or when a competitive bid
has been launched, the board of directors of the Target Company is required to issue a report
describing the advantages and disadvantages of tendering shares and disclosing any information
regarding any agreements between the offeror and the Target Company, its board members or its
shareholders.
4.7 Competitive bid

Competing bids may only be launched during the first 10 days after the tender offer period has
commenced. Pursuant to Peruvian law, competitive bids are not required to improve the terms and
conditions of the first tender offer.
Shareholders may accept the tender offer or any of the co-existing competing bids.
4.8 Acceptances
Acceptances of the tender offer must be processed by an authorized broker-dealer and may be
withdrawn at any moment during the tender offer period.

4.9 Allocation
Once the tender offer period expires, an officer of the Lima Stock Exchange (Director de Rueda) will
allocate the tendered securities the following day. The Lima Stock Exchange will notify the results of
the tender offer to the SMV and will publish them on the Lima Stock Exchange Bulletin.
4.10 Settlement
The settlement of the tender offer will be done following the rules that are applicable to transactions
made through the Lima Stock Exchange trading system, i.e., settlement shall be done in T+2.
4.11 International standards

If a tender offer takes place in Peru and in another jurisdiction simultaneously, the period and certain
other conditions can be adjusted to comply with international standards, provided that prior approval
of the SMV is obtained.
4.12 Non-conforming acquisition

To the extent that a substantial interest is acquired in a Target Company in violation of the applicable
tender regulations, the acquirer of such shares may be subject to the following:
• Administrative sanctions may be imposed (fines between 1 and 700 tax units).
• The SMV may suspend the voting rights of all the securities acquired by the offeror during the
three years prior to such acquisition and also those securities owned by the offeror prior to the
acquisition that violated the tender rules.
• The SMV will require the acquirer to sell the securities in the market through a public offering.
• In the case of indirect acquisition of substantial interest in the Target Company, the offeror
may either launch a subsequent Mandatory Tender Offer or launch an unconditional public
offer to sell the securities that were indirectly acquired either through an auction process or in
the open market. If the offeror decides to launch a public offer to sell through an auction
process, the initial maximum price to be offered for such securities shall be the lower between
(i) the actual price paid in the indirect acquisition of the substantial interest and (ii) the price
determined in the Valuation Report, as described above under “Consideration Offered”.
To the extent that the SMV determines that it would be more beneficial to the market, at the request of
the acquirer of the shares, the SMV may, at its own discretion, allow the offeror to launch a tender
offer for the remaining shares of the Target Company.
5 Timeline
As a general rule, the takeover bid process for a Mandatory Tender Offer is similar to the process that
applies in case of a Voluntary Tender Offer, with certain exceptions.
The table below contains a summary overview of the main steps of a typical Voluntary Tender Offer
under Peruvian law:
Step
• Preparation of the bid (analysis, due diligence, commit financing, drafting of
prospectus).

Step

• The offeror files the tender offer notice with the SMV, the Lima Stock Exchange
and the target company.
• The offer is binding and irrevocable the first business day after the tender notice
has been filed. On the same date, the tender offer notice is published in the Stock
Exchange Bulletin and remains published during the tender offer period.
• The tender offer notice must also be published in the Official Peruvian Gazette “El
Peruano” and another newspaper within two business days following the date in
which the tender offer period commences.
• The bid must be in force for at least 20 trading days.
3. During the Tender Offer period:

• The offeror, SMV and Lima Stock Exchange must grant recipients of the bid access
to all the filed documents.
• Within seven days following commencement of the tender offer period, the board of
directors must issue a report describing the advantages and disadvantages of
tendering the shares.
• The SMV has five business days from the beginning of the tender offer period to
comment on the filed documents.
• The offeror has three business days following receipt of the SMV’s comments to
address them. Failing to satisfactorily address the comments gives the SMV the
right to declare the tender offer invalid.
• The offeror might improve its offer and competing offers may only be filed within 10
trading days from the commencement of the tender offer period.
4. Settlement:
• Settlement shall occur within two business days following expiration of the tender
offer period.
Set out below is an overview of the main steps for a voluntary public takeover bid in Peru.

Start
process ‘A’ Day Day 0 Day 2 Day 4 Day 7 Day 10 Day 20 Day 22
Launch of bid: Offeror Offer is binding and Offer is published in SMV comments on Board of directors of Competing offers Expiry of tender Settlement
files tender offer notice irrevocable (first Officlal Peruvian the tender offer target company must may be filed offer period. occurs
with the Peruvian Capital business day after Gazette “El documents. Offeror issue report on the (within 10 business
Markets Superintendency tender notice is Peruano” and has 3 business days advantages and days from
(SMV), the Lima Stock filed) another newspaper to address SMV disadvantages of beginning of
Exchange and the target comments tendering the shares tender offer period)
company (otherwise SMV may
Tender offer notice declare tender offer
is published in the Offeror may
invalid).
Tender offer notice is Stock Exchange improve its offer
published in the Stock Bulletin whether or not a
Exchange Bulletin competing offer
has been filed.
Bid must be in force for at least 20 business days. During offer period, SMV and Lima Stock Exchange must grant recipients of the bid access to all filed documents

6 Takeover Tactics
The most common takeover tactics include the following:
6.1 Calculation of substantial interest in the Target Company

Although, under a hostile takeover bid, it will be difficult for the offeror to obtain information concerning
the holdings of each shareholder of the Target Company and their identities from the Target Company
or the Peruvian depository entity (CAVALI ICLV S.A.), it is crucial for the offeror to carry out an
investigation using publicly available information from the SMV and the Lima Stock Exchange, to
determine the number of shares with voting rights outstanding as well as the number of other
securities outstanding, i.e., (i) convertible bonds or any other securities that entitle their owners to
acquire or subscribe common shares, to the extent that such securities grant their owners to exercise
such rights within 18 months following their acquisition, and (ii) ADRs, GDRs or similar securities.
6.2 Obligation to acquire additional shares in a subsequent Mandatory

Tender Offer
As mentioned in 4.2 above, except for Voluntary Tender Offers and cases where the Mandatory
Tender Offer is launched prior to acquiring a substantial interest in the Target Company, if an offeror
acquires a substantial interest without having launched a tender offer, such acquisition will trigger the
obligation to launch a tender offer for the number of additional common shares as a result of the
formula described in 4.2 above. Therefore, the offeror must be aware of this obligation and make sure
it has secured the funds or securities needed to pay the required consideration before acquiring a
substantial interest in the Target Company.
6.3 Deciding whether to launch a prior Mandatory Tender Offer or a

subsequent Mandatory Tender Offer
Before deciding to launch a tender offer, an offeror should consider and evaluate the advantages and
disadvantages of launching a prior Mandatory Tender Offer or a subsequent Mandatory Tender Offer
after having acquired a substantial interest in the Target Company. The following table summarizes
the main advantages and disadvantages of implementing each strategy:
Prior Mandatory Tender Offer Subsequent Mandatory Tender

Offer
Consideration offered Determined by the offeror at its Minimum consideration

sole discretion. determined by a valuation entity
(see 4.3 above). Offeror has no
control over the consideration to
be offered.
Valuation Report No. Yes.
Competing bids Possible. Unlikely, as there is already a

bidder which has acquired
substantial interest in the Target
Company.
Power to determine the Yes. No. A Mandatory Offer

number of common subsequent to the acquisition of
shares to be acquired substantial interest shall be
launched to acquire an additional
number of common shares.

Prior Mandatory Tender Offer Subsequent Mandatory Tender
Offer
Prior disclosure Yes. No.

regarding intention to
acquire substantial
interest
6.4 Stake building

Potential bidder must take the following into consideration:
(i) If the potential bidder intends to acquire a substantial interest in the Target Company before
launching a Mandatory Tender Offer, such acquisition must be made in no more than a series
of four consecutive transactions in a period of 3 years. Otherwise, the SMV may consider that
such acquisition has been made in violation of Peruvian tender offer rules, since the bidder
should have launched a prior Mandatory Tender Offer.
(ii) The offeror is not allowed to acquire or commit to acquire common shares in the open market
(either through the Lima Stock Exchange or over the counter) during the tender offer period.
This limitation does not extend to the offeror’s affiliates.
6.5 Irrevocability of the bid

Once the tender offer has been launched, the offeror will not be able to revoke the offer.
6.6 Insider trading and market manipulation

Pursuant to the Securities Market Law and the Market Abuse Regulations, any person who has
access to inside information in connection with (i) a potential takeover bid or (ii) any undisclosed
information of the Target Company or its securities or businesses shall keep such information
confidential and cannot (a) reveal that information to third parties, (b) recommend operations to others
based on such information, (c) use that information to directly or indirectly benefit themself or third
parties, and (d) implement any price manipulation practices in order to create artificial, false or
misleading appearances with respect to the price of the Target Company’s common shares.

According to the Corporations Law, the fundamental obligations of the members of the board are (i) to
act in good faith, in the best interest of the company, and for the benefit of all its shareholders, (ii) not
to adopt any decision that benefits themselves or any related party, and (iii) to avoid conflicts or
potential conflicts of interest between themselves as members of the board and those of the company
as a whole.
In addition, pursuant to the Tender Offer Regulations, once directors and the management have
knowledge of a potential takeover offer (or that the company is under the threat of a takeover) and
until the announcement of the results of the takeover, they must be impartial towards potential
competitive offers, giving priority at all times to the interests of the shareholders and refrain from
performing, conducting or concerting any act that is not in the ordinary course of the company’s
business. They must not disrupt or frustrate the normal course of a offer or favor a offeror. Therefore,
directors and the company’s management cannot agree to issue new shares or other securities,
execute option agreements or sell any of the company’s assets, among other things.
There is no express prohibition, however, regarding the execution of agreements prior to having
knowledge of a takeover offer with the purpose of preventing or deterring unwanted takeovers, which
are subject to a condition precedent consisting of having been notified with a takeover offer.

Nonetheless, depending on which anti-takeover mechanism is agreed or implemented, such act may
be challenged for violating fundamental principles, i.e., if they damage the company as a whole, or
such measure is considered in benefit of a particular shareholder or group of shareholders such as
those who have control over the Target Company, except where such decisions have been agreed,
consented to or accepted by all of the company’s shareholders with voting rights. This requirement
may imply, in practice, that no defensive strategies may be adopted, given the fact that if the potential
offeror (or any of its affiliates or subsidiaries) previously acquired one common share of the future
Target Company and votes against the decision in the actual shareholders’ meeting, it will not be
possible to adopt the decision with 100% votes of the voting shares.
Anti-takeover mechanisms are unusual in Peru and there is no case law that addresses the legality or
validity of them. However, in the following chart we address the viability of some anti-takeover
mechanisms commonly used in other jurisdictions and their consequences if implemented in a
Peruvian listed company:
1. Share buyback • Once the management has been notified of the

bid, it is prohibited from performing any act that
Share buyback “with a view to avoid
may frustrate the bid.
imminent and serious harm” to the
company. • A buyback without cancelling shares is only
possible if it is done to prevent serious harm to
the company, or if there is an agreement at the
general shareholders’ meeting. The company
can only keep them for two years without
cancelling them, and the acquisition cannot
exceed 10% of the total share capital.
2. Crown jewels • The board would not be able to perform these

actions because they could be held liable for
An arrangement concerning key assets
damages to the company.
of the company which, in the event of a
takeover bid, may lead to the assets • If a shareholders’ meeting agrees on this
being sold. mechanism, it could be challenged for violating
the interests of the company, unless adopted by
all holders of common shares.
3. Limitation of voting rights • It is not possible. According to the Corporations

Law, every share has one vote.
Clause in the by-laws providing for a
proportional restriction of voting rights
(applying to all shareholders equally).
4. Limitation on share transfers • Listed companies cannot establish limitations to

transfer shares according to the Securities
Market Law.
5. Golden Parachutes • Such agreements may be questionable as it

may be deemed that they go against the
interests of the company in benefit of certain
shareholders and/or the administration.

Takeover
Under Peruvian legislation, it is not possible to compel the remaining shareholders to sell their
common shares to the offeror after a successful takeover bid. The only possible option is to negotiate
with the remaining shareholders.
8 Delisting
There are no legal limitations to prevent a public company from delisting and going private. However,
the delisting of a certain class or all common shares gives the holders that were absent or voted
against that decision in the shareholders’ meeting a redemption right. Accordingly, if there is a
decision to delist, the company and/or the shareholders that voted in favor of the delisting must launch
an offer directed at such shareholders offering to acquire all their holdings (Oferta Pública de Compra
por Exclusión). Any decision that has an economic effect equivalent to the delisting of the securities
triggers the obligation to launch the foregoing offer.

Liliana Espinosa, Pablo Berckholtz, Rafael Berckholtz, Alonso Miranda and Rafael Picasso in the
Lima office are the most appropriate contacts within Baker McKenzie for inquiries about public M&A in
Peru.
Liliana Espinosa Pablo Berckholtz

Lima Lima
liliana.espinosa@bakermckenzie.com pablo.berckholtz@bakermckenzie.com
+51 1 6188500 +51 1 6188500
Rafael Berckholtz Alonso Miranda
Lima Lima
rafael.berckholtz@bakermckenzie.com alonso.miranda@bakermckenzie.com
+51 1 6188500 +51 1 6188500
Rafael Picasso
Lima
rafael.picasso@bakermckenzie.com
+51 1 6188500

Philippines
1 Overview
Public M&A activity has been consistently robust in the Philippines. Popular or traditional sectors such
as power and utilities continue to dominate the market, with increased M&A activity in the healthcare,
financial industries, retail, infrastructure, and real property sectors.

The main rules and principles of Philippine law relating to public takeover bids can be found in:
• Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines
(“Revised Corporation Code”), which took effect on 23 February 2019; and
• Republic Act No. 8799, otherwise known as the “Securities Regulation Code” (“SRC”) and the
2015 Implementing Rules and Regulations of the SRC (“SRC IRR”).

Philippines, there are a number of additional rules and principles that are to be taken into account
(a) The rules relating to compliance with foreign ownership ceilings. These rules determine the
maximum allowable percentages of foreign ownership in companies subject to public
takeovers, and are set out in Republic Act No. 7042 (Foreign Investments Act of 1991), and
the Eleventh Regular Foreign Investments Negative List which specifies the types of
industries subject to foreign ownership ceilings. Furthermore, the guidance on the
computation of foreign ownership ceilings is provided in the Guidelines on Compliance with
Filipino-Foreign Ownership Requirements Prescribed in the Constitution and/or Existing Laws
by Corporations Engaged in Nationalized and Partly Nationalized Activities issued by the
Philippine Securities and Exchange Commission (“SEC”).
(b) The rules relating to insider dealing and market manipulation (insider trading rules). These
rules are contained in the SRC and SRC IRR.
(c) The rules relating to minimum public ownership (“MPO Rule”). These rules are relevant to the
extent that the company subject to the takeover is a listed company on the Philippine Stock
Exchange (“PSE”).
(d) The rules and regulations regarding merger control. These rules and regulations are provided
in the Philippine Competition Act (“PCA”) and the Rules and Regulations to Implement the
Provisions of the PCA (“PCA IRR”).
(e) The rules on disclosure issued by the PSE. Specifically, the PSE categorizes disclosure
reports as either (i) structured reports, or those reports which public listed companies are
required to submit on a regular basis, or (ii) unstructured reports, or those reports that need to
be disclosed in relation to any material fact or event that may affect an investor’s decision in
relation to the public issuer’s securities.
(f) The rules relating to additional securities. The PSE requires publicly-listed companies to
submit applications for listing of new shares that will be issued to the public, subject to the
requirements set forth under the PSE’s Consolidated Listing and Disclosure Rules (“PSE
Rules”).

(g) The rules on backdoor listing. Under the PSE Rules, a backdoor listing is deemed to occur
when a listed company acquires or merges or combines with an unlisted company, or when a
listed company is acquired by, merged or combined with an unlisted company, and which
acquisition, merger, or combination results in a substantial change in the business,
membership of the board of directors, or voting structure of the listed company. In this regard,
the PSE allows the listing of shares of a listed company subject to compliance with the
requirements for a backdoor listing.
(h) The rules on corporate governance. The Revised Corporation Code, as well as several recent
guidelines of the SEC (i.e., the revised Code of Corporate Governance for Public Companies
and Registered Issuers of the SEC took effect on 12 January 2020 and revised implementing
rules and regulations of Republic Act No. 9856 or the Real Estate Investment Trust (REIT) Act
of 2009) requires the appointment of independent directors and certain officers (such as REIT
property managers) to maintain stability and enforce supervision and oversight over listed
companies.
2.3 Supervision and enforcement by the SEC

Public takeover bids are subject to the supervision and control by the SEC, and the Philippine
Competition Commission (“PCC”), to the extent that the takeover breaches the thresholds requiring
merger clearance. The SEC is the principal securities regulator in the Philippines.
The SEC has a number of legal tools that it can use to supervise and enforce the compliance with the
public takeover bid rules, including administrative fines. In particular, the Market and Securities
Regulation Department (“MSRD”) of the SEC is the department charged with regulation of registration
of securities prior to their sale to the public, as well as compliance with disclosure obligations of listed
companies. In addition, criminal penalties could be imposed by the courts in cases of non-compliance.

The following general principles apply to public takeovers in the Philippines. These rules are based on
the Revised Corporation Code, SRC and the SRC IRR:
(a) All stockholders of a stock corporation shall enjoy pre-emptive right to subscribe to all issues
or disposition of shares of any class, in proportion to their respective shareholdings, unless
such right is denied by the articles of incorporation or an amendment thereto, provided that
such pre-emptive right shall not extend to shares to be issued in compliance with laws
requiring stock offerings or minimum stock ownership by the public; or to shares to be issued
in good faith with the approval of the stockholders representing two-thirds of the outstanding
capital stock, in exchange for property needed for corporate purposes or in payment of a
previously contracted debt;
(b) All stockholders shall have an appraisal right to dissent and demand payment of the fair value
of their shares in cases of public takeovers involving mergers or consolidation of companies;
(c) All holders of the securities of an offeree company of the same class must be afforded
equivalent treatment; moreover, if a person acquires control of a company, the other holders
(d) The holders of the securities of an offeree company must have sufficient time and information
to enable them to reach a properly informed decision on the bid; where it advises the holders
(e) The board of an offeree company must act in the interests of the company as a whole and

(f) False markets must not be created in the securities of the offeree company, of the offeror
company or of any other company concerned by the bid in such a way that the rise or fall of
the prices of the securities becomes artificial and the normal functioning of the markets is
distorted;
(g) During a tender offer (or before its commencement, if the target public company’s board of
directors has reason to believe that an offer might be imminent), the target public company
may not: (i) issue any authorized but unissued shares; (ii) issue or grant options in respect of
any unissued shares; (iii) create or issue or permit the creation or issuance of, any securities
carrying rights of conversion into, or subscription to shares; (iv) sell, dispose of or acquire, or
agree to acquire, any asset whose value amounts to 5% or more of the total value of the
assets prior to acquisition; or (v) enter into contracts that are not in the ordinary course of
business, except in each case, if the transaction is (1) pursuant to a contract previously
entered, (2) entered with the approval of the target public company’s shareholders in a
general meeting, or (3) with the prior approval of the SEC; and
(h) Any person who shall become aware of a potential tender offer before the tender offer has
been publicly announced may not buy or sell, directly or indirectly, the securities of the target
public company (including any securities convertible or exchangeable into such securities, or
any options or rights in any of the foregoing) until the tender offer shall have been publicly
announced.

Foreign investments are not restricted in the Philippines. Unless in the context of specific industries
and sectors (such as the banking industry, the telecommunications sector or other public utilities),
takeovers are not subject to prior governmental or regulatory approvals other than customary anti-
trust approvals.

There are no proposed or upcoming reforms on takeovers in the Philippines. Note, however, that
there is a proposal to raise the threshold for a mandatory tender offer, which is currently set at 35% of
equity shares in a public company, but the same has not been implemented to date.
There are also pending reforms to:
• Remove foreign equity restrictions on certain types of business activities, such as operation of
a public utility (e.g., transportation and telecommunication) and retail trade, which may
provide an opportunity for foreign players to take over or acquire existing public utilities and
retail trade businesses and invest in the Philippine market.
• The PSE is also proposing to amend involuntary delisting rules to require a listed company
that is subject to involuntary delisting to conduct a tender offer to all its stockholders of record,
at a minimum tender offer price which shall be the higher of (i) the highest value based on the
fairness opinion or valuation report prepared by an independent valuation provider in
accordance with SRC or (ii) the volume weighted average price of the listed security for one
year immediately preceding the issuance of the delisting order. Previously, listed companies
that are subject to an involuntary delisting proceeding are not required to conduct a tender
offer. The PSE is also proposing to amend the voluntary delisting rules to require stockholders
owning or representing at least 75% of the outstanding capital stock to approve the voluntary
delisting. The current voluntary delisting rules require only approval by the Board of Directors
to commence voluntary delisting proceedings.

levels of shareholding within a Philippine-listed corporation:
Shareholding Rights
One share • The right to subscribe to all issues or dispositions of shares of any class,
in proportion to respective shareholdings (pre-emptive right).
• The right to transfer or dispose of shareholdings.
• The right to attend and vote at general shareholders’ meetings.
• The right to obtain a copy of the documentation submitted to general

• The right to inspect corporate records and financial statements.
• The right to submit questions to the directors and statutory auditors at

general shareholders’ meetings (either orally at the meeting, or in writing
prior to the meeting).
• The right to elect directors in proportion to shareholdings.
• The right to dissent and demand payment for fair value of shares in cases
of (i) amendment of articles of incorporation which has the effect of
changing or restricting the rights of any stockholder or class of shares, or
of authorizing preferences in any respect to those of outstanding shares
of any class, or extending or shortening the term of corporate existence,
or (ii) lease, exchange, transfer, mortgage, pledge, or other disposition of
all or substantially all of the corporate property and assets as provided in
the Corporation Code; and (iii) merger and consolidation (appraisal right).
More than The ability at a general shareholders’ meeting:

50% (at a
• to amend articles of incorporation
general
shareholders’ • to elect directors in proportion to shareholdings
meeting)
• to invest in another business or corporation
• to increase or decrease capital stock
• to incur or increase bonded indebtedness
• to sell, dispose or encumber all or substantially all of the assets of a

corporation
• to declare stock dividends
• to enter into management contracts
• to adopt, amend, or repeal by-laws;

Shareholding Rights
• to fix consideration of no par value shares
• to approve any merger or consolidation

Philippine law contains a number of rules that already apply before a public takeover bid is
announced. These rules impose restrictions and disclosures in relation to prior stake building by a
bidder, announcements of a potential takeover bid by a bidder or a target company, and prior due
diligence by a candidate bidder. The main restrictions and hurdles have been summarised below.
Some careful planning is therefore necessary if a candidate bidder or target company intends to start
up a process that is to lead towards a public takeover bid.

remain applicable. For further information on the rules on insider dealing and market abuse see 6.3
below. The rules include amongst other things that manipulation of the target’s stock price, e.g., by
creating misleading rumours, is prohibited.

public takeover bid. Note, further, that public companies are required to submit their public ownership
reports on a quarterly basis, which provide details of the shareholdings in the company, and public
ownership of the company for the covered period.
The SRC provides for thresholds necessitating a mandatory tender offer of securities intended to be
acquired. Specifically, Rule 19 (SRC Rule 19, and with its subsections, hereafter collectively the
“Tender Offer Rules”) of the SRC IRR governs the procedures and other regulations applicable to
the conduct of tender offers in the Philippines.
Under the Tender Offer Rules, any person or group of persons acting in concert, who intends to
acquire:
(a) at least 15% of equity securities in a public company in one or more transactions within a
period of 12 months shall be required to file a declaration to that effect with the SEC;
(b) at least 35% of the outstanding voting shares, or such outstanding voting shares that are
sufficient to gain control of the board of directors of a public company, in one or more
transactions within a period of 12 months shall be required to disclose such intention and
contemporaneously make a tender offer for the percentage sought to all holders of such
securities within the said period;
(c) at least 35% of the outstanding voting shares, or such outstanding voting shares that are
sufficient to gain control of the board of directors of a public company, directly from one or
more stockholders shall be required to make a tender offer for all outstanding voting shares.
Note that the sale of shares pursuant to a private transaction or a block sale shall not be
completed prior to the closing and completion of the required tender offer; or
(d) such amount of the outstanding equity securities of a public company that will result in the
acquiring party owning more than 50% of the total outstanding equity securities thereof shall
be required to make a tender offer for all outstanding equity securities to all remaining
stockholders of the public company at a price supported by a fairness opinion provided by an

independent financial advisor or equivalent third party. Note that the acquirer of securities in
the public company making the tender offer is required to accept all securities tendered.
If a person or group of persons, acting in concert, intends to acquire 35% of the outstanding voting
shares or such outstanding voting shares that are sufficient to gain control of the board in a public
company through the PSE trading system shall not be required to make a tender offer (even if such
person or group of persons acting in concert acquire the remainder through a block sale), if after the
acquisition through the PSE trading system, they fail to acquire their target or 35% of such
outstanding voting shares that is sufficient to gain control of the board.
If equity securities of a public company are purchased at threshold amounts provided for under the
Tender Offer Rules without complying therewith, the SEC may, upon complaint, nullify such purchase
and order the conduct of a tender offer, without prejudice to any other applicable sanctions under the
SRC.
Furthermore, disclosure requirements applicable to acquisition / disposal of shares of stock of a public

company are governed by Rule 18 and Rule 23 of the SRC IRR, as follows:
(i) Reports filed by 5% beneficial owners under Rule 18 of the SRC
Any person who directly or indirectly acquires the beneficial ownership of 5% or more
of any class of equity securities of a public company is required to disclose such fact
to the public company, the PSE and the SEC. Such disclosure is made by way of
SEC Form 18-A, and is made within five days after the date of acquisition of beneficial
ownership by such person.
Generally, a person is a beneficial owner of or has beneficial ownership over an

equity security, e.g., shares of stock, if such person, directly or indirectly, in respect of
such security, has:
(A) through any contract, arrangement, understanding, relationship or otherwise,

the power to vote, or to direct the voting of, such security; and/or
(B) investment returns or power, which includes the power to dispose, or to direct
the disposition, of such security.
In addition, the SRC IRR provides that a person shall be deemed to have an indirect
beneficial ownership interest in any security which is held by a corporation of which
such person is a controlling shareholder or if such security is subject to any contract,
arrangement or understanding which gives a person voting power or investment
power with respect to such security. Control, for this purpose, is the power to govern
the financial and operating policies of an enterprise so as to obtain benefits from its
activities. Likewise, a person shall be deemed to be the beneficial owner of a security
if that person has the right to acquire beneficial ownership, within 30 days, including
but not limited to, any right to acquire, through the exercise of any option, warrant or
right, through the conversion of any security, pursuant to the power to revoke a trust,
discretionary account or similar arrangement, or pursuant to automatic termination of
a trust, discretionary account or similar arrangement.
(ii) Reports filed by 10% beneficial owners and the directors and officers of an issuer
A (a) director, (b) officer, or (c) any person who directly or indirectly is the beneficial
owner of 10% or more of any class of any security of a public company is required to
disclose and file a statement with the PSE and the SEC. The disclosure is made by
way of SEC Form 23-A and is made within 10 calendar days after becoming a
director, officer or a beneficial owner of the public company.

If there has been any change in such ownership (including if such ownership falls
below 10%) or if such person ceases to be an officer or director of the public
company), a director, officer or beneficial owner shall disclose and file a statement
with the PSE and the SEC within 10 days after the close of the month in which such
change occurred. The disclosure is made by way of SEC From 23-B, indicating: (a)
the amount of securities beneficially owned at the close of the calendar month; and/or
(b) if the person ceases to be an officer or director of the public company.
(iii) Additional disclosures by beneficial owners, directors and officers of an issuer
Persons required to disclose their beneficial ownership in securities of an issuer are

likewise required to disclose the information set out below (i) if the report is being filed
due to the acquisition of 5% or more beneficial ownership of securities of a public
company, and the reporting person previously owned 5% or more but not less than
10% of the outstanding securities of such public company, and (ii) if the report being
filed is due to a change in the beneficial ownership of securities held by a 10% or
more beneficial owner, only if such change in beneficial ownership is (1) equivalent to
50% of the previous shareholding of the reporting person, or (2) equivalent to 5% of
the outstanding capital stock of the public company:
(A) background information on the 5% or 10% beneficial owner;
(B) purpose or purposes of the acquisition of securities of the public company;
(C) information on the beneficial owner’s interest in the securities of the public
company, including, among others: (i) if the beneficial owner, together with
other persons, comprise a “group”, information on the beneficial ownership of
securities of such group members, (ii) voting or selling arrangements between
the beneficial owner and its co-members, if comprising a group, and (iii)
transactions relating to the class of securities reported on that were effected
during the past 60 days by the beneficial owner and its co-members, if
comprising a group; and
(D) information on (and copies of) contracts, arrangements, understandings or

relationships with respect to securities of the public company between (i) the
beneficial owner and its co-members, if comprising a group, or (ii) the
beneficial owner and any person, involving transfer or voting of any of the
securities of the public company, finder’s fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss, or
the giving or withholding of proxies.
We should note that the SEC, in its capacity as the primary government agency
responsible for regulating transactions in Philippine securities and the implementation
of the SRC and the SRC-IRR, may require from the reporting persons information
other than the foregoing that the SEC may deem relevant to the acquisition so
reported. The SEC may likewise require, in the public interest, the disclosure of the
foregoing additional information (and submission of all contracts, agreements,
instruments or other documents relating thereto) notwithstanding the fact that the
conditions for disclosure thereof (as indicated in the appropriate SEC Forms) do not
necessarily apply.

For further information on inside information, see also 6.1 below. The facts surrounding the

preparation of a public takeover bid may constitute inside information. If so, the target company must
announce this. However, the board of the target company can delay the announcement if it believes
that a disclosure would not be in the legitimate interest of the company. This could for instance be the
case if the target’s board believes that an early disclosure would prejudice the negotiations regarding
a bid. A delay of the announcement, however, is only permitted provided that the non-disclosure does
not entail the risk that the public is misled, and that the company can keep the relevant information
confidential.

Prior to the public announcement of the takeover bid by the offeror and the target company (see
section 6.2), no one is permitted to announce the launching of a public takeover bid. Announcement
of a takeover prior to the actual offer launch or announcement of intent to make an offer constitutes
material non-public information, which is prohibited under the SRC IRR.
A bidder that intends to announce a public takeover bid is mandated to make an announcement of its
intention (to make a tender offer) in a national newspaper of general circulation within five business
days from either (i) the approval by the board of directors of the selling shareholder(s) relative to the
purchase of shares that may result in a mandatory tender offer or (ii) 30 business days prior to the
commencement of the tender offer.
The offeror shall likewise publish the terms and conditions of the tender offer in two national
newspapers of general circulation in the Philippines on the date of the commencement of the tender
offer and for two consecutive days after compliance with the dissemination requirements under the
Tender Offer Rules, including the distribution of notices to the holders of the class of securities sought
to be acquired.
Copies of the foregoing notices of intent to make an offer are required to be submitted to the SEC
after its publication.
In addition to the foregoing, the rules on backdoor listing of the PSE requires the applicant company
to comply with the following:
(a) Comprehensive Corporate Disclosure - an applicant company is obligated to submit a

Comprehensive Corporate disclosure within five trading days from receipt of a request from
the PSE. The disclosure must include information such as the purpose of the transaction, the
complete details of the transaction, and information on the new shareholders, among others.
(b) Trading suspension - a trading suspension shall be imposed immediately after evaluation of
the disclosure submitted and determination on applicable of the rule on backdoor listing. The
suspension shall be lifted one trading day after dissemination by the PSE of the
Comprehensive Corporate Disclosure.
(c) Stockholders’ approval - the issuer must likewise submit a sworn Corporate Secretary’s
Certificate confirming that its stockholders’ approved the transactions resulting in backdoor
listing.
(d) Payment of listing and processing fees - the issuer must likewise pay a listing fee
equivalent to a tenth of 1% of the market capitalization of the new shares issued covered by
the transaction, as well as a processing fee of PHP 250,000.

(a) Early disclosure demanded by the SEC – Under the SRC, any person making a tender
offer shall make an announcement of its intent in a newspaper of general circulation within
five business days from either the company’s board approval authorizing negotiations relative
to the purchase of shares that may result in a mandatory tender offer, or 30 days prior to the

commencement of the offer. The announcement of intent (pre-launch notice) is required to be

disclosed to the SEC on the date of its publication. The pre-launch notice is appended to, and
shall form part of, the Initial Tender Offer Report (SEC Form 19-1).
(b) Put-up or shut-up – The SEC mandates the submission of an intention to launch a tender
offer on the date of the announcement of the intention to purchase shares that will result in a
tender offer.
3.8 Due diligence

The Philippine public takeover bid rules do not contain specific rules regarding the question of
whether a prior due diligence can be organised, nor how such due diligence is to be organised. Be
that as it may, the concept of a prior due diligence or pre-acquisition review by a bidder is generally
accepted (also by the SEC), and appropriate mechanisms have been developed in practice to
organise a due diligence or pre-acquisition review and to cope with potential market abuse and early
disclosure concerns (such as the use of strict confidentiality procedures and data rooms).

For the purpose of the Philippine takeover bid rules, the definition of “persons acting in concert” under
the Tender Offer Rules is not defined. While the phrase “persons acting in concert” is not expressly
defined under the SRC IRR or the Tender Offer Rules, we believe that this may be taken to mean, in
its ordinary usage, persons or entities acting together, with common intent, interest and/or objective in
respect of the activity sought to be regulated – in this context, the acquisition of outstanding securities
or voting shares of the target public company.
There are two main forms of takeover bids in the Philippines:
• a voluntary takeover bid, in which a bidder voluntarily makes an offer for securities which do
not meet the thresholds under the SRC IRR (see 4.1 below); and
• a mandatory takeover bid (see 4.2 below).
A bidder that intends to launch a takeover bid must include in its notification to the SEC and PSE an
Initial Tender Offer Report, as well as proof of certain funds or a cash confirmation letter.

The bidder is free to make the takeover bid subject to merger control clearance if the merger
breaches the thresholds under the PCA. Specifically, under the PCA, parties to an acquisition
involving any trade, industry or commerce within the Philippines, or even without, to the extent such
transaction has a direct, substantial and reasonably foreseeable effect in the trade, industry or
commerce within the Philippines) are required to notify the Philippine Competition Commission of
such transaction within 30 days from the execution of definitive agreements relating thereto where: (a)
the aggregate annual gross revenues in, into or from the Philippines, or the value of the assets in the
Philippines of the ultimate parent entity of at least one of the acquiring or acquired entities, including
that of all entities that the ultimate parent entity controls, directly or indirectly, exceeds PHP 6 billion
(Size of Party); and the value of the transaction exceeds PHP 2.4 billion (Size of Transaction).
Furthermore, SEC approval is required in cases of merger or consolidation.
The bidder is in principle free to determine the price and the form of consideration offered to the target
shareholders (absent any pre-existing controlling interest in the target):

• There is no minimum price for a voluntary takeover bid, but price is generally based on a
valuation report issued by an independent appraiser for the shares to be acquired.

A mandatory takeover bid is triggered as soon as a person or group of persons acting in concert (or
persons acting for their account) as a result of an acquisition of voting securities, holds (a) at least
15% of equity securities in a public company in one or more transactions within a period of 12 months;
or (b) at least 35% of the outstanding voting shares, or such outstanding voting shares that are
sufficient to gain control of the board of directors of a public company, in one or more transactions
within a period of 12 months; or (c) at least 35% of the outstanding voting shares, or such outstanding
voting shares that are sufficient to gain control of the board of directors of a public company, directly
from one or more stockholders; or (d) such amount of the outstanding equity securities of a public
company that will result in the acquiring party owning more than 50% of the total outstanding equity
securities thereof.
Under the SRC IRR, unless the acquisition of equity securities is intended to circumvent or defeat the
objectives of the Tender Offer Rules, the mandatory tender offer requirement shall not apply to the
situations where:
• any purchase of securities from the unissued capital stock; Provided, the acquisition will not
result to a fifty percent (50%) or more ownership of securities by the purchaser or such
percentage that is sufficient to gain control of the board;
• any purchase of securities from an increase in authorized capital stock;
• purchase in connection with foreclosure proceedings involving a duly constituted pledge or

security arrangement where the acquisition is made by the debtor or creditor;
• purchases in connection with a privatization undertaken by the government of the Philippines;
• purchases in connection with corporate rehabilitation under court supervision;
• purchases in the open market at the prevailing market price; and
• merger or consolidation.
In terms of the price offered and the form of the consideration, the Tender Offer Rules require that the
price must be supported by a fairness opinion provided by an independent financial advisor or
equivalent third party.

(a) Follow-on squeeze-out: There are no regulations under Philippine law which allow for a
“squeeze out” such that a bidder will be able to compel minority shareholders to sell their
shares.
(b) Sell-out right if the bidder is not itself launching a squeeze-out: There are likewise no
regulations under Philippine law allowing minority shareholders to sell-out their shares to a
bidder following a take-over. In lieu of a squeeze out, the delisting rules of the PSE
(“Delisting Rules”) requires an applicant seeking to delist to show the PSE that following the
acquisition of the tendered shares, such persons have obtained a total of at least 95% of the
issued and outstanding listed securities of the applicant company. Furthermore, a reverse
stock split which is also commonly implemented whereby a company will increase the par
value of its shares resulting in a “fractionalization” of the shares held by the shareholders
under the previous par value, that is, the reduction of a shareholders’ shareholding into less
than one share in the company.

5 Timeline
The takeover bid process for a mandatory public takeover is provided under the SRC IRR. The table
below contains a summarised overview of the main steps of a typical mandatory public takeover bid
process under Philippine law.
Step
1. Preparatory stage prior to pre-launch:

• Preparation of the bid by the bidder (study, due diligence, financing, obtaining a
third party fairness opinion/valuation report, cash/funds confirmation letter, terms
and conditions of offer)
• The bidder approaches the target and/or its key shareholders
• Negotiations with the target and/or its key shareholders
• Approval of board of directors for launch of offer
• Voluntary trading halt
2. Announce intention to make an offer:

• The offeror is required to make an announcement of its intention to make a tender
offer in a national newspaper of general circulation either within (i) five business
days from the approval by the board of directors of the selling shareholder(s) or the
bidder relative to the purchase of shares that may result in a mandatory tender
offer or (ii) 30 business days prior to the commencement of the tender offer.

• The offeror shall be required to file with the SEC (with a copy to the target public
company at its principal executive office and to each exchange where the securities
sought to be acquired are listed for trading), together with the prescribed filing fee,
the Initial Tender Offer Report (SEC Form 19-1) and all applicable exhibits. The
filing and receipt by the SEC of the Initial Tender Offer Report is generally
considered to be the date when the tender offer is deemed to have formally
commenced.
• The offeror shall likewise publish the terms and conditions of the tender offer in two
national newspapers of general circulation in the Philippines on the date of the
commencement of the tender offer and for two consecutive days after compliance
with the dissemination requirements under the Tender Offer Rules, including the
distribution of notices to the holders of the class of securities sought to be acquired.
4. Offer Period:
• A tender offer, unless withdrawn, shall remain open until the expiration of: (a) at
least 20 business days from its commencement, except that a tender offer should
to the extent possible be completed within 60 business days from the date the
intention to make such offer is publicly announced; or (b) at least 10 business days
from the date the notice of a change in the percentage of the class of securities
being sought or in the consideration offered is first published, sent or given to
holders of the class of securities sought to be acquired.
• The offeror may not extend the period of a tender offer without prior clearance from
the SEC through filing an exemptive relief application, and without issuing a notice
of such extension by publication in a national newspaper of general circulation. The
notice must disclose the total number of securities deposited or tendered to date

Step
and shall be made public not later than the scheduled original expiration date of the
tender offer.
5. Tender, Acceptance, and Termination of the Offer:

• The offeror is required to permit holders of the securities tendered in a tender offer
to withdraw the same (a) at any time during the period the tender offer remains
open, and (b) if not yet accepted for payment, after the expiration of 60 business
days from the commencement of the tender offer.
• If the tender offer is for less than the total outstanding securities of a class, but a
greater number of securities is tendered, the offeror shall be obliged to accept and
pay for the securities on a pro rata basis, disregarding fractions, according to the
number of securities tendered by each security holder during the period the offer
was open.
• In the event that the offeror increases the consideration offered after the tender
offer has commenced, the offeror shall pay such increased consideration to all
security holders whose tendered securities have been accepted for payment,
whether or not the securities were tendered prior to the variation of the tender offer
terms.
• In a mandatory tender offer (that is, where the tender offer is required to be made
to all holders of the class of securities sought to be acquired), the offeror shall be
compelled to offer the highest price paid by it for such securities during the
preceding six months.
• If a tender offer has been announced but has not become unconditional and has
been withdrawn or has lapsed, the offeror may not, without prior SEC approval,
undertake a new tender offer or otherwise acquire securities of the target public
company (which would require such person to make a mandatory tender offer)
within six months from the date the tender offer had been withdrawn or had lapsed.
6. No later than 10 business days after the termination of the tender offer (that is, after the
lapse of the tender offer period or the settlement of the tendered shares, as applicable), the
offeror is required to complete an amended Tender Offer Report (to reflect the results of the
tender offer) and file the same with the SEC.
Set out below is an overview of the main steps for a mandatory public takeover in the Philippines.

Mandatory public takeover (indicative timeline)
Start
process A Day L Day T Day E Day P Day C Day X Day
Offeror announces Launch tender offer Launch of tender offer End of acceptance Offeror files results of Payment of the Squeeze-out if
intention to make a bid by filing Initial acceptance period period2 tender offer with SEC offered consideration permitted by articles
tender offer in Tender Offer Report (Final and Amended as soon as possible of incorporation
Publication of terms
national newspaper1 (SEC Form 19-1) with Tender Offer Report) after filing results with
and conditions of
Philippines Securities SEC on a variable
tender offer on the
& Exchange date (Settlement
date of the
Commission (SEC) Date)
commencement of the
tender offer and for
two consecutive days
thereafter
Approximately 5 to 10 days 20-60 business days No later than 10 business days 3-7 business days (variable, no
(variable, no mandatory timeline) after the end of the offer mandatory date or timeline)
(1) Within (i) five business datys from approval by the board of directors of the selling shareholders or the bidder or (ii) 30 business days prior to the commencement of the tender offer.
(2) The acceptance period shall remain open for at least 20 business days, except that a tender offer should to the extent possible be completed within 60 business days.

6 Takeover Tactics
A Philippine company has the obligation to immediately disclose to the public all “inside information”
that relates to it, including all material changes in information that has already been disclosed to the
public.
“Inside information” or “material non-public information” means information that (a) has not been
generally disclosed to the public, and would likely affect the market price of the security after being
disseminated to the public and the lapse of a reasonable amount of time for the market to absorb the
information; or (b) would be considered by a reasonable person as important under the circumstances
in determining their course of action whether to buy, sell, or hold a security.

In the event of a (potential) public takeover bid, the Philippine takeover bid rules provide that an
announcement can be made of a potential takeover bid even without the prior approval by the SEC.
However, the SRC IRR requires the mandatory submission of the announcement of intent to make an
offer to the SEC immediately after its publication.

The basic legal framework regarding insider dealing and market abuse under Philippine law is set
forth in the SRC and SRC IRR. Under the SRC IRR, the following are considered as “insiders”: (a)
the issuer; (b) a director or officer (or any person performing similar functions) of, or a person
controlling the issuer; (c) a person whose relationship or former relationship to the issuer gives or
gave them access to material information about the issuer or the security that is not generally
available to the public; (d) a government employee, director, or officer of an exchange, clearing
agency, and/or self-regulatory organization who has access to material information about an issuer or
a security that is not generally available to the public; or (e) any person who learns such information
by a communication from any of the foregoing insiders.
Under Rule 27 the SRC IRR, the buying or selling of a security of an issuer by an insider thereof,
while in possession of material non-public information with respect to the issuer or the security, is
prohibited unless:
(a) the insider proves that the information was not gained from such relationship, or
(b) if the other party selling to or buying from the insider (or their agent) is identified, the insider
proves (i) that the material non-public information was disclosed to the other party, or (ii) that
the insider had reason to believe that the other party is also in possession of the same
material non-public information.
An insider is further prohibited from communicating any material non-public information about an
issuer or its securities to any person who, by virtue of the communication, becomes an insider, where
the insider communicating the material non-public information knows or has reason to believe that
such person will likely buy or sell a security of the issuer while in possession of such material non-
public information.
In the context of a potential or on-going tender offer, the following are likewise prohibited, and any
violation thereof shall be considered as acts or instances of insider trading (or trading on the basis of
material non-public information):
(a) Any person who becomes aware of a potential tender offer before the tender offer has been
publicly announced may not buy or sell, directly or indirectly, the securities of the target public
company (including any securities convertible or exchangeable into such securities, or any

options or rights in any of the foregoing) until the tender offer shall has been publicly
announced.
(b) Any person (other than the offeror) who is in possession of information relating to such tender
offer, may not buy or sell the securities of the issuer that are sought or to be sought by such
tender offer (including any securities convertible or exchangeable into such securities, or any
options or rights in any of the foregoing) if such person knows or has reason to believe that
the information is non-public and has been acquired, directly or indirectly, from the offeror,
those acting on its behalf, the issuer of securities sought or to be sought by such tender offer,
or any insider of such issuer.
(c) The offeror, those acting on its behalf, the issuer of the securities sought or to be sought by
such tender offer (including any securities convertible or exchangeable into such securities, or
any options or rights in any of the foregoing), and any insider of such issuer may not
communicate material non-public information relating to the tender offer to any other person
where such communication is likely to result in a violation of the rules and regulations on
insider trading or trading on the basis of material non-public information.
In addition to the foregoing, the SRC likewise states that for the purpose of preventing the unfair use
of information which may have been obtained by a beneficial owner, director, or officer by reason of
their relationship to the issuer, any profit realized by them from any purchase and sale, or any sale
and purchase, of any equity security of such issuer within any period of less than six (6) months,
unless such security was acquired in good faith in connection with a debt previously contracted, shall
inure to and be recoverable by the issuer, irrespective of any intention of holding the security
purchased or of not repurchasing the security sold for a period exceeding six (6) months.
6.4 Common anti-takeover defence mechanisms

The table below contains a summarised overview of the mechanisms that can be used by a target
company as a defence against a takeover bid. These take into account the restrictions that apply to
1. Capital increase (poison • Requires a majority vote of the board of directors

pill) and vote of stockholders representing or owning at
least two-thirds of the outstanding capital stock
Capital increase by the board entitled to vote.
(authorised capital) without
preferential subscription rights of the • The increase in capital stock requires prior
shareholders. approval of the SEC.
• Note, however, that the SEC has frowned upon

poison pill provisions for defeating the rights of
minority shareholders.
2. Share buyback Re-acquisition of shares of issuer or target of its own

securities shall only be made if the issuer has unrestricted
Share buyback retained earnings in its books to cover the amount of
shares to be purchased and is undertaken for a legitimate
corporate purpose.
3. Sale of crown jewels Requires prior approval of the board of directors and the
affirmative vote of the stockholders representing at least
An arrangement affecting the assets two-thirds of the outstanding capital of the Company
of, or creating a liability for, the

company which is triggered by a
change in control or the launch of a
takeover bid.
4. Frustrating actions • Only transactions which have sufficiently

progressed already (prior to receipt of notification of
Actions such as significant a takeover bid) may be implemented by the target’s
acquisitions, disposals, changes in board.
indebtedness, etc.
• Other transactions require shareholders’ approval
after the takeover bid has been notified to the
target.
5. Shareholders’ agreements • The shareholders could be considered as “acting in

concert”. If so, rules on mandatory offer apply to
Shareholders undertake to (consult them.
with a view to) vote their shares in
accordance with terms agreed • Assumes a stable shareholder base or reference
among them. shareholders.
6. Veto rights for certain • Requires an express inclusion in the by-laws by a

shareholders vote of stockholders owning or representing two-
thirds of the outstanding capital stock entitled to
Clauses providing for nomination vote.
rights by a reference shareholder or
similar governance mechanisms. • Requires prior approval of the SEC for the
amendment to by-laws.
• Requires reference shareholder(s).
7. Limitations on share • Inclusion in the articles of association requires an

transfers approval by a majority of the board of directors and
vote of stockholders representing or owning at least
Board approval or restriction clauses 2/3 of the outstanding capital stock entitled to vote.
such as rights of first refusal in the
articles of association or in • Pre-emptive rights or the right to subscribe to
agreements between shareholders. issuance of new shares in proportion to current
shareholdings is expressly provided in the
Corporation Code. Shareholders could be
considered as “acting in concert”. If so, see
“Shareholders agreements” above.
Notwithstanding the foregoing, the SRC IRR provides that during a tender offer (or before its
commencement, if the target public company’s board of directors has reason to believe that an offer
might be imminent), the target public company may not:
(a) issue any authorized but unissued shares;
(b) issue or grant options in respect of any unissued shares;
(c) create or issue, or permit the creation or issuance of, any securities carrying rights of
conversion into, or subscription to, shares;

(d) sell, dispose of or acquire, or agree to acquire, any asset whose value amounts to 5% or
more of the total value of the assets prior to acquisition; or
(e) enter into contracts that are not in the ordinary course of business;
except, in each case, if the transaction is (1) pursuant to a contract previously entered, (2) entered
with the approval of the target public company’s shareholders in a general meeting, or (3) with the
prior approval of the SEC.

Takeover
7.1 Squeeze-out
There are no regulations under Philippine law allowing bidders to squeeze out minority shareholders
such that the shareholders will be compelled to sell their shares to the bidder following a takeover.
The same, however, may be provided for in the Articles of Incorporation of the target company.
7.2 Sell-out
There are likewise no regulations under Philippine law allowing minority shareholders to sell-out their
shares to a bidder following a takeover. In lieu of a sell-out, the Delisting Rules permit a bidder or
selling shareholders seeking to delist the target company to show the PSE that following the
acquisition of the tendered shares, such person or persons have obtained a total of at least 95% of
the issued and outstanding listed securities of the applicant company.
In addition to the foregoing, a reverse stock split is also commonly implemented whereby a company
will increase the par value of its shares resulting in a “fractionalization” of the shares held by the
shareholders under the previous par value, that is, the reduction of a shareholders’ shareholding into
less than one share in the company.
7.3 Restrictions to acquire securities after the takeover bid period

There are no regulations under Philippine law restricting a bidder from acquiring securities after a
takeover bid period.
8 Delisting
Under the Delisting Rules, a listed company that has failed to comply with the minimum public
ownership rule, or which engages in operations which are contrary to the public interest, among
others, shall be considered for delisting. The procedure for involuntary delisting (on grounds other
than non-compliance with the minimum public ownership requirement) is set forth in Supplemental
Rule 8 of the Delisting Rules. Generally speaking, delisting may be ordered by the PSE after notice
and hearing on the grounds for delisting.
Listed companies are likewise permitted to apply for voluntary delisting of their securities with the
PSE, subject to compliance with the conditions under the Delisting Rules. Generally, the procedure for
voluntary delisting begins with the filing of the petition for delisting with the PSE. However, action on
the petition will be held in abeyance until such time that the company (or the persons seeking the
delisting) is able to demonstrate compliance with all of the other conditions for voluntary delisting, in
particular, the conduct and completion of the tender offer to all shareholders of record of the company
as required under the Delisting Rules.
If after evaluation of the petition and the required documents, the PSE finds that the delisting will not
prejudice the interests of investors, the PSE shall issue an order for delisting upon payment by the
company of a voluntary delisting fee equivalent to its annual listing maintenance fee for the year when
the application for delisting was filed.

Alain Charles J. Veloso and Luisa S. Fernandez-Guina in Manila are the most appropriate contacts
within Quisumbing Torres* for inquiries about public M&A in the Philippines.
Alain Charles J. Veloso Luisa S. Fernandez-Guina

Manila Manila
charles.veloso@quisumbingtorres.com luisa.fernandez-guina@quisumbingtorres.com
+63 2 8819 4954 +63 2 8819 4947
*Quisumbing Torres is a member firm of Baker & McKenzie International, a Swiss Verein.

Poland
1 Overview
Public mergers and acquisition transactions are relatively common in Poland. Historically, the
development of the capital market, and consequently the market for corporate control, in Poland has
been driven by the privatization program carried out since the introduction of the market economy in
1989. Most notable merger and acquisition transactions in Poland have been acquisitions of formerly
state-owned enterprises by Polish and foreign private investors. Currently, most takeover bids are
acquisitions of private companies by strategic investors, exits by private equity houses and going private
transactions. Takeovers usually take the form of a friendly acquisition preceded by negotiations
between the exiting major shareholder and the new strategic investor, followed by a mandatory tender
offer to all other shareholders. Unsolicited or hostile takeover bids are rare and most of them are
unsuccessful.
The number of takeover bids for shares in companies listed on the Warsaw Stock Exchange has
increased over the last several years. There were 24 takeover bids in 2015, 36 in 2016, 39 in 2017, 27
in 2018 and 35 in 2019. The increased number of takeover bids in recent years was a consequence of
many public to private transactions. Polish law requires that a mandatory takeover bid precedes a public
to private transaction.

The main rules and principles of Polish law relating to public takeover bids can be found in:
• Articles 73 to 81 of the Law dated 29 July 2005 on Public Offerings, Listing of Financial
Instruments and on Public Companies (“Public Offerings Law”); and
• The Regulation of the Minister of Development and Finance dated 14 September 2017 on
Forms of Documents for Tender Offers for Sale or Exchange of Shares of a Public Company,
the Detailed Procedures of Launching Tender Offers and the Terms and Conditions of
Acquiring Shares as a Result of Such Render Offers (“Tender Offer Regulation”).
The main body of the Polish takeover legislation is based on Directive 2004/25/EC of the European
was aimed at harmonizing the rules on public takeover bids in the different Member States of the
are still relevant differences in the national rules of the respective Member States of the EEA regarding

Poland, there are a number of additional rules and principles that are to be taken into account when
called transparency rules) included in Articles 69 to 71 of the Public Offerings Law. These
rules are based on Directive 2004/109/EC of the European Parliament and of the Council of
15 December 2004, on the harmonization of transparency requirements in relation to
information about issuers whose securities are admitted to trading on a regulated market and

amending Directive 2001/34/EC and related EU legislation. For further information, see 3.4
below.
rules) included in the EU Market Abuse Regulation (Regulation (EU) No 596/2014 of the
European Parliament and of the Council of 16 April 2014 on market abuse (“Market Abuse
Regulation”). For further information, see 6.3 below.
trading on a regulated market are included mainly in Regulation (EU) 2017/1129 of the
European Parliament and of the Council of 14 June 2017 on the prospectus to be published
when securities are offered to the public or admitted to trading on a regulated market, and
repealing Directive 2003/71/EC (“Prospectus Regulation”), other EU legal acts and in Articles
10 to 55 of the Public Offering Law. These rules could be relevant if the consideration that is
offered in the public takeover bid consists of securities.
(d) The general rules on the supervision and control over the financial markets included in the
Law dated 29 July 2005 on Supervision over Capital Market.
2.3 Supervision and enforcement by the Polish Financial Supervision

Authority
Public takeover bids are subject to the supervision and control of the Polish Financial Supervision
Authority (Komisja Nadzoru Finansowego, KNF). The Polish Financial Supervision Authority is the
principal securities regulator in Poland.
The Polish Financial Supervision Authority has a number of legal tools that it can use to supervise and
enforce compliance with the public takeover bid rules, including administrative fines. In addition, criminal
penalties could be imposed by the courts in case of non-compliance.
The Polish Financial Supervision Authority also has the power (in certain cases) to grant exemptions
from the rules that would otherwise apply to a public takeover bid.
2.4 Foreign investments regulation in Poland

Foreign investments are generally not restricted in Poland. Subject to constitutional guarantees and
foreign investment regulations, foreign investment receives the same treatment as investment made by
Polish and EU-nationals. In general there are no foreign exchange controls or rules that create specific
requirements for foreign exchange control or for foreign investments in Polish companies. Restrictions
on foreign ownership have generally been lifted except for a very limited number of specific types of
business activity.
(a) Permit for acquisition of real property or shares in a company holding real property
The purchase of real property by foreigners is governed by the provisions of the Act on the Purchase
of Real Estate by Foreigners. With certain exceptions, e.g. a company’s transformation, a permit is
required in each case of real property purchase, i.e., an acquisition of the ownership title or the
perpetual usufruct right to a real property or purchase, or taking up shares in a company which has a
registered place of business in Poland and is the legal owner or perpetual usufructuary of real
property. A permit is required if by purchasing shares in a company which is the legal owner or
perpetual usufructuary of real property a foreigner takes control of that company. A permit is also
required if the shares in an already-controlled company are acquired or taken up by a foreigner who is
not a shareholder of the company. The Minister of Internal Affairs may grant a foreigner a permit to
purchase real property or shares in a company owning real property if there is no probability of threat

to national security, public safety or public order, and if the foreigner can demonstrate the existence of
circumstances confirming their ties with Poland.
Specific limitations apply also to the sale of real property located in the so-called Special Economic
Zones (pol. Specjalne Strefy Ekonomiczne). In this case, the Special Economic Zone’s managing
entity has a pre-emptive right to acquire the land.
(b) Acquisition of agricultural real property or shares in a company holding agricultural real
property
The Act on Shaping the Agricultural System introduced several limitations on the transfer of the legal
title to agricultural real property, the transfer of shares in companies holding agricultural property or
reorganizations of companies holding the ownership or perpetual usufruct right to agricultural real
property.
In principle, agricultural land may only be acquired by persons meeting certain criteria (such as
individual farmers). Other entities are obliged to obtain the consent of the Head of National
Agricultural Support Centre (NASC), before the effective transfer of the title to the land. There are
several exceptions to this. Among others, the limitations do not apply to agricultural real property of a
specific size or that are located on areas designated in local zoning plans for non-agricultural
purposes. The NASC has also a pre-emptive right in relation to the purchase of shares in companies
which hold the ownership title to agricultural real property. However, this pre-emptive right does not
apply to the sale of shares on the stock exchange. The NASC also has other various rights relating to
mergers, divisions, transformations and acquisitions of shares in companies holding agricultural real
property. These limitations are taken into account when structuring a transaction, most commonly as
conditions for closing.
Additionally, other state agencies, e.g., State Forests, communes, may be granted with a pre-emptive
right on the basis of other regulations, depending on the status and location of the real property.
Therefore, it is important to verify the status of the real property before the transaction.
(c) Transaction permits
Under the Act of Control of Central Investments, transactions resulting in the acquisition or
achievement of a significant participation in or a dominant position in a company that is an entity
subject to protection, are subject to the purview of the controlling authority, i.e., the competent
minister for energy matters or the Prime Minister (in particular, transactions regarding strategic
companies - however this should be understood as strategic not from an economic point of view, but
rather for safety reasons). Dominant position is understood as acquiring 50% or more of the total
number of votes in the governing body or shares in the share capital. The controlling authority can
submit an objection to the transaction.
(d) Competition law
Poland’s anti-trust authority, the Office of Competition and Consumer Protection (UOKiK), reviews
investment and merger transactions for competition-related concerns. Its mandate covers transactions
of a magnitude which influences, or may influence, the Polish market. Participants in planned
transactions must obtain UOKiK’s advance clearance if their turnover in the year preceding the
application exceeded a certain threshold.
(e) Protection against expropriation
The rules of protection against expropriation are the same for both Polish and foreign entities. Thus,
according to the Polish Constitution, the State protects ownership, and expropriation is admissible
only for public purposes and in exchange for just compensation. Expropriation may only take place in
relation to public purposes projects such as are provided for by acts of Parliament.

(f) Other regulatory requirements
For acquisitions of control of financial institutions, e.g., banks, insurance companies, investment and
pension funds, investment firms, and of companies operating in specific sectors, such as
telecommunications, energy, the media, airway and railway transport sectors, the approval of the
relevant industry regulator is usually required before the share sale transaction due to the change of
control. The definition of control and the rules for the issuance of this regulatory approval vary
according to the rules of the specific regulatory authority and depending on the specific sector or
industry. These regulations are applied equally to foreign and domestic investors.
In asset transactions in a regulated industry or sector, it is usually required to obtain new permits and
approvals for operation.

The following general principles apply to public takeovers in Poland. These rules are based on the
Takeover Directive:
(d) false markets must not be created in the securities of the target company, the bidder or any
other company concerned by the bid in such a way that the rise or fall of the prices of the
securities becomes artificial and the normal functioning of the markets is distorted;
(e) a bidder must announce a bid only after ensuring that it can fulfil any cash consideration in

levels of shareholding within a Polish incorporated listed corporation:
Shareholding Rights

Shareholding Rights
other reasons.
• The right to file a liability claim against directors or to request the
nullity of a transaction on behalf of the company if such claim is
not filed by the company.
• The right (under certain conditions) to request that a shareholder
holding at least 95% of the company buys out shares held by the
minority shareholder.

shareholders’ meeting and to table draft resolutions for items on
the agenda.
• The right to request the management board to convene a general
• The right to ask, subject to certain conditions, the general meeting
of shareholders or, if the general meeting fails to do so, the
Companies Registration Court, to appoint an expert to check the
company’s books, financial records and the actions of the
company’s corporate bodies.
More than 10% The ability at a general shareholders’ meeting to block resolutions on
delisting the company.
20% The right to appoint a representative to the supervisory board.
meeting)
subscription right of existing shareholders in case of share issues;
and
• issues of convertible bonds or warrants.
• issues of new shares with pre-emptive rights of existing
meeting)
shareholders;
• any other changes to the articles of association, mergers, de-
mergers, spin-offs, capital increases, capital reductions, and
dissolution of the company (subject to item 5 above); and
• the authorization to the board of directors to increase the
so-called “authorized capital”).

• to approve payment of dividends;
meeting)

Shareholding Rights
• to appoint and dismiss members of the supervisory board and to
approve their remuneration and, as relevant, severance package;
remuneration;
• to grant discharge from liability to the directors and statutory
auditors for the performance of their mandate; and
• to take any other decisions for which no special majority is
required.
95% The possibility to force all other shareholders in a private company to sell
their shares (a “squeeze-out”).

Polish law contains a number of rules that already apply before a public takeover bid is announced.
announcements of a potential takeover bid by a bidder or a target company, and prior due diligence by
a potential bidder. The main restrictions and hurdles have been summarized below. Some careful
planning is therefore necessary if a potential bidder or target company intends to start a process that is
to lead towards a public takeover bid.

actual takeover bid) from purchasing any shares in a takeover bid.

disclosure threshold. The relevant disclosure thresholds in Poland are 5% and then 10%, 15%, 20%,
25%, 33%, 33 1/3%, 50%, 75% and 90%. In addition, a shareholder who holds over 10% must report
any change of shareholding (either up or down) of at least 2% (in a public company whose shares are
admitted to trading on the official listing market) or 5% (in a public company whose shares are admitted
to trading on another regulated market), and a shareholder who holds over 33% must report any change
of shareholding (either up or down) of at least 1%.
in concert (see 3.9 below). These include affiliates. The parties could also include existing shareholders
of the target company with whom the potential bidder has entered into specific arrangements, such as
call option agreements.


For further information on inside information, see 6.1 below. The facts surrounding the preparation of a
public takeover bid may constitute inside information. If so, the target company must announce this.
However, the board of the target company can delay the announcement if it believes that a disclosure
would not be in the legitimate interest of the company. For instance, this could be the case if the target’s
board believes that an early disclosure would prejudice the negotiations regarding a bid. However, a
delay of the announcement is only permitted provided that the non-disclosure does not entail the risk of
the public being misled, and that the company can keep the relevant information confidential.

The public takeover bid is announced by the acquirer at the time the tender offer documents are filed
with the Polish Financial Supervision Authority. The acquirer does not need to formally notify the target
company of launching the takeover bid (even though the target company has to announce the launch
of a bid pursuant to the general disclosure obligations described in 3.5).
A bidder that intends to announce a public takeover bid must first inform the Polish Financial Supervision
Authority. No approval of the Polish Financial Supervision Authority is required to launch the bid.
However, the Polish Financial Supervision Authority can block the takeover if it finds that that it violates
the law or if the takeover document does not include all the required information. As soon as the public
takeover bid is announced, it can normally no longer be withdrawn, except in certain circumstances.

Generally, the potential bidder does not have an obligation to publish information on the intended future
launch of a takeover bid. However, if the potential bidder is a listed company, the information on the
proposed bid may constitute inside information concerning the bidder and thus would have to be
published, unless such information is formally delayed as described in 3.5.
The Polish Financial Supervision Authority cannot force the bidder to accelerate the announcement of
a takeover bid. However, it does have the right to request a person who could be involved in a possible
public takeover bid make an announcement without delay or, if the latter person does not make such
disclosure, to make the announcement instead.
However, if there are rumours or leaks that a (potential) bidder intends to launch a public takeover bid,
the target company should publish an announcement if it has confirmed information that such rumours
are correct.
3.8 Due diligence

The Polish public takeover bid rules do not contain specific rules regarding the question of whether a
prior due diligence can be organized, or how such due diligence is to be organized. Be that as it may,
the concept of a prior due diligence or pre-acquisition review by a bidder is generally accepted in the
market and also by the Polish Financial Supervision Authority. Appropriate mechanisms have been
market abuse and early disclosure concerns. These include such as the use of strict confidentiality
procedures and data rooms. Still, it is quite common to proceed with a takeover bid without prior due
diligence of the target or with due diligence based solely on public disclosures made by the target
company.

For the purposes of the Polish takeover bid rules, persons “act in concert”:
• if they collaborate with the bidder or with any affiliate of the bidder on the basis of an express
or silent, oral or written, agreement aimed at acquiring shares in the target company,
coordinated voting at general shareholders’ meetings of the target company, or maintaining a
common policy in relation to the target company;
• if they hold or acquire shares in the target on behalf of or for the account of the bidder;
• if they are proxies of the bidder with discretionary voting powers at the general shareholders’
meetings of the target company; or
• if they are affiliates of the bidder.
In view of the above rules and criteria, the target company could be one of the entities with which a
takeover bids. If one or more persons in a group of persons acting in concert acquire voting securities
as a result of which the group in the aggregate would pass the 33% threshold, the members of the
group will have a joint obligation to carry out a mandatory takeover bid, even though the individual group
members do not pass the 33% threshold.
There are three main forms of takeover bids in Poland:
• a voluntary takeover bid, in which a bidder voluntarily makes an offer for all or a specified
number of the shares issued by the target company, without triggering the mandatory
takeover bid thresholds;
• a mandatory takeover bid, which a bidder is required to make if, for any reason, it crosses or
intends to cross (alone or in concert with others) a threshold of 33% or 66% of the shares of
the target; and
• a delisting bid, which a bidder is required to make prior to delisting the target. This can be
combined with a voluntary or mandatory takeover bid.
Voluntary bids used to be heavily regulated but all such regulations were repealed in April 2017.
Currently, voluntary takeover bids are unregulated and, in particular, do not need to be cleared with the
Polish Financial Supervision Authority.
A bidder that intends to launch a mandatory or delisting takeover bid must file a several page tender
offer document with the Polish Financial Supervision Authority, as well as proof of funds in the form of
a bank guarantee or cash deposit. No prospectus needs to be prepared in connection with a takeover
bid, except for an exchange offer where securities are offered as consideration.
4.1 Mandatory public takeover bid thresholds

(a) A mandatory takeover bid is triggered as soon as a person or group of persons acting in
concert (or persons acting for their account) directly or indirectly intends to hold or holds more
than 33% or 66% of the actual outstanding voting securities of the target company. There are
two thresholds for the mandatory bid so the target may be subject to a mandatory bid twice,
first upon crossing the threshold of 33% and then upon crossing the threshold of 66%.

(b) The mandatory takeover bid is triggered regardless of whether the bidder crossed the 33% or
66% threshold intentionally or unintentionally, e.g., due to share capital reduction. If the
threshold of 33% was crossed involuntarily, the bidder has the option of either launching the
mandatory bid or selling a number of shares and reducing its shareholding to below 33%.
(c) The main exceptions to the takeover bid obligation include situations where:
• the stake is acquired from an affiliate;
• the stake is acquired as party of a bankruptcy estate or from a court bailiff;
• the stake is acquired through enforcement of security interest; and
• the stake is acquired from the State Treasury in certain privatizations.
4.2 Mandatory public takeover bid procedure

(a) The number of shares subject to the mandatory takeover bid is subject to the following rules:
• if, as a result of the bid, the bidder (together with affiliates and persons acting in
concert) intends to hold more than 33% of shares in the target, the bid must be for
66% of shares in the target;
• if, as a result of the bid, the bidder (together with affiliates and persons acting in
concert) intends to hold more than 66% of shares in the target, the bid must be for all
the shares in the target.
(b) The bidder is free to make the takeover bid subject to merger control clearance (if relevant
merger control thresholds are met) and certain other conditions precedent, such as a
minimum acceptance level or a condition that the target company enters into a certain
agreement or that the target company’s general meeting passes certain resolution. Lack of
material adverse change or satisfactory results of due diligence are not acceptable conditions.
(c) Unless the target company is in a regulated industry, e.g., banking or insurance, no prior
approval of any regulatory authority is required to launch a takeover bid. Polish law imposes
restrictions on the acquisition of large shareholdings (over 20%) in certain companies of
strategic importance for the Polish state. The list of such companies is updated from time to
time by the Polish government and currently includes nine entities (mostly from the energy
and telecomm sectors) of which four are listed companies.
(d) The bidder is, in principle, free to determine the price and the form of consideration offered to
the target shareholders, subject to the following key terms:

Consideration consisting of securities may generally comprise of Polish treasury
securities, mortgage bonds, depositary receipts or shares in another company. For a
takeover bid for all the shares in a target company, consideration in securities may
only comprise of dematerialised shares in another company or other securities
granting voting rights in another company.
• The price in the takeover bid may not be lower than the minimum price required by
law. The minimum price is the higher of: (i) the highest price paid for shares in the
target company by the bidder (or its affiliates or persons acting in concert) in the last
12 months prior to the bid, (ii) the average stock exchange price of the target
company’s shares in the last six months prior to the bid and (iii) if the takeover bid is
for all the shares in the target company, the average stock exchange price of the
target company’s shares in the last three months prior to the bid. The Polish Financial

Supervisory Authority may accept a lower price upon a request from the bidder
supported by a third party valuation evidencing that the fair price of the company’s
shares is below the minimum price required by law. If it is impossible to calculate the
minimum price according to the guidelines above or if there are restructuring or
bankruptcy proceedings underway in the target, the price of the takeover bid must still
reflect the fair value of shares that are subject to the offer.
• The same price in the takeover bid must be paid to all holders of the same class of
shares who responded to the bid. However, the bidder may agree a lower price with
one or more shareholders who hold at least 5% of the shares subject to the bid. There
may be different prices paid for different voting classes of shares in the target. Usually
however, one price is offered for all the shares in the target, regardless of their voting
rights. Since 2016 there has only been one takeover bid where a different price was
offered for preferred shares in a target (out of a total of 12 takeover bids during that
period in which targets issued preferred shares).
• If consideration in the form of securities is proposed in a takeover bid for all the
shares in a company, a cash alternative must also be offered (in an amount
corresponding to the cash value of the consideration in securities).
• Any acquisition of securities subject to the takeover bid at a price in excess of the
offered price during the six months after the end of the takeover bid period will trigger
an obligation to pay the difference to holders of securities who tendered their
securities in the takeover bid.
(e) During the takeover bid period (starting on the date of filing the formal tender offer document
to the Polish Financial Supervisory Authority), the bidder (or its affiliates and persons acting in
concert) may not purchase any shares in the target outside the tender offer (or sell shares in
the target).

(a) Follow-on squeeze-out – a bidder will be able to squeeze out the residual minority
shareholders if, for any reason (including successful completion of a takeover bid), it holds,
alone or in concert with others, 95% of the voting securities of the target.
(b) Sell-out right – if the bidder is not itself launching a squeeze- out – minority shareholders have
a sell-out right if, for any reason (including successful completion of a takeover bid), the
bidder holds, alone or in concert with others, 95% of the voting securities of the target.
(c) The squeeze-out and sell-out may be effected within three months following the date on which
the bidder crosses the threshold of 95% in the target.
5 Timeline
The table below contains a summarized overview of the main steps of a typical public takeover bid
process under Polish law.
Step
• Preparation of the bid by the bidder (study, public sources due diligence and
arranging financing).

Step
• Negotiations with the target and/or its key shareholders; entering into share transfer
undertakings with key shareholders. Preliminary agreements with key shareholders
may trigger information disclosure obligations under the Market Abuse Regulation.
• Engagement of Polish investment firm to act as agent in the bid.
• Preparation of tender offer document.

• The investment firm, on behalf of the bidder, files the bid with the Polish Financial
Supervision Authority and the Warsaw Stock Exchange. The filing must contain,
among other elements, proof of certain funds to pay the offer price and the tender
offer document. As of that moment, the bidder can no longer withdraw the bid (except
in certain limited circumstances, such as in the event of a counter-bid).
• Immediately following the filing with authorities, the investment firm, on behalf of the
bidder, delivers the tender offer document to the Polish Press Agency for immediate
public publication through newswires.
• No filing with the target is required. The target learns of the bid through newswires
and other public sources.
• Counter-bids and higher bids can be filed at any time.
3. Review of the tender offer document by the Polish Financial Supervision Authority:
• The Polish Financial Supervision Authority may, not later than three business days
before commencement of the acceptance period, request changes or explanations
in relation to the document. The takeover bid is suspended until the changes are
introduced or the explanations are provided.
4. Publication of the tender offer document in a nationwide newspaper with the changes
requested by the Polish Financial Supervision Authority (or following lapse of the review
period).
5. Opinion of the target’s management board:

• The target’s management board provides their opinion on the takeover bid. The
opinion discusses the impact of the bid on the target’s business, perspectives,
employees and location of facilities. The opinion also includes board’s view as to
whether or not the proposed purchase price is fair. Third party fairness opinions are
optional and rare.
• The opinion is filed with the Polish Financial Supervision Authority, published through
Polish Press Agency and delivered to trade unions operating at the target or directly
to the target’s employees, not later than two business days before commencement
of the acceptance period.
• The opinion is not approved by the Polish Financial Supervision Authority. It only
serves as guidance to shareholders and does not have any direct impact on the
procedure or purchase price in the takeover bid.

• Start: 14 business days at the earliest and 37 business days at the latest following
the launch of the bid, but not earlier than one business day after publication of the
tender offer document in a newspaper.

Step
• Duration: not less than 14 days and not more than 70 days if the bid is for 66% or
less of the shares in the target, or not less than 30 days and not more than 70 days
if the bid is for 100% of the shares in the target.
• The acceptance period may be extended up to 120 days, in particular, if all the
required conditions precedent to the bid (e.g., merger approvals) have not been
fulfilled or if in the course of the tender offer a risk materializes, which affects the
realization of the goal of the offer.
7. Purchase of shares tendered in the takeover bid within three business days from the end of
the acceptance period.
8. Publication of results of the takeover bid within four business days from the end of the
acceptance period (where relevant: publication of information about fulfilment of conditions
precedent to the takeover bid, at the deadline indicated in the tender offer).
9. Settlement of purchase of shares, within three business days of the purchase:

• Payment of purchase price to shareholders who accepted the bid.
• Legal acquisition of purchased shares by the bidder.
10. Squeeze-out if the bidder acquired at least 95% of the shares in target:
• Launch: by filing with the Polish Financial Supervisory Authority and the Warsaw
Stock Exchange and publication through the Polish Press Agency and in a
nationwide newspaper, within three months from the date on which the bidder
exceeded 95% of shares in target.
• Purchase of shares and settlement: generally on a predetermined date, no later than
30 days following launch of squeeze-out.
11. Sell-out out if the bidder acquired at least 95% of the shares:
• Request from a shareholder filed within three months following acquisition of 95% of
the shares.
Set out below is an overview of the main steps for a public voluntary takeover offer in Poland.

Public voluntary takeover offer (indicative timeline)
Start
process Day 0 Day 15 Day 16 Day 16 Day 18 Day 36 Day 37 Day 40
Launch of bid. FSA reviews bid and Publication of tender offer Target management Start of acceptance Purchase of shares (within Publication of tender Launch of squeeze-out
may (no later than 3 in nationwide newspaper opines on the bid period (between 14 3 business days from the offer results (within 4 or sell-out if bidder
• Filed with FSA and
days before start of (including price and and 37 business days end of acceptance period) business days from the acquires at least 95%
Warsaw Stock
acceptance period) impact on business, after launch of bid, but end of acceptance of voting shares in
Exchange. Bidder
raise queries or request employees etc.) not earlier than 1 period) target
cannot withdraw bid
changes. Bid business day after
(except in limited Opinion filed with FSA,
suspended until publication of tender
circumstances e.g. published through Press
changes are offer)
counter-bid) Agency and delivered to
made/responses
trade unions (not later
• Filed with Press provided
than 2 business days
Agency for immediate
before start of
publication
acceptance period)
• Filing with target not
required
• Counter/higher bids
can be filed at any Duration of acceptance period: Squeeze-out or sell-out
time between 14 and 70 days if bid is may be launched within 3
for 66% or less of target shares months after reaching over
(between 30 and 70 days if bid is 95% of voting shares in
for 100% of target shares). target
Extendable up to 120 days (e.g. if
conditions precedent have not
been fulfilled or if a risk to the goal
of the tender materializes in its
course)

6 Takeover Tactics
A company listed on a regulated market in Poland has the obligation to immediately disclose to the
public all “inside information” that relates to it, including all material changes in information that has
already been disclosed to the public. Disclosure of inside information is regulated by the Market Abuse
Regulation.
• “Inside information” under the Market Abuse Regulation means information of a precise
nature which has not been made public, relating, directly or indirectly, to one or more issuers
of financial instruments or to one or more financial instruments and which, if it were made
public, would be likely to have a significant effect on the prices of those financial instruments
or on the price of related derivative financial instruments.

occurred or may reasonably be expected to occur, where it is specific enough to enable a
investment decision.
It is up to the company to determine if certain information qualifies as “inside information”. This will often
be a difficult exercise, and a large grey area will exist as to whether certain events will need to be
disclosed or not. The Polish Financial Supervision Authority actively monitors and, if necessary,
sanctions breaches of disclosure obligations by Polish companies.

In the event of a (potential) mandatory takeover bid, the Polish takeover bid rules provide that no
announcement can be made of a takeover bid unless with the prior notification of the Polish Financial
Supervision Authority. Following the notification, no approval of the authority is required and the bidder
may proceed with completing the bid.

The basic legal framework regarding insider dealing and market abuse under Polish law is included in
the Market Abuse Regulation, and a number of additional EU directives and regulations. As the
framework is based on EU legislation, similar rules on insider dealing and market abuse exist in other
jurisdictions of the EEA.
In principle, the rules on insider dealing and market abuse remain applicable before, during and after a
public takeover bid, albeit that during a takeover bid additional disclosures and restrictions apply in

that apply to the board and general shareholders’ meeting of the target company pending a takeover
bid.

1. Special voting rights • Requires an express authorization in the articles of

association by a majority of 75% of the votes cast at
Holding shares giving
special voting rights, e.g.,
two votes for each share. • Usually, special voting rights are approved before the
IPO while the company is still closely held.
• The maximum voting power is two votes per one
share.
2. Special rights to appoint • Requires an express authorization in the articles of

board members association by a majority of 75% of the votes cast at
Special rights of key
shareholder(s) to appoint • Usually special appointment rights are approved
certain (or even the before the IPO while the company is still closely held.
majority of) board
• Usually afforded to founders and/or heirs of
members, regardless of the
founders.
number of shares held.
• Removal of special rights requires the consent of the
holder.
• May apply to appointment of supervisory board or
management board members.
• Management board members so appointed may
always be removed by the general meeting by a
majority of 50%.
3. Limitation of voting rights • A shareholder may only exercise its voting rights up
to a specific level, e.g., 30% of the total voting rights.
Clause in the articles of
association providing for a • The level cannot be lower than 10%. The most
maximum number of voting common level is 20%.
rights exercised by a single
• The limitation must apply to all shareholders equally.
shareholder.
• Depending on the articles, the number of voting
rights held may be calculated on a single
shareholder level or a group of affiliated
shareholders.
• Requires an express inclusion in the articles of
association by a majority of 75% of the votes cast at
4. Holding structures • Key assets, projects or revenue streams are held

through subsidiaries with participation of certain
Holding key assets through
shareholders or third parties.
subsidiaries jointly
controlled by certain • Due to a special structure of shareholdings or special
shareholders or third provisions in the subsidiary’s articles of association,
parties. taking control of the parent company does not give
automatic control over the subsidiary.
• Usually do not require shareholders’ approval if the
holding structure is established at the time of

acquisition of the key assets or at commencement of
a revenue generating project.
5. Sale of crown jewels • Sale of the entire business (or its organized part) or
sale of real property (unless waived in the articles of
An arrangement affecting
association) requires prior approval by the general
the assets of, or creating a
shareholders’ meeting by 75% or 50% majority of the
liability for, the company
votes cast respectively.
which is triggered by a
change in control or the • Generally, no approval of the general meeting is
launch of a takeover bid. required if the crown jewels are held through
subsidiary companies.
6. Capital increase (poison • Requires an express authorization in the articles of

pill) association by a majority of 80% of the votes cast at
a general shareholders’ meeting at which at least
one-third of the share capital is present or
board (authorized capital)
represented (no quorum is required at a second
without preferential rights
meeting that is convened if the one-third quorum was
of the shareholders.
not reached at the first meeting).
• The authorization is only valid for 3 years, but can be
renewed.
• The capital increase may not exceed 75% of the
existing share capital or the amount remaining
available under the authorized capital.
• Shares may not be issued in exchange for in-kind
contributions.
• The issue price is determined by the management
board with approval by the supervisory board.
• Instead of an outright issuance of shares, warrants
with preferential subscription rights may be issued, in
which case payment of issue price may be deferred.
• Very rarely used as a takeover defense in Poland.
7. Share buyback • No authorization in the articles of association or by

general shareholders’ meeting is required.
Share buyback “with a view
to avoiding an imminent • The total of directly and indirectly acquired shares
and serious harm” to the may not exceed 20% of the share capital.
company.
• Buybacks are to be made in compliance with
corporate, transparency and market (abuse) rules.
• The management board must provide the general
shareholders’ meeting with a report justifying the
share buyback.
8. Frustrating actions • No shareholders’ approval is required unless the

articles of association expressly require such


Actions such as significant approval for actions after the takeover bid has been
acquisitions, disposals, notified. Such requirements are very rare.
changes in indebtedness,
• May be questionable as actions against the best
extremely high golden
interests of the target and/or may lead to directors’
parachutes, salary raises,
liability.
etc.
9. Shareholders’ • No special restrictions as to purpose, time limit or

agreements scope of undertakings.
Shareholders undertake to • The shareholders could be considered as “acting in
(consult with a view to) concert”. If so, disclosure obligations apply and, if
vote their shares in they hold together more than 33% of the voting
accordance with terms rights, forming the group and any subsequent
agreed among them. acquisition of shares will trigger an obligation to
launch a takeover bid.
• Assumes a stable shareholder base or reference
shareholders.
• Quite popular and usually confidential, unless “acting
in concert” rules apply.
10. Veto rights for certain • Generally considered illegal as regards voting at the
shareholders general shareholders’ meeting (although still found,
and in fact enforced, in a number of companies).
Clauses providing for veto
rights by key shareholders. • Possible at the level of voting in the supervisory
board or management board.
• Requires an express authorization in the articles of
association by a majority of 75%.
• Usually, veto rights are approved before the IPO
while the company is still closely held.
• Defined by reference to an individually identified
shareholder. Not transferable.
11. Limitations on share • In public companies, share transfer limitations are

transfers only possible if there are different classes of shares
and certain classes are not listed. All listed shares
must be freely transferable.
emptive restriction clauses
in the articles of • The articles of association may waive share transfer
association or in limitations on unlisted shares in the event of a
agreements between takeover bid.
shareholders.
• Contractual share transfer limitations, including
limitations on listed shares, are possible and popular.
• Share transfer limitations may be for a maximum of
five years. Pre-emptive rights may be for a maximum
of 10 years.
• Shareholders could be considered as “acting in
concert”. If so, see “Shareholders’ agreements”
above.

Takeover
7.1 Squeeze-out
If a shareholder in a public (listed) company (together with the persons with whom the shareholder acts
in concert) holds 95% of the share capital with voting rights (as a result of a takeover bid or otherwise),
they can force all other holders of share capital to transfer their shares to the majority shareholder at
the price established in accordance with the rules applicable to establish a minimum price in the tender
offer (see 4(a) above) and, if such majority shareholder reached the 95% threshold as a result of a
takeover bid, the price should not be lower than the price offered in that takeover bid. The squeeze-out
may start within three months after reaching the 95% threshold which, in the case of a takeover bid,
means three months from the closing of the takeover bid. Shares that are subject to the squeeze-out
are automatically acquired by the bidder at the closing of the squeeze-out, which occurs 14 business
days following the launch, without any action by the holders of such shares.
7.2 Sell-out
If a shareholder in a public (listed) company (together with the persons with whom the shareholder acts
in concert) holds 95% of the share capital with voting rights (as a result of a takeover bid or otherwise),
each shareholder of that company has the right to demand that the majority shareholder buys out the
shares held by the minority shareholder at the price established in accordance with the rules applicable
to establish a minimum price in the tender offer (see 4(a) above) or, if such majority shareholder reaches
the 95% threshold as a result of a takeover bid, the price should not be lower than the price offered in
that takeover bid. The sell-out request may be filed within three months after reaching the 95%
threshold, which, in the case of a takeover bid, means three months from the closing of the takeover
bid.

If, within six months after the end of the takeover bid period, the bidder directly or indirectly acquired
any securities to which the takeover bid applied on terms that are more favorable for the transferees
than the terms and conditions that applied to the takeover bid, the bidder shall pay the price difference
to all the security holders that tendered their securities to the bidder.
8 Delisting
Delisting of a Polish company must be approved by the Polish Financial Supervision Authority and by
the company’s general shareholders’ meeting by 90% of votes in the presence of shareholders holding
shares representing at least 50% of the listed company’s share capital. The shareholder who proposes
the resolution to delist must first launch a public bid allowing all shareholders to sell the shares at the
price established in accordance with the rules applicable to the minimum price in the tender offer (see
4(a) above). If such conditions are not met, the Polish Financial Supervision Authority will not permit a
delisting of a Polish company, even if the company no longer has a relevant free float.

Ireneusz Stolarski in the Warsaw office is the most appropriate contact within Baker McKenzie for
inquiries about public M&A in Poland.
Ireneusz Stolarski
Warsaw
Ireneusz.Stolarski@bakermckenzie.com
+48 22 4453413

Russia
1 Overview
Prudent fiscal policy by Russian authorities, as well as stable oil prices have helped the Russian
economy to resume slight growth in 2019. However, Western sanctions and increasing global volatility
have had a negative effect on transactional activity and investor sentiment and in 2020 the economy
is expected to be hit by lockdowns and the effects of the COVID-19 pandemic.
Russian corporate and commercial laws were recently modernized to introduce concepts commonly
used in international business and cross-border transactions, including M&A, joint ventures and
private equity deals, such as representations and warranties, indemnities, options, escrow accounts
and more sophisticated security instruments. Corporate law has been made more flexible in many
areas, particularly in relation to private companies, and the regulation of intellectual property rights
has been improved. There is a growing tendency, particularly among state-owned Russian
companies, to increasingly use Russian law to govern M&A and joint venture transactions.
The government has set itself a goal of combatting corruption and red tape, stimulating small and
medium-size businesses and attracting investments for infrastructure projects and industries. Over the
last several years, Russia has significantly improved its position in the Doing Business rankings
published by the World Bank, moving up to 28th place in 2019 (from 51st in 2016), out of the 190
jurisdictions ranked, ahead of Brazil, China, India, and Italy.
New rules on foreign controlled companies, disclosure of offshore assets, beneficial ownership and
corporate tax residency were introduced recently as part of efforts to stop capital flight and prompt
Russian businesses, which historically operated using offshore companies, to return home.
Following the imposition of Western sanctions, Russian businesses have been exploring opportunities
in China and other Asia Pacific jurisdictions, as well as in the Middle East and Latin America. The
Russian government, sovereign funds and large government-owned corporates continue to
strengthen commercial ties with Asia Pacific, CIS and Latin American jurisdictions by offering
participation in a number of significant Russian infrastructure projects, as well as presenting
opportunities to invest in sectors such as agriculture and logistics.
According to the Central Bank’s estimates, in 2019 foreign direct investments by non-residents in
Russia’s non-banking sector amounted to US$26.9 billion, which was almost 4.5 times higher than a
year earlier, returning to levels seen in 2015-2017. Russia’s M&A market recorded a slight increase in
the number of deals (by 3%), compared to 2018, but grew in volume by 20%, exceeding US$60 billion
in deal value, showing growth both in the overall value of cross-border acquisitions (by nearly 50%)
and domestic deal value (by 19%), according to KPMG. Investors apparently took comfort in the fact
that the Russian economy has adapted to sanctions, is now more resilient to oil price fluctuations, and
appears in reasonable health. The largest M&A deals were done in the oil and gas sector which
remains a major attraction for investors (CNOOC, CNODC, GMNC and Mutsui acquired shares in
Arctic LNG-2 from Novatek, Lukoil did a buy-out of its shares from minority shareholders and an
undisclosed buyer acquired 2.9% of Gazprom shares). In tech and telecom DXC Technology acquired
Luxoft for US$2 billion, Megafon launched a buy-out of its shares for nearly US$1.5 billion and
Sberbank and Mail.ru announced a joint venture in food delivery and transport.

The main rules and principles of Russian law relating to public takeover bids can be found in:
• the Civil Code;

• the Joint Stock Companies Law; and
• the Securities Market Law.

There are also a number of additional rules and principles that should be taken into account when
(a) The rules relating to the disclosure of shareholdings in public companies, which are stated in
the Securities Market Law and regulations issued by the Central Bank of Russia (CBR). For
(b) The rules relating to insider dealing and market manipulation. These rules are based on the
Law on Combatting Unlawful Use of Inside Information and Market Manipulation. For further
information, see 6.4 below.
securities on a regulated market. These rules could be relevant to the extent the consideration
that is offered in the public takeover bid consists of securities. Importantly, a Russian joint
stock company must obtain the status of a public company once the total number of its
shareholders exceeds 50, irrespective of whether the shares of such company are listed on a
stock exchange (and takeover rules apply to all public joint stock companies, and not only to
listed ones).
(d) The general rules on the supervision and control of the financial markets.
(e) The rules and regulations regarding merger control and restrictions under the Foreign
Investments and Strategic Companies Law. For further information, see 2.5 below.
2.3 Supervision and enforcement by the Central Bank of Russia

Public takeover bids are subject to the supervision and control of the CBR, the principal securities
regulator in Russia.
Voluntary and mandatory offers, as well as squeeze-out demands, must be submitted to the CBR for
review. The CBR may demand that their terms are brought in line with the law and suspend the
relevant offer or squeeze-out. It can also impose administrative fines for breaches of law.
The CBR does not have the power to grant exemptions from the rules regulating a public takeover
bid.

The following general principles apply to public takeovers in Russia. These rules are based on the
Joint Stock Companies Law and the Securities Market Law:
(a) public offers to acquire more than 30% of all of the public company’s ordinary shares and
voting preference shares may only be made in the manner prescribed for voluntary and
mandatory tender offers;
(b) the bidder must strictly follow the tender offer procedures stated by law. Once an offer
(voluntary or mandatory) is made, the bidder may not acquire company securities on terms
that differ from those specified in the offer;
(c) from the moment of the acquisition of more than 30% (or 50%/75% respectively of voting
shares in a public joint stock company) and until the date when a compliant mandatory offer is

received by the company, the acquirer may only vote 30% (or 50%/75% respectively) of its
voting shares in the target company;
(d) an offer must be for cash (although securities holders may be offered to be paid in securities)
and the payment obligation must be secured by an irrevocable bank guarantee;
(e) the board of the target company must give its views on the effects of the implementation of
the bid on the company by way of recommendations to the shareholders; and
(f) all holders of the securities of the target company of the same class must be afforded
equivalent treatment. If a person (jointly with affiliates) acquires more than 30% (or 50%/75%
respectively) of ordinary and voting preference shares in a public joint stock company, the
other holders of the company’s securities must be offered to be bought out.
2.5 Governmental prior approval – foreign investments regulation

Foreign investments are not restricted in Russia, other than customary anti-trust approvals, unless
they relate to certain specific sensitive activities.
Preliminary consent of a special governmental commission (“Commission”) is required for foreign

investment in “strategic companies” doing business in certain sectors of the Russian economy, i.e.,
nuclear industry, weapons and the military equipment industry, aviation and aviation security, space
activities, manufacture of special equipment, e.g., connected with encryption, geological surveys,
exploration and development of natural resources, activities impacting hydro-meteorological and
geophysical processes and phenomena, mass media and certain types of telecommunications
services rendered by business entities having a dominant position in the relevant markets, and
several other. The list of strategic activities is set in the law “On the Procedure for Foreign
Investments in Companies of Strategic Importance for the Defense of the Country and Security of the
State”. The Russian anti-trust regulator (Federal Anti-monopoly Service or “FAS”) is the body through
which consent must be sought. Obtaining consent may take several months and the process is in the
discretion of the Commission chaired by the Prime Minister.
Additional restrictions apply to foreign investment in strategic companies involved in the exploration,
development and production of natural resources on subsoil plots of federal significance.
Prior consent of the Commission is required for transactions resulting in:
• acquisitions by foreign investors of control over a Russian strategic company (by holding of
voting shares, having the right to appoint a majority of its management/executive bodies,
performing the functions of its management company or otherwise determining decisions of a
company);
• the acquisition by a foreign jurisdiction, international organization, and companies under their
control, including Russian companies, or by investors who fail to comply with Russian
disclosure requirements with respect to their beneficiaries and controlling persons, of more
than 25% of the voting shares or rights to block decisions of the management bodies of a
strategic company.
The law permits the above transactions to be effected without prior consent if prior to the transaction
the foreign investor directly or indirectly held more than 50% of the voting shares in the strategic
company. However, this exemption is not applicable to strategic companies using federal subsoil
plots. Certain additional transactions involving strategic companies using federal subsoil plots are in
the scope of governmental control.
Importantly, a foreign jurisdiction, international organization, and companies under their control,
including Russian companies, as well as investors who fail to comply with Russian disclosure
requirements with respect to their beneficiaries and controlling persons, are prohibited from exercising

control over strategic companies or acquiring the main production assets of strategic companies
whose value is 25% or more of the book asset value of the company.
FAS must be informed about the completion of transactions and other actions for which preliminary
consent was obtained.
Investments by foreign states, international organizations and organizations under their control into
Russian companies (strategic and non-strategic) are subject to additional clearance requirements
under the Russian Law on Foreign Investments. Any transaction which gives a foreign state, an
international organization or an organization under their control the right to dispose directly or
indirectly of more than 25% of the total number of votes attached to voting shares in any Russian
company, or otherwise block decisions of the governing bodies of a Russian company, requires
preliminary clearance from the Commission and/or the FAS.
In addition, the chairman of the Commission may decide that any transaction involving foreign
investments with respect to a Russian company may need consent in accordance with the procedure
set out for strategic companies. In this case FAS will notify the foreign investor(s) about such decision
within three business days.
In certain industries, such as banking, insurance and mass media, foreign investors may need
consent from regulators or may be restricted from acquiring stakes beyond a certain threshold set by
law.

levels of shareholding within a Russian public joint stock company.
Shareholding Rights and other consequences of acquiring a shareholding
GENERAL NOTE: thresholds are calculated as a percentage of the company’s “voting”

shares, i.e., (i) ordinary shares that are not subject to voting restrictions, e.g., imposed by
the court, and (ii) certain types of preference shares when they carry voting rights.
Percentages are counted based on the overall number of shares issued by the company,
unless specifically indicated otherwise.
One share Right to bring a claim against the company’s management bodies
(general director, members of the board of directors, members of the
company’s management board, external manager and management
company) for damages suffered by the shareholder in connection with
the execution of tender offers.
1% • Access to the list of persons having the right to participate in a

general shareholders’ meeting (“GSM”) and basic corporate
documents and information, such as board of directors’
protocols, information about major and interested-party
transactions, and appraisers’ reports for the purposes of
major/interested party transactions.
• Right to bring derivative shareholders’ claims against the
company’s management bodies for damages suffered by the
company. Note: this right is granted to holders of ordinary
shares only.
• Right to demand approval for interested party transactions.

2% Right to propose:
• matters for the agenda of the annual GSM;
• candidates to the board of directors;
• candidates to the management board (collective executive
body) and the general director (sole executive body), if elected
by the GSM; and
• candidates to the internal audit commission and ballot
commission.
Under 5% If a shareholder acquired (together with its affiliates) more than 95% of
the voting shares in the company, the remaining shareholders may
demand that such shareholder buy out their shares.
5% + one share Ability to block:

• the decision of the company to become non-public;
• delisting of all of the company’s shares and securities
convertible into shares; and
• an application to be exempt from disclosure requirements.
10% Right to request:

• that an extraordinary GSM be held; and
• an internal audit of the company.
25% Right to get access to:

• resolutions of the company’s management board (collective
executive body); and
• accounting documents of the company.
25% + one share Ability to block:

Note: this percentage is • liquidation of the company, appointment of a liquidation
calculated from the commission, and approval of interim and final liquidation
number of voting shares balance sheets;
attending the GSM
• a reorganization of the company;
• a determination of the number, nominal value, class (category)
of authorized shares and rights evidenced by such shares;
• the approval of major transactions, i.e., transactions that are
not in the ordinary course of business, involving the acquisition,
disposal or possible disposal of assets representing more than
50% of the company’s book asset value;
• a share capital decrease through reduction of the nominal
value of the company’s shares;
• a share capital decrease through the company’s buy-out of a
portion of its outstanding shares so as to reduce their overall
number;

• a buy-out by the company of a portion of its outstanding shares
for purposes other than charter capital decrease (this matter
may be referred to the competence of the board of directors);
• listing/delisting of the company’s preference shares. Note: this
decision also requires votes of 75% of holders of preference
shares;
• delisting of the company’s shares and securities convertible
into shares;
• a share capital increase by private placement of additional
shares (closed subscription);
• placement of the company’s securities convertible into shares
by private placement (closed subscription);
• a share capital increase by public placement (open
subscription) of ordinary shares constituting more than 25% of
shares issued earlier; and
• public placement of the company’s securities convertible into
ordinary shares (open subscription) if such securities may be
converted into ordinary shares constituting more than 25% of
the company’s ordinary shares issued earlier.
30% Constitutes quorum for the adjourned GSM (if the initial GSM had no
quorum).
30% + Acquisition of more than 30% of all voting shares triggers the obligation
of the acquirer to make a mandatory tender offer to purchase the
remaining shares and securities convertible into shares from their
owners.
50% + one share • Constitutes standard quorum for GSM.

• Acquisition of more than 50% of all voting shares (including
shares held by the affiliates) triggers the obligation of the
acquirer to make a mandatory tender offer to purchase the
remaining shares and securities convertible into shares from
their owners.
50% + one share Ability to:

Note: this percentage is • determine the principles of formation and use of the company’s
calculated from the assets;
number of voting shares
• determine the number of members of the board of directors,
attending the GSM.
terminate their authorities and decide on payment of their
remuneration and/or reimbursement of their expenses;
• increase the company’s share capital by increasing the nominal
value of the company’s shares;
• elect and dismiss members of the internal audit commission
and decide on their remuneration and/or reimbursement of their
expenses;
• approve the company’s external auditor;


• distribute the company’s profits (including declaration/payment
of dividends) and allocate the company’s losses upon the
results of a reporting year;
• determine procedures for the conduct of GSMs;
• elect and dismiss members of the ballot commission;
• split and consolidate the company’s shares;
• approve major transactions involving the acquisition or
disposal/possible disposal of any assets valued between 25%
and 50% of the company’s book asset value if the board of
directors was unable to reach a unanimous decision in respect
of such matter;
• decide on participation in financial and industrial groups,
associations and other unions of commercial organizations;
and
• approve the company’s internal regulations and other
documents governing the corporate relations in the company.
NOTE: the company’s charter may provide that the below matters fall within the competence
of the board of directors.
50% + one share Ability to:

Note: this percentage is • approve the annual report and annual accounting (financial)
calculated from the statements;
• increase the company’s share capital by public placement of
attending the GSM.
ordinary shares representing 25% or less of such shares
issued earlier;
• issue securities convertible into ordinary shares by public
placement (open subscription) if such securities may be
converted into ordinary shares representing 25% or less of the
company’s ordinary shares issued earlier;
• appoint and dismiss the company’s executive bodies
(management board and the general director);
• appoint and dismiss the management company or external
manager performing the functions of the company’s sole
executive body; and
• approve the application for the listing of the company’s shares
and securities convertible into shares.
75% Ability to decide on the matters discussed above in connection with the
blocking rights of (25%+) shareholders.
Note: this percentage is
calculated from the
attending the GSM.

75% + one share Acquisition of more than 75% of all voting shares (including shares held
by affiliates) triggers the obligation of the acquirer to make a mandatory
tender offer to purchase the remaining shares and securities
convertible into shares from their owners.
95% Ability to decide:

• that the company is to become non-public;
• on delisting of all of the company’s shares and securities
convertible into shares; and
• on filing for exemption from disclosure requirements.
95% + one share A shareholder who acquired (together with its affiliates) more than 95%
of voting shares in the company can squeeze out the remaining voting
shares and securities convertible therein from their holders provided
that at least 10% of such (95%+) stake was acquired through a tender
offer made during the six months prior to the squeeze-out.
There is a corresponding obligation of such acquirer to buy out all
remaining shareholders of the comppany (see section “Under 5%”
above in this table).
Majority of uninterested Interested party transactions may need to be approved by the GSM
shareholders (i.e., transactions between the company and a third party valued in
excess of 10% of the company’s book asset value (or related to
placement of more than 2% of the company’s placed ordinary /
preferred shares or securities convertible therein) and involving a
conflict of interest on the part of (i) the company’s controlling
shareholder, (ii) members of its board of directors or (iii) executive
bodies). Such transactions can only be approved by a simple majority
(50%+) of votes of those shareholders who do not fall within the
category of interested parties.
Cumulative voting Election of the company’s board of directors requires “cumulative

voting” of the company’s shareholders. During cumulative voting, the
number of votes held by each shareholder must be multiplied by the
number of persons to be elected to the company’s board of directors,
and the shareholder may give all of the resulting votes for one
candidate or divide such votes between two or more candidates. The
number of voting shares sufficient for election of a member of the board
of directors depends on the aggregate number of board members.

Russian law contains a number of rules that already apply before a public takeover bid is announced.
These rules impose certain restrictions in relation to announcements of a potential takeover bid and
use of inside information. The main restrictions and issues have been summarized below. Some
careful planning is therefore necessary if a candidate bidder or target company intends to start a
process that is to lead towards a public takeover bid.


below. The rules include, amongst other things, that manipulation of the target’s stock price, e.g., by
prevent a bidder that has inside information regarding a target company from buying the target’s
securities.

Pursuant to these rules, if a bidder starts building up a stake in the target company, it will be obliged
to inform the company and the CBR once it acquires 5% or more of votes carried by the company’s
voting shares. The same obligation to inform the company and the regulator extends to a shareholder
whose shareholding becomes more or less than 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% or 95%
of the total amount of votes carried by the company’s shares.
A public company must disclose information on all its shareholders whose shareholding exceeds (or
becomes less than) 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% or 95% of the total number of votes
carried by the company’s voting shares. Thus, if a stake exceeding 5% is acquired by a bidder, and it
notifies the company of the acquisition (or the company becomes aware of such fact from its share
registrar), it will be obliged to disclose the relevant information in a newswire and on its website.
When determining whether or not a threshold has been passed, a bidder must also take into account
the voting securities held by its controlled persons and the parties with whom it has entered into a
contract to exercise rights carried by such voting securities.

The target company must continue to comply with the general rules regarding disclosure. These rules
include that a company must promptly announce facts specified in the law. For further information on
inside information, see 6.2 below.

The bid must be sent to holders of the securities through the target company. Before sending the bid
to the target, the bidder shall submit the bid to the CBR for review.
The bidder may send the bid to the target only upon the expiry of 15 days following the date of its
submission to the CBR, unless the CBR sends a demand prior to the expiry of that period to bring the
bid in compliance with the requirements of the law.
If the bid is made with respect to securities traded on a stock exchange, the bidder must disclose the
fact that it submitted the bid to the CBR. The text of such bid must be disclosed on the Internet on the
next day following the expiry of the 15-day period after the bid was submitted to the CBR, unless the
CBR sends a demand prior to the expiry of that period to bring the bid in compliance with the
requirements of law. The target company must also publicly disclose the fact that it has received the
bid and its terms.
The bid must disclose the identity of the bidder, its affiliates and shareholders owning more than 20%
of shares in the bidder (in certain cases, the threshold is 10% of such shares). This requirement
applies to companies and persons incorporated in or having residence in offshore zones.

3.7 Due diligence
The Russian public takeover bid rules do not contain specific rules regarding the question of whether
or not a prior due diligence can be organized, nor how such due diligence is to be organized. Be that
as it may, the concept of a prior due diligence or pre-acquisition review by a bidder is generally
accepted, and mechanisms have been developed in practice to organize a due diligence or pre-
acquisition review and to address issues associated with possession of inside information.
3.8 Affiliates
In Russian law, including for the purpose of takeover bid rules, “affiliates” are defined as individuals
and legal entities that can influence the activities of legal entities and/or those individuals who are
engaged in business.
The following persons are deemed to be affiliated with a legal entity:
• members of the board of directors/supervisory boards of such legal entity, members of its
collective executive body (management council/board) or its CEO;
• persons belonging to the same group of persons;
• persons who have rights to dispose of more than 20% of its voting shares;
• a legal entity in which such legal entity has the right to dispose of more than 20% of the voting
shares; and
• if the legal entity is a member of a financial industrial group, all members of the boards of
directors/supervisory boards and management councils (boards), and the CEO of members of
the financial industrial group.
The following persons are deemed to be affiliated with an individual engaged in business:
• persons belonging to the same group of persons; and
• a legal entity in which such individual has the right to dispose of more than 20% of the voting
shares.
The definition of “group of persons” is quite broad and includes all entities and individuals worldwide
that are related as a result of controlling share ownership, management control or other de facto
control.
There are two main forms of takeover bids in Russia:
• a voluntary offer, in which a bidder intending to acquire more than 30% of ordinary and voting
preference shares in a public joint stock company voluntarily makes an offer for voting shares
and securities issued by the target company convertible into such shares; and
• a mandatory offer, whereby a bidder is required to offer to buy out all voting shares and
securities convertible into such shares of the target company if it acquires (alone or together
with its affiliates) more than 30% of ordinary and voting preference shares of the target.
4.1 Voluntary offer

• The bidder is free to make the voluntary offer subject to certain conditions precedent, such as
a minimum acceptance level, merger control clearance and a material adverse change
condition.

• The bidder is, in principle, free to determine the price offered to the target shareholders:
o The offered price may be paid in cash or, at the choice of the seller, in securities, or a
combination of both.
o There is no minimum price for a voluntary offer, other than that the price shall be the
same for the securities of one and the same type and category for all of their holders.
If, instead of a fixed price, the bid envisages a method for its calculation, the method
must also provide for determining such equal price.
• A bid must be accompanied by an irrevocable bank guarantee, which must provide for the
bank’s obligation to pay the price for the securities should the bidder breach its obligation to
pay. The expiry date of the bank guarantee may not be earlier than six months after the
deadline for payments under the voluntary offer. The bank guarantee should cover all the
securities subject to the bid.
• In case the bid is made with regard to some but not all of the voting shares and securities
convertible into shares, and/or is not made on the terms prescribed for mandatory offers (see
4.2), upon the acquisition of more than 30% (or more than 50% or 75% respectively) of
ordinary and voting preference shares in the target (counting the shares held by its affiliates),
the bidder will be required to make a mandatory offer to buy out all holders of the remaining
voting shares and other securities convertible into such shares.
4.2 Mandatory offer

• A mandatory offer is triggered as soon as a person (together with its affiliates), as a result of
an acquisition of shares, directly or indirectly holds more than 30% (or 50%/75% respectively)
of the ordinary and voting preference shares of the target company.
• The bid should be made through the target within 35 days of the date on which the acquirer
obtained the title to more than 30%/50%/75% of the target’s voting shares, or learns (or
should have learnt) that it holds such shares jointly with its affiliates.
• The mandatory offer must be unconditional and must be in respect of all voting shares and
securities convertible into such shares.
• The main exceptions to the obligation to make a mandatory offer include situations where:
o shares are acquired in the course of the establishment or reorganization of a public

joint stock company;
o shares are acquired on the basis of an earlier voluntary bid (made on the terms of a
mandatory offer) to buy all of a public company’s voting securities;
o shares were acquired on the basis of a mandatory offer sent earlier;
o shares are transferred by a person to or from its affiliates, or as a severance

arrangement between spouses or by way of inheritance;
o a portion of a company’s shares are cancelled by the company;
o shares are acquired by a shareholder exercising its pre-emptive right to acquire

newly-issued shares;
o shares are acquired as part of their placement by the person identified in the
securities prospectus as the organizer of a placement, and/or provider of services in
organizing the placement or placing the shares, provided such person has held the
securities for no more than six months;

o shares are acquired as a result of their contribution by the Russian Federation, a
member of the Russian Federation or a municipality into the charter capital of a public
company in which the Russian Federation, a member of the Russian Federation or a
municipality holds (or acquires as a result of such contribution) more than 50% of
ordinary shares;
o a public company that is included in the register of strategic joint stock companies by
a decision of the President of the Russian Federation acquires shares contributed as
payment for new shares issued by the public company by closed subscription; and
o there are certain transfers involving government entities.
• The price offered for securities in a mandatory offer must meet the following criteria:
o if the securities are traded on a stock exchange (or several stock exchanges), the
price offered may not be lower than their average weighted price as determined upon
the results of their trading on the stock exchange(s) over the six months directly
preceding the date on which the bid was filed with the CBR;
o if the securities are not traded on stock exchanges, or have been traded for less than
six months, the price offered must not be lower than their market value as determined
by an independent appraiser;
o the price may not be lower than the highest price for which the bidder or its affiliates
acquired or agreed to acquire the securities during the six months directly preceding
the date on which the bid was sent to the target; and
o the consideration offered may consist of cash or, at the option of the seller, of
securities, or a combination of both.
• Similar to a voluntary offer, the mandatory offer must be accompanied by an irrevocable bank
guarantee providing for the bank’s obligation to pay the price for the securities should the
bidder breach its payment obligations. The expiry date of the bank guarantee may not be
earlier than six months after the deadline for payment under the bid. The bank guarantee
should cover all the securities subject to the bid.
• The holders of the securities may be offered to accept the bid during a period not less than 70
or more than 80 days from the date of receipt of the bid by the target.
• Holders who accepted the offer must submit their acceptance notices to the shareholders
registrar or nominee holder, and upon receipt of the acceptance notice, the registrar/nominee
must block the relevant shares and the accepting holder cannot dispose of such shares or
encumber them subsequently, unless the acceptance notice is withdrawn or the sale contract
is terminated.
• The purchase price must be paid to the transferring holder within 17 days of the expiry of the
offer acceptance period.
• The registrar transfers title to the shares to the bidder after the bidder submits a report on the
results of the offer and presents documents confirming payment for the shares to holders who
accepted the offer.
• Failure to comply with mandatory offer requirements may result in an administrative fine of up
to RUB 500,000 and officers of the non-compliant company may be subject to fines of up to
RUB 20,000.

• A person who sold their shares based on an improper mandatory offer can sue the bidder for
losses incurred due to the non-compliance.
5 Timeline
As a general rule, the takeover bid process for a mandatory offer is similar to the process that applies
to the voluntary offer, with certain exceptions.
The table below contains a summarized overview of the main steps of a typical voluntary offer
process under Russian law.
Step
• Preparation of the bid by the bidder (study, due diligence and financing).
• The bidder approaches the key shareholders and/or the target.
• Negotiations with the key shareholders and/or the target.

• The bidder files the bid with the CBR. The filing must contain, among other
elements, an irrevocable bank guarantee to secure payment of the offer price.
• The bidder discloses the fact of the filing in newswires and on a website. If no
objections/comments are received from the CBR within 15 days following the
submission of the bid, the bidder may send the bid with the relevant enclosures to
the target and must disclose the terms of the bid. The text of the bid must be
available on the website within six months after the date of disclosure.
• The target discloses information in the newswires and on its website about the
receipt of the bid.
• Counter-bids can be filed (until, at the latest, 25 days prior to the expiry of the
acceptance period of the last bid; see step 6 below in this table).
3. The board of directors of the target shall approve the recommendations with respect to:
(i) the price offered for securities;
(ii) possible fluctuations in the market value of securities; and
(iii) plans of the bidder with respect to the target (including its employees).
Within 15 days of receipt of the offer, the target must send this, together with the board of
directors’ recommendations and certain other documents, to the holders of securities, and
must also send the board’s recommendations to the bidder.
4. Transfer of securities to the bidder:

• Holders of securities send acceptances of the offer to the registrar/nominee within
the term indicated in the bid, which cannot be less than 70 days and more than 90
days following the receipt of the bid by the target.
• The bidder is entitled to refuse to acquire securities that are encumbered.
5. The bidder shall pay for the securities within the period indicated in the bid. If the bidder
fails to pay when due, the holders are entitled to:
(i) unilaterally withdraw from the transaction and demand that their securities are
returned; or

Step
(ii) demand payment under the bank guarantee from the issuing bank.
6. Within 30 days after the expiry of the term for the acceptance of the offer, the bidder must
prepare a report (in a statutory form) on the results of the bid and submit this to the CBR
and the target.
7. The target discloses information regarding the acquisition by the bidder of more than 50%
or 75% of shares in the target, if applicable.
Set out below is an overview of the main steps for a public voluntary takeover offer in Russia.

Start
process Day 0 Day 15 Day 30 Day 105 Day (X) Day 135
Launch of bid. Bidder sends bid to Target’s board approves Holders of securities: Bidder pays for securities Bidder prepares report (in
target. Discloses terms of recommendations on: (within period indicated in statutory form) on the
bid publicly the bid). Failure to do so results of the bid and
• Bid filed with Central • Send acceptances means holders of submits report to CBR
Bank of Russia • Offer price to registrar securities may: and target (within 30
(CBR). Must include Target discloses (nominee) within the
• Possible fluctuations • Withdraw from the days after expiry of
irrevocable bank information about the term indicated in the acceptance period)
in market value of transaction and
guarantee to secure receipt of the bid in bid (must be
securities demand return of
payment of offer price newswires and on its between 70 and 90 If payment has not
securities, or
website • Bidder’s plans days after receipt of become due by this date,
• Bidder discloses the • Demand payment bidder must submit
regarding the target bid by target)
fact of the filing in under bank updated report to CBR
and employees
newswires (and Counter-bids can be filed • Registrar (within 30 days of expiry
guarantee
website, if bidder is (until 25 days before (nominees) block of term for payment)
subject to special expiry of acceptance Target sends board securities, pending
disclosure period of last bid) payment Registrar transfers
recommendations to
requirements) securities to bidder based
h ld f iti ( d
on the above report and
proof of pament

6 Takeover Tactics
6.1 Acquisition scenarios
The following transaction structures could be considered for the acquisition of a major stake in a
public company in Russia:
(a) Private deal plus mandatory offer – This option would involve the acquisition by the bidder of
voting shares from the majority shareholder(s) of more than 30% in a private deal, followed by
a mandatory offer. If the bidder, together with its affiliates, acquires more than 95% of ordinary
shares (and voting preference shares, if any) and provided that at least 10% of such shares
are acquired through the mandatory offer, it will be entitled to squeeze out the remaining
voting shares and securities convertible therein from their holders.
(b) Voluntary offer – Under this option, the bidder would launch a voluntary offer to acquire all
voting shares and securities convertible into such shares in the target company. The voluntary
offer may be conditional on a certain number of shareholders accepting the offer. If the bidder
acquires more than 95% of ordinary shares and voting preference shares (including at least
10% of such shares through the voluntary offer), it will be able to squeeze out the remaining
voting shares and securities convertible therein from their holders.
(c) Merger of companies – A merger of two or more Russian companies is a way to avoid making
a costly mandatory offer, and is sometimes used for public takeovers. There is some flexibility
in determining the share exchange coefficient, and the merger requires the approval of 75%
of the shareholders of each merging entity. In addition, shareholders opposing the merger
may need to be bought out and creditors will need to be notified of the merger. The creditors
may also demand acceleration in certain instances.

A Russian public company has the obligation to publicly disclose certain information that relates to it,
specified by law and in its disclosure policy, including all material changes in information that has
already been disclosed.
Generally, persons who possess inside information cannot deal in the company’s securities unless
such inside information has been disclosed publicly.
• “Inside information” means information of a precise nature which has not been made public
relating, directly or indirectly to one or more issuers of financial instruments or to one or more
instruments.
• Information shall be deemed to be “inside information” if it is included in the list of inside

information in accordance with the law. If information is provided by the issuer (or by a party
contracted by the issuer) to potential investor(s) for the purposes of prompting them to acquire
securities in connection with a placement and/or offering, such information is not deemed
“inside information” provided potential buyers are warned that such information may only be
used to decide whether or not to acquire the securities.
The public company must adopt its own policy with a specific list of inside information based on the
list adopted in accordance with applicable law.


The receipt of a public takeover bid by the company, or any changes to the terms of the bid, and
competing bids constitute inside information that will need to be disclosed publicly in order to comply
with Russian inside information rules.

The basic legal framework regarding insider dealing and market abuse under Russian law is set forth
in the Law on Combatting Unlawful Use of Inside Information and Market Manipulation.

Generally, most Russian public companies have a controlling shareholder(s) who also control(s) the
board and management, and there are very few companies that may be taken over by a third party if
the majority shareholder(s) is(are) not willing to allow this. Therefore, anti-takeover defense
mechanisms are rarely used.

Takeover
7.1 Squeeze-out
A successful bidder will be able to squeeze out the residual holders of voting shares and securities
convertible therein if:
(a) it owns (together with its affiliates) more than 95% of the ordinary shares and voting preferred
shares of the target;
(b) the 95% threshold is exceeded in the course of a voluntary bid to buy all shares of the target
and all securities convertible into such shares, or in the course of a mandatory bid; and
(c) the bidder acquires at least 10% of ordinary and voting preferred shares in the course of the
voluntary or mandatory bid.
If the above criteria are met, the bidder will be entitled to, within six months of the voluntary or
mandatory bid, buy out all other holders of the remaining ordinary and voting preferred shares and
other securities convertible into such shares. However, if the 95% threshold is achieved during a
voluntary/mandatory offer, but less than 10% of shares are acquired in the offer, the minority
shareholders can put their securities on the bidder, but the bidder won’t be entitled to squeeze them
out.
Importantly, non-voting shares are not subject to a squeeze-out. If the bidder’s ultimate goal is to
become a sole shareholder of the target and there are several holders of the target’s non-voting
shares, the bidder would need to explore additional structuring options, e.g., converting the non-voting
shares into voting ones that are eligible for a squeeze-out.
7.2 Sell-out
The bidder must, within 35 days after achieving the 95% threshold of all ordinary and voting
preference shares of the target, including shares held by its affiliates, send a notice via the target to all
other shareholders (including holders of non-voting preferred shares) and holders of securities
convertible into the target’s shares advising them that they have the right to put their securities on the

bidder, and must buy out those who put their securities on the bidder within six months of the date
when the target notifies them of their right.
The securities must be bought out for their (i) six-month average weighted price (for securities traded
on a stock exchange), or (ii) market price determined by an appraiser (for non-traded securities), but
not less than the price for which the bidder bought the securities in the course of the voluntary or
mandatory offer, or for which the bidder or its affiliates acquired or agreed to acquire the securities
after the expiry of the term of the voluntary or mandatory offer.
Instead of sending the notice about the put, the bidder may, within 35 days of achieving the 95%
threshold, send a squeeze-out demand (if the bidder is entitled to make it taking into consideration
any other requirements applicable thereto) to holders of voting shares in the target and securities
convertible therein (see 7.1 above), in which case it will be exempt from sending the notification about
the put.
If the bidder fails to send the squeeze-out demand within 35 days, it will be obliged to buy out the
other holders of all other shares of the target (including non-voting preferred shares) and securities
convertible into such shares on demand by their holders. The bidder can still send out the squeeze-
out demand, but must buy out those holders of the target’s securities who put their securities on the
bidder before doing so.
7.3 Restrictions on acquiring securities during the takeover bid period

After sending the offer to the target and before the expiry of the time period set for the acceptance of
the offer, the bidder may not acquire the target’s voting shares and securities convertible into such
shares on conditions which differ from those on which the offer has been made.
From the moment of the acquisition of more than 30%/50%/75% of voting shares in the target until the
date when a compliant offer is sent to the target, the acquirer may only vote 30% (or 50%/75%
respectively) of its voting shares in the target.
8 Delisting
The decision to turn a public company into a private one, exempt it from public disclosure obligations
and delist all the company’s shares and securities convertible into shares, may be taken by a 95%
vote of all holders of the company’s shares of all classes/types. Shareholders who vote against this
decision or do not participate in the voting are entitled to demand that their shares be bought out for a
price determined by an appraiser, which may not be lower than the average-weighted price on the
stock exchange during the six months preceding the date of the decision to hold a shareholders’
meeting to vote on delisting. The decision to delist becomes effective unless holders of more than
10% of the company’s shares demand to be bought out.


Sergei Voitishkin and Alexey Frolov in the Moscow office and Maxim Kalinin in the St. Petersburg
office are the most appropriate contacts within Baker McKenzie for inquiries about public M&A in
Russia.
Sergei Voitishkin Alexey Frolov

Moscow Moscow
sergei.voitishkin@bakermckenzie.com alexey.frolov@bakermckenzie.com
+7 495 787 2736 +7 495 787 2711
Maxim Kalinin
St. Petersburg
maxim.kalinin@bakermckenzie.com
+7 812 303 9000

Saudi Arabia
1 Overview
The Saudi stock exchange or “Tadawul” is currently the only stock exchange in Saudi Arabia. The
Merger and Acquisition Regulations (“MARs”) were introduced by the Capital Market Authority
(“CMA”) in 2007 as a framework to regulate the takeovers of publicly listed companies in Saudi
Arabia.
In October 2017, the CMA introduced extensive amendments to the MARs which aimed to address
some of the ambiguities and perceived deficiencies in the regulations and facilitate public takeovers in
the jurisdiction. The revised regime is the product of a comprehensive review of established practices
in several international jurisdictions, and aligns the principles of the MARs more closely with
international best practices. This was one of several initiatives that follow the CMA’s release of its
Strategic Plan (2015-2019), which sets out a detailed and comprehensive agenda for the
enhancement of Saudi Arabia’s capital market.
Only a few public M&A takeovers have been executed under the amended MARs, one of which was
the merger of the Saudi British Bank (SABB) and Alawwal bank in 2019, which created the third
largest bank by assets in Saudi Arabia.

The legal framework for takeovers of public companies in Saudi Arabia is set out in the MARs. The
MARs are implementing regulations of the Capital Market Law (“CML”), which establishes a broader
framework designed to promote the development of Saudi Arabia’s capital markets.
The MARs state that its provisions apply to any (i) purchase or sale of voting shares in a Saudi listed
company resulting in ownership or control of 10% or more of the shares, and (ii) offer to purchase
voting shares in such a company, if the shares sought to be acquired would increase ownership to
10% or more.
In addition to regulating pubic takeovers, the MARs also include provisions that apply to privately
negotiated transactions between the bidder and selling shareholder(s) in a listed company which does
not involve making a public offer to the shareholder of the target. Such private transactions are not
discussed further in this chapter.

In addition to the MARs, there are a number of additional rules and principles in Saudi Arabia that will
need to be taken into account by prospective bidders planning a takeover, such as:
(a) The Market Conduct Regulations, first issued by the CMA on 4 October 2004 and
subsequently amended on 18 January 2018, which address issues such as insider trading
and market manipulation.
(b) The Rules on the Offer of Securities and Continuing Obligation (the “OSCOs”) issued by the
CMA on 27 December 2017, and subsequently amended on 30 September 2019. The
OSCOs impose disclosure obligations on listed companies and contain standards for
prospectus disclosure, which the MARs require bidders to comply with where the offer
consideration includes securities.
(c) The Listing Rules issued by the CMA on 27 December 2017, and subsequently amended on
30 September 2019, which govern, among other things, the listing of securities and the
continuing obligations and delisting of listed companies.

(d) The Competition Law, issued by Royal Decree No. M/25 on 22 June 2004 (as amended),
which sets out Saudi Arabia’s framework for competition law and merger control.
(e) The Rules for Qualified Foreign Financial Institutions Investment in Listed Shares (“QFI
Rules”), issued by the CMA on 4 May 2015, and subsequently amended on 17 June 2019,
which restrict direct investment in Saudi listed companies to QFIs subject to certain ownership
limits.
2.3 The role of the CMA

The CMA was formed pursuant to the CML and is responsible for applying the CML and issuing rules,
regulations and instructions related to the capital markets, including the MARs.
In its capacity as the principal securities regulator in Saudi Arabia, the CMA has traditionally exercised
a broad discretion in the supervision and enforcement of the CML and its implementing regulations.
The CMA is given broad powers under the MARs to intervene as necessary to ensure that the
provisions and principles in the MARs are complied with. The MARs also explicitly provide that the
CMA may waive any requirement, in whole or in part, either upon request of the person to whom the
relevant requirement applies or on its own initiative.

It is also important to note that, in spite of the significant revisions to the takeover framework
introduced by the amended MARs, we expect foreign companies to remain prohibited from executing
a takeover of a publicly listed Saudi company. This is due to the restrictions under the Rules for
Qualified Foreign Financial Institutions Investment in Listed Shares (the “QFI Rules”), which limit
foreign direct investment in Saudi listed companies to certain qualified financial institutions (QFIs) and
impose limits on shareholding levels, which would prevent a QFI from acquiring a majority stake.
Recently, the CMA introduced new rules which allow “strategic” foreign shareholders to directly own
stakes in Saudi listed companies but it is not currently clear whether this will open the door for foreign
companies to execute a takeover of Saudi publicly listed companies.

The MARs set out a number of general principles that apply to public takeovers, including the
following:
(a) Parties involved in takeovers must take care that information made available for the purpose
of such transactions are not made in a way that may mislead shareholders or Tadawul.
(b) All shareholders of the target must be treated equally by the bidder.
(c) Any document or announcement relating to an offer or potential offer, addressed to the
bidder, the board of the target or their respective advisors, or to the shareholders, must be
true, fair and not misleading.
(d) During the course of an offer, or when an offer is being contemplated by the target, neither the
bidder, nor the target, nor any of their respective advisors, may furnish information to only
some of the shareholders which is not readily made available to all shareholders.
(e) The bidder and the board of directors of the target must give sufficient information and advice
to the shareholders of the target to enable them to reach a properly informed decision to
accept or reject the offer.
(f) The board of the target company must always act in the best interests of their shareholders.

(g) The target’s board may not commit any frustrating action(s) when a bona fide offer is
imminent.
(h) A shareholder who owns shares in both the bidder and the target may only vote on decisions
related to the offer at either the general assembly of the bidder or the target.
(i) A director shall not vote at a board meeting, committee meeting or a general assembly
meeting on any resolution concerning the offer or any relevant matter where the director has a
conflict of interest.
(j) The activities of the target must not be affected for longer than is reasonable as a
consequence of an offer.
3 Before a Public Takeover Offer

3.1 Consultation with the CMA
Given that there has been only limited practical experience of takeovers in Saudi Arabia, it would be
prudent for any prospective bidder to consult with the CMA on all the steps before proceeding with
such transactions.
Aside from this, we note that the MARs specifically require that the CMA be consulted on certain key
aspects of the proposed offer, including in relation to any proposed break-fee arrangement or where
the a party wishes to contact any shareholder with a view to seeking an irrevocable commitment to
accept or refrain from accepting an offer or potential offer.
3.2 Pre-bid considerations under the MARs

With only limited practical experience of conducting takeovers in Saudi Arabia, and certainly no
established market practice, it is difficult to meaningfully comment on what the pre-bid considerations
for a bidder in Saudi Arabia might be and how the provisions of the MARs might impact on the
bidder’s preparations in practice.
That being said, it is perhaps useful to consider some of the key steps that bidders in other
jurisdictions would be likely to undertake in advance of launching a formal offer (whether on a
mandatory or voluntary basis) and consider how these are treated or addressed under the MARs:
(a) Maintaining secrecy during the pre-bid phase – The MARs impose obligations on persons
involved in a takeover to “eliminate the chances of a leak of information”. Accordingly, we
would expect bidders in Saudi Arabia to monitor the target’s share price and press
speculation as evidence of any leak and have a “leaks” announcement pre-drafted and ready
for release to correct any rumor or speculation (as the MARs require).
(b) Due diligence – Obligations around conducting due diligence are not directly addressed in the
MARs. However, as in the case of an issuer conducting an IPO, a bidder conducting a
takeover is required to appoint a financial and legal adviser who would likely perform a role in
the due diligence.
(c) Confirming availability of financing on a “certain funds” basis – In cases where the offer is in
cash or includes a cash element, the MARs require that the offer document must confirm that
the bidder has obtained a bank guarantee from a local bank guaranteeing its ability to fully
fund the cash component of the offer.
(d) Plan for dealing with any share options – The MARs require that offers are also to be made
for options.
(e) Seeking support for the offer both from the target directors and from large shareholders. The
CMA takes the view that the MARs do not allow a bidder to selectively share information with

only some of the shareholders of the target that is not made available to remaining
shareholders on the basis that this goes against the principle of “equality of information”
between shareholders. Therefore, the bidder will need to seek a formal waiver from the CMA
before it shares any price sensitive information with any shareholder.

levels of shareholding within a Saudi Arabian listed corporation:
Shareholding Rights
One share • The right to attend, participate and vote at general shareholders’
meetings.
• The right to obtain a copy of the audit committee report.
• The right to view the documents and books of the corporation.
• The right to submit questions to the directors and auditors at
• The right to request that decisions of general shareholders’
meetings are annulled in cases where they do not comply with
the Companies’ Law or the by-laws of the corporation.
• The right to file a derivative action against directors.
2% The right to submit an application to the CMA to call for an ordinary

general shareholders’ meeting in the following circumstances:
• if the ordinary general shareholders’ meeting did not convene
after the elapse of the set term.
• if the number of directors falls below the minimum required for
the ordinary general shareholders’ meeting to convene.
• if there are any violations of the Companies’ Law or the by-laws
of the corporation, or in the event of mismanagement of the
corporation.
• if the board of directors has not called for an ordinary general
shareholders’ meeting within 15 days from the date of the
request thereof.

• The right to request that a competent judicial authority
investigates the affairs of the corporation where the actions
taken by directors or auditors, in relation to the affairs of the
corporation, are considered suspicious.
More than 25% The ability at an extraordinary general shareholders’ meeting to block
mergers, capital increases, capital reductions, an extension of the term
of the corporation or dissolution of the corporation.

Shareholding Rights
33.34% The ability at an extraordinary general shareholders’ meeting to block

amendments to the by-laws of the corporation.
50% The ability at an ordinary general shareholders’ meeting to block:

• appointment of directors;
• approval of the annual report of the board of directors;
• appointment of an auditor for the corporation;
• approval of the auditor report and financial statements;
• discharging liability of directors; and
• approval of related party transactions.
66.6% The ability to approve all amendments to the bylaws, except

amendments requiring the approval of shareholders representing 75%
(see out below).
75% The ability to approve:

• amendments to the bylaws in respect of:
o increasing or reducing the company’s capital; and/or
o extending the company’s term;
• winding up the company before the expiry of its term;
• merging the company with another company; and
• a takeover undertaken through a share exchange/swap.

The MARs contain provisions requiring persons who “act in concert” to be treated as one person.
Persons are treated as acting in concert if they actively co-operate, pursuant to an agreement or an
understanding (even if it is non-binding or informal), to control a company through the acquisition by
any of them of voting shares in that company. In certain cases, persons are presumed to be acting in
concert with each other where they have a certain relationship(s) with one another, e.g., such as
companies that are members of the same group.
3.5 Announcement of a public takeover obligation

The MARs clarify that an announcement of a firm intention to make an offer should only be made
where the bidder has “every reason” to believe that it can and will be able to implement its offer.
Where an announcement of a firm intention is made, the bidder must, unless it is exempted by the
CMA, proceed with the offer except where the offer is subject to a specific condition which has been
made public and which has not been met.
The MARs stipulate a number of other circumstances where an announcement must be made by
either the bidder or the target in the context of a potential offer, including:
• when a firm intention to make an offer is notified to the board of the target, irrespective of the
target’s attitude to the offer;
• upon an acquisition of shares by a person which gives rise to an obligation to make a

mandatory offer (see 4.2);

• when a person (or persons acting in concert) become(s) the owner of 40% of the target’s
voting shares;
• when, before a bid approach has been made, the target is the subject of rumors and
speculation or where there is an untoward price movement in the target’s shares of 10% or
more within a single day and there are reasonable grounds for concluding that this is a result
of the potential bidder’s actions;
• when, following a bid approach, the target is the subject of offer-related rumors and
speculation, or where there is an untoward price movement in the target’s shares of 20% or
more from the lowest share price since the time of the approach or a price movement of 10%
or more in a single day; and
• when negotiations or discussions are extended to include more than a very restricted number
of people, i.e., outside those who need to know in the companies concerned and their
immediate advisors, regarding (i) an acquisition of 30% or more of the voting shares of the
target or (ii) the board of the target seeking one or more potential bidders.
3.6 Insider dealing

The general rules regarding insider dealing are set out in the Market Conduct Regulations. They will
continue to apply both during and after the offer. The MARs also include provisions which prohibit
improper disclosure of confidential information, including, in particular, price sensitive information.
3.7 Disclosure of certain dealings

The MARs require various specific disclosures concerning dealings during the offer period, including
dealings by a bidder or a target for their own account.
4.1 Types of public takeover bids
A takeover can be undertaken through two structures. The first is a voluntary takeover bid to the
shareholders of the target, be it in the form of a cash offer, a share offer or a mix between the two.
The second is a statutory merger, where the shareholders of the bidder and the target resolve, at their
respective general assembly meetings, to merge one company into the other or both companies into a
new entity.
In the case of both a share offer and a statutory merger, the offer is accepted by the shareholders of
the target at a duly convened general assembly. The approval threshold at a general assembly is 75%
of the shares represented at the meeting.
A cash offer (or an offer with a cash alternative) must also be made in circumstances where the
bidder (or those acting in concert with it) purchases the target’s shares for cash during the offer period
or in the 12 months prior to it. The price offered must not be less than the highest price paid.
4.2 Mandatory offer

Where a person (or persons acting in concert) increase(s) its/their aggregate interest in the voting
shares of a listed company to 50% or more through a restricted purchase of shares or a restricted
offer for shares, the Board of the CMA will have the right to require such person(s) to purchase the
remaining voting shares of the target.
It is worth noting that the MARs provide that a person (or persons acting in concert) who acquire(s) or
control(s) 40% or more of a specific class of voting shares of a listed company, will be subject to a
lock-up for a period of six months from the date on which this ownership level is reached.

4.3 Partial offer
A bidder may, subject to obtaining the CMA’s approval, make a partial offer to the board of a target to
acquire 30% or more of a specific class of the target’s voting share. The partial offer shall not be
conditional except in respect of obtaining the relevant approvals related to the shares. If the bidder
receives a level of acceptance that is higher than the level the bidder offered to acquire, the bidder
may, subject to obtaining the CMA’s approval, allocate the shares to the accepting shareholders pro
rata to their shareholding in the target.
4.4 Conditionality and certain funds

An offer cannot be made subject to conditions relating to financing. Furthermore, an offer must not be
subject to conditions which depend solely on subjective judgements by the bidder or the target, their
respective directors, or that the fulfilment of such conditions is subject to their opinions.
As noted above, the MARs clarify that an announcement of a firm intention to make an offer should
only be made where the bidder has “every reason” to believe that it can and will be able to implement
the offer. Responsibility for advising the bidder and ensuring all reasonable steps are taken in this
respect rests on its financial advisor.
The MARs also state that in cases where the offer is in cash or includes a cash element, the offer
document must contain a bank guarantee issued by a local bank to ensure that the bidder can fulfil
the full value of the offer.
5 Timeline
The MARs provide that a bidder must submit to the CMA, no later than three days from publishing the
firm intention announcement, the timetable for the offer. The timeline below sets out the main
milestones under the MARs. Depending on the structure pursuant to which the takeover is
undertaken, there could be other milestones and requirements which the parties to the transaction will
have to adhere to:
Step
1. Submission of the final offer document to the CMA
2. T - Obtaining the CMA’s approval
3. No later than T+3 - Publication of the offer document approved by the CMA and providing
the same to the board and shareholders of the target
4. No later than T+17 - Publication of the circular of the board of target setting out its views on
the bidder’s plans in respect of the target and its employees (unless it is published as part
of the offer document)
5. No later than T+31 - Obtaining the approval of the bidder’s shareholders (to the extent
required)
6. No later than T+31 - Obtaining the approval of the target’s shareholders
7. No earlier than T+31 - The earliest permitted closing date of the offer
8. No later than 14 days from the earliest permitted closing date of the offer - The right of
withdrawal of acceptances if the offer has not become unconditional as to acceptances
9. No later than T+63 - The last date on which the target may announce profit or dividend
forecasts, asset valuations or proposals for dividend payments

Step
10. No later than T+63 - The last date on which the bidder may revise its offer or publish new
information
11. No later than T+63 - The last date on which the offer can be declared unconditional as to
acceptances
12. No earlier than 21 days from the last date on which the offer can be declared unconditional
as to acceptances - The last date on which the offer must remain open for acceptance after
it is declared unconditional as to acceptances
13. No later than 21 days from the last date on which the offer can be declared unconditional
as to acceptances -The last date for satisfaction of all other conditions
14. No later than 10 days from the last date for satisfaction of all conditions - The last date for
cash or other consideration to be provided to the shareholders of the target

Set out below is an overview of the main steps for a takeover in Saudi Arabia.
Takeover (indicative timeline)*
Start
process T Day T+3 T + 17 T + 31 T + 63
Obtain Capital Markets Publish approved offer Target’s board publishes Obtain approval of Right of withdrawal of Last date for target to All other conditions Last date for cash or
Authority’s (CMA) document and provide to circular setting out views bidder’s and target’s acceptances if offer has announce profit or other than acceptances other consideration to
approval board and shareholders on bidder’s plans shareholders not become unconditional dividend forecasts, asset must be satisfied no be provided to
of the target as to acceptances valuations or proposals later than 21 days from shareholders of the
for dividend payments last date on which offer target is 10 days from
Earliest permitted can be declared last date for
closing date of offer Last date for bidder to
unconditional as to satisfaction of all
revise offer or publish
acceptances conditions
new information
Offer must remain
Last date to declare offer
open for acceptance
unconditional as to
for at least 21 days
acceptances
after it is declared
unconditional as to
acceptances
Within 3 days No later than 14 days from

earliest permitted closing date
*The timeline sets out the main milestones under the Merger and Acquisition Regulations. Depending on the structure pursuant to which the
takeover is undertaken, there could be other milestones and requirements which the parties to the transaction will have to adhere to.

6 Takeover Tactics
With only a limited amount of takeover activity in Saudi Arabia and no established market practice, we
believe that it would be premature to discuss takeover tactics. It will be interesting to observe how
market practice develops in light of the latest amendments to the MARs.

Takeover
As noted above, in a share offer and a statutory merger, the shareholders of the target accept the
offer at a duly convened general assembly. The required approval threshold at the general assembly
is 75% of the shares represented at the meeting. Assuming this approval threshold is achieved, the
dissenting shareholders will be bound by the majority vote and will be effectively “squeezed-out”.
There is no squeeze-out mechanism in cash offers.
8 Delisting
The target must obtain the CMA’s approval prior to delisting. It must also notify Tadawul of its
intention to delist. The delisting application must provide the following:
• specific reasons for the proposed delisting;
• a copy of the form of required announcements;
• a copy of all documents addressed to the shareholders of the target; and
• the names and contact details of the financial advisor and legal advisor.
Once the CMA approves the request, the company is required to obtain the consent of its
shareholders.

Karim Nassar and Robert Eastwood in the Riyadh office are the most appropriate contacts within
Legal Advisors, Abdulaziz I. Al-Ajlan & Partners* for inquiries about public M&A in Saudi Arabia.
Karim Nassar Robert Eastwood

Riyadh Riyadh
karim.nassar@bakermckenzie.com robert.eastwood@bakermckenzie.com
+966 11 265 8900 +966 11 265 8900
* Legal Advisors, Abdulaziz I. Al-Ajlan & Partners in association with Baker & McKenzie Limited.

Singapore
1 Overview
Singapore’s public takeover rules are modelled after those of the United Kingdom, Australia and Hong
Kong, where the primary rules governing public takeover bids are found in a non-statutory code of
conduct. The Singapore Code on Take-overs and Mergers (“Code”) applies to takeovers and mergers
of:
• corporations, business trusts and real estate investment trusts with a primary listing of their
equity securities and units on the SGX-ST; and
• Singapore unlisted public companies and Singapore unlisted registered business trusts with
more than 50 shareholders or unitholders, and with net tangible assets of S$5 million or more.
The Code applies whether the bidders are natural persons, corporations or unincorporated bodies,
and whether they are resident in Singapore or not.

The main rules and principles of Singapore law relating to public takeover bids can be found in:
• the Code;
• the listing manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”) ( “Listing
Manual”);
• the Companies Act (Cap. 50) of Singapore (“Companies Act”); and
• the Securities and Futures Act (Cap. 289) of Singapore (“Securities and Futures Act”).

Aside from the main legal framework for public takeover bids in Singapore, there are a number of
additional rules and principles that are to be taken into account when preparing or conducting a public
takeover bid, such as:
called transparency rules). These rules are based on the Companies Act and the Securities
and Futures Act. For further information, see 3.4 below.
rules). These rules are found in the Securities and Futures Act. For further information, see
3.3 below.
offered in the public takeover bid consists of securities. These rules are found in the Listing
Manual.

2.3 Supervision and enforcement by the Securities Industry Council

Public takeover bids are subject to the supervision and control of the Securities Industry Council
(“SIC”). The SIC administers and enforces the Code. The Code is issued by the Monetary Authority of
Singapore (“MAS”), the paramount securities regulator in Singapore.
The SIC has a number of legal tools that it can use to supervise and enforce compliance with the
Code, including private reprimands, public censures, depriving the offender of its ability to enjoy the
facilities of the securities market and administrative fines. In addition, the SIC has the power to
investigate any dealing in securities connected with a public takeover. If the SIC finds evidence to
show that a criminal offence has taken place, whether under the Companies Act, the Securities and
Futures Act or otherwise, it will refer the matter to the appropriate authorities.
The SIC also has the power to grant (in certain cases) exemptions from the rules that would otherwise

Foreign investments are not restricted in Singapore. Unless in the context of specific industries and
sectors (such as the banking and financial services industry), takeovers are not subject to prior
governmental or regulatory approvals other than customary anti-trust approvals.

The following general principles apply to public takeovers in Singapore. These are based on the
Code:
(a) persons engaged in public takeovers must observe both the spirit and the precise wording of
the general principles and rules. Moreover, the general principles and the spirit of the Code
will apply in areas not explicitly covered by any rule.;
(b) while the boards of a bidder and a target company and their respective advisers and
associates have a primary duty to act in the best interests of their respective shareholders,
the general principles and rules will inevitably impinge on the freedom of action of boards and
persons involved in public takeovers. They must therefore accept that there are limitations on
the manner in which those interests can be pursued in public takeovers.
(c) a bidder must treat all shareholders of the same class in a target company equally.
(d) rights of control must be exercised in good faith and oppression of the minority is wholly
unacceptable;
(e) where effective control of a company is acquired or consolidated by a person, or persons

acting in concert, a general offer to all other shareholders is normally required;
(f) a bidder should announce an offer only after the most careful consideration. Before taking any
action which may lead to an obligation to make a general offer, a person and their financial
advisers should be satisfied that they can and will continue to be able to implement the offer
in full;
(g) if the board of a target company has received a bona fide offer or has reason to believe that a
bona fide offer is imminent, it must not, without the approval of its shareholders in general
meeting, take any action on the affairs of the target company that could effectively result in
any bona fide offer being frustrated or the shareholders being denied an opportunity to decide
on its merits;
(h) a target company board which receives an offer or is approached with a view to an offer being
made, should, in the interests of its shareholders, seek competent independent advice;

(i) in the course of a public takeover, or when such transaction is in contemplation, the bidder,
the target company and their respective advisers must not give information to some
shareholders that is not made available to all shareholders. This principle does not apply to
the provision of information in confidence by the target company to a bona fide potential
bidder or vice versa;
(j) shareholders should be given sufficient information, advice and time to enable them to reach
an informed decision on an offer. No relevant information should be withheld from them;
(k) any document or advertisement addressed to shareholders containing information, opinions

or recommendations from the board of a bidder or target company or its advisers, should, as
with a prospectus, meet the highest standards of care and accuracy. Profit forecasts require
special care;
(l) all parties to a public takeover should make full and prompt disclosure of all relevant
information and use every endeavour to prevent the creation of a false market in the shares of
a bidder or target company. Parties to such transactions must take care not to make
statements which may mislead shareholders or the market; and
(m) directors of a bidder or a target company should, in advising their shareholders, have regard
to the interests of shareholders as a whole, and not to their own interests or those derived
from personal or family relationships. Shareholders of companies which are effectively
controlled by their directors must accept that the attitude of their board on any offer will be
decisive. There may be good reasons for the board rejecting an offer or preferring the lower of
two offers. The board must carefully examine its reasons for doing so and be prepared to
explain its decision to shareholders.

levels of shareholding within a Singapore listed company:
Shareholding Rights
at general shareholders’ meetings (either orally at the meeting, or in
writing prior to the meeting).
• The right to request the nullity of decisions of general shareholders’
meetings for irregularities as to form, process or other reasons (as
provided for in section 216 of the Companies Act).
• The right to request to bring an action on behalf of the company or
intervene in an action to which the company is a party (as provided
for in section 216A of the Companies Act).

shareholders’ meeting and to table draft resolutions for items on the
agenda.

Shareholding Rights
• The right to call for a poll vote on a resolution.
• The right to require directors’ salaries and other benefits to be
disclosed.

More than 25% of • The ability to block a delisting proposal at a general shareholders’
the total number of meeting.
shares held by
independent
shareholders (i.e.,
shareholders other
than the bidder and
its concert parties)
(at a general
shareholders’
meeting)
general
• any changes to the constitution, capital reductions, share buy-backs
shareholders’
and dissolution of the company;
meeting)
• the modification or disapplication (limitation or cancellation) of the
preferential subscription right of existing shareholders in case of
share issues in cash, or issues of convertible bonds or warrants;
• the giving of financial assistance by a public company to purchase
its shares or shares of its holding company; and
• certain methods of takeovers, i.e., amalgamations and schemes of
arrangements.

general
• to approve capital increases;
shareholders’
meeting) • to approve a disposal of the whole or substantially the whole of the
company’s property;
• to appoint and dismiss directors and to approve the remuneration
• to approve certain aspects of the remuneration and severance
package of executive management;
remuneration;
remuneration report of the remuneration committee of the board of
directors);
• to approve dividend payments; and
• to take decisions for which no special majority is required.

Shareholding Rights
90% The right to force all other shareholders to sell their shares (a “squeeze-
out”) following a takeover bid if (i) the takeover bid is made by way of a
general offer or other scheme or contract, and (ii) the bidder, its nominees
and its related corporations do not own any shares in the target company as
of the date of the offer or proposal.

Singapore law contains a number of rules that already apply before a public takeover bid is

remain applicable. The relevant provisions in the Securities and Futures Act prohibit an individual in
possession of non-public material price-sensitive information from (a) communicating the information
to a third party who is likely to deal in the securities or (b) dealing in the securities.
The rules include, amongst other things, that manipulation of the target company’s stock price, e.g.,
by creating misleading rumours, is prohibited. In addition, the rules on the prohibition of insider trading
For further information on the rules on insider dealing and market abuse, see 6.1 below.

threshold. The relevant disclosure threshold in Singapore is 5%.
in concert (see 3.9 below). These include its affiliates, financial or professional advisers and directors.
The parties could also include existing shareholders of the target company with whom the potential
bidder has entered into specific arrangements such as call option agreements or voting undertakings.

a (potential) public takeover bid may constitute inside information. If so, the target company must
announce this. However, the board of the target company can delay the announcement if a
reasonable person would not expect the information to be disclosed and (a) the information concerns
an incomplete proposal or negotiation or (b) the information comprises matters of supposition or is
insufficiently definite to warrant disclosure. However, a delay of the announcement is only permitted

provided that the non-disclosure does not entail the risk of the public being misled, and that the
company can keep the relevant information confidential. Where the target company is the subject of
rumours or speculation about a possible bid, or where there is significant movement in its share price
or share turnover, the target company must immediately make an announcement.

Prior to the public announcement of a (potential) takeover bid by the bidder or the target company, no
one is permitted to announce the launching of a public takeover bid.
Following an approach to the target company’s board, the target company must make an
announcement once it receives notification of a firm intention to make an offer. As soon as the public
takeover bid is announced, it can normally no longer be withdrawn (except in certain circumstances).
If there are rumors or leaks that a (potential) bidder intends to launch a public takeover bid, or there
are undue movements in the target company’s share price or trading volume, and there are
reasonable grounds for concluding that it is the potential bidder’s actions (whether through purchase
of the target company’s shares or otherwise) which have directly contributed to the situation, the
bidder or the target company (depending on whether or not an approach has been made to the target
company) must make a holding announcement to clarify the situation. See 3.7 for further details.

(a) Early disclosure – Where there is a leak regarding information relating to a potential bid, or
where there are undue movements in the target company’s share price or trading volume, a
holding announcement is required to be made, regardless of whether or not there is a firm
intention to make an offer. In addition, the target company could request that the SIC imposes
a deadline by which the potential bidder must clarify its intention as to whether or not it is
making an offer. This type of disclosure may be considered when the bid is hostile or where
there is prolonged uncertainty as to whether or not a bid is forthcoming, but an announcement
is nevertheless appropriate.
(b) Put-up or shut-up – Under the Code, there are no formal sanction mechanisms for the SIC to
force a bidder to make an announcement to clarify whether or not it intends to carry out a
public takeover bid. However, in the case of a competitive bid situation, a potential competing
bidder must clarify its intention by the 53rd day from the date the first bidder dispatches its
offer document (in the case of a general offer), or no later than the seventh day prior to the
date of the general shareholders’ meeting to approve the scheme of arrangement or
amalgamation.
3.8 Due diligence

The Listing Manual generally prohibits selective disclosure in order to prevent insider dealing and
market abuse, but allows selective disclosure to be made on an exceptional basis for limited
purposes, such as for purposes of facilitating the target company’s business or corporate objectives.
Appropriate confidentiality restraints (such as the use of confidentiality undertakings and stand-still
agreements) must be put in place and disclosure should only be made on a need-to-know basis.
A concern for the parties involved during the due diligence process prior to commencement of the
offer is the risk of inside information being disclosed in the process, which would result in the target
and the bidder running afoul of the insider dealing and market abuse rules. As a result, care needs to
be taken to ensure that the information provided by a target company to a bidder during due diligence
does not include materially price-sensitive information. When an offer or a potential offer has been
announced, the Code requires the target company to provide, at a competing bidder’s request, the
information provided to the other competing bidder(s).

In the absence of the target company providing confidential information to the potential bidder, the
bidder will only have access to publicly-available information of the target company. In the case of a
Singapore listed target company, this would include the following information available from the
Accounting and Corporate Regulatory Authority and/or the target company’s corporate
announcements page on the SGX-ST:
• its constitution;
• annual audited financial statements;
• half-yearly or quarterly financial results;
• shareholder circulars and prospectuses;
• public announcements pursuant to its disclosure obligations under the Listing Manual, for the
last 5 years;
• substantial shareholding notifications; and
• annual reports.

For the purpose of the Singapore takeover rules, persons are “acting in concert” if they collaborate
with the bidder, the target company or with any other person on the basis of an express or silent, oral
or written, agreement aimed at acquiring or consolidating effective control over the target company.
Persons that are affiliates of each other are presumed to be acting in concert unless the contrary is
established.
mandatory general offers. If one or more persons in a group of persons acting in concert acquire
voting securities as a result of which the group in the aggregate would pass the 30% threshold, the
members of the group will have a joint obligation to carry out a mandatory general offer, even though
the individual group members do not pass the 30% threshold.
If persons acting in concert with the bidder possess confidential price-sensitive information, they are
prohibited from dealing in the target company’s securities during the time when there is reason to
suppose that an approach, an offer or a revised offer is contemplated and the announcement of such
approach, offer or revised offer. Such restriction does not apply where such dealings are excluded
from the proposed offer or where there are no-profit arrangements in place.
If the bidder, the target or any of the persons acting in concert with them deal in the securities of the
target company or securities of the bidder (in the case of a securities exchange offer), they are
required to publicly disclose such dealings before the commencement of the offer period, if a potential
offer has been the subject of an announcement that talks are taking place (whether or not the
potential bidder has been named) or if a potential bidder has announced that it is considering making
an offer.
Purchases of securities in the target company by persons acting in concert with the bidder within the
period between three to six months prior to the commencement of a general offer may affect the price
payable by the bidder to the target shareholders. Please see 4 below for more details.
A public takeover bid in Singapore can take one of the following forms:

• a voluntary general offer in which a bidder voluntarily makes an offer for all the voting
securities issued by the target company (and securities issued by the target company
conferring the right to acquire voting securities of the target company);
• a mandatory general offer, which a bidder is required to make if, as a result of an acquisition
of securities, it crosses (alone or in concert with others) a threshold of at least 30% of the
voting securities of the target company, or where it already holds 30%-50% of the voting
securities of the target company (alone or in concert with others), acquires 1% of the voting
securities of the target company within a rolling six-month period;
• a scheme of arrangement under section 210 of the Companies Act, in which the bidder enters
into an implementation agreement with the target company to acquire all the voting securities
issued by the target company, either by cancelling the existing securities of the target
company with new securities issued to the bidder, or transferring the securities of the target
company to the bidder;
• an amalgamation under sections 215A to 215J of the Companies Act, in which the bidder
enters into an amalgamation proposal with the target company, and the target company is
merged with the bidder, with the bidder (or a special purpose vehicle) as the surviving entity;
and
• a voluntary delisting whereby an exit offer is made by the target company or majority holders
to buy out the minority holders in the target company.
4.1 Voluntary general offer

• A voluntary general offer must be conditional upon the bidder acquiring at least 50% of the
target company’s voting securities.
• The bidder is free to make the voluntary general offer subject to a higher minimum
acceptance threshold, and other sufficiently objective conditions, subject to prior approval by
the SIC. Prior approval by the SIC is not required in the case of customary conditions such as
merger control clearance, approval of security holders for new issuances of securities and
approval from the SGX-ST for listing.
the target shareholders (absent any pre-existing controlling interest in the target), subject to
the following:
o The offered price may be paid in cash, securities or a combination of both, unless the
bidder or a person acting in concert with it had acquired more than 10% of the voting
rights in the target company for cash within the six-month period prior to making its
offer, in which case the offer must be made for cash or a cash alternative.
o The offered price must not be less than the highest price paid by the bidder or
persons acting in concert with it during the offer period (starting on the date of the
takeover announcement) or within the three months prior to the commencement of
the offer period.
o If, during the offer period, the bidder or persons acting in concert with the bidder
acquire or commit to acquire securities to which the offer relates at a higher price,
then the offered price must be raised to that higher price.
o If the target company has different categories of securities, comparable offers must
be made for each class of securities, subject to prior consultation with the SIC.

4.2 Mandatory general offer
• A mandatory general offer is triggered as soon as:
o a person or group of persons acting in concert (or persons acting for their account),
as a result of an acquisition of voting securities of the target company, directly or
indirectly holds more than 30% of the voting securities of the target company; or
o where a person or group of persons acting in concert (or persons acting for their
account) already hold, directly or indirectly, between 30% to 50% of the voting
securities of the target company and acquires 1% of the voting securities of the target
company within a rolling six-month period.
• The mandatory general offer must be made conditional upon the bidder acquiring at least
50% of the target company’s voting securities. Save for merger control clearance (if required),
no other conditions are allowed and a mandatory general offer cannot be subject to a higher
minimum acceptance threshold.
• The main exceptions to the mandatory general offer obligation include situations where:
o the stake of more than 30% is acquired as a result of acceptances under a voluntary
general offer;
o the stake is acquired from another member of the concert party group, provided that
the leader of the concert party group or the largest individual shareholding does not
change, and the price paid for the shares is not at a significant premium;
o the stake in the target company is acquired indirectly through obtaining control over
an intermediate holding company that holds more than 30% in the target company,
i.e., an indirect acquisition, and the target company does not contribute significantly to
the assets, market capitalization, sales or earnings of the intermediate holding
company;
o the stake is acquired pursuant to a subscription of new shares, i.e., a rights offering or
issue of new securities as consideration for an acquisition, and the waiver of the
requirement to make a mandatory general offer is obtained through an independent
vote of the holders of securities in the target company in compliance with the
whitewash procedure under the Code;
o the stake is acquired within the framework of a corporate restructuring, i.e., a pro rata
distribution of voting securities in a downstream company to the upstream company’s
shareholders, and approval is obtained from the independent holders of securities in
the target company in compliance with the whitewash procedure under the Code; and
o in the case of companies with a dual class share structure with a separate class of
shares that carry multiple votes, there occurs a voluntary conversion or automatic
conversion of multiple voting shares into ordinary shares which carry one vote each
or a reduction in the number of votes attached to each multiple voting share, which
results in an increase in the percentage of voting rights of a shareholder and persons
acting in concert with them, and such shareholder is independent of the conversion or
reduction. Where such shareholder is not independent, the waiver of the requirement
to make a mandatory general offer may be obtained through an independent vote of
the holders of securities in the target company in compliance with the whitewash
procedure under the Code. A mandatory general offer is also not required if the
shareholder and/or their concert parties dispose within six months (or such longer
period of time as the SIC may allow in exceptional circumstances) of the date of the
conversion or reduction such number of shares as is necessary to reduce their

aggregate voting rights in the target company to a level which is below the mandatory
general offer thresholds.
The SIC should nonetheless be consulted in all the above cases.
• The offer consideration payable by the bidder in a mandatory general offer must meet the
following criteria:
o The offered price must be paid in cash or accompanied by a cash alternative.
o The offered price must not be less than the highest price paid by the bidder or
persons acting in concert with it during the offer period (starting on the date of the
takeover announcement) or within the six months prior to the commencement of the
offer period.
o If, during the offer period, the bidder or persons acting in concert with the bidder
acquire or commit to acquire securities to which the offer relates at a higher price,
then the offered price must be raised to that higher price.
o If the target company has different classes of securities, comparable offers must be
made for each class of securities, subject to prior consultation with the SIC.
o in the case of companies with a dual class share structure, the offer price will be the
highest price that the bidder and/or its concert parties have paid for voting rights in
the target company in the six months prior to the earlier of the date of the
announcement of the conversion or reduction, or the date of the conversion or the
reduction. If the bidder and its concert parties did not acquire shares in the target
company in the six months prior to such date, the SIC will generally require the offer
price to be the simple average of the daily volume weighted average traded prices of
the target company on either the latest 20 trading days or whatever number of trading
days there were within the 30 calendar days prior to the earlier of the date of the
announcement of the conversion or the reduction, or the date of the conversion or the
reduction. The SIC, however, reserves the right to disregard any inexplicably high or
low traded prices during the said 30 calendar days when computing the offer price.
4.3 Scheme of arrangement

• Although the provisions of the Code apply to schemes of arrangement, it is usual for the
bidder to obtain from the SIC exemptions from compliance with certain provisions of the
Code, e.g., provisions relating to the takeover timetable and type of consideration required,
etc.
• Under section 210 of the Companies Act, a scheme of arrangement must be conditional upon
the approval from a majority in number of holders representing at least 75% of the voting
securities of the target company or the class of voting securities present and voting.
• The following stages are involved in effecting a public takeover by way of a scheme of
arrangement:
o the target company applies to the court to convene the requisite meetings of the
classes of holders;
o the relevant classes of holders hold meetings to approve the scheme of arrangement;
and
o the target company applies for the court’s sanction if the holders of all the classes
approve the scheme of arrangement by the requisite majorities.

• Once the scheme of arrangement is approved and sanctioned by the court, all the holders of
securities of the target company are bound by the scheme, including those who voted against
it.
4.4 Amalgamation
• Although the provisions of the Code apply to amalgamations, the bidder may obtain from the
SIC exemptions from compliance with certain provisions of the Code, e.g., provisions relating
to the offer timetable.
• An amalgamation under sections 215A to 215J of the Companies Act must be conditional
upon the approval of the holders of securities of each of the bidder and the target company
representing at least 75% of the voting securities of each company present and voting.
• The boards of the bidder and the target company are also required to make solvency
statements, in relation to their own companies and also in relation to the amalgamated
company.
• If a bidder wishes to achieve full control over the target company, the bidder should designate
the bidder or a special purpose vehicle as the surviving entity. If the consideration is in the
form of cash and accepted, the minority holders of securities of the target company would be
cashed out. If the consideration is in the form of securities in the amalgamated company,
there would likely be a dilution in the aggregate holdings of the minority holders.
• The amalgamation process under sections 215A to 215J of the Companies Act is yet to be
used in a public takeover bid.
4.5 Voluntary delisting

• A voluntary delisting under Rule 1307 of the Listing Manual must be conditional upon the
approval by a majority representing at least 75% of the total voting securities of the target
company (excluding treasury shares and subsidiary holdings) held by holders present and
voting. The bidder and parties acting in concert with it must abstain from voting on the
resolution.
• The exit offer must include a cash alternative as the default alternative
• The target company must appoint an independent financial adviser to advise on the exit offer
and the independent financial adviser must opine that the exit offer is fair and reasonable.
• An exit offer under Rule 1309 of the Listing Manual is an offer that falls within the ambit of the
Code. However, the SIC would normally waive compliance with certain provisions under the
Code, subject to conditions.
5 Timeline
As a general rule, the takeover bid process for a mandatory general offer is similar to the process that
applies to a voluntary general offer, with certain exceptions.
The table below contains a summarized overview of the main steps of a typical voluntary general offer
process under the Code.
Step
announcement).

Step
2. “D” Day (Launching of the bid) – The bidder announces a firm intention to make the offer to
the public and the target company. As of that moment, the bid is public, the bidder can no
longer withdraw the bid (except in certain limited circumstances such as in the event of a
counter-bid or non-fulfilment of a condition) and the powers of the board of the target
company are limited.
3. D + 14 to 21 days (“T”) – The bidder must post its offer document (the “Offer Document”)
not earlier than 14 days but not later than 21 days from the offer announcement date. In the
case of a pre-conditional voluntary offer, the bidder may be permitted to post the offer
document on a date earlier than 14 days from the offer announcement date.
4. T + 14 days – Within 14 days of the posting of the offer document, the board of the target
company must send a circular to its shareholders setting out its views on the bid. The
circular will contain the opinion of an independent financial adviser, appointed to advise the
independent directors of the target company on the offer.
5. T + 28 days – The offer must remain open for at least 28 days after the date on which the
offer document is posted (the “First Closing Date”).
The offer may be extended beyond the First Closing Date subject to the following:
• once the offer becomes unconditional as to acceptances, the offer must be
extended for at least 14 days from the date on which it would have closed;
• the bidder is not allowed to extend the closing date if it has expressly stated that it
will not extend the closing date;
• if the offer is revised, it must be kept open for at least 14 days from the date of
revision;
• the offer cannot be extended beyond the 60th day from the posting of the offer
document, unless the offer turns or is declared unconditional as to acceptances by
then;
• in the case of a competitive bid situation, the timetable will be adjusted with respect
to the dispatch of the offer document of the latest competing bidder.
6. First dealing day after the First Closing Date (and all subsequent closing dates or when the
offer becomes unconditional as to acceptances) – Announcement of acceptance levels.
7. T + 39 days – The target will not be able to announce material information, such as trading
results, profit or dividend forecasts, asset valuations or major transactions after the 39th
day following the posting of the Offer Document, except with the consent of the SIC.
8. T + 42 days – If the offer is not yet unconditional as to acceptances, accepting

shareholders may withdraw their acceptances.
9. T + 46 days – The last day for the bidder to revise its offer.
10. T + 53 days – In a competing bid situation, the last day for a potential competing bidder to
confirm its intention to make an offer for the target company.

Step
11. T + 60 days – The last day for the offer to be kept open or declared unconditional as to
acceptances, which cannot be extended unless the SIC consents or a competitive bid
situation arises.
12. T + 74 days (“X”) – The final closing date of the offer, where the offer becomes
unconditional as to acceptances on T + 60.
13. X + 7 business days – Last date for payment of the offer consideration by the bidder (within
seven business days of the offer becoming unconditional in all respects or the bidder
receiving valid acceptances where such acceptances were tendered after the offer has
become or been declared unconditional in all respects).
14. Squeeze-out or sell-out if the bidder acquired 90% of the shares:

• Squeeze-out – within a term of two months after the 90% threshold is met.
• Sell-out – within a term of three months following the receipt of notice from the
bidder that it holds 90% of the voting securities.
15. Delisting of the target company – Usually occurs after completion of squeeze-out or sell-
out.
Set out below are overviews of the main steps for (i) a voluntary general offer process and (ii) a
scheme of arrangement, in Singapore. For a scheme of arrangement, there is no prescribed timeline
other than the takeover timetable in the Code for which an exemption is usually obtained. The timeline
will be dictated by the parties and the court’s availability.

Voluntary general offer process (indicative timeline)
Start D + 14 T + 74
process D Day to 21 (T) T +14 T + 28 T +39 T +42 T +46 T +53 T +60 (X) X+7 X + 30
Launch the bid - Bidder must post Target sends a Earliest day to Final day to If the offer is not Last day for the Last day for a Last day for the Final closing Last date for Squeeze-out 1 or Delisting of
Bidder its offer circular to end the offer announce yet unconditional bidder to revise potential offer to be kept date of the offer payment of the sell-out2 if the target after
announces a document shareholders period (First material as to its offer competing open or declared (where the offer offer bidder acquired squeeze-out/sell-
firm intention to setting out its closing date) information after acceptances, bidder to confirm unconditional as becomes consideration by 90% of the out
make the offer to views on the bid posting the offer accepting its intention to to acceptances unconditional as the bidder shares
the target and to document shareholders make an offer to acceptances
the public without the may withdraw on T + 60)
consent of their
Securities acceptances
Industry Council
14 – 21 days at least 28 days 7 days
1. Squeeze-out – within a term of two months following the close of the offer or when the 90% threshold is reached.
2. Sell-out – within a term of three months following the receipt of notice from the bidder that it holds 90% of the voting securities.

Scheme of Arrangement (indicative timetable)
Start During
process process Day 0 Day 21 Day 49 Day 63 Day 66 Day 80 Day 81 Day 95 Day 96
Apply to Securities Sign scheme Finalise scheme Consider SGX First court hearing Send scheme Scheme meeting Apply for second Second court Effect the scheme
Industry Council implementation document, RegCo comments document to target
court hearing hearing
(SIC) for approval to agreement Independent shareholders
Approve scheme
effect takeover by Financial Adviser’s document Advertise notice of
way of scheme of (IFA) Report and scheme meeting
arrangement and for Singapore Exchange Apply for first court
submit scheme
clearance of scheme (SGX) document and IFA hearing
conditions announcement of
Report to SGX
transaction RegCo
5 – 7 weeks 21 days preparation 28 days SGX RegCo 14 days waiting Printing and mailing 16 days (14 clear 15 days
period clearance period period 3 days days’ notice period)

6 Takeover Tactics
A person who is in possession of “inside information” that relates to any securities listed on the SGX-
ST is prohibited from (a) dealing in those securities and (b) communicating (directly or indirectly) the
inside information to another person if it knows or ought reasonably to know that the other person
would or would be likely to deal in those securities or procure a third person to deal in those
securities.
• “Inside information” means information that is not generally available but, if the information
were generally available, a reasonable person would expect it to have a material effect on the
price or value of securities.
• “Dealing” in securities means subscribing for, purchasing or selling, or entering into an

agreement to subscribe for, purchase or sell, the securities, or procuring another person to do
any of the foregoing.
This difficulty generally arises when a bidder is given the opportunity to conduct due diligence on the
target company before a (potential) takeover bid is made (see 3.8 above for further details). In the
event that inside information is unearthed during due diligence, the same inside information should be
disclosed to the public before a takeover bid is made. This will often be a difficult exercise, and a large
gray area will exist as to whether or not certain information constitutes inside information.

In the event of a (potential) public takeover bid, the Singapore takeover bid rules provide that there
must be absolute secrecy before an announcement of a takeover bid. For a partial takeover bid, no
announcement can be made unless it is made with the prior approval of the SIC. In addition, before
an approach has been made to the target company, if the target company is the subject of rumour or
speculation about a possible bid, or if there is undue movement in its share price or a significant
increase in the volume of share turnover, and there are reasonable grounds for concluding that it is
the potential bidder’s actions (whether through purchase of the offeree company’s shares or
otherwise) which have directly contributed to the situation, the potential bidder must make an
announcement. Following an approach to the target company, if the target company is the subject of
rumour or speculation about a possible bid, or if there is undue movement in its share price or a
significant increase in the volume of share turnover, the target company must make an
announcement, whether or not there is a firm intention to make an offer.

The basic legal framework regarding insider dealing and market abuse under Singapore law is set
forth in the Securities and Futures Act.
relation to trading in listed securities. See 3.3 and 6.1 for more information.
6.4 Stakebuilding
Although stakebuilding is possible, a potential bidder should be aware that it will incur an obligation to
publicly disclose its interests in the target when it holds 5% or more of the voting shares (and each
change in percentage level thereafter). In addition, a mandatory general offer is triggered if a potential
bidder acquires 30% or more of the voting rights of the target company. This obliges the potential
bidder to make an offer for all the remaining securities at the highest price paid by it within six months
of a mandatory general offer. Conversely, for a voluntary general offer, the potential bidder’s minimum
bid price is the highest price paid by it within three months of a voluntary general offer. In addition, a

stakebuilding exercise will make it more difficult for a potential bidder to invoke the squeeze-out
mechanism of minority shareholders, as shares acquired during stakebuilding before the launch of the
takeover bid cannot be taken into account when determining if the squeeze-out threshold of 90% is
met.

Arrangements by way of irrevocable undertakings to sell shares are not uncommon in Singapore.
Under this arrangement, a potential bidder is assured that it will receive a certain level of acceptances
for its bid. Typically, a potential bidder will seek to receive undertakings in respect of just over 50% of
the total voting rights of the target company.
6.6 Break fees

Break fee arrangements are uncommon in Singapore. Nonetheless, as a general rule under the Code,
the break fee must be minimal (normally no more than 1% of the value of the target company,
calculated by reference to the bid price). Furthermore, the target company and its financial adviser are
required to make full disclosures to the SIC. In this regard, certain capital maintenance issues will
have to be addressed, as a Singapore public company is prohibited from giving any financial
assistance for the purpose of, or in connection with, the acquisition by any person of shares in the
public company.
6.7 Common anti-takeover defence mechanisms

company as a defence against a takeover bid. These take into account the restrictions that apply to
1. Capital increase (poison pill) • In the course of a takeover bid, or even

before the date of the takeover bid, if the
Capital increase by the board without
board of the target company has reason
to believe that a bona fide takeover bid is
shareholders.
imminent, the board of the target company
may not issue any shares, grant any
options in respect of unissued shares or
create, issue or permit the creation or
issuance of any securities carrying rights
of conversion into or subscription for
shares of the target company.
• Exceptions:
(i) Pursuant to a contract entered
into earlier; or
(ii) Approval of shareholders holding
more than 50% of the total voting
rights at a general meeting is
obtained. The notice convening
such meeting must include
information about the bid or
anticipated bid.

2. Share buyback • In the course of a takeover bid, or even

before the date of the takeover bid, if the
Share buyback “with a view to avoiding
board of the target company has reason
imminent and serious harm” to the
to believe that a bona fide takeover bid is
company.
imminent, the board of the target company
may not cause the target company or any
subsidiary or associated company to
purchase or redeem any shares in the
target company or provide financial
assistance for any such purchase.
• Exceptions:
into earlier; or
anticipated bid.
3. Sale of crown jewels • In the course of takeover bid, or even

before the date of the bid, if the board of
An arrangement affecting the assets of, or
the target company has reason to believe
creating a liability for, the company, which
that a bona fide takeover bid is imminent,
is triggered by a change in control or the
the board of the target company may not
launch of a takeover bid.
sell, dispose of or acquire, or agree to sell,
dispose of or acquire, assets of a material
amount.
• Exceptions:
into earlier; or
anticipated bid.
4. Warrants on new shares • See item 1 above.

Warrants are issued prior to the takeover
bid in favor of “friendly person(s)” (without
shareholders) who can exercise the
warrants at their option and subscribe for
new shares.

5. Cross shareholdings • Subject to the Rule 5 general prohibition

under the Code, which provides that in the
Acquisition of more than 10% of voting
course of a takeover bid, or even before
rights in the potential bidder (or its
the date of the takeover bid, if the board of
subsidiaries) prohibits a bidder from
acquiring more than 10% of shares in a
target.
the board must not take any action on the
affairs of the target company that could
effectively result in any bona fide bid
being frustrated or the shareholders being
denied an opportunity to decide on its
merits.
• Exceptions:
into earlier; or
anticipated bid.
6. Frustrating actions • Only pursuant to a contract entered into

before the date of the takeover bid and
Actions such as significant acquisitions,
before the board of the target company
disposals, changes in indebtedness, etc.
has reason to believe that a bona fide
takeover bid is imminent.
• Other transactions require the approval of
shareholders holding more than 50% of
the total voting rights at a general
meeting. The notice convening such
meeting must include information about
the bid or anticipated bid.
7. Shareholders’ agreements • The shareholders could be considered as

“acting in concert”. If so, disclosure
Shareholders undertake to (consult with a
obligations apply and (a) if they hold less
view to) vote their shares in accordance
than 30% of voting rights, an obligation to
with terms agreed among them.
make a takeover bid would arise if any
member of that group acquired further
shares so that the group’s aggregate
holdings of voting rights reached 30% or
more, or (b) if they hold between 30% to
50% of voting rights, an obligation to
make a takeover bid would arise if any
member of that group acquired shares
which would result in aggregate
acquisitions by the group amounting to


more than 1% of the voting rights in any
six-month period.
8. Limitation of voting rights • Subject to the Rule 5 general prohibition

Clause in the articles of association
providing for a proportional restriction of
voting rights (applying to all shareholders
equally).
effectively result in any bona fide takeover
bid being frustrated or the shareholders
being denied an opportunity to decide on
its merits.
• A possible exception is if the approval of
shareholders holding more than 75% of
the total voting rights at a general meeting
is obtained for the amendment to the
constitution of the target company, with
the notice convening such meeting to
include information about the bid or
anticipated bid. However, the curtailment
of voting rights could be in contravention
of paragraph 8(a) of Appendix 2.2 of the
Listing Manual.
9. Veto rights for certain shareholders • Subject to the Rule 5 general prohibition
Clauses providing for nomination rights by
a reference shareholder or similar
governance mechanisms.
effectively result in any bona fide takeover
bid being frustrated or the shareholders
being denied an opportunity to decide on
its merits.
• Exceptions:
into earlier; or
obtained for the amendment to
the constitution of the target
company. The notice convening

anticipated bid.
10. Limitations on share transfers • A listed target company must ensure that,
in its constitution, there shall be no
Board approval or pre-emptive restriction
restriction on the transfer of fully paid
clauses in the articles of association or in
securities except where required by law or
agreements between shareholders.
the Listing Manual.
• Private arrangements between
shareholders to limit share transfers are
still possible.
• Shareholders could be considered as
“acting in concert”. If so, see
“Shareholders’ agreements” above.

Takeover
7.1 Squeeze-out
If, following the takeover bid, the bidder receives acceptances of not less than 90% of the total
number of issued shares (other than those already held by the bidder, its related corporations or their
respective nominees as at the date of the takeover bid and excluding any shares held as treasury
shares), the bidder can compulsorily acquire the shares of the remaining shareholders. The remaining
shareholders are entitled, within one month from the date on which notice is given by the bidder, to
apply to court to have the acquisition stopped. However, this is uncommon in practice, as the burden
of proof is on the remaining shareholder to show that the proposed acquisition is unfair or not made
bona fide. If no application is made, the bidder will be bound to acquire those shares.
7.2 Sell-out
If the takeover bid results in the bidder or its nominees holding 90% or more of the total number of
issued shares of the target company (including any shares held as treasury shares, which are treated
as having been acquired by the bidder), the shareholders who have not accepted the offer have a
right to require the bidder to acquire their shares on the same terms as those offered under the offer.
A remaining shareholder may exercise its sell-out rights within three months of the bidder giving
notice of it reaching the 90% threshold.

Where a general offer has been announced or posted but is withdrawn or lapses, the bidder and its
concert parties are prohibited, within a period of 12 months from the date such offer is withdrawn or
lapses, from either announcing an offer or possible offer for the target company or acquiring any
voting rights of the target company if the bidder or its concert parties would thereby become obliged
under the Code to make a mandatory general offer.
In addition, neither the bidder nor its concert parties may, within six months of the closure of any
previous offer made by it which became or was declared unconditional in all respects, make a second
offer to, or acquire any securities from, any shareholder in the target company on terms better than
those made available under the previous offer.

8 Delisting
Following a mandatory or voluntary general offer, if the bidder exercises its squeeze-out rights to
achieve 100% ownership of the target company, an application is made by the listed target company
to the SGX-ST for confirmation of delisting.
If the bidder is unable to exercise its squeeze-out rights but the percentage of the total number of
issued shares (excluding treasury shares) held in public hands nevertheless falls below 10%, the
listed target company must announce that fact as soon as practicable and the SGX-ST will at the
close of the offer suspend the trading of all the shares. The SGX-ST may allow the listed target
company a period of three months (or a longer period if the SGX-ST agrees) to raise the percentage
of shares in public hands to at least 10%, failing which the listed target company may be delisted from
the SGX-ST.
The target company may also choose to apply to the SGX-ST for a voluntary delisting, which is
subject to the target company holding a general meeting to seek shareholder approval for the
delisting, and an exit offer (which must be opined upon as fair and reasonable by an independent
financial adviser) must be made. The resolution to delist must be approved by a majority of at least
75% of the total number of issued shares (excluding treasury shares and subsidiary holdings) held by
the shareholders present and voting on a poll. The bidder and parties acting in concert with it must
abstain from voting on the delisting resolution. See 4 for more details.
In addition to the above, a delisting can be effected through the following mechanisms:
• A scheme of arrangement under section 210 of the Companies Act, which provides for an
acquisition of the securities of the target company on an ‘all or nothing’ basis. If the scheme is
successful in obtaining the requisite majority approval of the different classes of holders, then
the bidder can acquire all the shares of the target company, including dissenting
shareholders’ shares. This would result in a delisting of the target company. See 4 for more
details.
• An amalgamation under sections 215A to 215J of the Companies Act, whereby the target
company is amalgamated with the bidder, with the bidder or special purpose vehicle
remaining as the surviving entity. As the target company ceases to exist, it would result in a
delisting of the target company. See 4 for more details.
• A selective capital reduction under section 78G of the Companies Act, where all the shares
held by the minority shareholders will be cancelled, with a sum constituting part of the total
paid-up share capital of the target company being cancelled and returned to the minority
shareholders. However, this exercise requires (a) a special resolution to be passed at a
general meeting on a poll, i.e., approval of at least 75% of all shares voted by shareholders
present and voting on a poll at the general meeting, with the bidder and its concert parties to
abstain from voting; and (b) the approval and confirmation by the High Court.
Separately, after delisting, if the target company is incorporated in Singapore and has no more than
50 shareholders, a special resolution may be passed to privatize the target company.

Ai Ai Wong, Min-tze Lean and Kenny Kwan in the Singapore office are the most appropriate contacts
within Baker & McKenzie.Wong & Leow* for inquiries about public M&A in Singapore.
Ai Ai Wong Min-tze Lean

Singapore Singapore
aiai.wong@bakermckenzie.com min-tze.lean@bakermckenzie.com
+65 6434 2553 +65 6434 2288
Kenny Kwan
Singapore
kenny.kwan@bakermckenzie.com
+65 6434 2252
*Baker & McKenzie.Wong & Leow is a member of Baker & McKenzie International.

South Africa
1 Overview
Although the South African economy was still in the midst of political and economic uncertainty at the
beginning of 2020, there were signs pointing at economic recovery and an increase in merger and
acquisition value and volume predictions. This was due largely to the commitment to improving the
local investment environment.
Foreign investors and domestic dealmakers may be discouraged by the South African business and
socio-economic environment. This includes uncertainty around certain laws and regulations, such as
the Broad-Based Black Economic Empowerment (“BBBEE”) laws and regulations, as well as the
socio-economic mandate of South African Competition Authorities. Dealmakers have expressed views
that these laws and regulations are too complex, inconsistent and unpredictable. However, PepsiCo’s
recent acquisition of Pioneer Foods (valued at USD 1.7 million) was a noteworthy exception to
BBBEE being considered a hindrance to investment, as this is the first transaction in which
Competition Authorities imposed BBBEE ownership conditions on the acquisition, and such conditions
were welcomed by PepsiCo. Nevertheless, other areas still give rise to concern, including labour
market related issues; the support and performance of state-owned entities; recent credit-ratings
downgrades and land expropriation without compensation.
Despite all this, there was optimism that the South African economy was on the right track towards
growth and recovery. The Baker McKenzie Global Transaction Forecast, produced in conjunction with
Oxford Economics, predicted that South Africa’s merger and acquisition market would remain weak in
the near-term, in line with global patterns, with the projected strengthening of the economy in 2020-21
likely to support a modest recovery in deal-making activity in future years. Merger and acquisition
value in South Africa was USD 10.1 billion in 2019, but was expected to drop to USD 5.2 billion in
2020, before rising to USD 9.4 billion in 2021 and USD 12 billion in 2022.
However, these predicted upturns are likely to be revised downwards as South Africa, along with most
other global economies, braces itself for the impact of COVID-19. It is likely to result in increased
short-term uncertainty around how the pandemic will affect investment opportunities in South Africa.
Nevertheless, we remain hopeful that the rebound from COVID-19 will coincide with the
implementation of the African Continental Free Trade Area (“AfCFTA”) in July 2020, which should
provide an additional boost to deal activity in Africa in the coming years. The AfCFTA is the first
continent-wide African trade agreement, with the potential to facilitate and harmonise trade and
infrastructure development in Africa.

Public mergers, acquisitions and takeovers in South Africa are primarily regulated by the South
African Companies Act, 71 of 2008 (“Companies Act”), which incorporates the South African Takeover
Regulations (“Takeover Regulations”).

There are a number of additional rules and principles that must be taken into account when preparing
or conducting a public takeover bid in South Africa, including:
• the rules relating to the disclosure of significant shareholdings in listed companies, as

contained in the Companies Act and the Takeover Regulations;

• the rules regarding the offer of securities to the public and the admission to trading of these
securities on a regulated market, in circumstances where the consideration that is offered in a
public takeover bid consists of securities, as contained in the Companies Act;
• the rules relating to insider dealing and market manipulation (the so-called market abuse
rules), as contained in the Financial Markets Act, 19 of 2012 (“FMA”);
• the rules on the supervision and control of the financial markets, as contained in the FMA; and
• the rules and regulations regarding merger control, as contained in the Competition Act, 89 of
1998 (the “Competition Act”).
In addition, public companies with shares listed on the JSE Limited (“JSE”) are required to adhere to
the JSE Listings Requirements (“JSE Listings Requirements”) in the context of a takeover bid.
2.3 Supervisory bodies

Legislation/Rules Supervisory Body Role/Function
Companies Act and Takeover Takeover Regulation Panel Approval, regulation and
Regulations (“TRP”) investigation of affected
transactions, which include
takeovers.
Competition Act Competition Commission Intermediate and large merger

transactions must be notified to
Competition Tribunal
and approved by the
Competition Commission and
Competition Tribunal,
respectively (see 4.9).
Exchange Control Regulations Authorized foreign exchange Regulates exchange control

dealers (South African matters in relation to cross-
commercial banks) and border transactions.
Financial Surveillance
Department of the South
African Reserve Bank (SARB)
JSE Listings Requirements JSE Certain procedural

requirements have been
prescribed for transactions
involving listed companies or
their subsidiaries which may
include mergers and takeovers.
The requirements will depend
on the categorization of the
transaction with reference to
the market capitalization of the
target.
FMA Financial Sector Conduct Prosecutes insider trading and

Authority other types of market abuse.
Contravention of the above legislation/rules can result in administrative fines and, in some cases,
criminal sanctions being imposed on the offender.


Foreign investments are not restricted in South Africa. Unless in the context of specific industries and
sectors (such as the mining industry as set out in 2.6 below), takeovers are not subject to prior
governmental or regulatory approvals other than customary anti-trust approvals and exchange control
approval, as set out in 4.9 below.

A number of general principles apply to public takeovers in South Africa, which are borne out of the
provisions of, among others, the Takeover Regulations:
• all holders of the securities of the target of the same class must be afforded equivalent
must be protected;
• securities holders of the target company must have sufficient time and information to enable
them to reach a properly informed decision on the bid;
• the target company’s board must act in the best interests of the target and must not deny the
holders of securities the opportunity to decide on the merits of the bid;
• false markets must not be created in the securities of the target, the bidder or any other
company concerned by the bid in such a way that the rise or fall of the prices of the securities
becomes artificial and the normal functioning of the markets is distorted;
• a bidder must announce a bid only after ensuring that it can fulfil any cash consideration in
• the target must not be hindered in the conduct of its affairs for longer than is reasonable by a
bid for its securities.
2.6 Black Economic Empowerment (“BBBEE”)

To enable economic empowerment of previously disadvantaged South Africans, the South African
government promulgated the Broad-Based Black Economic Empowerment Act, 53 of 2003 (“BBBEE
Act”). The BBBEE Act, read together with the 2015 BBBEE Codes of Good Practice (“Codes”), sets
out a scoring matrix which rates a company’s compliance with the BBBEE Act and the Codes against
various metrics, including black ownership, management, employment equity, skills development,
preferential procurement, enterprise development and socio economic development. Compliance with
BBBEE in South Africa is not required by law (other than in certain specific sectors such as the
minerals and mining sector). However, having a higher BBBEE rating provides entities with a
competitive advantage, particularly when supplying to the Government of South Africa, which will
require its suppliers to have a sufficient BBBEE rating. In the private sector, BBBEE instead works on
an incentive basis, as companies work for higher BBBEE rating levels in order to remain competitive
in the South African market. Therefore, the point of departure for BBBEE in South Africa is that an
entity will aim for a higher BBBEE rating level in order to attract customers looking to improve the
enterprise and supplier development element on their own BBBEE scorecard. Thus, entities score
points towards their own BBBEE rating level when procuring goods and services from supplying
entities with high BBBEE rating levels.
Certain industry sectors are subject to stricter BBBEE requirements. For example, the BBBEE rules
applicable to the mining sector presently requires that 26% of the shares of a company that engages
existing in mining and prospecting activities must be held by historically disadvantaged South Africans
(“BEE Shareholding”), failing which the mining and prospecting rights of the company are at risk of
being suspended or cancelled by the South African Department of Mineral Resources (“DMR”). In

terms of the New Mining Charter published by the DMR, applicants for a new mining or prospecting
right must have a minimum of 30% BEE Shareholding.
Accordingly, in structuring a takeover bid, it is important to take account of the effect of the transaction
on the target’s BBBEE rating, especially in the case of a 100% takeover where the target’s existing
BBBEE shareholder is to exit, creating a need for a replacement BBBEE shareholder to be introduced
at the time or shortly after implementation of the transaction. In these circumstances, it is not
uncommon for the bidder to be a consortium which includes a BBBEE shareholder.

The table below provides an overview of the different rights and powers attaching to different levels of
shareholding within a South African public company. In its constitutional documents, a company may
vary the percentage of voting rights required to approve any special resolution provided that, at all
times, there is a margin of at least 10% between the highest established requirement for an ordinary
resolution and the lowest established requirement for a special resolution. The table is based on the
assumption that no such variation is made, and that the default position under the Companies Act
applies.
Shareholding Rights
One share • Right to receive notice of and to attend and vote at all
• Right to inspect and copy the information contained in the
records of the company, including the memorandum of
incorporation, records in respect of the company’s directors,
annual financial statements, notices and minutes of annual
meetings and the securities register.
• Appraisal rights (provisions in the Companies Act which allow
a dissenting shareholder to sell its shares to the company for
fair value in the event of certain fundamental decisions being
made by the company, such as an amendment to the
company’s constitutional documents in a manner materially
adverse to the rights or interests of the dissenting
shareholder).
• Right to be represented by proxy.
• Right to apply to court to set aside a resolution of a company
placing it into business rescue.
• Right to apply to court to have a director declared delinquent.
• Right to apply to court for relief from oppressive or prejudicial
conduct of the company.
10% Right to demand that a polled vote be held on a particular matter at a

> 25% • Right to constitute a quorate shareholders’ meeting (at least

25%).
• Ability to veto/block the passing of a special resolution (75%
vote) of shareholders.

Shareholding Rights
> 50% The ability to take decisions in respect of the following actions for
which the approval of an ordinary resolution (>50% vote) is required:
• appoint and dismiss directors;
• appoint the company’s auditor;
• elect members of the company’s audit committee; and
• take any decision for which a special resolution (75% vote) is
not required and in respect of which a vote may be proposed
at a general shareholders’ meeting.
75% The ability to take decisions in respect of the following actions for
which the approval of a special resolution (75% vote) is required:
• amend the company’s memorandum of incorporation;
• ratify a consolidated revision of a company’s memorandum of
incorporation;
• ratify any action by the company or its directors that is
inconsistent with any limit, restriction or qualification in the
company’s memorandum of incorporation;
• authorize any issue of shares or securities convertible into
shares, or a grant of options or any other right exercisable for
securities and which are issued to a director, prescribed officer
or related or inter-related party of the company;
• authorize any issue of shares or securities convertible into
shares, or a grant of options or any other right exercisable for
securities to any person if the voting power of the class of
shares that are issued or issuable as a result of the
transaction will be equal to or exceed 30% of the total voting
power of all the shares of that class;
• authorize any provision of financial assistance to a related or
inter-related company or person or director of the company,
for the purpose of the subscription of any securities issued or
to be issued by the company;
• authorize the repurchase by the company of its own shares
(share buybacks);
• authorize the payment of any remuneration by a company to
its directors for their services as directors;
• approve the voluntary winding-up of a solvent company;
• allow a court to wind up a solvent company;
• approve the transfer of the registration of the company to a
foreign jurisdiction;
• approve any proposed fundamental transaction (see 3.2); and
• approve any other matter for which a company’s
memorandum of incorporation requires the approval of a
special resolution (75% vote).

3.2 Methods of acquisition
The main methods of obtaining control of a public company are as follows:
• scheme of arrangement;
• merger or amalgamation; and
• takeover bid.
A scheme of arrangement is the most commonly used mechanism to implement a transaction for
obtaining control of a public company. It is broadly defined and includes most arrangements
concluded between the company and holders of any class of its securities. Common examples are the
repurchase by a company of all its securities other than those acquired by the takeover bidder,
resulting in the latter becoming the sole shareholder, or the exchange of its securities for securities in
the bidder.
The statutory merger or amalgamation provisions of the Companies Act are a recent addition to South
African law. In practice, however, it is seldom used as it requires all known creditors of the target to be
notified of the transaction, whereupon creditors can intervene in the transaction even after it has been
approved by shareholders and a merger agreement had been signed. Furthermore, creditors could
apply for leave to have the merger reviewed by the courts, which could substantially delay
implementation of the transaction even if the creditors’ review application should fail.
A scheme of arrangement and statutory merger are “fundamental transactions”. All fundamental
transactions require the approval of a special resolution (75% affirmative shareholder vote) and may
also require court approval if either:
• the special resolution is opposed by at least 15% of the voting rights exercised, and any
person who voted against the resolution requires the company to seek court approval; or
• the court grants leave to a single dissenting shareholder to require that the fundamental
transaction be approved by the courts.
Lastly, a bidder may obtain control of a public company through a takeover bid.
3.3 Due diligence

Due diligence investigations are not uncommon in friendly takeover bids. There are no specific rules
governing these. The scope and extent of the due diligence investigation are dependent on, among
other things, the time available to conduct the investigation, the need to preserve confidentiality and
comply with insider trading rules (see 3.5) and the level of cooperation by the target board.
In a hostile bid scenario, there is no obligation on the target board to disclose any information and it is
unlikely that they would permit a due diligence to be undertaken. The bidder would be limited to
reviewing publicly available information on the target.
In relation to affected transactions (which includes the methods of acquiring control discussed in 3.2),
competing bidders are entitled to equal access of information. Therefore, information made available
by the target to one bidder would have to be made available to a competing bidder.
3.4 Secrecy and cautionary announcements

Before a takeover bid is announced, discussions between an independent board (appointed under the
Takeover Regulations to consider a takeover bid) and a bidder must be kept confidential. Any person
who has been made aware of confidential or price-sensitive information as a result of or concerning a
potential bid must:

• not disclose that information; and
• conduct themself in a manner which reduces the risk of such information being leaked.
If, at any stage, a company has acquired any confidential or price-sensitive information, it must
publish a cautionary announcement through the JSE’s stock exchange news service (SENS), unless
the confidentiality of such information can be maintained for a limited period of time.
The purpose of the cautionary announcement is to alert existing and potential future shareholders that
the target is the subject of potential corporate action, and that they must accordingly exercise care in
trading in the company’s securities until it has made a detailed announcement.

“Inside information” is defined as specific or precise information which has not been made public, is
obtained or learned as an “insider” and, if it were to be made public, would be likely to have a material
effect on the trading price or value of any listed security.
An “insider” is broadly defined as any person who has inside information
• through:
o being a director, employee or shareholder of a listed company to which the inside

information relates; or
o having had access to such information by virtue of employment, office or position; or
• where such person knows that the direct or indirect source of the information was a director,
employee or shareholder, or person who had access to such information by virtue of
employment, office or position.
Any person who comes into possession of inside information at any stage of the transaction will be
prohibited from acting on that information by dealing in securities in the target until either:
• the specific inside information of which it is aware is made public; or
• full details of the bid are made public through an announcement.
Market abuse mainly involves:
• market manipulation, being knowingly participating in any practice which has the effect of
creating a false or deceptive appearance of the demand for, supply of, trading activity or
artificial price for a security; or
• false, misleading or deceptive statements in respect of any material fact relating to a listed
security.
Any contravention of the insider trading and market abuse rules is a criminal offense and could lead to
both imprisonment and significant fines being imposed on the offender.
3.6 Stake-building and disclosure of shareholding

The rules regarding disclosure of shareholdings apply before, during and after a public takeover bid,
and are relevant when a bidder starts building up a stake in the target.
Any person who acquires a beneficial interest in sufficient shares of a public company such that, as a
result of the acquisition, the person holds a beneficial interest of 5%, or any multiple of 5%, is required
to notify the company within three business days of such acquisition through a prescribed disclosure
notice.

After receiving a disclosure notice, the company must file a copy with the TRP.
Furthermore, a listed company is required to:
• disclose in its annual financial statements all shareholders which directly or indirectly hold 5%
or more of it shares; and
• within 48 hours after receiving a disclosure notice, publish the information contained in the
disclosure notice on SENS.
3.7 Agreements with shareholders

In a takeover bid scenario, it is common for the bidder to obtain irrevocable undertakings to support
and vote in favor of the proposed transaction from the target’s main or institutional shareholders prior
to formally submitting its bid.
This is subject to the following restrictions:
• only shareholders holding 5% or more of the aggregate securities subject to the offer may be
approached;
• not more than 5 such shareholders may be approached;
• the relevant shareholders must sign confidentiality undertakings in relation to the offer; and
• the shareholders must adhere to the provisions of the FMA, in relation to insider trading prior
to the announcement of the offer (see 3.5).
The undertakings are usually conditional upon:
• the requisite approvals being obtained (including shareholder approval for the transaction);
• the bid being made within a certain period; and
• the bidder being satisfied with the outcome of any due diligence investigation it decides to
undertake.
If the bidder and a shareholder enter into an irrevocable undertaking, that shareholder’s voting rights
will be excluded when calculating whether the relevant percentage of votes which are required in
support of a resolution authorizing the entering into of the transaction has been attained.
4.1 Types of takeover bids
There are three main forms of takeover bids in South Africa:
• a voluntary takeover bid, in which a bidder voluntarily makes an offer for voting securities
issued by the target;
squeeze out the remaining holders of voting securities. This type of bid can be combined with
a voluntary or mandatary takeover bid.

Voluntary takeover bids can be either friendly (negotiated) or hostile. A friendly takeover involves the
bidder approaching the target board prior to making a formal bid to the target’s shareholders. The
target board agrees to the offer and either recommends it to the shareholders or remains neutral.
A hostile takeover is where the bidder approaches the target board, the target board opposes the bid
and advises the shareholders to reject the offer; whereafter the bidder makes an offer directly to the
shareholders. Hostile takeovers are less common than friendly takeovers in the South African market.
4.2 How and when a bid is made public

The Takeover Regulations provide that a takeover bid must be notified by the bidder in writing to the
target’s board.
The takeover bid is made public through the release of a “firm intention announcement”. Such
announcement must be made immediately when the target board receives a formal written offer, or
where a mandatory offer is required (discussed in 4.3). The target is responsible for making the
announcement. It is published in the press and on SENS, and must contain:
• the terms of the offer;
• the identity of the bidder;
• the details of any existing holders of shares in the target;
• all material conditions to which the offer is subject; and
• the details of any arrangements which exist between the bidder and the target or any concert
party of either of them.
4.3 Mandatory offer

The threshold for triggering a mandatory offer to also acquire the securities of the remaining
shareholders is the acquisition of 35% or more of the voting securities of a company or of any class of
such securities. For purposes of determining such holding, the holdings of all persons acting in
concert are aggregated.
A bidder is exempt from the requirement to make a mandatory offer if (i) the bidder would acquire
voting securities in the target by means of an issue of securities (and not a direct sale from a offeree
shareholder); (ii) the holders of a majority of the independent shares of the target, i.e., shareholders
other than the bidder and its concert parties, have agreed to waive the mandatory offer; and (iii) the
TRP exempts the bidder from making a mandatory offer.
4.4 Minimum offer price

If the bidder has acquired securities in the target within the six-month period before the
commencement of the offer period, then the minimum offer price must be equal to the highest
consideration paid by the bidder for those acquisitions.
4.5 Form of consideration

The acquisition consideration may be discharged in cash or shares, or a combination of cash and
shares. If securities carrying 5% or more of the voting rights are acquired, then the offer must be
accompanied by a cash consideration.
Where the consideration is wholly or partly in cash, the bidder must provide the TRP with an
irrevocable unconditional guarantee issued by a South African registered bank, or an irrevocable
unconditional confirmation from a third party that sufficient cash is held in escrow, to provide security
for payment of the consideration. Such confirmation must be provided both at the time that the firm

intention announcement is made and also on posting of the offer circular to shareholders. It is
therefore not possible for the bid to be conditional on the bidder obtaining finance.
A bidder cannot offer shares in a foreign company which is not listed on the JSE as consideration,
without the approval of the Exchange Control Department of the SARB. The Exchange Control
Department does allow this form of consideration, but is likely to impose conditions regarding the sale
of the shares and the repatriation of the proceeds of the sale.
4.6 Conditions
It is common for takeover offers to be subject to regulatory and other conditions. Regulatory
conditions typically include anti-trust approval, the approval of the exchange control authorities (for
cross-border transactions) and the approval of industry regulators, depending on the industry sector to
which the target belongs. Other conditions may include obtaining shareholder approval and the
consent of counterparties to material contracts of the target which contain change of control
provisions. An offer may not be subject to any condition that is dependent solely on the subjective
judgment of the directors of the bidder, or where the directors of the bidder are able to control the
fulfilment (or not) of such a condition.
In addition, if the bidder intends to obtain:
• 100% of the target’s shares, it will bargain for a condition that 90% of the target’s
shareholders accept the offer; or
• control of the target, it will bargain for a condition that more than 50% of the target’s
shareholders accept the offer.
In the case of schemes of arrangement or mergers and amalgamations, the offer will be conditional
upon 75% of the shareholders voting in favor of the transaction.
4.7 Restrictions on launching new offers (put-up or shut-up)

Where an offer has not become or been declared unconditional, and has then been withdrawn or has
lapsed, neither the bidder nor its concert parties can, for 12 months following the date on which the
offer is withdrawn or lapses (except with the consent of the TRP):
• make an offer for the target; or
• acquire any shares of the target which would result in a mandatory offer requirement being
triggered.
4.8 Restriction on frustrating action

If the board of the target believes that a bona fide offer might be imminent, or has received such offer,
the board must not:
• take any action in relation to the affairs of the target which could result in the (i) offer being
frustrated or (ii) shareholders being denied an opportunity to decide on the merits of the offer;
• issue any shares, options or convertible securities;
• sell or dispose of or agree to sell or dispose of a material asset (except in the ordinary course
of business);
• enter into contracts other than in the ordinary course of business; or
• make a distribution that is abnormal as to timing and amount,

without the consent of the TRP and shareholders, or in terms of a pre-existing obligation or
agreement.
4.9 Regulatory approvals

(a) Antitrust approval
Intermediate and large mergers require prior notification to and approval from the South African
competition authorities.
A transaction must be notified as an intermediate merger and approved by the SA Competition

Commission if:
• the target firm has assets or turnover of ZAR 100 million or more; and
• the parties to the merger have combined assets or annual turnover of ZAR 600 million or
more.
A transaction must be notified as a large merger and approved by the SA Competition Tribunal if:
• the target firm has assets or turnover of ZAR 190 million or more; and
• the parties to the merger have combined assets or annual turnover of ZAR 6.6 billion or more.
(b) Exchange control approval
In general, there are no restrictions on foreign ownership of shares. However, certain industries
(including banking, insurance and broadcasting) have specific statutory restrictions on the percentage
shareholding in a South African company by foreign shareholders.
In addition, all dealings in and registration of shares in which non-residents of South Africa are
involved are governed by the Exchange Control Regulations.
In the case of a disposal of shares in a SA target to a non- resident, the shares in the SA target will
constitute “controlled securities” for exchange control purposes.
As regards on-market disposals of shares in the SA target, upon transfer of the shares from the seller
to the buyer, the relevant Central Securities Depository (“CSD”) will record the buyer’s residential
status (i.e. being a non-resident) in the registers of both the CSD and the authorized dealer, against
presentation of the broker’s note indicating the value of the trade.
In relation to off-market disposals of shares in the SA Target, documentary evidence such as a sale
agreement or validated trade advices and auditors’ certificates, where applicable, must be viewed by
the relevant CSD in order to ensure that such transactions are concluded at arm’s length and at fair
and market related prices.
In the absence of exchange control approval for the transaction, the SA target would be prohibited
from remitting dividends and other distributions to a non-resident shareholder offshore.
(c) Industry-specific regulations
There are a number of other industry-specific regulations that may be applicable, for example in the
banking, mining and communications industries.
(d) Foreign investment regulation
See 2.4 above.

5 Timeline
The Takeover Regulations provide a strict timetable in relation to takeover offers, as set out below:
No. Event
1. The timetable commences with the publication by the company of a firm intention
announcement, which is triggered by receipt by the target board of a formal written offer
from the bidder.
2. After publication of the firm intention announcement, the bidder has 20 business days to
post the offer document (offer circular) to the target’s shareholders.
3. The offer must initially be open for acceptance for at least 30 business days after the
offer document is posted.
4. The target’s independent board must advise its shareholders of its views of the offer
within 20 business days of the posting of the offer document by way of a response
circular.
5. The offer must be declared unconditional as to acceptances (that is, all the necessary
acceptances have been received) within 45 days from the posting of the offer document,
or the offer will lapse.
6. Once the offer has been declared unconditional as to acceptances, the bidder must
announce that fact within one business day and the offer must remain open for a further
10 business days after that announcement.
7. Consideration for the offer must be settled within six business days of the offer becoming
or being declared unconditional, or the offer being accepted, whichever is the later.
8. An offer may be extended by an announcement made prior to the initial closing date
provided that the right to do so has been specifically reserved in the offer document.
9. If an offer consideration is revised (by increasing the original announced offer

consideration or providing an alternate consideration to the original announced offer
consideration), it must remain open for 15 business days following the date on which the
revised offer consideration is announced. Shareholders who have accepted the original
offer consideration are entitled to revise their initial acceptance and elect to receive the
revised offer consideration.
If a competing offer is announced in respect of the target, both bidders will usually be bound by the
timetable established by the competing offer.
Set out below is an overview of the main steps for a public voluntary takeover offer in South Africa.

Start
process Day 0 Day 20 Day 40 Day 65 Day 75 Day (X) Day (X)
Publication of firm After publication of the Target’s independent Offer must be declared Bidder must announce that Consideration must be If an offer
intention firm intention board must advise unconditional as to the offer has been settled within six consideration is
announcement, which announcement, bidder shareholders of its views acceptances (ie, all declared unconditional as business days of the revised (by increasing
is triggered by receipt has 20 business days to on the offer within 20 necessary to acceptances within one offer becoming or the original announced
by the target board of a post the offer document business days of the acceptances have business day being declared consideration or
formal written offer from (offer circular) to the posting of the offer been received) within unconditional, or the providing an alternate
the bidder target’s shareholders document by way of a 45 days from the offer being accepted, consideration), it must
response circular Offer must remain open for
posting of the offer whichever is the later remain open for 15
a further 10 business days
document, or the offer business days
after this announcement An offer may be
will lapse following the date on
extended by an
which the revised
announcement made
consideration is
before the initial
announced
closing date provided
that the right to do so Shareholders who
has been specifically accepted the original
Offer must initially be open for acceptance for at least 30 reserved in the offer consideration are
business days after the offer document is posted document entitled to elect to
receive the revised
offer consideration

6 Takeover Tactics
6.1 Exclusivity agreements
Exclusivity agreements are usually executed as a method of restricting the target from soliciting or
engaging other potential buyers. Adherence to the provisions of these agreements is incentivized by
provisions to pay “break fees”. Break fees are not formally regulated, but in terms of the TRP’s
guidelines, a break fee cap of 1% of the value of the transaction is normally acceptable.
The effectiveness of exclusivity agreements are, however, weakened in light of the fiduciary duties
owed by directors. Two of the most fundamental duties of the directors are to act in good faith and in
the best interest of the company. This requires that the directors ensure that the bid they recommend
is in the best interests of the company. The Companies Act furthermore prohibits the directors of a
company from taking actions designed to frustrate a bona fide offer, or the shareholders’ ability to
consider the offer on its merits. In fact, one of the mandates of the TRP is to “prevent actions by a
regulated company designed to impede, frustrate or defeat a bid, or the making of a fair and informed
decision by the [shareholders]”. Therefore, the effect of an exclusivity agreement is limited to
restraining a board from actively soliciting, or seeking to solicit, competing bids.
6.2 Anti-takeover tactics

Given that hostile takeovers remain relatively uncommon in the South African market and the
restrictions imposed on the board of a target in relation to frustrating a takeover offer (see 6.1 above),
the options available to a target to defend a takeover are limited in their development.
The common approach adopted by a target’s board is to be uncooperative with respect to the joint
mandates of the bidder and the target (such as jointly submitting the merger filing to the competition
authorities). Furthermore, the board may seek to impose as many procedural and administrative
hurdles to the bid process as possible. This involves a careful balancing act, as the target board must
not be seen to be breaching its fiduciary duties and obligations under the Companies Act. Reliance
has also been placed on the TRP and other takeover authorities such as the Competition Commission
to hinder takeover bids.

Takeover
Where a takeover offer is made and 90% of a particular class of the target’s shareholders accept the
offer:
• the bidder can compel the non-accepting shareholders in that class to also sell their shares
(“Squeeze Out”); and
• a non-accepting shareholder in that class may demand that the bidder acquire its shares.
A court may, in certain circumstances, allow such a Squeeze-Out despite the fact that less than 90%
of shareholders of a particular class have accepted the offer.
A non-accepting shareholder can apply to court, within 30 business days of the posting of the
Squeeze Out notice, for an order to prohibit the compulsory sale or to make it subject to certain
conditions.
Where a scheme of arrangement is proposed, once the scheme of arrangement has been approved
by special resolution (75% vote), all the shares (including the shares of those shareholders who voted
against the scheme at the scheme meeting) can be acquired by the bidder.

8 Delisting
The most utilized method for a listed company to delist its shares is for it to:
(a) send a circular to its shareholders:
• seeking their approval to delist;
• clearly stating the reasons for the delisting; and
• containing a bid to the shareholders for their shares accompanied by a statement from the
board of directors that the bid is fair (who, in turn, have been so advised by an independent
expert appointed for that purpose); and
(b) submit a written application to the JSE stating from which time and date it wishes the delisting
to be effective.
The JSE Committee will approve the delisting if the aforementioned shareholder approval has been
obtained and the company has stated the reasons for its delisting in the written application.
The circular and shareholder approval will not be required if:
• in terms of a takeover bid, the bidder is to hold more than 90% of the shares in a regulated
company and notice was given by the bidder of its intention to delist the shares in the initial
bid document or any subsequent circular sent to the shareholders; or
• following the completion of a scheme of arrangement with shareholders, the bidder has
acquired all the shares in the company or the JSE is satisfied (in its discretion) that the
company no longer qualifies for a listing.

Morné van der Merwe and Mike Van Rensburg in the Johannesburg office are the most appropriate
contacts within Baker McKenzie for inquiries about public M&A in South Africa.
Morné van der Merwe Mike Van Rensburg

Johannesburg Johannesburg
morne.vandermerwe@bakermckenzie.com mike.vanrensburg@bakermckenzie.com
+27 (0) 11 911 4305 +27 (0) 11 911 4332

Spain
1 Overview
Following the trend over the previous 5 years, the market for control in Spanish listed companies has
been active during 2019, although no transactions have been announced yet within the first quarter of
2020.
Between 1 January 2013 and 1 March 2020, the Spanish Securities Market Commission (Comisión
Nacional del Mercado de Valores, or the “CNMV”) authorized a total of 43 public takeover bids, of which
more than half consisted of transactions to gain a controlling interest in the target company, while the
rest were intended either to achieve the delisting of the relevant companies or were launched by the
target companies themselves within the context of share buyback transactions.
As is typical in a market like the Spanish one, characterized by highly concentrated shareholdings in
most of its listed companies, public takeover bids aimed at gaining a controlling interest are normally
launched as voluntary public takeover bids and are not preceded by acquisition transactions. Instead,
they are structured through the formalization of various agreements among the significant shareholders
of the target company. Irrevocable undertakings or call options are typically used to acquire shares thus
allowing the bidder to carry out the takeover bid under the more flexible procedure and requirements
available for voluntary takeover bids.

The main rules and principles of Spanish law relating to public takeover bids can be found in:
• the consolidated text of the Securities Market Act (the “SMA”), passed by the Spanish Royal
Legislative Decree 4/2015 of 23 October 2015; and
• the Spanish Royal Decree 1066/2007 of 27 July 2007 on takeover bid procedures (“RD
1066/2007”) by virtue of which the Takeover Directive (as defined below) was transposed into
Spanish Law.
The above mentioned legislation is applicable to any takeover bid concerning shares of a listed
company, i.e., of any company whose shares have been totally or partially admitted to trading on the
Spanish equity regulated market (the Spanish stock exchanges), or to any other securities that entitle
their holders to subscribe for or acquire such shares, regardless of whether they are structured as
mandatory or voluntary takeover bids. Therefore, the regulation on public takeover bids is not applicable
to companies whose shares are traded on Multilateral Trading Facilities (Sistemas Multilaterales de
Negociación) and, in particular, on the Alternative Investment Market (Mercado Alternativo Bursátil, or
MAB).
The legislation also establishes specific rules that are applicable to takeover bids for listed companies
that do not have their registered address in Spain and whose shares are not admitted to trading in the
Member State where the company has its registered address.
The main body of the Spanish takeover bid legislation is based on Directive 2004/25/EC of the European
Parliament and of the Council of 21 April 2004 on takeover bids (the “Takeover Directive”). This directive
was aimed at harmonizing the rules on public takeover bids in the different Member States of the

are still relevant differences in the national rules of the respective Member States of the EEA regarding

Spain, there are a number of additional rules and principles that may need to be taken into account
(i) The rules relating to the disclosure of significant shareholdings in listed companies (the so-
called transparency rules) set forth, chiefly, in Spanish Royal Decree 1362/2007 of 19 October
2007, on transparency requirements of listed companies (“RD 1362/2007”). These rules are
based on Directive 2004/109/EC of the European Parliament and of the Council of 15 December
2004, on the harmonization of transparency requirements in relation to information about
issuers whose securities are admitted to trading on a regulated market and amending Directive
2001/34/EC and related EU legislation. For further information, see 3.4 below.
(ii) The rules relating to insider dealing and market manipulation (the so-called market abuse rules),
set forth, chiefly, in Regulation (EU) 596/2014, of the European Parliament and of the Council
of 16 April 2014, on market abuse (the “Market Abuse Regulation”) which repeals Directives
2003/6/EC of 28 January 2003, Directive 2003/124/EC, Directive 2003/125/EC and Directive
2004/72/EC. For further information, see 3.3 and 3.5 below.
(iii) The general corporate regulation contained in the Spanish Companies Act (the “SCA”), set forth
in Royal Legal Decree 1/2010 of 2 July 2010, which includes a specific section and regulation
for listed companies.
(iv) The rules and regulations regarding merger control. These rules and regulations are not further
discussed herein.
(v) During the COVID-19 outbreak, the extraordinary measures to deal with the economic and
social impact of COVID-19, set forth in Royal Decree Law 8/2020 of 17 March 2020.
2.3 Supervision and enforcement by the CNMV

Public takeover bids are subject to the supervision and control of the CNMV.
The CNMV has a number of legal tools that it can use to supervise and enforce compliance with the
public takeover bid rules, including administrative fines.
The CNMV also has the power to grant (in certain cases) exemptions from the rules that would

Foreign investments are not generally restricted in Spain, as the liberalization system for foreign direct
investment applies. However, the liberalization system has been temporarily suspended as a result of
the COVID-19 outbreak.
Royal Decree Law 8, 2020, of 17 March 2020, on urgent extraordinary measures to deal with the
economic and social impact of COVID-19 has temporarily suspended the liberalization system. Until
such suspension is revoked by the Spanish Council of Ministers, prior authorization shall be obtained
from the public authorities for any investment by means of which an investor that does not reside in a
country within the European Union or the European Free Trade Association becomes the owner of a
stake equal to or greater than 10% of the share capital of a Spanish company (either listed or unlisted),
or when as a result of the corporate transaction, act or legal business, control is taken of the
administrative body of the Spanish company in the following sectors:

(i) energy, transport, water, health, communications, media, data processing or storage,
aerospace, defence, electoral or financial infrastructures and sensitive facilities;
(ii) critical technologies and dual-use items, including artificial intelligence robotics,
semiconductors, cyber-security, aerospace, defence, energy storage, quantum and nuclear
technologies, as well as nanotechnologies and biotechnologies;
(iii) supply of key inputs, in particular energy, raw materials and food security, sectors with access
to sensitive information, in particular personal data, or with the ability to control such information;
or
(iv) media.
Likewise, the liberalization system for foreign direct investment in Spain has also been suspended in
the following events:
(i) if the foreign investor is directly or indirectly controlled by the government, including public
bodies or the armed forces, of a third country;
(ii) if the foreign investor has made investments or participated in business in sectors affecting
security, public order and public health in another Member State, and in particular those listed
above.
(iii) if proceedings, either administrative or judicial, have been opened against the foreign investor
in another Member State or in the home State or in a third State for criminal or illegal activities.
Unless in the context of specific industries and sectors (such as the banking industry), takeovers are
not subject to prior governmental or regulatory approvals other than customary anti-trust approvals.

The following general principles apply to public takeover bids in Spain, based on the Takeover Directive:
(a) all holders of the securities of a target company whose circumstances are equal must be
afforded equal treatment. Moreover, if a person acquires control of a company, the other
holders of securities must be protected;
company´s places of business;
(d) false markets must not be created in the securities of the target company, the bidder company
or any other company concerned by the bid in such a way that the rise or fall of the prices of
the securities becomes artificial and the normal functioning of the markets is distorted;
(e) a bidder must only announce a bid after ensuring that it can fulfil any cash consideration in

2.6 Basic features of a public takeover bid

The following are the main features of the public takeover bid regime governed by RD 1066/2007 which
implements and develops the Takeover Directive in Spain:
• Mandatory takeover bids as a consequence of the prior acquisition of a controlling interest in

the target company must be launched unconditionally, over all securities and at an equitable
price.
• The threshold which determines the mandatory nature of a takeover bid is set at 30% of the
voting rights of the target company (thus excluding any treasury or self-owned shares from
the calculation). In addition, the obligation to launch a takeover bid would also arise if the
bidder acquires less than 30% of the voting rights but appoints a majority of the members of
the company’s board of directors.
• The establishment of various types of takeover bids, each with different requirements and
features, including mandatory takeover bids (which are defined according to how the
controlling interest is obtained and can be in the form of ordinary takeover bids, indirect
takeover bids and incidental takeover bids), delisting takeover bids, voluntary takeover bids,
and takeover bids in the framework of share buyback transactions within the context of a
corporate resolution to reduce the company´s share capital.
• The “equitable price” rule is applicable to mandatory takeover bids, based on the highest price
paid or agreed upon in the 12 months immediately prior to the announcement of the takeover
bid. This is deemed to be the reference period. However, an alternative criterion is
established in cases where no share purchases occurred during the reference period,
whereby the price is determined on the basis of objective valuation criteria. In addition, the
CNMV is entitled to modify the equitable price in certain specific and predefined situations.
• A more flexible procedure is established for voluntary takeover bids, which may be total or
partial, are not subject to the equitable price requirement and allow the establishment of
several conditions precedent.
• The decision or obligation to launch a takeover bid must be announced immediately, provided
that the capacity to pay the full amount of the consideration for the takeover bid has been
confirmed.
• The takeover bid must always be previously authorized by the CNMV, which must also
approve the relevant prospectus.
• The target company’s board of directors is under a duty to remain passive but is also entitled
to take defensive measures, provided such measures are previously authorized at a general
• Companies are entitled to optionally establish a breakthrough regime in regard to anti-

takeover bid clauses provided for in their by-laws or in shareholders’ agreements, without
prejudice to the application of certain imperative breakthrough measures in the event that,
after a takeover bid, the bidder obtains voting rights of at least 70% of the target company’s
share capital.
• A detailed regime for competing takeover bids is established, which allows break-up fees to
be negotiated by the initial bidder and the target company for an amount up to 1% of the total
takeover bid amount, and including the so-called “principle of equal information” with regard to
any information that is provided by the target company to the different bidders.

• A procedure for squeeze-outs and sell-outs is also provided for, linked to the simultaneous
obtainment of a 90% controlling interest in the target company and a minimum 90%
acceptance level of the takeover bid.

levels of shareholding within a Spanish listed company. Unless otherwise stated, the relevant
percentages needed to exercise the relevant rights may be reached by the shareholders individually or
jointly with other shareholders.
Shareholding Rights
One share In general, and amongst others:

• The right to attend, participate and vote at general
shareholders’ meetings. However, the by-laws of the company
may require the holding of a minimum number of shares in
order to attend the meeting (never greater than 1,000 shares
though) and a limitation to the maximum number of votes a
shareholder may be entitled to cast.
• The right to obtain information and clarification relating to the
matters included in the agenda of an upcoming shareholders’
meeting. However, the directors may refuse to give such
information in case they consider the information may be used
for purposes unconnected with the company or its disclosure
may pose a threat to the company, unless the information is
requested by shareholders representing at least 25% of the
company´s share capital, in which case the directors may not
refuse its disclosure.
• The right to submit questions to the directors at general
shareholders’ meetings (either orally at the meeting, or in
writing prior to the meeting).
• The right to request the convening of a shareholders’ meeting
in order to decide upon the dissolution of the company if, due
to the losses incurred, the net assets become lower than half
the share capital, unless the company is bound to file for
insolvency. If the directors do not convene such meeting, any
shareholder or third party with a legitimate interest (including
creditors) may request the dissolution at the courts of justice.
• The right to request the appointment of an auditor from the
Commercial Registry, in case the shareholders´ meeting does
not appoint it, or if the appointed auditor does not accept its
nomination or cannot carry out its functions.
1‰ (one per mille) The right to challenge the resolutions of the general shareholders’
meetings or the board of directors.
1% • The right to request the attendance of a Notary Public at


Shareholding Rights
• The right to request, from the relevant court of justice, the
adoption of an interim measure (medida cautelar) whereby the
decision of the shareholders’ meeting or the board of directors
which is being challenged is temporarily suspended.

shareholders’ meeting and to table draft resolutions for items
on the agenda.
• The right to file a minority claim against the directors on behalf
of the company.
• The right to obtain certain personal data concerning the rest of
the shareholders, including their respective addresses and
contact details, exclusively for the purpose of contacting them
in order to exercise their rights and to better protect their
common interests.
• The right to request the Commercial Registry to appoint an
independent expert in order to valuate any in rem, i.e., non-
monetary, assets contributed to the company, with certain
exceptions.
Quorum and voting In accordance with the SCA, a general shareholders’ meeting is validly
majorities convened, in the first call, when shareholders account for at least 25%
of the capital with voting rights. In the second call, the general
shareholders’ meeting is validly convened regardless of the capital
represented at the meeting.
Resolutions at a general shareholders’ meeting are passed by simple
majority, i.e., more yes- votes than no-votes, of the capital represented
at the meeting.
However, the following matters are subject to legal enhanced quorum
and majority voting requirements:
• the increase or decrease of the company´s share capital, or
any other amendment of the company’s by-laws;
• the issuance of bonds;
• the suppression or limitation of the pre-emptive right of
shareholders in the context of the issuance of new shares or
convertible bonds; and
• the transformation, merger, spin-off, global transfer of assets
and liabilities, and the change of corporate address to a
foreignjurisdiction.
For the approval of these matters, the SCA requires a quorum of
shareholders that account for at least 50%, in the first call, and 25% in
the second call. Additionally, these particular resolutions have to be
passed by absolute majority, i.e., more than half of the votes, except in
the second call, where if capital present or represented accounts for less

Shareholding Rights
than 50% of the share capital, it will be necessary to have the favorable
vote of two-thirds of the capital present or represented at the meeting.
The by-laws of the company may enhance the legal quorum and majority
voting requirements.
Additionally, regarding the appointment of directors, shares that are
voluntarily pooled so that they constitute an amount of capital greater
than or equal to that which results from dividing total capital by the
number of members of the board, will have the right to appoint those
that, exceeding whole fractions, result from the corresponding
proportion.

Spanish law and the Market Abuse Regulation contain a number of rules that already apply before a
public takeover bid is announced. These rules impose restrictions and hurdles in relation to prior “stake
building” by a bidder, the preparation process and announcements of the takeover bids. The main
restrictions and hurdles have been summarized below. Some careful planning is therefore necessary if
a potential bidder or target company intends to start up a process that is to lead towards a public
takeover bid.
3.3 Inside information and market abuse

In general, before, during and after a takeover bid, rules regarding inside information and market abuse
remain applicable. Nevertheless, there are certain rules regarding insider dealing which shall be
specifically taken into account in relation to takeover bids or which are expressly aimed at these.
In accordance with the Market Abuse Regulation, the mere fact that a person uses their own knowledge
to acquire or dispose of financial instruments in the acquisition or disposal of those financial instruments
shall not of itself constitute use of inside information for the purpose of the prohibitions regarding insider
dealing and unlawful disclosure of inside information.
In particular, the Market Abuse Regulation specifically provides that the mere fact of having access to
inside information relating to a target company and using it in the context of a public takeover bid should
not be deemed to constitute insider dealing, provided that, at the point of acceptance of the offer by the
shareholders of that company, any inside information has been made public or has otherwise ceased
to constitute inside information. This exception does not apply to “stake-building”, i.e., to the previous
acquisition of securities in the target company below the threshold that triggers a mandatory takeover
bid.

disclosure threshold. The relevant disclosure thresholds in Spain are 3%, 5%, 10%, 15%, 20%, 25%,
30% (which triggers the obligation to launch a mandatory takeover bid), 35%, 40%, 45%, 50%, 60%,
70%, 75%, 80% and 90%.

When determining whether or not a threshold has been reached, a potential bidder must also take into
account certain other voting rights or percentages, as they will be attributed to the bidder (see 3.8(b)
below).
Furthermore, from the public announcement of a takeover bid until its settlement or withdrawal, the
following requirements shall apply:
(i) the bidder shall communicate to the market, by means of a regulatory disclosure (hecho
relevante), any acquisition of shares of the target company, as well as the prices paid or agreed
thereupon; and
(ii) other shareholders shall inform the CNMV if they reach or exceed 1% of the voting rights of the
target company. Those shareholders that already have a stake of over 3% in the target
company shall inform the CNMV about any transaction in the company’s shares. The CNMV
shall disclose such information immediately.
3.5 Inside information, preparation process and intermediate steps

The preparation of a takeover bid normally includes various intermediate steps until the final decision
to launch the takeover bid and its definite terms and conditions are decided upon. In fact, in the Spanish
market, takeover bids are usually preceded by certain negotiations and dealings with the shareholders
and the target company itself. During this preparation process, the requirements related to inside
information must be borne in mind.
Under the Market Abuse Regulation, certain ‘precise information’ may be inside information. During the
preparatory period before a takeover bid is launched there may be events or circumstances that may
be deemed to be precise and, therefore, constitute inside information.
The target company, as the issuer, is subject to the general obligation to publicly disclose any inside
information as soon as possible. However, it may delay such public disclosure provided that (i)
immediate disclosure is likely to prejudice its legitimate interest; (ii) the delay of the disclosure is not
likely to mislead the public; and (iii) the issuer is able to ensure the confidentiality of that information.
3.6 Information leakages, early disclosures, and Put-up or shut-up

The bidder shall be obliged to immediately announce the takeover bid once the decision has been
adopted or made public, or whenever the obligation to launch the bid arises, but only after ensuring it
can fulfil any consideration resulting from the takeover bid in full. Therefore, Spanish takeover bid
regulation does not contemplate an early disclosure obligation, and in particular, the put-up-or-shut-up
rule is not provided for under Spanish regulation.
Nevertheless, and without prejudice to the general obligation of the issuer regarding premature, partial
or distorted disclosure (see 3.5 above), in those cases where there has been a leak to the market about
a potential takeover bid, the CNMV normally requires that the target company or the bidder issues an
“inside information release” (comunicación de información privilegiada) which clearly and precisely
indicates the status of the transaction under way or contains a preview of the information to be provided.
3.7 Due diligence

The Spanish public takeover bid rules do not contain specific rules regarding the question of whether a
prior due diligence can be organized, nor how such due diligence is to be organized. However, RD
1066/2007 lays down the principle of “equal amount of information for all competing bidders”, i.e., all
existing or potential bidders shall have access to the same amount of information or, at least, shall have
the opportunity to have access to the same information.
Be that as it may, the concept of a prior due diligence or pre-acquisition review by a bidder is generally
accepted in the market and by the CNMV as well. Appropriate mechanisms have been developed in

practice to organize a due diligence or pre-acquisition review and to cope with potential market abuse
and early disclosure concerns. These include the use of strict confidentiality procedures and data rooms
in accordance with the provisions mentioned in 3.5 above.
Prior to conducting a due diligence review, it is market practice for the target company and the future
bidder to enter into a confidentiality agreement whereby the recipient of the information undertakes not
to use the information made available by the target company for any purpose other than launching the
takeover bid.
3.8 The acquisition of a controlling interest as the backbone of the Spanish

public takeover bid regime
(a) The concept of control
The obligation to launch a mandatory public takeover bid is set forth in RD 1066/2007 as a
consequence of having acquired a controlling interest in a given listed company. Such controlling
interest would be deemed to have been acquired in either of the following situations:
(i) when ownership directly or indirectly reaches or exceeds 30% of the voting rights of the target
company, i.e., excluding the shares that the target company directly or indirectly keeps as
treasury shares and any other shares without voting rights; or
(ii) when a percentage of voting rights lower than 30% is acquired and a given number of
directors is appointed which, in addition to those already appointed by the bidder, if any,
exceeds half the number of board members of the target company within 24 months of said
acquisition. RD 1066/2007 establishes a series of conditions that must be met in order to
consider that such board members were appointed by the owner of the relevant stake.
Under Spanish law there will be an acquisition of a controlling interest that triggers the obligation to
launch a mandatory takeover bid, if a person acquires “effective control”. In relation to this:
(i) an exemption from the obligation to launch a takeover bid may be permitted provided there is
another shareholder that, individually or jointly with others, holds a percentage of voting rights
that is greater than or equal to the stake in question. Said exemption must be expressly
granted by the CNMV and requires both that the other shareholder referred to above does not
subsequently lower its stake to an amount that is less than the one that is exempted from the
takeover bid obligation, and that the exempted shareholder does not appoint more than half
the members of the target company’s board of directors;
(ii) the acquisition of a controlling interest is linked to the ownership of shares or securities that
confer voting rights in the target company, but not to the ownership of those securities or
instruments that entitle their holders to an eventual redemption, subscription or acquisition of
the underlying shares. Those situations will only imply the obligation to launch a takeover bid
when said redemption, subscription or acquisition takes place. Consequently, the signing of
call option agreements or so-called “irrevocable undertakings” (which are customary in the
context of the actions carried out prior to or in preparation of the bid) will not trigger a
mandatory takeover bid and will enable the relevant bidder to launch the takeover bid under
the more flexible regime provided for voluntary takeover bids.
(b) Ways of acquiring a controlling interest and action in concert
For the purposes of determining the obligation to launch a public takeover bid, the acquisition of a
controlling interest in a listed company may take place by means of any of the following procedures:
(i) by acquiring shares or other securities that directly or indirectly confer voting rights in the
target company;

(ii) by entering into agreements to act in concert with other holders of securities in order to obtain
a control stake in the target company; or
(iii) as a result of an indirect or incidental acquisition of a controlling interest (see 4.1(c) below).
For the purpose of the Spanish takeover bid rules, persons “act in concert”:
(i) if they collaborate with any other person on the basis of an express or tacit, oral or written,
agreement aimed at acquiring the control over the target company; or
(ii) if they enter into a shareholders’ agreement with the aim of establishing a common policy with
respect to the management of the company or to significantly influence such management, or
that, with the same objective, regulates voting rights on the board of directors or the executive
committee of the company.
(c) Calculation of voting rights
For the purposes of calculating the number of voting rights to obtain a controlling interest, one must
take into account both the ownership of shares with voting rights attributed and the voting rights held
by means of usufruct, pledge or otherwise.
In addition, the percentage of voting rights held by the following persons or entities shall be attributed
to the bidder:
• the voting rights held by any other company pertaining to its group of companies and, unless
proven otherwise, their board members;
• the voting rights held by the parties that act in their own name but with which the bidder acts
in concert or may be deemed to act in concert;
• the voting rights that the bidder can exercise freely and on a permanent basis pursuant to the
relevant powers granted to the bidder by the owners of the shares, in the absence of specific
voting instructions; and
• the voting rights attributed to shares held by nominees that act in their own name but on
behalf of the bidder, i.e., by those people to whom the bidder has wholly or partially spared
from the risks inherent to acquiring, possessing or transferring such shares.
3.9 Exceptions to the obligation to launch a public takeover bid

RD 1066/2007 establishes several exceptions to the need to launch a takeover bid when the acquisition
of the controlling interest in a listed company has taken place as a result of any of the following
situations:
(a) acquisitions or other transactions performed by guaranteed funds or other similar institutions
subject to the rules of publication and competition established in their specific regulations;
(b) acquisitions or other transactions performed according to the Spanish Mandatory

Expropriation Act (Ley de Expropiación Forzosa), and any other transactions that may arise
from competent authorities exercising their legally established powers under public law;
(c) transfers or swaps of securities that are unanimously approved by all the relevant company’s
security holders and which provide for the delisting of such securities;
(d) acquisitions or other transactions that arise from the conversion or capitalization of credits in
companies whose financial viability is in serious or imminent danger (even when the
companies are not undergoing insolvency proceedings) and when said acquisitions or
transactions are aimed at guaranteeing the long-term financial recovery of the relevant

company. In such cases, the CNMV would be entitled to waive the obligation to launch the
takeover bid unless the transaction refers to refinancing agreements approved by a court of
justice and which have obtained a favorable report by an independent expert pursuant to the
provisions of the Spanish Bankruptcy Act (Ley Concursal);
(e) acquisitions made in contemplation of death (mortis causa) and free acquisitions between
living persons provided that, in relation to the latter, the acquirer has neither acquired shares
during the 12 months immediately prior nor entered into an agreement or concert with the
transferor thereto;
(f) when the controlling interest is obtained pursuant to a voluntary takeover bid for all the
securities of the target company, provided said bid (i) was launched at an equitable price (see
4.3 below); or (ii) was accepted by at least 50% of the security holders (excluding securities
held by shareholders that had reached some agreement with the bidder in relation to the bid);
and
(g) when the controlling interest is obtained within the context of a merger transaction affecting
the target company, provided that (i) the parties that are obliged to launch the takeover bid did
not vote in favor of the merger at the relevant general shareholders’ meeting of the target
company; and (ii) it can be proven that the main objective of the takeover was not to obtain a
controlling interest but rather to meet some commercial or business goal. In any event, the
CNMV would have to issue the relevant exemption from the obligation to launch the bid.
4.1 Types of public takeover bids in Spain
(a) Mandatory takeover bids
This category includes all the different types of mandatory takeover bids deriving from a voluntary act
by the bidder aimed at obtaining a controlling interest in the relevant target company by any of the
following means:
• the acquisition of shares or other securities conferring voting rights on their holders which
causes the bidder to obtain a stake equal to or greater than 30% of the target company’s
voting rights;
• the acquisition of a stake below 30% together with the appointment, within the next 24
months, of a number of members on the target company’s board of directors that, together
with any directors previously appointed by the bidder, represent a majority of the members on
said board; or
• the signing of shareholder agreements with other holders of securities which results in any of
the aforesaid situations.
• In all such cases, the takeover bid must be carried out as a total takeover (see 4.2 below) and
at an equitable price (see 4.3 below). It must also be structured as an irrevocable and
unconditional bid subject to no conditions, with the exception of any prior authorizations that
may need to be obtained from competition authorities or other administrative authorities.
(b) Indirect mandatory takeover bids
The obligation to launch an indirect mandatory takeover bid arises when the bidder acquires an
indirect controlling interest in the target company as a result of a merger or takeover of a third
company or entity with a direct or indirect holding in the target company.

The same procedure as the one mentioned for ordinary mandatory takeover bids is applicable here.
However, the mandatory launching of the bid can be avoided if the share capital in excess of the
relevant threshold is disposed of within three months of acquiring the controlling interest, provided the
voting rights inherent to such share capital in excess are not exercised in that timeframe.
(c) Incidental mandatory takeover bids
An incidental mandatory takeover bid (OPA obligatoria sobrevenida) is one that must be carried out
whenever a controlling interest in a target company is acquired in an “incidental” manner, that is to
say as a result of any of the following events:
• a decrease on the share capital of the target company;
• an exchange, subscription, conversion or acquisition of shares derived from securities or

other instruments conferring such rights;
• an increase on the interest held derived from a rise in the target company’s treasury stock; or
• an acquisition of shares resulting from underwriting agreements or an initial public offering.
• Similar to indirect takeover bids, an incidental takeover bid must observe the compulsory and
irrevocable procedure established for mandatory takeover bids, unless the share capital in
excess (or the excess in treasury stock giving rise to the incidental takeover bid) is disposed
of within three months, and provided the voting rights inherent to such share capital in excess
are not exercised in that timeframe.
(d) Voluntary takeover bids
A voluntary takeover bid can be launched at the discretion of the bidder, provided said bidder is not
under the obligation to launch a mandatory takeover bid, either because the bidder (i) has not
previously acquired a controlling interest requiring a mandatory takeover bid; or (ii) already controls
the target company and may therefore freely increase its holding without being subject to the rules
governing mandatory takeover bids.
The legal regime governing voluntary takeover bids is more flexible and includes the following
features:
• Partial takeover bids. Unlike mandatory takeover bids, voluntary ones may be partial,
provided that: (i) the bidder does not acquire a controlling interest as a result of the bid; or (ii)
the bidder already holds a controlling interest in the company and can therefore increase its
interest without having to launch a mandatory takeover bid.
• Freedom to determine price. Voluntary takeover bids are not subject to a minimum equitable
price requirement and can therefore be made at the price determined by the bidder.
• Voluntary takeover bid conditions and withdrawal of bids. Voluntary takeover bids may be
conditioned by the bidder to a range of requirements, including the passing of certain
resolutions at the general shareholders’ meeting of the target company, the acceptance of the
bid by a particular number of securities and, in general, any other condition deemed valid by
the CNMV. With regard to the withdrawal of a bid, the regulations applicable to voluntary
takeover bids are much more flexible than those governing mandatory ones.
• The acquisition of a controlling interest resulting from a voluntary takeover bid would not
require the bidder to launch a subsequent mandatory bid in any of the following scenarios: (i)
the voluntary takeover bid was launched at an equitable price; or (ii) the voluntary bid was
accepted by at least 50% of the shares to which it was addressed, not including those already

owned by the bidder and/or shareholders that had reached an agreement with the bidder in
relation to the bid.
(e) Takeover bids resulting from the acquisition of treasury stock for redemption
RD 1066/2007 establishes that the takeover bid regime and procedures shall apply to capital
decreases executed by listed companies by means of the acquisition of treasury stock for its
redemption. It also establishes an exception to the rule when the treasury stock purchased does not
exceed 10% of the share capital and is based on European Regulation 2273/2003 governing share
buyback programs and stabilization of financial instruments.
(f) Delisting takeover bids
RD 1066/2007 sets forth specific regulations and requirements for those takeover bids that ought to
be launched in case of a delisting. For further information, see 8 below.
4.2 Scope of the public takeover bid

As a general rule, the takeover bid must be addressed to:
(a) all the shareholders of the target company, including those without voting rights who, upon
authorization of the takeover bid, held voting rights according to the provisions of the
applicable regulation; and
(b) any person or entity that holds either preferential acquisition rights over the shares, or
convertible or exchangeable bonds, if any.
In addition, voluntarily and at the discretion of the bidder, the takeover bid may also be extended to all
owners of warrants or other securities that confer their holders the option to acquire or subscribe shares,
i.e., atypical securities, different from the convertible or exchangeable bonds mentioned in (b) above.
In practice, and even though RD 1066/2007 only regulates it in regards to delisting takeover bids, it is
not necessary to extend the bid to the owners of securities that have undertaken not to accept the bid
and who have blocked their shares until the liquidation of the bid is concluded, thus enabling a limit on
the scope of the takeover bid and lower guarantee-related costs in relation to the bid.
4.3 Equitable price and takeover bid consideration

(a) General procedure
Unlike voluntary takeover bids, mandatory takeover bids must be launched at a price not lower than
the so-called equitable price, as defined in RD 1066/2007, which essentially follows the concept
established in the Takeover Directive. The definition of equitable price in accordance with RD
1066/2007 is:
(i) the highest price or consideration paid or agreed upon by the bidder or any person acting in
concert with the bidder in regards to the same type of securities during the reference period,
which is understood as the 12 months immediately prior to the takeover bid announcement; or
(ii) if no acquisition took place in the reference period, the equitable price may not be lower than
the one obtained by applying the rules for calculation and objective settling established in
regards to delisting takeover bids (see 4.1.f) above).
In any case, one must bear in mind that the term ‘equitable price’ is a legal concept that does not
necessarily coincide with that of ‘fair value’. It is intended to ensure that the principle of equal
treatment to all the target company’s shareholders is applied and, particularly, to ensure an equitable
distribution of the control premium.

(b) Total amount and amendment of equitable price
For the purpose of determining the equitable price, the total amount of the consideration or price paid
or offered by the bidder must be taken into account, and special rules are established in case of
acquisitions resulting from the execution of options or other financial instruments, situations of
swapping or the redemption of shares, and agreements that include additional compensation or
deferral of payment.
In addition, and according to the provisions of the Takeover Directive, the determination of an
equitable price according to the aforementioned criteria and, particularly, according to the rules
regarding the highest price paid or agreed, is established in RD 1066/2007 for those situations in
which the acquisition or the agreement to acquire a controlling interest may have taken place under
normal or ordinary market circumstances, thereby establishing various situations where the equitable
price can be modified by the CNMV. Said situations are the following:
(i) Objective corrections and modifications of the equitable price.
In cases where the equitable price must be objectively corrected, typically to maintain a financial
equivalency, or when it may be substituted by an alternative and predetermined price, including the
following cases:
• when the traded price for the securities may have been affected in the reference period by
dividends, corporate transactions or extraordinary events that would allow the equitable price
to be objectively corrected;
• when the equitable price is lower than the range of quotation prices for the day of acquisition
that determines said price, in which case the price may not be less than the lowest price in
said range; and
• when the equitable price refers to a non-significant acquisition in relative terms and provided
such acquisition was carried out at the quotation price, in which case the price would be the
highest amount paid or agreed upon in the remaining acquisitions carried out in the reference
period.
(ii) Amendments to increase or decrease the equitable price.
This refers to situations where the equitable price is modified in accordance with objective appraisal
criteria and on the basis of the relevant appraisal report issued by an independent expert. Such
situations include:
• when the quotation price has been affected in the period of reference by events that point to
market abuse manipulation, which may have caused the CNMV to initiate disciplinary
proceedings. In such cases, the price would be determined according to objective appraisal
criteria, which would have to include the consideration paid by the bidder in the reference
period; and
• when the target company can be proven to be undergoing serious financial difficulties, in
which case the equitable price would be determined according to the objective appraisal
criteria for delisting takeover bids (see 4.1(f) above).
(iii) Amendments to increase the equitable price, as established in the SMA.
The SMA contemplates various situations where the equitable price may be modified pursuant to
different extraordinary events that may have occurred in the 2-year lapse preceding the takeover bid,
extending the procedure not only to mandatory takeover bids but also to voluntary ones which, if they
fall under the situations mentioned, must necessarily be carried out using a price that is calculated
according to the rules indicated below. Said situations are the following:

• when the quotation prices for the shares point to there being reasonable proof that market
abuse manipulation has occurred, which would be cause for the CNMV to initiate penalty
proceedings;
• when market prices in general, or the price of the target company in particular, have been
affected by extraordinary events, such as natural disasters, wars, calamities or other events
caused by force majeure; and
• when the target company is subject to expropriation, confiscations or other circumstances of a

similar nature which could imply a change in its real net worth.
• These cases always imply an increase of the equitable price so that the takeover bid price
cannot be less than the highest price of either the price calculated according to the
aforementioned general criteria for establishing equitable prices, or the price calculated
according to objective appraisal criteria (including therein, the consideration paid by the bidder
in the reference period).
(c) Consideration
With regard to the consideration offered, takeover bids may be structured as a purchase deal (cash),
a swap or exchange deal (securities) or a combination of both. However, certain cases will require the
consideration to be paid in cash, or that said consideration is included as an alternative to the option
granted to the shareholders of the target company, for an amount that represents the financial
equivalent of the exchange offered.
5 Timeline
5.1 Typical takeover bid timeline
As a general rule, the takeover bid process for a mandatory public takeover bid is similar to the process
that applies to other kinds of takeover bids, with certain exceptions. The following chart reflects a typical
timeline of a customary takeover bid process in Spain.
5.2 Announcement of the public takeover bid. Target and bidder restrictions
A bidder that intends, or is compelled, to launch a public takeover bid must immediately inform both the
market and the CNMV of such situation:
(i) in the case of a voluntary takeover bid, as soon as the bidder takes the decision to launch the
bid, but only after ensuring it can fulfil any consideration thereof in full. The bidder is not obliged
to prove such requirement at such time, but as the takeover bid becomes irrevocable upon the
public announcement, the bidder should ensure it has the capability to cover the maximum
takeover bid consideration, including funding confirmation from the relevant financial entity; or
(ii) in the case of a mandatory takeover bid, whenever the acquisition of a controlling stake in the
target company is reached, irrespective of whether such control is direct, indirect or incidental.
In these latter cases, the bidder shall disclose whether or not it intends to launch the public
takeover bid, request an exemption from the CNMV or dispose of the shares in excess of the
relevant threshold that triggered the need to launch the bid.
In any event, the announcement will need to conform to a regulated template established by the CNMV.
The announcement has several effects, including the commencement of the duty to remain passive on
the part of the target company (see 6.2 below). Additionally, upon public announcement of the takeover
bid and, thus, its irrevocability, the bidder itself and those parties acting in concert with the bidder will
be subject to certain restrictions contemplated in RD 1066/2007, including the following:

(i) the prohibition from disclosing or publishing any information not included in the bid
announcement;
(ii) in the case of a mandatory takeover bid, and until the bid is authorized by the CNMV, the
prohibition from exercising the voting rights inherent to the share capital in excess of the
relevant threshold which triggers the need to launch the bid;
(iii) the obligation to inform the CNMV, on a daily basis, of the number of securities of the target
company acquired in the framework of the takeover bid, together with the acquisition price
thereof; and
(iv) the prohibition from transferring any securities held in the target company until the final
settlement of the takeover bid.
5.3 Filing and approval of a public takeover bid

Following the initial announcement of a public takeover bid, the bidder must file a request for
authorization with the CNMV within one month from such initial announcement in case of voluntary or
ordinary mandatory takeover bids, or within a maximum of three months in case of indirect or incidental
mandatory takeover bids.
Similar to the announcement, the request for authorization will need to conform to a regulated template
established by the CNMV.
The request for authorization shall also include (i) the relevant documentation certifying the relevant
corporate resolution whereby the launching of the takeover bid is adopted; and (ii) the offer prospectus,
subject to the specific contents provided for in RD 1066/2007. All other documentation which is required
to be filed by RD 1066/2007 (including, among other things, proof of the relevant guarantees and
documentation certifying the price of the bid and valuation reports, where applicable) shall be filed with
the CNMV within seven working days after the aforesaid request for authorization is filed.
The CNMV will examine the request for authorization, the offer prospectus and all supplementary
documentation filed by the bidder and will ask for any further documentation it deems fit, and will either
approve or reject the public takeover bid within 20 working days of receipt of the last of these
documents.
5.4 Publication, acceptance period and target company’s board of directors’

report
No later than five working days after receiving notification from the CNMV that the relevant authorization
has been granted, a bidder shall publish the basic contents of its takeover bid in the relevant stock
exchange listings bulletins (boletines de cotización) and in at least one national newspaper.
The takeover bid acceptance period starts on the fifth stock exchange working day following the date
of publication of the first of the above mentioned announcements and shall remain open for between
15 and 70 calendar days.
In addition, and within 10 calendar days after the start of the acceptance period, the board of directors
of the target company shall issue and publish a detailed report on the public takeover bid, stating its
comments for and against the bid and expressly disclosing any agreement that may exist between the
target company and the bidder or the directors or shareholders thereof, or between the latter and the
board members of the target company in relation to the takeover bid.

5.5 Publication of the result, settlement and payment
The CNMV will announce the result of the takeover bid no later than seven working days after the
acceptance period expires. If the takeover bid is successful, payment thereof must take place in the
following manner:
• In case of in-cash payments, according to the procedure set by the Spanish Clearing and
Settlement System (Iberclear). The date on which the transfer transaction is carried out from a
stock market perspective would be deemed to be that on which the result of the bid is
published in the relevant stock exchange listings bulletin.
• In case of in-kind payments (attribution or swap of shares), according to the procedure set out
in the offer document filed by the bidder and approved by the CNMV.
5.6 Amendment, withdrawal and invalidity of a public takeover bid

(a) Amendment of the takeover bid
A bid may be amended at any time prior to the fifth working day prior to the end of the
acceptance period, provided the amendment is more beneficial for the persons to whom it is
addressed. In the case of competing bids, specific relevant provisions apply.
(b) Withdrawal and cessation of the effects of a takeover bid
A public takeover bid is irrevocable as of its announcement and the bidder can only withdraw the bid
in the specific cases set forth in RD 1066/2007. There are significantly different rules according to the
type of bid at stake:
(i) Mandatory takeover bids - The bidder may only withdraw its bid in the following cases:
o when the bid has been conditioned on the approval by the competition authorities
and, prior to the end of the acceptance period, said authorities declare the proposed
transaction to be inadmissible or make it subject to any condition, or do not expressly
or implicitly approve the transaction;
o when, for exceptional reasons beyond the control of the bidder, the takeover bid
cannot be launched or becomes patently unviable, provided the prior approval of the
CNMV is obtained; and
o when, upon conclusion of the procedure applicable to competing bids, an

unconditioned competing bid exists which improves the initial mandatory takeover
bid.
(ii) Voluntary takeover bids - Voluntary takeover bids cease to be effective when the conditions to
which they may be subject are not fulfilled. In addition, a bidder may withdraw its bid in the
same cases applicable to mandatory bids, as well as in the following cases:
o when a competing bid is approved; or
o when the target company adopts a defensive measure that prevents the bidder from
maintaining its bid, provided the prior approval of the CNMV is obtained. If the
defensive measure in question consists of the payment of an extraordinary dividend
or other type of exceptional remuneration to the shareholders, a bidder may maintain
its bid and reduce the consideration accordingly in order to maintain the equivalent
price, subject to CNMV approval.
Set out below is an overview of the main steps for a takeover bid in Spain.

Takeover bid (indicative timeline)
Start
process D - 90
Mandatory Disclosure by
takeover bid means of a
due to indirect relevant event
and incidental to the Spanish
control Securities
Market
D D+7 D + 14 D + 27 D + 32 D + 33 D + 43 D + 98 D + 103 D + 110 D + 113
Commission
(CNMV)
Filing of Filing of CNMV CNMV Takeover bid Start takeover Publication of Last day to End of Publish Takeover
authorisation supplementary processes authorises formal bid term of takeover bid improve or takeover bid takeover bid settlement
request with documents authorisation takeover bid announcements acceptance report by the amend the term of result
the CNMV and request and forwarding target’s board takeover bid acceptance
Start submission of of prospectus of directors
process D - 30 takeover bid and forward to
CNMV and Last day to
prospectus
worker submit a
representatives competing bid
(i) Mandatory Disclosure by

takeover bid due means of a
to acquisition of relevant event
controlling to the CNMV
interest or
appointment of
more than 50%
of board
members or Announcement Authorization by the CNMV Acceptance period Publication and settlement
(ii) voluntary bid

6 Takeover Tactics
6.1 Competing takeover bids
RD 1066/2007 establishes a specific regulation for competing takeover bids, the main features of which
are set forth below:
(a) Filing period and prohibition of bids outside the timeframe
Competing takeover bids must be filed in the period commencing after the filing of the initial bid and
ending on the fifth calendar day prior to the expiry of the acceptance period, including extensions and
additional time. An extension will be granted in the event of a subsequent mandatory bid. In any case,
the announcement of a new voluntary takeover bid after the filing period for competing bids has
expired is expressly forbidden.
(b) Improving a preceding takeover bid
Competing takeover bids must be for at least the same number of securities as the last preceding bid
and must improve the preceding bid, either by increasing the price or consideration offered, or by
extending the takeover bid to a greater number of securities. Nevertheless, competing bids may be
subject to conditions or even to acceptance of a greater number of securities than the preceding bid.
Subsequently, improved bids are also possible at any time after approval of the last competing bid
and prior to the date of presentation of closed envelopes.
(c) Acceptance period
The acceptance period is 30 calendar days following publication of the first announcement. The
launching of a competing takeover bid interrupts the acceptance period for preceding bids, which are
thereby automatically modified so that all takeover bids’ acceptance periods expire at the same time.
Acceptance of the various competing bids is expressly allowed, but the order of preference between
them must be specified.
(d) Sealed envelope procedure and initial bidder preference
On the fifth working day following expiry of the period for the filing of competing bids, all bidders that
have not withdrawn their bid shall proceed to submit a closed envelope to the CNMV including, as the
case may be, their improved offer. Once the envelopes have been opened, only the initial bidder,
provided it has not withdrawn its bid, may subsequently improve its takeover bid, so long as:
• the consideration offered in the closed envelope by the initial bidder is not 2% lower than the
highest consideration offered by any other of the takeover bids; and
• the initial bidder improves the conditions of the competing takeover bids, either by increasing
the price or consideration offered by the best bid received by at least 1% or by extending the
initial takeover bid to more than 5% of securities with respect to the best competing bid.
(e) Break-out fee
The initial bidder is entitled to receive a fee from the target company in the event a competing
takeover bid is submitted, provided such fee:
• does not exceed 1% of the takeover bid price; and
• has been approved by the board of directors, with a favorable report from the financial
advisers to the company and described in the offer document.

(f) Information equality
Bidders are entitled to equal information, with the target company being under a duty to
provide all bidders with the information made available to all other bidders, whether current or
potential.
6.2 Target passivity rule and defensive measures

RD 1066/2007 imposes a general duty on the governing bodies and management of the target
company, any delegated or empowered body of such and their respective members, as well as the
companies belonging to the target company group and any company that may act jointly with the above,
to remain passive and request prior shareholder approval before performing any act that may prevent
the success of a takeover bid.
Without prejudice to the generality of the abovementioned limitation, the approval of the shareholders
at a general meeting of the target company shall be specifically required before any of the following
actions are taken:
• approve or initiate the issuance of securities that may prevent the success of a takeover bid;
• carry out or promote transactions related to the securities subject to the takeover bid or other
securities, in an attempt to prevent the success of a takeover bid;
• dispose of, encumber or lease fixed or other company assets when the transaction could
prevent the success of a takeover bid; or
• pay extraordinary dividends or remuneration of any kind that is not in line with standard
company policy on dividend payments to shareholders or owners of other securities in the
target company, except when the necessary company resolutions have been previously
passed by the relevant company body and made public.
The only exception to the foregoing is that the board of directors of the target company does not need
the approval of the shareholders in order to seek other offers that compete with the takeover bid
originally submitted.
The general duty to remain passive begins when a takeover bid is publicly announced and ends when
the final result is published.
Notwithstanding the above, companies are entitled not to observe the preceding regulations when they
are subject to a takeover bid launched by an entity whose registered company address is outside Spain
and is not subject to equivalent regulations, i.e., whenever the bidder is entitled to take defensive
measures without the need of approval by its general shareholders’ meeting. In this case, previous
approval of such regime by the general shareholders’ meeting of the target company is required not
later than 18 months before the takeover bid is made public.
6.3 Common preventive measures for hostile takeover bids

The preventive measures that may be adopted by a listed company in the event of a possible hostile
takeover bid are basically of two kinds: measures contemplated in the by-laws and contractual
measures.
The most effective preventive measure that may be contemplated in the by-laws of a listed company
that is admissible in Spain is the limitation of the number of votes that may be cast by a single
shareholder or by all shareholders belonging to the same group. Qualified quorums or voting majorities
for the approval of certain resolutions, e.g., capital increases and the issue of bonds, may also be
included in the by-laws of a listed company which, though they may favor the creation of a blocking
minority that hinders the future plans of a possible hostile acquirer, may also affect the day-to-day
management of the company. Another preventive measure that may be contained in the by-laws is the

establishment of special requirements to be appointed director, for example, being a shareholder of the
company over a minimum period of time prior to the appointment or to serve in key positions (chairman,
chief executive officer) on the board of directors (such as, for example, a particular length of service as
director of the company).
Contractual preventive measures may, in turn, be divided into two groups of measures: those provided
for in contracts entered into by the company; and those arising from agreements executed by third
parties. The former includes agreements which contain a change of control clause and which may affect
assets, e.g., call options, financing, e.g., early redemption and interest rate increase provisions,
issuances of securities, e.g., accelerated conversion clauses and clauses providing for a downward
adjustment in the conversion price of convertible debentures, etc., and which, whether or not originally
included for a defensive purpose, may discourage the submission of a takeover bid that has not been
agreed upon. In relation to the second group, the most significant measures are possible restrictions
on the transfer of shares that may be provided for in shareholders’ agreements executed by the
shareholders of the company, which may restrict the acceptance of the takeover bid by the parties to
the shareholders’ agreement.
In addition to preventive measures of a legal nature, there are measures or strategies of a financial
nature, such as an increase in the company’s leverage or the listing of subsidiaries, which may require
a heightened financial effort in order to take control of the company by forcing the bidder to assume a
greater debt or to increase the total consideration needed in view of the obligation to offer the acquisition
of minority interests in subsidiaries by means of a successive takeover bid.
6.4 Breakthrough provisions

Listed companies that have preventive measures in place may decide that one or more of the following
breakthrough measures apply in the event that the company is the target of a takeover bid:
(i) the ineffectiveness of any restriction on the transfer of securities established in any
shareholders’ agreement regarding the company during the takeover bid acceptance period;
(ii) the ineffectiveness, at the shareholders’ meeting at which decisions are made on the potential
defensive measures to be adopted, of any restriction to the voting rights established in the
company’s by-laws or in any shareholders’ agreement; or
(iii) the ineffectiveness of any restriction mentioned in (i) and (ii) above with regard to shareholders’
agreements in the event a bidder obtains a stake of at least 75% of the voting rights after
launching a takeover bid.
The decision on whether to adopt or revoke said breakthrough measures must be passed at a general
shareholders’ meeting of the company. When a company decides to apply breakthrough measures, it
must include a provision in its by-laws for adequate compensation for the loss suffered by the holders
of the neutralized rights, together with a description of the manner in which such compensation shall be
paid and the method used to determine it.
In line with the comments made above on defensive measures, in the event a company is subject to a
takeover bid by an entity that has not adopted equivalent breakthrough measures, the target company
may decide not to apply any breakthrough measures currently in place. In such case, the previous
approval of the shareholders’ meeting is required (no later than 18 months prior to the time the takeover
bid is made public).
Finally, regardless of the optional breakthrough regime of the anti-takeover measures mentioned above,
the SCA and the SMA establish an imperative breakthrough regime by means of which any by-law
provisions that either directly or indirectly establish, on a general basis, a limit to the maximum number
of votes corresponding to a shareholder, companies belonging to the same group or any person acting

in concert with any of the foregoing, shall have no effect after a takeover bid in the event the bidder
acquires at least 70% of voting rights.

Takeover
The SMA and RD 1066/2007 establish regulations governing the squeeze- out/sell-out regime set forth
in the Takeover Directive whenever, as a result of a takeover:
(i) the bidder holds at least 90% of the voting rights in the target company’s share capital; and
(ii) the bid has been accepted by at least 90% of the shareholders with voting rights to which it was
addressed.
In such cases:
• the bidder is entitled to a squeeze-out right whereby the remaining shareholders shall sell
their shares to such bidder at an equitable price; and
• the shareholders of the target company are entitled to a sell- out right whereby they can make
the bidder purchase their shares at an equitable price.
The maximum squeeze-out or sell-out term is three months as of the expiry of the acceptance period,
and the intention of the bidder to exercise its right must be specified in the offer document. The equitable
price shall be deemed to be the previous takeover bid consideration.
8 Delisting
In accordance with RD 1066/2007, whenever a company decides to delist its shares, a takeover bid
shall be launched subject to a specific regime and requirements. Any other transaction by virtue of
which the shareholders of a listed company become part or full shareholders in another non-listed entity,
will be subject to the same procedure.
The so-called delisting takeover bid has the following characteristics:
• the decision to undertake the delisting, the launching of the takeover bid and the setting of the
takeover price shall be approved by a shareholders’ meeting of the target company;
• the takeover bid must be made directly by the target company to acquire its own shares or by
a third party;
• the bid must be for 100% of the securities and structured as a purchase deal, in other words,
for cash consideration;
• the bid price cannot be less than: (i) the equitable price (see 4.3 above); or (ii) the price
resulting from jointly taking into account and justifying the respective relevance of different
valuation methods of the shares of the target company, e.g., book value, net asset value,
weighted average price over the last six months, consideration offered in a preceding
takeover bid and other generally accepted valuation methods, including cash flow discount,
company multiples, comparable transactions and others. The determination of the price in
accordance with the above must be documented in a report issued by the board of directors
of the target company and usually supported by a valuation report prepared by an
independent expert; and
• there are certain exceptions to the obligation to launch a delisting takeover bid, including,
among others, the fact that the conditions required to exercise a squeeze-out have been
fulfilled or that, in a previous bid, the intention to delist was expressed and: (i) the price was
determined in accordance with delisting takeover bid criteria; and (ii) a purchase order is

maintained for at least one month after the settlement of the preceding takeover bid at the
same price as such preceding bid.

Enrique Carretero and Carlos Martín in the Madrid office are the most appropriate contacts within
Baker McKenzie for inquiries about public M&A in Spain.
Enrique Carretero Carlos Martín

Madrid Madrid
enrique.carretero@bakermckenzie.com carlos.martin@bakermckenzie.com
+34 91 230 45 34 +34 91 436 66 85

Sweden
1 Overview
Sweden has over the years been attractive for public M&A deals with attractive price levels, a well-
developed regulatory regime and few obstacles to public takeovers and direct foreign investments.

Sweden’s regulatory regime aims to protect the shareholders of a target company and to create a
system of rules for participants in a takeover. The main rules and principles of Swedish law relating to
public takeover bids on a regulated market can be found in:
• The Act on Public Takeovers (2006:451) (“Takeover Act”) (Sw. Lag om offentliga
uppköpserbjudanden på aktiemarknaden);
• The Takeover Rules for Regulated Markets (“Takeover Code”) (Sw. Takeover-regler för
reglerade marknader);
• The Financial Instruments Trading Act (1991:980) (“Trading Act”) (Sw. Lag om handel med
finansiella instrument), which contains rules on shareholding disclosure requirements and
offer documents;
• The Companies Act (2005:551) (“Companies Act”) (Sw. Aktiebolagslagen), which does not
specifically address public offers, but contains relevant provisions relating to, for example, the
duties of directors; and
• The Market Abuse Regulation (“MAR”), Regulation (EU) No 596/2014 of the European
Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation)
and repealing Directive 2003/6/EC of the European Parliament and of the Council and
Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC, which contains rules
regarding insider information, insider dealing and market manipulation.
The main body of the Swedish takeover legislation is based on Directive 2004/25/EC of the European
are still certain differences in the national rules of the respective Member States of the EEA regarding
2.2 No governmental prior approval

Foreign investments are not restricted in Sweden and takeovers are not subject to prior governmental
or regulatory approvals other than customary anti-trust approvals.

Sweden, there are a number of additional rules and principles that are to be taken into account when
(a) The rules relating to sanctions for insider dealing and market manipulation as set out in the
Securities Market Abuse Penalties Act (2016:1307) (“Securities Market Abuse Penalties Act”)
(Sw. Lag om straff för marknadsmissbruk på värdepappersmarknaden) and in the Act with
Complementing Regulations to the EU Market Abuse Regulation (2016:1306) (Sw. Lag med
kompletterande bestämmelser till EU:s marknadsmissbruksförordning).
(b) The rules relating to the public offer of securities, and the admission to trading of these
securities on a regulated market, are set out in the Regulation (EU) 2017/1129 of the
European Parliament and of the Council of 14 June 2017 on the prospectus to be published
when securities are offered to the public or admitted to trading on a regulated market, and
repealing Directive 2003/71/EC.
(c) The general rules on the supervision and control over the financial markets including the
framework legislation in the Securities Markets Act (2007:528) (“Securities Markets Act”) (Sw.
Lag om vädepappersmarknaden). The Securities Markets Act imposes a statutory obligation
on the exchanges to establish a self regulatory Takeover Code.
(d) Further rules may apply to bids on companies in certain sectors, such as companies
operating under the supervision of the Swedish Financial Supervisory Authority (“SFSA”) (Sw.
Finansinspektionen), for example companies with license to conduct banking, insurance or
finance business operations.
2.4 Supervision and enforcement

Public takeover bids are subject to the supervision and control of the Disciplinary Committees of the
Regulated Markets, the Securities Council (Sw. Aktiemarknadsnämnden) and ultimately the SFSA.
The SFSA is the principal securities regulator in Sweden.
The abovementioned bodies have a number of legal tools available to supervise and enforce
compliance with the public takeover bid rules, including administrative fines.
The Securities Council and the SFSA (and ultimately the administrative courts) also have the power to
grant, in certain cases, exemptions from the rules that would otherwise apply to a public takeover bid.

The following general principles apply to public takeovers in Sweden. These rules are based on the
Takeover Directive:
(a) all holders of the same class of securities of a target company must be afforded equivalent
must be protected;
target company’s places of business;

(d) false conditions for trading must not be created in the securities of the target company, the
offeror company or any other company concerned by the bid in such a way that the rise or fall
of the prices of the securities becomes artificial and the normal functioning of the markets is
distorted;
(e) an offeror must announce a bid only after ensuring that it has certain funds and after taking all
reasonable measures to secure the implementation of any other type of consideration; and
It should be noted that Swedish law has a strong focus on the rights of shareholders in relation to
takeover bids. Thus, principle (c) above should be construed as meaning that the board of directors
should act in the interest of the shareholders as a whole (see rule II.17 in the Takeover Code).

Swedish law provides for multiple classes of shares with different voting rights. One class of shares
may represent up to 10 times the voting rights of another class. Consequently, the number of shares
does not always correspond to the voting power.
levels of shareholding within a Swedish listed entity:
Shareholding Rights
• The right to introduce additional items on the agenda of a
general shareholders’ meeting and to table draft resolutions for
items on the agenda, by request to the board of directors prior
to the issuance of the notice of a meeting.
auditors at general shareholders’ meetings (orally at the
meeting).
other reasons (as provided for in Ch. 7 Sections 50-51 of the
Swedish Companies Act).
• In case of a merger or de-merger, the right to file a liability claim
against directors or to request the nullity of the merger or de-
merger.
5% of the shares or the • Substantial holding level which, provided that the company is
votes listed on a regulated market, requires the holder to notify the
listed company and the SFSA. Subsequent increases in
holdings need to be notified when the shareholder passes the
following holding thresholds: 10%, 15%, 20%, 25%, 30%, 50%,

Shareholding Rights
66 2/3 % and 90% of the total number of shares or votes in the
company.
10% of the shares • The right to request the board of directors to convene a general
• The right to ask the Swedish Companies Registration Office
(Sw. Bolagsverket) to appoint a special expert to check the
company’s books, financial records and acts of the company’s
corporate bodies, or to appoint a minority auditor who will take
part in the statutory audit.
• The right to file derivative action against the directors on behalf
of the company.
• The right to block a decision to discharge the directors and
managing director from liability.
• The right to block decisions which require more than 90%
majority according to the Companies Act.
• The right to request redemption of minority shares.
30% of the votes Substantial holding level which requires the holder, once the level is
reached, to announce the magnitude of the shareholding and, within
four weeks, place a mandatory bid regarding the remaining shares.
More than 33 1/3% of The ability at a general shareholders’ meeting to block any changes to
the votes (at a general the articles of association.
shareholders’ meeting)
More than 50% of the The ability at a general shareholders’ meeting to, amongst other things:
votes (at a general
• appoint and dismiss directors and approve the remuneration
• approve certain aspects of the remuneration and severance
package of executive management;
• appoint and dismiss statutory auditors and approve their
remuneration; and
remuneration report of the remuneration committee of the board
of directors).
More than 66 2/3% of The ability to ensure that certain special resolutions are passed, e.g.,
the votes directed share issues.
More than 90% of the The possibility to force all other shareholders to sell their shares
shares through a public bid (a “squeeze-out”).

Swedish law contains a number of rules that already apply before a public takeover bid is announced.
by a potential offeror. The main restrictions and hurdles have been summarized below. Some careful

planning is therefore necessary if a potential offeror or target company intends to initiate a process

according to MAR are applicable. For further information on the rules on insider dealing and market
abuse, see 6.3 below. The rules include, amongst other things, a prohibition on the manipulation of
the target’s stock price, for example by creating misleading rumors. In addition, the rules prohibiting
insider trading prevent an offeror that has inside information regarding a target company (other than
such information received in relation to the actual takeover bid) from trading in the target company’s
securities.

The rules relating to the disclosure of significant shareholdings in listed companies (the so-called
‘transparency rules’) are contained in the Trading Act. These rules are based on Directive
2004/109/EC of the European Parliament and of the Council of 15 December 2004, on the
harmonization of transparency requirements in relation to information about issuers whose securities
are admitted to trading on a regulated market and amending Directive 2001/34/EC, with Directive
2013/50/EU amending the Transparency Directive.
public takeover bid (as long as the target company is listed on a regulated market).
Pursuant to these rules, if a potential offeror starts building up a stake in the target company, it will be
disclosure threshold. As stated above, the relevant disclosure thresholds are 5%, multiples of 5% up
to 30%, and 50%, 66 2/3% and 90% thereafter.
arrangements, such as call option agreements or voting agreements.

transparency.
These rules include that a company must immediately publicly disclose all inside information, subject
to exceptions contained in Article 17 of the MAR. For further information on inside information, see 6.1
below. The facts surrounding the preparation of a public takeover bid would normally constitute inside
information. If so, the target company may be obliged to announce this. However, the board of the
target company can delay the announcement for a limited period of time if it believes that a disclosure
would not be in the legitimate interest of the company. For instance, this could be the case if the
target’s board believes that an early disclosure would prejudice the negotiation of a bid. A delay of the
announcement, however, is only permitted provided that the non-disclosure does not entail the risk of
the public being misled, and that the company can keep the relevant information confidential.

An offeror that intends to make a public takeover bid must first undertake to comply with the Takeover
Act and the Takeover Code by a notification to the regulated market on which the target company’s
shares are admitted to trading. After the notification, the offeror may announce the bid. Prior to

announcing the bid, any uncertainty regarding the interpretation of a provision in the Takeover Code
in a specific case should be eliminated by submitting an enquiry to the Securities Council.
As a takeover bid announcement will normally have an effect on the price of the target’s shares, it
must, as far as possible, contain all the facts that are relevant to making a proper assessment of the
share price.
Within four weeks from the announcement, the bidder must file an offer document with the SFSA. The
SFSA must scrutinize and provide comments on the offer within 10 business days. The offer
document is normally approved by the SFSA a few days after the offer document has been revised in
accordance with any comments received from the SFSA. As soon as the approved offer document is
published, the acceptance period can start.
If there are rumors or leaks that a potential offeror intends to launch a public takeover bid, the
Securities Council could force an announcement. This could lead to an early disclosure and possibly
an acceleration of the preparations by an offeror, as the bidder could be forced to make an
announcement as to the offeror’s intentions.
3.7 Early disclosure

If an offeror has been compelled by the Securities Council to make an early disclosure, the Securities
Council may decide that a bid must be announced within a certain period of time or that the offeror
must otherwise refrain from making a bid.
3.8 Due diligence

The Swedish public takeover bid rules contain general rules about a pre-offer due diligence. If the
offeror requests that it be permitted to conduct a due diligence on the target company, the board of
the target company is to decide whether the company can and will participate in such an investigation
and, if so, on what conditions and to what extent. The board is to limit the investigation to factors
necessary for submitting and implementing the bid. Having said this, the concept of a prior due
diligence or pre-acquisition review by an offeror is generally accepted and appropriate mechanisms
have been developed in practice to organize a due diligence or pre-acquisition review and to cope
with potential market abuse and early disclosure concerns. These mechanisms include the use of
strict confidentiality procedures, a limitation on sharing information and data rooms. Inside information
is often specifically excluded from information shared since there is an obligation to disclose such
shared information (see also 6.2).
As indicated above, there is no obligation for the target board to allow a due diligence process and it
is up to the board of directors to decide whether or not a due diligence is appropriate in the individual
case. It is unlikely that a reasonable refusal from the board of directors to allow a due diligence could
lead to the target board being held liable for damages on any ground. The target board must
determine to what extent a request for due diligence should be met, taking into consideration the
commercial interest of the target and its shareholders, and keeping in mind the principle that all
shareholders must receive equal treatment, for example, disclosure of inside information. Thus, the
target board must assess whether or not the offeror is serious and if the terms of the takeover bid are
sufficiently favorable to justify a due diligence.

For the purposes of the Swedish takeover bid rules, persons “are acting in concert”:
• if they collaborate with the offeror, the target company or with any other person on the basis
of an express or silent, oral or written, agreement aimed at acquiring control over the target
company, facilitating the implementation of a takeover bid or maintaining control over the
target company;

shareholder acts in concert or is deemed to act in concert. This is the case, for example, when a
mandatory takeover bids. If one or more persons in a group of persons acting in concert acquire
voting securities as a result of which the group in the aggregate would pass the 30% threshold, the
members of the group will have a joint obligation to carry out a mandatory takeover bid, even though
the individual group members do not pass the 30% threshold.
There are two main forms of takeover bids in Sweden:
• a voluntary takeover bid, in which an offeror voluntarily makes an offer for all or up to 30% of
the voting securities issued by the target company. A bid for less than all of the shares is
uncommon; and
• a mandatory takeover bid, which an offeror is required to make if, as a result of an acquisition
securities of the target.

• The offeror is free to make the takeover bid subject to specified conditions that the offeror
may not have control over, such as, among other things, merger control clearance, minimum
acceptance level or a material adverse change condition.
• The offeror is in principle free to determine the form of consideration offered to the target
shareholders.
• The offeror is in principle free to decide the price if the consideration is to be paid in cash,
subject to the condition that the highest price paid by the offeror within six months before or
after the bid, or during the bid, must be reflected in the price.
• The offered price may be paid in cash, securities or a combination of both. All shareholders of
the same class of securities must have equal rights to any form or value of consideration,
subject to exceptions granted by the Securities Council or if there are certain circumstances in
the specific case in favor of an exception such as legal obstacles for receiving the
consideration.

directly or indirectly holds more than 30% of the (actual outstanding) voting securities of the
target company. The mandatory takeover bid is unconditional. However, instead of making a
mandatory bid, the offeror may submit a voluntary bid. The Securities Council may grant
exceptions from the mandatory public takeover bid obligation. Situations in which the
Securities Council has granted exceptions include the following:

o the stake is acquired from an affiliate (i.e., no change of real control);
o a third party exercises control over the target company or holds a larger shareholding
in the company than the party holding more than 30%;
o the stake is acquired within the framework of a subscription to a capital increase with
preferential subscription rights for the shareholders, which has been decided upon by
the general shareholders’ meeting, i.e., a rights offering;
o the stake is acquired within the framework of a subscription to a capital increase by a

target company in financial difficulties, which has been decided upon by the general
shareholders’ meeting; and
o the stake is acquired in connection with an issue in kind, i.e., where the third party is
being paid shares in the target company as consideration when the target company is
making an acquisition.
o the price must be equal or higher to the price paid by the bidder for any shares within
a period of six months before or after the bid, or the weighted average trading price
for securities of the target company which have been settled in shares;
o in the case of an indirect acquisition of at least 30% of the target company, for
example, when the offeror has acquired control of a company (hereafter referred to
as the holding company), which in turn owns shares in the target company, the prior
transaction is to be considered as conducted at a price per share corresponding to
the volume weighted average price of the share during the 20 trading days preceding
the date of acquisition of the holding company. If, when acquiring the holding
company, the offeror has assigned a higher price for the target company shares, i.e.,
if the part of the purchase price of the holding company that the offeror allocated to
the target company shares means a higher price per target company share than the
20 day average, the prior transaction is instead to be considered as carried out at a
price per share corresponding to that assigned price. The offeror will be obliged to
provide information on the purchase price for the holding company, how the purchase
price was allocated between the target company shares and other assets and the
reasoning that led to this allocation.
o the consideration offered can consist of cash, securities or a combination of both.

However, a cash alternative must be offered; and
o the Securities Council may allow exceptions from the rules on consideration.

shareholders if it holds, directly or indirectly, 90% of the voting securities of the target
company.
• Sell-out right if the bidder is not itself launching a squeeze- out – minority shareholders have a
sell-out right if the offeror holds, directly or indirectly, 90% of the voting securities of the target
company.

5 Timeline
takeover bid process on a regulated market in Sweden.
Step
• Preparation of the bid by the offeror (study, due diligence, financing and draft
prospectus).
• The bidder approaches the board of the target company and/ or its key
shareholders. Due to the ownership structure on the Swedish stock market, it is
usually advisable to approach key shareholders at this stage.
• Negotiations with the board of the target company and/or its key shareholders. Due
to the ownership structure on the Swedish stock market, it is usually advisable to
negotiate with key shareholders, possibly securing irrevocable undertakings where
the shareholders agree to accept the takeover bid under certain circumstances.
• The bidder must enter into an undertaking with the regulated market to comply with
the applicable takeover regulations.
• Apply for consultations and exceptions from the Securities Council, as necessary.

• The offeror may announce a bid after having undertaken to comply with the
applicable takeover regulations.
• The board of the target company issues a statement recommending that the target
shareholders accept the bid.
• Within four weeks from the announcement, the offeror must make an offer
document public. Prior to that, the offer document must have been filed with, and
approved by, the SFSA.
• The offeror may not withdraw from the bid after it has been announced unless the
bidder made it subject to specified conditions.
• In a negotiated bid, the offeror is expected to include the response on the bid from
the board of directors of the target company.
3. Information to employees of the target company when the bid has been publicly disclosed.

• Start: not before the offer document has been made public.
• Duration: not less than three weeks and not more than 10 weeks.
• The acceptance period may be extended if the bidder has provided for possible
extension in the offer document, after approval by the Securities Council, or in
accordance with applicable takeover regulation. The total acceptance period may
not be extended by more than three months or, if the offer is conditional on the
attainment of necessary regulatory approval, nine months. The Securities Council
may approve even longer extensions.

Step
• Without prejudice to the above, the acceptance period may be extended if the
offeror has announced that it will complete the bid.
5. The target company’s board of directors announces its opinion regarding the bid no later
than two weeks prior to the end of the acceptance period.
6. Publication of results as soon as possible after the end of the acceptance period.
7. Payment of the offered consideration by the offeror as soon as possible after publication of
the result.
8. Squeeze-out if the offeror acquired more than 90% of the shares and delisting of the target
shares is applied for.
Set out below is an overview of the main steps for a voluntary public takeover in Sweden.

Start
process A Day L Day2 T Day E Day P Day C Day X Day
Launch of the Bidder makes offer Launch of the Target’s board of End of acceptance Publication of Payment of the Squeeze-out if the
takeover1 document acceptance period directors period3 results after the offered offeror acquired
available to the announces opinion end of the consideration as more than 90% of
public (immediately regarding bid acceptance period soon as possible the shares and
after approval of after the delisting of the
offer document by publication of the target shares is
the Swedish FSA) takeover outcome applied for
2 weeks minimum
3 – 10 weeks As soon as As soon as possible

possible
(3) Offer document filed with Swedish Financial Services Authority (FSA) within four weeks of announcement (but normally before A Day)
(4) Usually this is shortly after A Day
(5) Normally the acceptance period is closer to three weeks but may be extended by one week to allow for additional acceptances following a declaration that the takeover has been
l t d

6 Takeover Tactics
A Swedish public listed company is required to immediately disclose to the public all “inside
disclosed to the public:
instruments.

It is up to the target company to determine if certain information qualifies as “inside information”. In

many circumstances, this will be a difficult exercise and a large gray area will exist as to whether
certain events will need to be disclosed or not. A voluntary takeover bid would be considered inside
information. However, the board of the target company can delay the announcement for a limited
period of time if it believes that a disclosure would not be in the legitimate interest of the company. For
instance, this could be the case if the target’s board believes that an early disclosure would prejudice
the negotiation of a bid. A delay of the announcement, however, is only permitted provided that the
non-disclosure does not entail the risk of the public being misled, and that the company can keep the
relevant information confidential.

Prior to the announcement of a public takeover bid, the parties will, as mentioned in 6.1 above, rely on
the provisions in Article 17.4 of the MAR to delay the public disclosure of the potential bid. In case of
rumors or leaks, an obligation to disclose information may be imposed by MAR, listing rules or by a
decision from the Securities Council.
If the offeror launches a bid and if the target company during the course of the due diligence provides
the offeror with inside information, the target company is to ensure that this information is made public
as soon as possible. The information must only be made public if a bid is actually launched. The
information is normally made public by the target company in connection with the announcement of
the bid and is also to be included in the offer document.

Rules on what constitutes insider dealing and market abuse follows from MAR. In principle such
offences are subject to criminal prosecution and punishable according to the Securities Market Abuse
Penalties Act, which is a transposition of the of Directive 2014/57/EU of the European Parliament and
of the Council of 16 April 2014 on criminal sanctions for market abuse (the “Market Abuse Directive”)
and the Act with Complementing Regulations to the EU Market Abuse Regulation, which

complements MAR. As the framework is based on EU legislation, similar rules on insider dealing and
market abuse exist in other jurisdictions of the EEA.
As a general rule, a potential bidder should refrain from trading in the target company’s securities
without appropriate prior legal consultation in order to minimize the risk of any unintentional negative
effects.

In practice, Swedish takeover defense mechanisms are not applied in Swedish takeover bids. Under
the Takeover Act, actions by the management or the board of directors in the target company which
may be construed as frustrating a public takeover bid can only be taken with prior approval from the
general meeting of the shareholders or the Securities Council (however, this has never occurred and
even if approval for frustrating actions were approved, even a slight change in the bid, such as a
minor adjustment of the price, would mean that a new approval would have to be sought).
Defense measures requiring shareholder approval may include, for example, issuing shares for non-
cash consideration, buy-backs of shares, acquisitions or disposals of assets or a counter takeover bid
to the bidder’s shareholders.
However, it is possible for a target company to try to solicit an alternative bidder (a “white knight”) to
make a rival bid or to acquire a large shareholding.

Takeover
7.1 Squeeze-out
If, following the takeover bid, the offeror directly or indirectly holds 90% of the share capital with voting
rights, the bidder can force the other shareholders to sell their shares at the price offered in the
takeover bid.
This type of squeeze-out procedure is subject to the same rules and procedures that would otherwise
apply to a stand-alone squeeze-out procedure outside the framework of a voluntary or mandatory
public takeover bid, with the exception of the price (provided that more than 90% of the outstanding
shares not held by the offeror are acquired in the bid).
7.2 Redemption
In the same situation referred to in 7.1, the minority shareholders have a corresponding right to force
redemption of their shares.

If the offeror withdraws from a bid, the offeror or anyone acting in concert with the offeror may not
launch a new bid for the target company within 12 months, unless the new offer is recommended by
the board of directors of the target company; or if the offer was withdrawn after the nine-month period
due to the failure to obtain the required regulatory approvals and a new offer is made within four
weeks after approval of the required regulatory approvals.
8 Delisting
A delisting requires a decision by the target company’s board of directors only. The target board can
apply for delisting in writing to the exchange operating the regulated market where it is listed. The
stock market regulator has no power to oppose a delisting but the Securities Council has issued

statements providing guidance to companies on what considerations should be taken into account
prior to passing a resolution to delist.
When the exchange receives an application for delisting, it investigates the trading in the target
company’s shares and draws up a timetable for the delisting procedure.

Joakim Falkner and Carl Svernlöv in the Stockholm office are the most appropriate contacts within
Baker McKenzie for inquiries about public M&A in Sweden.
Joakim Falkner Carl Svernlöv

Stockholm Stockholm
joakim.falkner@bakermckenzie.com carl.svernlov@bakermckenzie.com
+46 8 56617780 +46 8 56617707

Switzerland
1 Overview
The two stock exchanges in Switzerland together host over 270 companies with a main listing of
equity securities on at least one of these exchanges. Among these companies are large corporates
like Novartis and Nestlé, global banks like UBS and Credit Suisse and a number of smaller players
that often focus on specialized niche markets. Industry coverage is broad. Swiss companies are
examined as possible takeover targets, although not many of the transactions are successful. This is
partly due to a range of anti-takeover measures applied by Swiss companies. While there are very
few companies with real poison pills, there are a number with clauses in their articles of association
that may slow down a takeover or decrease the probability of success. In spite of this, public M&A
remains possible, even if the target is unwilling to support the transaction.

2.1 Applicable rules and regulations
The general legal framework for public takeover bids and the acquisition of major shareholdings in
companies listed in Switzerland is set out in the Federal Act on Financial Market Infrastructures and
Market Conduct in Securities and Derivatives Trading of 19 June 2015 (“FMIA”). The FMIA is
complemented by several ordinances, three of which are relevant for public takeover bids:
• the Ordinance of the Takeover Board on Public Takeover Offers of 21 August 2008. This
contains the details on the procedure, the documents to be published and the rights and
obligations in public takeovers;
• the Ordinance of the Swiss Financial Market Supervisory Authority on Financial Market
Infrastructures and Market Conduct in Securities and Derivatives Trading of 3 December
2015. This contains the details of major shareholder disclosures and the rules applicable to
mandatory takeover bids, which, by reference, also partly apply to voluntary offers; and
• the Ordinance on Financial Market Infrastructures and Market Conduct in Securities and
Derivatives Trading of 25 November 2015. This deals with the major shareholder disclosure
rules for foreign companies with a primary listing on a Swiss stock exchange, the fees
payable to the Swiss authorities in connection with public takeover bids, the squeeze-out of
minority shareholders and certain exemptions to the ban on insider trading and market
manipulation.
While the aforementioned legislation contains the main legal framework for public takeover bids, there
are a number of additional rules to be observed when preparing and implementing a public takeover
bid, such as the listing rules of the stock exchange concerned and Swiss corporate law rules.
2.2 General objectives

Swiss public takeover regulations are governed by several major objectives:
(a) Transparency
Swiss public takeover regulations aim to ensure transparency. All shareholders of the target company
shall have sufficient time and information to enable them to reach an informed decision on whether or
not to accept the offer. This results in the duty to publish an offer prospectus and the duty to publish a
board report explaining the effects of the offer on the target company and its shareholders.

(b) Equal treatment of the shareholders of the target company
A further objective is to ensure that the target shareholders are treated equally. All shareholders shall
have equal access to information and be able to sell their shares according to the same terms and
conditions. This principle takes account of the fact that the minority shareholders are in a weak
bargaining position vis-à-vis the bidder. The most important equal treatment rules are the best price
rule and the rule that any offer that takes the bidder across the 33 1/3% voting rights threshold needs
to be for all the shares of the target.
(c) Equal treatment of different bidders
The principle of equal treatment also extends to all potential bidders. The target company is obliged to
ensure equal treatment of all potential bidders and to allow a fair competing offer process.
(d) Expedient proceedings
The public takeover rules provide for expedient proceedings with decisions taken within a short period
of time.

Public takeover bids are subject to the supervision of the Swiss Takeover Board (“TOB”). The TOB
reviews and approves the offer documentation and supervises compliance with the public takeover
regulations. Decisions of the TOB may be appealed to the Swiss Financial Market Supervisory
Authority (“FINMA”). The Federal Administrative Court is the appeal body for any decisions rendered
by the FINMA. The decision of the Federal Administrative Court in takeover matters is final.

Foreign investments are not restricted in Switzerland with the exception of investments into real estate
used for business purposes. Unless in the context of specific industries and sectors (such as the
financial industry), takeovers are not subject to prior governmental or regulatory approvals other than
customary anti-trust approvals.

3.1 In general
(a) Summary of shareholding rights and powers
levels of shareholdings within a Swiss company listed on a Swiss stock exchange:
Shareholding Rights
One share • Right to attend and vote at general shareholders’ meetings.

• Entitlement to a pro rata share of the disposable profit to the
extent that the distribution of such profit among shareholders is
resolved by the shareholders’ meeting and provided for by law
or the company’s articles of association.
• Entitlement to a pro rata share of the liquidation proceeds upon
liquidation of the company, unless otherwise provided by the
articles of association.
• Right of holders of registered shares to be entered into the
shareholders’ register of the company.

Shareholding Rights
• Right to inspect and/or request a copy of the annual report and
the audit report of the company to be voted on at the annual
• Right to request a copy of the annual report in the form
approved by the shareholders’ meeting and the audit report
from the company during the year following the relevant
• Right to submit questions to the board of directors and the
statutory auditors at the shareholders’ meeting.
• Right to request the shareholders’ meeting to have specific
matters clarified by means of a special audit, provided that (i)
this is necessary for exercising shareholder rights and (ii) the
ordinary rights to information and inspection have already been
exercised.
• Right to request the court to take adequate measures in case
the company does not have a required corporate body or if the
composition of one of the corporate bodies does not comply
with the law.
• Right to file a claim for the payment of damages, possibly to the
company, against persons involved in the formation, drafting or
distribution of a prospectus regarding the securities,
management, liquidation or audit of the company in case of
breach of corporate law.
• Right to challenge, in court, resolutions of the shareholders’
meeting which violate the law or the articles of association.
• Various rights to file actions under the Swiss Merger Act.
Shares in an aggregate • Right to request the board of directors to put additional items on
nominal amount of the agenda of a shareholders’ meeting.
CHF1 million
10% • Right to apply to the court to appoint a special auditor within

three months following the rejection of the shareholders’
meeting to designate such an auditor. Shareholders holding
shares in an aggregate nominal amount of CHF2 million have
the same right.
• Right to request the board of directors to convene a
• Right to request the board of directors to put additional items on
the agenda of a shareholders’ meeting.
More than 33 1/3% (at a Ability to block:

• changes to the corporate purpose clause of the company;
• the introduction of shares with preferential voting rights;
• the implementation of any restriction on the transferability of
registered shares;

Shareholding Rights
• an authorized or contingent capital increase or the creation of
reserve capital according to Article 12 of the Federal Banking
Act;
• a capital increase, funded by equity capital, against
contributions in kind or to fund acquisitions in kind and the
granting of special privileges;
• any restriction or cancellation of subscription rights of the
shareholders;
• a relocation of the seat of the company; and
• the dissolution, a merger, a demerger or the sale of the entire or
substantially the entire business of the company.
More than 50% (at a Ability at a shareholders’ meeting to pass shareholders’ resolutions
shareholders’ meeting) other than the shareholders’ resolutions referred to in item 4 above.
66 2/3% (at a Ability at a shareholders’ meeting to pass the resolutions referred to in

shareholders’ meeting) item 4 above.
90% Possibility to squeeze out minority shareholders through a cash-out

merger.
More than 98% Possibility to squeeze out other shareholders after a takeover bid.
(b) Scope of Swiss public takeover rules
The Swiss public takeover rules apply to public takeover bids for equity securities of target companies
with registered offices in Switzerland and equity securities at least partly listed on a Swiss stock
exchange. The rules also apply to foreign companies with equity securities at least part of which are
mainly listed on a Swiss stock exchange, provided it is not a mere secondary listing. If a foreign
takeover regime also applies, the TOB decides on the limits of Swiss law with a view to avoiding
contradictions and maintaining protection for shareholders.
3.2 Selected aspects of the pre-acquisition phase

Several rules need to be taken into account in the pre-acquisition phase to ensure compliance with
takeover and other capital market regulations (see 6 below for tactical aspects):
(a) Financing of the transaction
The review body needs to confirm at the time of publication of the prospectus that the bidder has
taken the necessary measures to ensure that financing will be available on the settlement date.
Therefore, in a debt financed transaction, full financing must be secured prior to the offer. In an
exchange offer, preparations need to be made to have the required equity available at the time of the
settlement. These steps and, in particular, the structuring of the debt financing require time to prepare
(for further details on the security of funds concept under Swiss law, see 4.1 and 4.2 below).
(b) Stake building and disclosure of shareholdings
A bidder may have various reasons to build a stake in the target company before starting the bid.
These may be to: (i) warn off competing bidders; (ii) obtain a level of shareholdings that gives
substantial shareholder rights; or (iii) cover its costs for the bid should a competing bidder succeed.

However, hidden stake building is limited due to the obligation to disclose major shareholdings in
listed companies. The disclosure rules apply to shareholdings in Swiss companies with equity
securities listed on a Swiss stock exchange and to foreign companies with equity securities with a
main listing on such exchange. Reporting thresholds are 3%, 5%, 10%, 15%, 20%, 25%, 33 1/3%,
50% or 66 2/3% of the voting rights. A reporting obligation is triggered when the relevant reporting
thresholds are reached or crossed. Holdings in financial derivatives, irrespective of whether they are
cash settled or not, including call and put options, equity swaps, contracts for difference and share
lending, also need to be disclosed. Securities that are acquired indirectly or by a coordinated group
are to be aggregated. Shares for which a person is entitled to discretionarily exercise voting rights
also need to be included with any other securities held. The thresholds apply individually to long
positions, short positions and share positions. A report to the company and the disclosure office
needs to be made within four trading days from the day of entering into the transaction, irrespective of
when the trade is settled. A conditional purchase does not exempt the purchaser from making a
disclosure. The company must publish the report within two trading days upon receipt.
In addition to complying with the disclosure rules, a bidder also needs to comply with the price rules.
As will be set out further below (see 4), the acquisition price during the 12-month period before the
offer is relevant when determining the minimum price to be offered in the bid.
(c) Contacting the target company
(i) In general
If the bidder is interested in pursuing a public takeover after an evaluation of the target
company’s non-public information, or wishes to secure the support of the target’s
board, the bidder’s first step will be to approach the board of the target. The approach
needs to be made by notifying the contact person that it will receive insider
information and that such information must not be exploited. That notification must be
documented either by a file note, a taped record (if admissible) or a written
notification.
The board of the target has no obligation to react to the approach of a bidder, unless
the target is not able to follow a standalone strategy anymore. In that case, the board
must evaluate the proposed bid.
If the target company rejects the approach outright or does not react at all, it is under
no obligation to make an ad hoc disclosure. However, if the target starts to consider
the approach by the bidder, it needs to disclose the approach made under ad hoc
publicity rules. This may be avoided by promptly entering into a confidentiality
agreement.
(ii) Confidentiality and standstill agreement
If both the bidder and the target are interested in evaluating the takeover bid, they will
enter into a confidentiality agreement, sometimes combined with a standstill clause. In
the confidentiality agreement, the target company and the bidder agree to maintain
confidentiality regarding the transaction, the negotiations and all information disclosed
to a party during the negotiations.
(d) Due diligence
Swiss public takeover regulations do not contain rules as to whether or not a due diligence is to be
granted by the target company, nor how such due diligence is to be organized. However, the
obligation of the target to treat bidders equally requires the target to grant equal access to due
diligence, if due diligence access is granted at all. A due diligence review is frequently, but not always,
conducted. Appropriate mechanisms have been developed in practice to organize a due diligence and

to cope with potential market abuse and early disclosure concerns. As the target company is listed on
a Swiss stock exchange and generally has to publish any price sensitive information, financials,
corporate governance information and compensation reports, the access to information by the bidder
within a due diligence is often quite limited. Further limitations arise because the target has to treat
competing bidders equally and therefore must fully disclose the due diligence information to other
bidders in a bidding process. Therefore, a due diligence review is usually limited in scope. It typically
focuses on transaction obstacles, change of control issues, equity compensation schemes and their
impact on the takeover, site visits, reviews of business plans and discussions with management.
The board of directors decides whether or not, and to what extent, a bidder is granted a due diligence
review. Such decision is based on the potential benefit for the target company, taking into account the
effect of the due diligence on the offer price, whether or not the bidder is a competitor of the target
company and the probability of the bidder submitting the offer. The board also takes into account
whether or not there may be competing bidders that are entitled to review the same documents under
the equal treatment rules.
(e) Transaction agreement
If the board of the target comes to the conclusion that a takeover is in the interest of the target and its
shareholders and the bidder is willing to submit a bid, the target and the bidder typically enter into a
transaction agreement. The transaction agreement is signed immediately prior to the start of the offer.
This triggers the obligation on the part of the target company to notify the public of the transaction.
Typically, the following items are covered by the transaction agreement:
• Structure of the transaction (including price, offer conditions and timetable) and content of the
offer documents;
• Obligation of the bidder to submit the offer and of the target board to support it;
• Conduct of business during the offer, including the trading in shares and financial instruments
of the target;
• Conditions for accepting and/or looking for competing bidders;
• Handling of option and other incentive programs;
• Obligation to call an extraordinary shareholders’ meeting of the target company, resignations

from the board of directors of the target company, support regarding regulatory filings and
registration in the shareholders’ register post-acquisition; and
• Confidentiality and communication strategy.
After entering into a transaction agreement, the bidder and the target company, including all of their
subsidiaries, qualify as persons acting in concert with respect to the bid. Accordingly, the target
company and its subsidiaries are subject to the same rules as the bidder (with the exception of the
duty to make an offer). If further parties, such as the main shareholder of the target company, are
acting in concert with the bidder, they should become a party to an agreement that sets out certain
duties, in particular with respect to trading in shares.
There are essentially two ways to effect a takeover. The first is a voluntary or mandatory takeover bid
to the shareholders, be it in the form of a cash offer, a share offer or a mix between the two. The
second is a statutory merger, where the shareholders’ meetings resolve on merging one company into
the other or both companies into a new entity. However, in Switzerland, statutory mergers are rarely
used in takeover situations.

4.1 Voluntary public cash takeover bid

A voluntary cash takeover bid is an offer for the purchase of the shares of a Swiss or foreign company
with a main listing on a Swiss stock exchange addressed publicly to the shareholders of that
company. It needs to be made public through a prospectus. It may be pre-announced through a
published pre-announcement that contains the key elements of the bid. The pre-announcement
triggers the obligation to publish the prospectus within a period of six weeks. The pre-announcement
also has the effect of locking-in the minimum price and requiring the bidder and the target to comply
with the takeover rules. A pre-announcement may be required if a transaction that is not yet fully
prepared leaks or where the bidder needs additional time to prepare certain aspects of the offer.
A public takeover bid may be made for some or all of the shares of the target. A partial offer is
basically irrelevant in the Swiss market. The main reason is that if the partial offer is for a number of
shares that takes the bidder over the 33 1/3% voting rights threshold and the target company has no
opt-out clause in its articles, the offer must be made for 100% of the shares. Additionally, it is
substantially easier and less costly to acquire some blocks of shares in the market rather than submit
a partial takeover bid.
(a) Price rules
The minimum price rules are applicable to a bid for the shares of a company without an opting-out
clause in the articles. An opting-out clause is a clause in the articles of a company that allows it to
exclude the application of the mandatory offer rules to that specific company. The rules require that
the price offered to the shareholders of the target company is at least as high as:
• the highest price paid by the bidder in the 12-month period prior to the launch of the bid.
Purchases of derivatives are taken into account by computing the implied price of the share
underlying the derivative. This means that a control premium must not be paid to a controlling
shareholder whose shares are purchased before the bid is launched. Bidders sometimes try
to circumvent the minimum price rule by having others purchase shares for them. This does,
however, not work as those others are most often deemed to be parties acting in concert with
the bidder (see 3.2(b)); and
• the market price. If a share is sufficiently liquid, the market price equals the 60-trading day
volume weighted average price prior to the launch of the offer. If the shares of the target are
illiquid, the price is determined by valuation, whereby the prices paid at the market have a
particular weight in that valuation.
A bidder also needs to comply with the best price rule. That rule applies from the launch of the offer
until six months after the end of the additional offer period. It applies irrespective of whether there is
an opting-out clause or not. Under the rule, if the bidder purchases shares outside of the offer it needs
to also offer that same price, if higher than the offer price, to all other shareholders. The rule is
particularly dangerous in the following situations:
• Purchases by parties acting in concert with the bidder – The best price rule also applies to
parties acting in concert with the bidder, i.e., violation of the rule by any party acting in concert
with the bidder forces the bidder to increase the offer price. The bidder and all its controlled
and controlling entities are parties acting in concert with the bidder. The same applies to the
target company, its controlled entities and its controlling entities in the case of a pre-agreed
transaction. The bidder must make sure that all such parties fully abide by the best price rule
by giving corresponding instructions internally to their treasury departments.
• Purchasing shares from a major shareholder during the offer to secure the bid and granting
additional rights, e.g., a gross-up right in case of a subsequent improvement of the offer – Any
such additional agreement or right may be regarded as increasing the cash price paid. If that
is the case, the value of the additional right or agreement is assessed by an expert and added

to the cash price paid, which may then result in a violation of the best price rule requiring the
offer price to other shareholders to be increased.
• Engaging in plans to obtain 100% of the shares subsequent to the offer – There are several
ways to squeeze out remaining minority shareholders after the offer. During the applicability of
the best price rule, the bidder needs to be particularly careful not to overpay in subsequent
purchases or squeeze-out transactions.
There is no restriction on the currency that may be offered. However, if a currency other than the
Swiss Franc is offered, the bidder may have to offer any retail investors the opportunity to exchange
the offer price into Swiss Francs at an exchange rate that corresponds to one generally available to
large investors only.
(b) Certainty of funds
The law requires that the bid is audited by a special auditor or review body, which is normally one of
the large audit companies. Among others, they primarily have to confirm that the bidder has taken
those measures that are necessary to ensure that, at the time of settlement of the offer, the necessary
funds are available:
• In a self-financed cash bid, the bidder needs to have sufficient own funds. There is no
requirement to put these funds into escrow although the review body may require this in
certain circumstances. Normally, the review body will look into the cash-flow planning of the
bidder to be comfortable with the use of the funds.
• In a bank financed bid, a mere term sheet is not enough. The full financing documentation
must be available and signed. Until the bid is settled, a so- called “certain funds period”
applies. It limits the conditions precedent and the covenants. Conditions that correspond to
offer conditions are generally admissible. Conditions precedent concerning the existence,
ability to act and change of control of the bidder are admissible as well. Conditions precedent
and covenants that are under the control of the bidder, such as the issue of securities or
compliance with certain obligations under the agreements (pari passu clauses, negative
pledge clauses, etc.) are also allowed during the certain funds period. Even the substantial
deterioration of the bidder’s ability to make payments is accepted.
(c) Offer conditions
The bidder’s offer may be subject to conditions. Conditions are only admissible if:
• it is in the bidder’s interest to set the condition;
• the condition cannot be substantially influenced by the bidder;
• the bidder has made all efforts available to it to fulfil a condition; and
• the condition does not violate any of the general principles of transparency, fairness and
equal treatment.
The last requirement in particular has been used by the TOB to scale back the number of admissible
conditions. In essence, the following conditions are admissible in voluntary bids:
• Minimum acceptance level – For Swiss companies, a company is almost under full control of
a shareholder if 66 2/3% of its shares are owned by one shareholder (see 3.1(a)). Therefore,
this is the acceptance threshold a bidder may set if it starts the bid from zero holding. Of
course, it may provide a substantial benefit to set the level at 90% as this allows for a
squeeze-out merger. However, such a high threshold would require that the bidder holds
about 60% of the target shares already before the offer is launched.

• Material adverse change clauses – material adverse change clauses need to list major
consequences to be acceptable, e.g., a 5% reduction in turnover, a 10% reduction in EBIT or
EBITDA and a 10% reduction in equity. The trigger event may either be a future event or an
unknown past event.
• Approvals by authorities – This normally concerns the approval of competition law authorities
as well as approvals by authorities that regulate the particular industry of the target, be it in
Switzerland or abroad. Typically, one should specifically name these approvals rather than
refer to them in general.
• No prohibition of the offer – Normally, bidders include a condition that the offer or its
settlement has not been prohibited by any court.
• Amendments to articles of incorporation – A bidder must make sure that it controls the target
company after the offer. Therefore, a bidder will usually put the offer subject to the removal of
any transfer restrictions and voting right restrictions in the articles.
• Entry in the shareholders’ register – To acquire the shares and to be allowed to vote the
shares, a bidder needs to be registered with all voting rights in the shareholders’ register.
Therefore, a bidder will normally make its bid under the condition that the board has approved
the registration of the bidder’s shares with voting rights in the shareholders’ register.
• Control over the board – Subsequent to the offer, a bidder may wish to fully control the target
company. The bidder may therefore ask that the current board members step down as per the
settlement and that new board members are elected subject to the settlement. The alternative
is that sufficient current board members sign agreements with the bidder under which they are
obligated to follow the bidder’s instructions.
• No structural changes – A bidder may also include a condition that aims to limit actions taken
by the shareholders’ meeting of the target. This includes, for example, open or hidden
distributions or disposals of more than 10% of the assets or that influence EBITDA by more
than 10%, mergers, demergers, capital increases, new transfer or voting right restrictions.
The first two conditions only last until the end of the offer period, while the other conditions last until
the settlement of the offer, if so provided for in the prospectus. Normally, a bidder will provide that the
settlement may be postponed if competition authority clearance has not been obtained. A
postponement period of up to four months is the most common period agreed to by the TOB. A bidder
will usually provide that it is entitled to waive conditions partly or entirely.
4.2 Voluntary public exchange or mixed offer

Instead of cash, a bidder may offer shares or a mix thereof. Mix-and-match offers are also admissible.
The offered shares do not have to be listed shares. There are a number of particularities to be taken
into account when offering anything other than pure cash:
(a) Price rules
The minimum price rules and the best price rule apply as well. If the shares are listed and sufficiently
liquid then the bidder can use the 60-trading day volume weighted average price of the shares offered
to comply with the minimum price rules. If that is not the case, they need to be valued by the special
auditor. For compliance with the best price rule, the value of the offered shares at the moment the
agreement to exchange shares is entered into is relevant.
In case of a partial or full exchange offer, there are two additional price rules which must be complied
with:

• Pre-offer cash purchases rule – If during the 12-month period before launching the bid, the
bidder purchases 10% or more of the equity capital of the company with cash, it is under an
obligation to offer a full cash alternative. That cash alternative may be lower than the share
alternative as long as it complies with the minimum price rules. The pre-offer cash purchases
rule does not apply if the target’s articles contain a so-called opting-out clause.
• Pending offer cash purchases rule – If, during a bid, the bidder purchases shares for cash, it
needs to offer a full cash alternative. Again, that cash alternative may be lower than the share
alternative as long as it complies with the minimum price rules.
(b) Certainty of funds
Certainty of funds in exchange offers or for the shares part in mixed offers means that the bidder must
have taken the necessary measures to ensure that the required shares can be created. These
measures must not have been taken before the bid is launched, but the review body needs to be
satisfied that the plans to take those steps are such that they are going to be implemented in time.
(c) Offer conditions
The following are typical additional offer conditions in exchange or mixed offers:
• Shareholders’ meeting to approve the issue of new bidder shares – In some cases, the board
of the bidder has the necessary powers to resolve to issue shares to the target’s
shareholders. However, a shareholders’ meeting of the bidder may also be required. The
approval by the bidder’s shareholders may be set as a condition of the exchange or mixed
offer.
• Registration and listing of newly issued shares, approval of issue prospectus and admission
to trading – Depending on the origin of the bidder, certain measures may need to be taken
and approvals sought so that the bidder’s shares can be admitted to trading on a stock
exchange. It is admissible to set the granting of these approvals as conditions for the
exchange or mixed offer.
4.3 Mandatory offer rules

A shareholder is obligated to submit a mandatory offer if it crosses the 33 1/3% threshold, or a higher
threshold if there is an opting-up clause in the target company’s articles. An opting-up clause is a
clause in the articles of a company which moves the mandatory offer threshold to a level not greater
than 49%. No obligation to submit a mandatory offer exists if the articles of the target company
provide for an opting-out clause as in this case the mandatory offer rules do not apply to the relevant
company. There are no creeper rules.
There are a number of exemptions from the obligation to submit a mandatory bid. For example, if
shareholders form a group to coordinate a sale of their shares rather than to control a company, they
may obtain an exemption even if they have crossed the requisite threshold for making a mandatory
offer. There are various other situations in which an exemption may be sought. In each case, the
exemption must be obtained before entering into the particular transaction. The TOB is responsible for
approving any exemptions.
All shares held by a shareholder, directly or indirectly, or in a group together with others, are
aggregated to determine whether or not the mandatory offer threshold has been crossed. A group of
shareholders exists if shareholders act together and coordinate their actions with respect to controlling
a company. This goes beyond mere discussions with a view to a shareholders’ meeting. The
boundaries are quite vaguely defined and the TOB looks at each case individually. Therefore, it is
important to enter into an agreement early on if there is an intention to coordinate actions in order to
avoid triggering the offer threshold.

If a shareholder is under an obligation to submit a mandatory bid, there are some special rules to be
observed:
• Extent of the offer – The offer must be made to all shareholders holding listed equity
securities;
• Price rules – The bidder may offer shares, but is under an obligation to offer a full cash
alternative to the target’s shareholders; and
• Conditions – The offer conditions are more limited. Acceptance thresholds do not apply and
material adverse change clauses are inadmissible. Conditions that require control to be
obtained are admissible.
The typical practice in Switzerland is to buy shares up to 33 1/3% or slightly below and then, when the
price rules allow for a low offer price, to cross the threshold and submit an offer at the minimum price.
By doing so, the bidder just crosses the mandatory offer threshold but only acquires a few shares.
After the expiry of the best price rule, the bidder is free to buy as many shares as it wishes in the
market without the obligation to submit another bid.
4.4 Duties of the board of directors

Under Swiss law, the board of directors is not the shareholders’ agent, but only has responsibility
towards the company. It has to act solely in the company’s interests. This principle becomes slightly
modified in a public takeover scenario:
• The board needs to comment on the bid and, in particular, to consider the bid from the
perspective of the shareholders. If it recommends accepting or not accepting the bid, such
recommendation has to be made from the shareholders’ perspective and not the target
company’s perspective. Instead of giving a recommendation, the board may also simply list
the advantages and disadvantages of the bid. The report of the board needs be true and
complete. If a fairness opinion is obtained, it needs to be obtained from an independent and
appropriately qualified provider.
• If, due to the situation of the company, it is necessary for the board of directors to sell the
target company or where the sale of the company becomes inevitable, the board’s duties shift
more towards the shareholders. The board is now under an obligation to maximize the price,
but is not obligated to arrange for a bidding competition.
Within the framework described, there is no difference between the duties of the board in a hostile
offer or in a recommended offer. The only difference is at the beginning of an approach when a bidder
may contact the board with a high indicative price, which motivates the board to allow such bidder to
conduct due diligence. If the board does so, the bidder may, subsequent to the due diligence, try to
renegotiate a lower offer price. That creates a difficult situation for the board as, in many instances,
the only way to control a takeover bid is by not allowing a due diligence. Thus, the board should, prior
to allowing a due diligence to take place, already be thinking about its duty to obtain a high offer price
and to try to secure that price before allowing a due diligence.
Aside from the above obligations, there are a number of further duties of the board of directors that
apply after the launch of the takeover bid. In particular, the board of directors must treat all bidders
equally, which has an impact on granting access to due diligence and paying break fees. The board
must report defense actions it intends to take and is barred from taking certain defense measures, in
particular those that entail a substantial change to the company’s capital structure, the remuneration
of directors or the business of the target company.
4.5 Mergers
A takeover may also be effected through a statutory merger, where either:

• the two companies involved form a new entity and combine into that entity; or
• one company survives and takes over all the assets and liabilities of the other company by
granting the other company’s shareholders shares in the surviving entity.
Those transactions are possible both within Switzerland and, if the foreign law allows, cross-border.
Cross-border mergers often pose a challenge because one needs to properly consider all applicable
laws and be aware of the risk of undesired tax consequences. In pure Swiss transactions statutory
mergers are uncommon. The disadvantage of the merger is that shareholders have appraisal rights,
i.e., they may dispute the exchange ratio offered relating to the merger. Although the success rate of
shareholders that have asked for an appraisal is very low, that right nevertheless leads to uncertainty
that may last for quite a while. In addition, offering only cash requires a super-majority of 90%. As a
consequence, such mergers are much less common than public takeover bids.
5 Timeline
The table below sets out a typical timeline for a friendly public takeover bid in Switzerland. It includes
the major steps only and may vary a lot. It applies to both purchase and exchange bids as well as
combinations thereof. Mergers proceed on a different timeline and are not discussed further here.
Step Timing (in trading days)
Personal preparation: extent of personal preparation depends

on necessity and takeover tactics
Contacting target company and entering into confidentiality and

standstill agreement
Preparation of the offer: T-30 to T-1

• due diligence
• financing documentation
• transaction documents
• ensuring immediate control after the takeover
• approval process with the special auditor (review body)
• approval process with the TOB
Final steps before the offer: T-1

• entering into transaction agreement
• entering into financing documentation
• ruling of the TOB
Publication of the offer prospectus, including the board report as T0

part of the prospectus
Cooling-off period T1 – T10
Offer period of 20 trading days T11 – T30
Preliminary interim results T31
Final interim results T34
Additional offer period of 10 trading days T35 – T44

Step Timing (in trading days)
Preliminary end results T45
Final end results T46
Settlement of the offer T54
Start of court proceedings for squeezing out minorities T104
Application regarding delisting and waiver of disclosure rules T105
End of squeeze-out proceedings and delisting T224
A competing bid may change the timeline. Such a bid needs to be published until the last trading day
of the offer period. The offer period of the competing bid ends on the same day as the first bid.
However, if that would lead to an offer period shorter than 10 trading days, the offer period of the first
bid is extended. Both bids may subsequently be amended. Any such changes need to be published
five days before the end of the offer period at the latest. Starting from the publication date of the
revised offer, the offer period needs to remain open for an additional term of 10 trading days.
Set out below is an overview of the main steps for a friendly public takeover in Switzerland.

Friendly public takeover (indicative timeline)
Start
process T-1 T T + 11 T + 30 T + 31 T + 34 T + 35 T + 44 T + 45 T + 46 T + 54 T + 104 T + 105 T + 224
Final steps before Publication of Start of offer End of offer Preliminary Final interim Start of End of Preliminary end Final end Settlement of Start of court Application for End of
offer: offer period period interim results results additional offer additional offer results results offer proceedings for delisting and squeeze-out
prospectus, period period squeeze-out waiver of and delisting
including board disclosure rules
• Enter into
report
transaction
agreement and
financing
agreement
• Publication of pre-
announcement
• Ruling of the
Takeover Board
Cooling-off 20 trading days 10 trading days

period (10
trading days)

6 Takeover Tactics
A bidder should observe two simple rules for a successful takeover in Switzerland:
• move quickly as soon as it contacts the target or publishes the bid; and
• offer a fair and reasonable price.
6.1 Acting on a fast timeline

(a) Preparation before contacting the target
• By far the biggest risk in a public takeover is a competing bid. The bidder may either lose out
to a competing bid or risk overpaying if the price is driven up by a competing bidder.
Normally, the competing bidder will need several weeks to assess the bidding opportunity. As
seen in the timeline above, the tightest (normal) timeline gives a competing bidder a window
of 30 trading days, or roughly six weeks, to publish the competing bid. Under normal
circumstances, this is not sufficient to assess and launch a competing bid, which needs to be
published at the end of the offer period of the first bid. However, a 10-week window may just
be enough. These four weeks may make the difference.
• The bidder should always be aware that the target company’s board may not be primarily
interested in organizing a bidding competition. In fact, the board may wish to avoid a takeover
bid entirely. Unfortunately, this knowledge does not help a lot. It just means that one should
only present a takeover bid as unavoidable to the target company once one has done all the
home work. If a bidder can persuade a target company that a takeover is unavoidable, the
board’s reluctance to accept a takeover bid may fade away. However, this does not mean that
they will now full-heartedly welcome the bidder, rather that they may wish to organize a
bidding competition since their interest is now to obtain the best price for the shareholders.
• Ultimately, the conclusion is that a bidder should confidentially prepare the bid and proceed
with the due diligence based on publicly available information without disclosing any takeover
intentions to the target. In certain instances, it may be appropriate to begin discussions with
the target to get an impression of its position regarding a business combination. A bidder
should present a proposal to the target only after the bidder is fully prepared.
• Discretely preparing a bid is also sensible to avoid the application of the “put up or shut up”
rule, which may require certain decisions to be made before the bidder is ready. Under this
rule, the bidder could be forced to either submit a bid or refrain from doing so for a period of
six months. The rule will only apply where there is confusion in the market as a result of
speculative comments by the possible bidder. Therefore, as long as the bidder remains
entirely silent or announces its intentions in the correct way, the risk that the “put up or shut
up” rule applies is reduced.
(b) Use of standard and safe approaches increases speed
Speed may also be jeopardized by employing risky approaches, such as earn-out structures for major
shareholders that sell before the public takeover or put- and call-option structures for management in
an MBO if management has also committed to sell shares. Such structures are not prohibited, but
they are more prone to challenges which may slowdown or hinder the efficient execution of the
transaction.
(c) Be wary of target companies taking away control over the bid
When approaching a target, it is important to put a confidentiality agreement in place as soon as

possible (see 3.2(c)(i)). Target companies often try to add a standstill clause into a confidentiality

agreement and a clause that prevents the submission of the bid without the target’s consent or
attempts to lock in a certain price. A bidder should be wary of such attempts:
• A bidder should try to avoid the consent clause and the price clause, although their
effectiveness is limited. Once a bid is submitted to the shareholders, the bidder is bound and
it is irrelevant if it was made in violation of the consent clause. Locking in the price only works
effectively if the agreement is set up such that it works in favor of the shareholders and gives
them the right to enforce the agreement directly.
• The standstill clause on the other hand is most often acceptable, for the following reasons:
o Stake building is possible as long as the target has not been contacted, since Swiss
laws allow the bidder to trade based on the information that it intends to submit a
takeover bid. However, trading target shares based on the knowledge that the target
board is receptive of the bid or based on other price relevant information is not
allowed. This needs to be factored in if the bidder wishes to purchase a stake shortly
before the offer is launched. Such purchase is allowed as long as it does not exploit
price sensitive information.
o In addition to the limitations imposed by insider trading, stake building is also limited
by disclosure obligations (see 3.2(b)). Therefore, unless one or several large blocks
can be purchased, stake building prior to the launching of the bid is not helpful.
However, if a large stake can be purchased, the uncertainty in the takeover bid can
often be removed and speed becomes less of a factor.
(d) Hostile approaches
Switzerland has seen a number of hostile bids, some ending in favor of the bidder, some in favor of a
competing bidder. Typically, the target company was only successful in defending against a hostile
bid when the price was insufficient. Hostile bids can be successful in Switzerland, but there are also
some drawbacks:
• Generally, hostile bids are not well received in the Swiss business community. This
reputational issue needs to be considered carefully, particularly with respect to the
employees. Nevertheless, many bidders have been able to properly manage the risks
entailed, profiting from the fact that while the Swiss business community does not like a
hostile approach, it also dislikes a defensive battle.
• In the case of a bid that is not discussed in advance with the target company, it is not possible
to get pre- approval from the TOB.
• In certain instances, shareholders will have to vote on removing transfer or voting right
restrictions to enable the bid. A shareholders’ meeting is called by the board or possibly upon
the request of shareholders holding a specified number of shares. If the offer is submitted for
such company, the board may refuse to call the shareholders’ meeting and, in such case, a
shareholder with a sufficient holding of shares may have to go to court to force a
shareholders’ meeting to be called. However, the likelihood of the board refusing to call a
shareholders’ meeting in case of an offer with a good price is rather low, particularly as there
is risk of both negative publicity and liability towards shareholders.

6.2 Paying a fair and reasonable price

Besides the necessity of speed, offering a fair and reasonable price is the second principle to
observe. A bidder will also wish to avoid overpaying and so it is important to look into aspects that
help to determine the price:
• The support of the board – For a board, it is extremely difficult to defend a company against a
takeover bid if the price is good. Any board will have to consider what happens if it becomes
public that a good price was confidentially made and the shareholders learn that the board did
not support the offer. In many instances, a board will also not be inclined to engage in a
bidding process as this inevitably means that independence is lost and there is a good chance
of a leak. The board will therefore have a tendency to defend the target company by
explaining that its own strategy, if valued properly, will beat the price offered by the bidder.
• The ordinary shareholders’ votes – To control a company, it is often sufficient to get across
the 50% threshold or even obtain fewer shares (see 3.1(a)). In particular, by crossing the 50%
threshold, the bidder may elect all the directors and executives, and determine strategy and
daily management. It may freely decide to take the company private. Experience shows that if
the bidder gets a majority of the shares tendered during the offer period, it also gets across at
least the two-thirds super majority line in the additional offer period. The shareholders
tendering are then not interested in remaining in a delisted company ruled by one large
shareholder who provides only minimal information. Many shareholders, such as investment
funds, may not even stay invested in the stock. To get across the 50% threshold, a bidder
only needs to offer a price that is acceptable to 50% of the shareholders.
• Super majority shareholders’ votes – In certain instances, the success of the public takeover
requires the removal of transfer restrictions or of voting rights restrictions. A number of Swiss
companies limit the voting rights of shareholders that hold more than a certain percentage of
shares. The bid is then made conditional on a shareholder vote to remove these restrictions.
According to the law, the removal of such restrictions only requires a simple majority approval.
However, the restrictions themselves may operate such that more than a simple majority of
shareholders is required. Additionally, a number of companies provide that a super majority
needs to approve the removal of those limiting clauses. Therefore, in case of a target
company with these restrictions, the price offered by the bidder needs to accommodate the
majority required to remove the limiting clauses.
6.3 Alternative tactics

Besides the two basic principles – speed and price – bidders often think about applying other deal
protection methods, such as agreeing on exclusivity, break fees or tender agreements with larger
shareholders. These techniques work to a certain extent, but are generally not very effective. Taking
each of these in turn:
• Exclusivity – Exclusivity does not protect against a better competing offer. If the target
company receives a proposal with a better offer price, the board is under a fiduciary duty to
enter into discussions with the competing bidder and allow due diligence to the extent granted
to the first bidder.
• Break fees – Break fees may cover costs, but nothing more. Otherwise, they are in conflict
with the fiduciary duties of the board. Additionally, as all bidders need to be treated equally,
break fees must be offered to all bidders and not just the first bidder.
• Tender agreements – Tender agreements are valuable in making sure that larger
shareholders do not jeopardize a transaction. However, they become ineffective as soon as a
competing bid is published. Any shareholder may then freely choose between the competing
bids and may even withdraw tenders already made, irrespective of any tender agreements.

One needs to be careful with voting agreements and other arrangements with existing shareholders.
Such agreements may make the contracting party a party acting in concert with the bidder. Therefore,
their behavior is fully attributed to the bidder and may trigger a number of disclosures. In the worst
case, the bidder may be forced to submit a mandatory bid (see 4.3).
6.4 Defense mechanisms employed

The above also illustrates the defense mechanisms employed by Swiss companies. There are usually
no hard defense mechanisms in place, such as the right of a related company to purchase substantial
assets of the target company.
Usually, defense mechanisms, such as voting rights or transfer restrictions, limitations on deselecting
the board, etc., may be removed by a majority or a super-majority vote. The difficulty with these
clauses is that if the board vigorously defends the company, a bidder needs to factor in the time
required to enforce the calling of a shareholders’ meeting in the courts. That may take between three
and eight months. The bidder also needs to make sure that there are larger shareholders supporting
the bid and willing to take the appropriate court actions, unless the bidder has already purchased
sufficient shares to request a shareholders’ meeting. The defense of Swiss companies therefore
works on the level of reputation and the fear that a bid may be delayed by court proceedings or
otherwise.

Takeover
7.1 In general
If, following the takeover bid, the bidder (together with the persons acting in concert) does not hold
100% of the target company, there are several options available in order to achieve full control over
the target company. These options depend on the stake in the target company that the bidder was
able to acquire.
7.2 Ordinary squeeze-out

If the bidder has acquired a shareholding of more than 98% of the voting rights in the target, it may,
within three months after the end of the additional offer period, initiate court proceedings to cancel the
equity securities held by the remaining public shareholders. In the course of the proceeding, the
shares of the minority shareholders are cancelled and reissued to the bidder against payment of the
offer price or fulfilment of the exchange offer in favor of the minority shareholders whose shares are
cancelled. The offer price is not re-evaluated. The cancellation proceedings can be finalized within 4-
12 months after they have been initiated.
There is a risk that a delisting of the target company before the end of the ordinary squeeze-out bars
the bidder from claiming the squeeze-out. Therefore, bidders usually delay the delisting until the end
of the squeeze-out.
7.3 Squeeze-out merger

If the bidder has acquired at least 90% of the voting rights in the target company, it may conduct a
squeeze-out merger in which the target company is either merged into the bidder or one of its
affiliates. When determining the cash payment to the minority shareholders, the bidder has to observe
the best price rule if the merger contract is entered into within six months after the end of the
additional offer period. Therefore, a squeeze-out merger will, in practice, rarely take place before the
end of this six-month period. Furthermore, the fairness of the cash payment to be made following the
squeeze-out merger is subject to court review if such a review is requested by a minority shareholder.
The delisting process with regard to the target company can be initiated in parallel to the squeeze-out
preparations, and a delisting can take place concurrently with the completion of the merger.

7.4 Asset deal

In case the bidder acquired more than 66 2/3% of the voting rights in the target, it may convene an
extraordinary shareholders’ meeting of the target and resolve on an asset deal which leads to the
liquidation of the target. It is crucial to review the potential tax consequences of an asset deal in detail.
While it is likely that the transaction can be structured in a tax efficient way from the perspective of the
bidder, this will not necessarily be possible for the remaining minority shareholders.
8 Delisting
The delisting of the target company requires a resolution of its board of directors and an application to
the stock exchange. The delisting procedure is initiated by filing an application with the relevant stock
exchange at least 20 trading days prior to the announcement of the delisting. The time from the
announcement of the delisting and the last trading day is fixed by the relevant exchange and is
between three and 12 months. If the announcement of the intention to delist the target company is
made in the offer prospectus, the term between the official announcement of the delisting and the
effective delisting is usually shortened to five trading days.

Matthias Courvoisier, Philip Spoerlé and Yves Mauchle in the Zurich office are the most appropriate
contacts within Baker McKenzie for inquiries about public M&A in Switzerland.
Matthias Courvoisier Philip Spoerlé

Zurich Zurich
matthias.courvoisier@bakermckenzie.com philip.spoerle@bakermckenzie.com
+41 44 384 13 40 +41 44 384 14 96
Yves Mauchle
Zurich
yves.mauchle@bakermckenzie.com
+41 44 384 14 12

Taiwan
1 Overview
The public M&A market in Taiwan has continued to be active over the last few years. The major
players, however, have shifted from multinational companies to local Taiwanese and PRC-based
companies. Most of the high profile public M&A deals in the market relate to companies in the
technology and financial industries. A tender offer followed by a cash merger or a share swap is one
of the most commonly used transaction structures with respect to public M&A in Taiwan. Although
tender offers may be used to accomplish hostile takeovers in other jurisdictions, given that hostile
takeovers are historically rare in Taiwan, tender offers are usually used as a friendly takeover tool
here. Nevertheless, a few acquirers have recently tried to accomplish hostile takeovers through a
tender offer. Their takeover tactics and the anti-takeover defenses adopted by the target drew a large
amount of attention in the market and similar transactions are expected to appear in the future.

The main rules and principles of Taiwan’s law relating to public M&A can be found in:
• The Securities Exchange Law (“SEL”);
• The Company Act;
• The Business Mergers And Acquisitions Act (“M&A Act”);
• The Financial Institutions Merger Act; and
• Regulations Governing Tender Offers for Purchase of the Securities of a Public Company
(“Tender Offer Regulations”).
Existing shares of a company listed on the Taiwan Stock Exchange (“TSE”) or the Taipei Exchange
(“TPEx”) can be purchased by regular trading in the market during trading hours, odd-lot trading, after-
hour fixed-price trading, block trading, auction, and tender offer. One may also subscribe for new
shares of these listed companies by public offering and private placement.
While acquisition of the shares of a TSE- or TPEx-listed company through a securities exchange is
feasible, an acquisition of 20% or more shares of a public company within 50 days can only be carried
out through a tender offer. Article 43-1 of the SEL and the Tender Offer Regulations are the main
legislative provisions relating to public takeovers. The Tender Offer Regulations prescribe the
circumstances under which a buyer can make a tender offer and provide the related regulations to
conduct it.
The offeror may launch a tender offer to acquire up to 100% of the shares of a public company and
thus bypass the TSE or TPEx, but they may be conducted only after the tender offer has been
reported to the Financial Supervisory Commission of Taiwan (“FSC”) and publicly announced (see
2.3).
Alternatively, a company may acquire 100% of the outstanding shares of a target public company by
issuing new shares, cash, or other assets pursuant to Article 29 of the M&A Act, and the target
company will become a 100% held subsidiary company of the acquiring company.
In addition to a share purchase deal, under Article 316 of the Company Law and Articles 18-21 of the
M&A Act it is possible to effect a statutory merger of two companies limited by shares regardless of
whether they are public companies or not. The surviving company can either be one of the existing

companies or it may be a new company. In either case, the existing company or the new company
after the statutory merger must be a company limited by shares.
The Financial Institutions Merger Act governs mergers between banking enterprises, securities and
futures enterprises, institutions covered by the insurance enterprise and other institutions approved by
the competent authority.

Except for certain specific sensitive activities as listed below, foreign investments are generally not
restricted in Taiwan but are subject to the prior approval from the Investment Commission of Taiwan if
a foreign investor wants to acquire 10% or more of the shares of a Taiwan listed company. The
approval must be obtained before the final completion of the transaction.
The following are considered sensitive activities:
• activities likely to jeopardize public order, public safety or national defense interests
• activities relating to research, manufacture or sale of arms or weapons, munitions, explosive

powder or other explosive substances
• operation of transportation networks and services
• operation of an establishment that is strategic to Taiwan national defense
• protection of public health

While the aforementioned legislation contains the main legal framework for public M&A in Taiwan,
there are a number of additional laws and regulations that are to be taken into account, such as:
(a) Article 22-2 and 25 of the SEL relating to the disclosure of significant shareholdings in listed
companies;
(b) Article 157-1 and 155 of the SEL relating to insider trading and market manipulation;
(c) “Regulations Governing Information to be Published in Tender Offer Prospectuses” relating to

the prospectus to be published when there is an offer of securities to the public;
(d) The general rules on the supervision and control of the financial markets; and
discussed further herein.
2.4 Supervision and enforcement by the Financial Supervisory Commission

of Taiwan
Tender offers are subject to supervision and control by the FSC. The FSC is the principal securities
regulator in Taiwan. It promulgates regulations pursuant to the SEL that pertain to public companies,
i.e., those companies which have been approved by the FSC to publicly issue their shares and listed
companies on the TSE or the TPEx. The objective of the FSC regulations is to prevent the abuse of
listing rules and the circumvention of initial public offering requirements. The regulations provide
guidelines for mergers between listed companies as well as mergers between private companies and
listed companies.
The FSC has a number of legal tools that it can use to supervise and enforce compliance with the
tender offers rules, including administrative fines. In addition, criminal penalties could be imposed by
the courts in the case of non-compliance.

The following general principles apply to public takeovers in Taiwan. These regulations are provided
in the SEL and Tender Offer Regulations:
(a) In order to treat all shareholders equally, a tender offeror shall offer the same consideration as
well as other terms and conditions to all shareholders in the tender offer, and may not modify
the acquisition conditions, except for raising the offer price, changing the maximum number of
shares to be acquired and extending of the tender offer period. Moreover, the tender offeror
may not enter into an agreement or covenant with a shareholder of the target company
entitling such shareholder to any special rights as a result of the shareholder’s participation in
the tender offer.
(b) After receiving tender offer documents from the offeror, the target company shall promptly
form a review committee to conduct a review and to comment on the fairness and
reasonableness of the tender offer conditions, and then publicly announce the results of such
review within 10 days to enable the shareholders of the target company to decide on the offer.
(c) A tender offeror shall report to the FSC and announce the tender offer, together with related
documents, prior to the commencement date of the tender offer. If approvals or effective
registration with the FSC or any other competent government authority is required, the filing
documents shall be reviewed by an attorney, and a lawfully prepared attorney’s opinion shall
be provided. The tender offeror shall report to the FSC and publicly announce the result of the
tender offer within two days after the tender offer period expires.
(d) During the period from the determination date of a tender offer to the reporting and public
announcement date(s), any person who becomes aware of any information relating to that
tender offer due to their professional duties or for any other reasons shall keep such
information confidential.

The current Tender Offer Regulations were amended in December 2015 and we do not foresee any
material reform to takeover regulation in Taiwan in the near future.
3 Before A Tender Offer

levels of shareholding within a Taiwan listed corporation:
Shareholding Rights
One share • The right to attend and vote at general shareholders’

meetings.
• If the board of directors decides, by resolution to commit any
act in violation of any law, regulation or the company’s articles
of incorporation, any shareholder who has continuously held
shares of the company for at least one year may request the
board of directors to discontinue such act.

Shareholding Rights
1% • The ability to nominate the candidates for directors.

• The right to propose an agenda item in the annual general
3% • The ability to institute a lawsuit for a judgment to discharge the

director who has, in the course of performing their duties,
committed any act resulting in material damages to the
company or in serious violation of applicable laws and/or
regulations.
• The ability to convene a shareholders’ meeting after obtaining
an approval from the competent authority when the board of
directors fails or cannot convene a shareholders’ meeting on
account of share transfer or any other causes.
3%, continuously held for The ability to apply to the court for inspection of the company’s
at least six months business and property when it is deemed necessary in view of the
state of the company’s property.
3%, continuously held for • The right to request the board of directors to call a special
at least one year shareholders’ meeting by filing a written proposal.
• The right to request in writing for the supervisor(s) of the
company to institute, for the company, an action against a
director of the company.
• The right to apply to the court for appointment of an inspector
to inspect the current status of business operations, the
financial accounts and the property of the company.
• The ability to apply to the court for removal of the liquidator.
10%, continuously held • The right to apply to the court for reorganization in the event
for at least six months that a company which publicly issues shares or corporate
bonds suspends its business due to financial difficulty or there
is a perceived risk of suspension but with the possibility for the
company to be reconstructed or rehabilitated.
• The right to apply to the court for a ruling for the dissolution of
the company in the event of an apparent difficulty in the
operation of a company or serious damage.
50%, continuously held The right to call for a shareholders’ meeting of the company.
for at least three months

Taiwanese law contains a number of rules that already apply before a tender offer is announced.
These rules impose restrictions and hurdles in relation to prior stake building by a tender offeror. The
main restrictions and hurdles have been summarized below. Some careful planning is therefore
necessary if a candidate tender offeror intends to start up a process that is to lead towards a tender
offer.

Before, during and after a tender offer, the normal rules regarding insider trading and market abuse
remain applicable. For further information on the rules on insider trading and market abuse (see 6.2).
The rules include, among other things, that manipulation of the target’s stock price, e.g., by creating
misleading rumors is prohibited. In addition, the rules on the prohibition of insider trading prevent a
potential tender offeror that has inside information regarding a target company from launching a
tender offer.

tender offer.
Pursuant to these rules, if a potential tender offeror starts building up a stake in the target company, it
will be obliged to announce its stake if the voting rights attached to its stake have passed an
applicable disclosure threshold. The relevant disclosure threshold in Taiwan is 10%. Listed companies
are required to disclose to the market the identity and the shareholding of any shareholder who owns
a 10% stake thereof on a monthly basis.
When determining whether a threshold has been passed, a potential tender offeror must also take into
account the voting securities held by the parties with whom it acts in concert (see 3.9). The parties
could also include existing shareholders of the target company with whom the potential tender offeror
has entered into specific arrangements.

transparency. These rules include that a company must immediately announce all material
information. For further information on material information, see 6.1 below.
3.6 Announcements of a tender offer

According to the Tender Offer Regulations, no one can launch a tender offer before submitting a
tender offer report to the FSC and making a public announcement. The tender offeror shall not make
an announcement on the proposed tender offer before submitting the tender offer report to the FSC.

Under Taiwanese law, the disclosure of material information shall follow the Taiwan Stock Exchange
Corporation Procedures for Verification and Disclosure of Material Information of Companies with
Listed Securities and the Taipei Exchange Procedures for Verification and Disclosure of Material
Information of Companies with TPEx Listed Securities. There is no early disclosure requirement
specifically designed for the tender offer, and there is no sanction mechanism to force a person to
make an announcement as to whether or not they intend to carry out a tender offer. This is also
known as the put-up or shut-up mechanism.
3.8 Due diligence

The tender offer rules in Taiwan do not prohibit a prior due diligence from being organized. In practice,
after the tender offeror and the major shareholders of the target company reach a certain consensus
on the sales of shares, the major shareholder will usually procure the target company to allow a prior
due diligence or pre-acquisition review by the tender offeror. Due to the potential risk that the tender
offeror may obtain insider information before the tender offer is made, such due diligence is usually
done for the purpose of confirming the publicly disclosed information.


With respect to the Taiwanese tender offer rules, persons “act in concert” if they acquire the shares of
the target company for a common purpose by means of a contract, agreement, or other form of
meeting of minds.
There are two main forms of tender offers in Taiwan:
• a voluntary tender offer – a person voluntarily makes an offer for the securities issued by the
target company bypassing the TSE or the TPEx; and
• a mandatory tender offer under the SEL – triggered as soon as any person, whether acting
independently or in conjunction with another person or persons, intends to acquire 20% or
more of the total issued and outstanding shares of a public company within a period of 50
calendar days.

• The tender offeror is free to purchase the securities of a public company bypassing the TSE
or the TPEx only after the tender offer has been reported to the FSC and publicly announced,
except under the following circumstances:
o The number of securities proposed for tender offer by the tender offeror plus the total
number of securities of the public company already obtained by the tender offeror and
its related parties do not exceed 5% of the total number of voting shares issued by
the public company.
o The securities purchased by the tender offeror through the tender offer are securities
of a company of which the tender offeror holds more than 50% of the issued voting
shares.
o Other circumstances in conformity with the regulations prescribed by the FSC.
• The tender offeror is, in principle, free to determine the price and form of consideration offered
to the target shareholders:
• The form of the consideration may be cash or non-cash within the following scope:
(i) Domestic securities that are either TSE or TPEx listed pursuant to the provisions of
the SEL. The scope of foreign securities eligible as consideration shall be as
separately prescribed by the FSC.
(ii) If the tender offeror is a public company, stocks or bonds offered and issued thereby.
If the tender offeror is a foreign company, the range of stocks or bonds offered and
issued that are eligible as consideration shall be as separately prescribed by the FSC.
(iii) Other property of a tender offeror – The tender offeror may decide the offer price at its
discretion. However, the tender offeror shall include an appraisal by an independent
expert of the reasonableness of the cash price calculation or share exchange ratio of
the tender offer consideration in the prospectus.

• A mandatory tender offer is triggered as soon as any person, whether acting independently or
in conjunction with another person or persons, intends to acquire 20% or more of the total
issued and outstanding shares of a public company within a period of 50 calendar days.

• The main exceptions to the mandatory tender offer obligation include the situations where:
o The transfer of shares is between related parties.
o Shares obtained are under the Taiwan Stock Exchange Corporation Regulations
Governing Auction of Listed Securities by Consignment.
o Shares obtained are under the Taiwan Stock Exchange Corporation Rules Governing
Purchase of Listed Securities by On-Market Tender Offer or under the Taipei
Exchange Rules Governing Purchase of OTC Securities by On-market Tender Offer.
o Shares are obtained by designated persons satisfying the qualifications prescribed by

the competent authority which is formerly held by the directors, supervisors,
managerial officers, or shareholders holding more than 10% of the total shares of the
target company.
o Implementing a share exchange under the Company Act, Article 156, paragraph 6, or
under the Business Mergers and Acquisitions Act, in which new shares are issued to
serve as the consideration for acquiring the shares of another public company.
o Other conditions in conformity with FSC regulations.
case of a voluntary tender offer.
5 Timeline
As a general rule, the tender offer process for a mandatory tender offer is the same as the process
that applies to a voluntary tender offer.
The table below contains a summarized overview of the main steps of a typical tender offer process
under Taiwanese law.
Step
• Preparation of the tender offer by the tender offeror (study, due diligence, financing,
draft prospectus).
• The tender offeror approaches the target and/or its key shareholders.
• The tender offeror engages a tender offer agent, which is usually a securities firm.
2. Launching of the tender offer:

The tender offeror files the tender offer report with the FSC, TSE, Taiwan Depository and Clearing
Corporation and the target. The filing must contain the tender offer prospectus, legal opinion from
local counsel, tender offer agent service agreement, and fairness opinion on the tender offer price.
3. After receipt of the tender offeror’s tender offer report, the board of the target must form a
review committee comprised of independent directors to provide a recommendation to
shareholders. Such recommendation should be announced by the target within 10 calendar
days after receipt of the report.
4. Public announcement regarding achievement of minimum acceptance threshold.

Step
5. Public announcement and report to the FSC on completion of the tender offer within two
days after tender offer period expires.
6. Payment of the offered consideration by the tender offeror (as per the announcement on
completion of tender offer).
Set out below is an overview of the main steps for a mandatory tender offer in Taiwan.

Mandatory tender offer (indicative timeline)
Start
process A Day A + 15 X Day A + 50 Day A + 52
Launch of tender offer. Target board provides a Public announcement Tender offer period Public announcement Payment of offered
Bidder files tender offer recommendation to once minimum expires and report to FSC consideration
report with the Financial shareholders acceptance threshold has
Supervisory Commission been reached
of Taiwan (FSC), Taiwan
Stock Exchange (TSE),
Taiwan Depository and
Clearing Corporation and
target
within 15 calendar days within 2 days

6 Takeover Tactics
A Taiwanese company is obligated to immediately disclose to the public all “material information” that
relates to it, including all material changes in information that has already been disclosed to the public.
Such material information is usually deemed as inside information under the insider trading regime.
• “Inside information” means information that will have a material impact on the price of the
securities of the issuing company.
• The phrase “information that will have a material impact on the price of the securities”
shall mean information relating to the finances or businesses of the company, or the supply
and demand of such securities on the market, or tender offer of such securities, the specific
content of which will have a material impact on the price of the securities, or will have a
material impact on the investment decision of a reasonably prudent investor.
• The scope of the material information is prescribed in the Taiwan Stock Exchange
Corporation Procedures for Verification and Disclosure of Material Information of Companies
with Listed Securities and the Taipei Exchange Procedures for Verification and Disclosure of
Material Information of Companies with TPEx Listed Securities.

Under Taiwanese law, the tender offer cannot be launched until the tender offeror submits its report to
the FSC and makes a public announcement.

The basic legal framework regarding insider dealing and market abuse under Taiwanese law is set
forth in the SEL.
a tender offer, albeit that during a tender offer additional disclosures apply in relation to trading in
listed securities

There are only limited anti-takeover defense mechanisms that a Taiwanese company may take after
the tender offer is launched. The table below contains a summarized overview of the mechanisms that
can be used by a target company as a defense against a tender offer. These take into account the
restrictions that apply to the board and general shareholders’ meeting of the target company pending
a tender offer.
1. Share Exchange (white knight • Requires only the approval of the board of
and poison pill) directors (approval vote of a majority of at least
one-half of the directors present) as long as
Issue new shares to exchange
the number of the new shares to be issued
the shares of the “friendly
does not exceed the authorized capital of the
company” which will enlarge the
company.
total outstanding shares of the
target company and result in
cross holding of the target
company and the friendly
company.

2. Share buyback • Requires only the approval of the board

directors (approval vote of a majority of at least
Buy back shares to “maintain the
two-thirds of the directors present).
company’s credit and
shareholders’ equity”. • The number of shares bought back under the
preceding paragraphs may not exceed 10% of
the total number of issued and outstanding
shares of the company.
• The total amount of the shares bought back
may not exceed the amount of retained
earnings plus premium on capital stock plus
realized capital reserve.
3. Sale of crown jewels • Requires prior approval by the general

shareholders’ meeting (by a majority vote of
the total shares present where a quorum
assets of, or creating a liability
represents two-thirds of the total outstanding
for, the company which is
voting shares or, if the aforementioned quorum
triggered by a change in control
is not met, by two-thirds of votes of the total
or the launch of a tender offer.
shares present where a quorum represents a
majority of the outstanding voting shares).
4. Private placement of equity • Requires prior approval by the general

securities shareholders’ meeting (by two-thirds of votes
of the total shares present where a quorum
Offering equity securities through
representing a majority of the outstanding
private placement prior to the
voting shares).
tender offer in favor of “friendly
person(s)” (without preferential • The terms and condition of the equity
subscription rights of the securities (including the exercise price) and
shareholders) who can exercise the reasonableness thereof must be disclosed
the warrants at their option and to the shareholders before the aforementioned
subscribe for new shares. general shareholders’ meeting.

Takeover
7.1 Squeeze-out
There is no squeeze-out mechanism that applies to tender offers under Taiwanese law. Following the
tender offer bid, the tender offeror (together with the persons with whom they act in concert) cannot,
regardless of the percentage of the shares the tender offeror obtained after the tender offer, force all
other holders of voting securities and securities conferring the right to voting securities to transfer their
securities to the tender offeror at the price offered in the tender offer.
7.2 Sell-out
There is no sell-out right for the shareholders that did not accept the tender offer bid under Taiwanese
law.


If a shareholder is opposed to the proposed merger, they may request the company to buy back their
shares at “fair price”. The company and shareholder may reach an agreement about such fair price. In
case no agreement is reached, the company shall apply to the court for a ruling on the fair price on
behalf of all the dissenting shareholders. All the expenses of the application procedure shall be borne
by the company.
7.4 Restrictions to acquiring securities after the takeover bid period

During a term of 50 days as of the end of the closing of the tender offer, the tender offeror and the
persons acting in concert with the tender offeror cannot launch another tender offer for the securities
to which the original tender offer applied at terms that are different from the original tender offer.
8 Delisting
If the acquirer is a foreign entity or its 100%-owned Taiwanese subsidiary, the Investment
Commission may oppose any transaction that would result in the delisting of a Taiwanese company
that is listed on TSE or TPEx. This is in order to protect the interests of investors. Other than the
above circumstance, as long as the Taiwanese listed company has obtained two- thirds of total
shares voting for the voluntary delisting or two-thirds of the total shares voting for a merger or being a
100%-owned subsidiary by means of share swap, the company may delist from the TSE or TPEx. In
the case of voluntary delisting, the directors, other than independent directors, who expressed
consent at the relevant board of directors’ meeting to submit the delisting application proposal to the
shareholders’ meeting for approval will then be jointly and severally liable to purchase the shares of
the company from the shareholders.

Michael Wong and James Hsiao in the Taipei office are the most appropriate contacts within
Baker McKenzie for inquiries about public M&A in Taiwan.
Michael Wong James Hsiao

Taipei Taipei
michael.wong@bakermckenzie.com james.hsiao@bakermckenzie.com
+886 2 2715 7246 +886 2 2715 7375

Thailand
1 Overview
Thailand has different laws and regulations governing public M&A activities depending on the
investor’s activities. These activities are based on:
• the status of the corporate entities involved;
• the types of acquisition methods; and
• the industry of the target business.

M&A activities related to public companies are mainly governed by the following laws:
• the Securities and Exchange Act B.E. 2535 (1992), as amended (the “SEC Act”); and
• the Public Limited Company Act B.E. 2535 (1992), as amended (the “PLCA”).
For M&A activities related to public companies whose shares are listed on the Stock Exchange of
Thailand (SET), the following rules and regulations would also be applicable and should be taken into
consideration when carrying out M&A activities:
• the rules and regulations of the Securities and Exchange Commission (SEC);
• the rules and regulations of the Capital Market Supervisory Board (CMSB);
• the rules and regulations of the SET;
• the rules and regulations of the Thai Securities Depository Co., Ltd. (TSD); and
• the rules and regulations of the Thai Clearing House Co., Ltd. (TCH).

The key regulatory bodies for public M&A are:
• the SEC;
• the SET; and
• the Ministry of Commerce (MOC).

While the aforementioned legislation contains the main legal framework for public M&A in Thailand,
there are a number of additional rules and principles that are to be taken into account when preparing
or conducting public M&A activities, such as:
(a) Foreign investment restrictions
There are several laws and regulations that govern the extent of foreign participation in business
activities in Thailand. The main governing law is the Foreign Business Act, B.E. 2542 (1999) (the
“FBA”). The FBA limits the rights of foreign nationals and entities to engage in certain business
activities in Thailand unless a foreign business license or the foreign business certificate from the
MOC is obtained before the commencement of the business operation. Under the FBA, a person or

an entity will be treated as foreign if an individual person is a foreign national or if 50% or more of the
shares in such entity is held by foreign shareholders. Investors contemplating new business ventures
must carefully consider the FBA before attempting to set up operations. A foreigner may operate a
business in Thailand, unless the specific activity of that business is restricted under the FBA or is
otherwise prohibited by another law. The restricted businesses under the FBA cover almost all kinds
of service businesses.
(b) Restrictions on foreign participation in specific sectors
In addition to the FBA, there are several statutes that impose conditions of majority ownership and
management by Thai nationals in specific business sectors, examples of which are:
• The Financial Institution Business Act B.E. 2551 (2008), as amended;
• The Life Insurance Act B.E. 2535 (1992), as amended, and the Non- Life Insurance Act B.E.
2535 (1992), as amended;
• The Thai Vessel Act B.E. 2481 (1938); and
• The Employment Provision and Employment Seekers Protection Act B.E. 2528 (1985).
(c) Investment promotion
Corporate entities operating in Thailand may be granted special privileges by the Board of Investment
(BOI) so as to promote their investments. These privileges include land ownership, 100% foreign
ownership for certain businesses and exemptions from certain taxes and duties. However, conditions
are often attached to such promotional privileges. For example, the BOI may set a condition
specifying a minimum registered capital requirement, or the minimum ratio of Thai national
shareholders that may apply to a certain promoted investment project.
(d) Land ownership
The Land Code of Thailand generally provides that a land may only be owned by Thai individuals or
Thai juristic entities in which foreign shareholders own not more than 49% of the share capital and not
more than half the number of the shareholders are foreigners.
However, if the Thai juristic entities in which foreign shareholders own more than 49% of the share
capital or more than half of the number of the shareholders are foreigners have been granted special
privileges by the BOI, they may acquire land by obtaining permission to own the land from the BOI.
Alternatively, if the land is located in an industrial estate area, such juristic entities may obtain
permission to own such land from the Industrial Estate Authority of Thailand.
(e) Anti-trust Law
Under the Trade Competition Act B.E. 2560 (2017) (the “Trade Competition Act”) of Thailand, which
was effective from 5 October 2017, there are two levels of merger control mechanisms:
• A merger of businesses which may reduce competition in a significant way (per the criteria
prescribed by the Trade Competition Commission (“TCC”)), requires such merger to be
notified to the TCC within 7 days from the closing date (“Post-Merger Filing”). For the Post-
Merger Filing, the TCC only sets a financial baseline of Baht 1 billion of the turnover of either
party or combined turnover of both parties in a relevant market in Thailand (including group
turnover for the sales of products in the relevant market in Thailand) in the past financial year.
• A merger of businesses which may result in a monopoly or a dominant position requires prior
approval from the TCC (“Pre-Merger Approval”). The Pre-Merger Approval regime sets a
relatively high threshold — the potential creation of a monopoly or a business operator having
a dominant position in the market — when compared to the post-merger filing regime.

Under the Trade Competition Act:
(i) A monopoly is defined as a situation where, in a market, there is only one business operator,
with a turnover of Baht 1 billion or more.
(ii) A business operator shall be deemed holding a dominant position when:
o it has a market share of 50% or more, and turnover of Baht 1 billion or more in the
previous year; or
o it is among the top three business operators with a combined market share of 75% or
more, and individually has the turnover of Baht 1 billion or more in the previous year.
All three business operators will be classified as dominant business operators, unless
any one business operator has a market share of less than 10% in the previous year.
The application for the pre-merger approval requires comprehensive and detailed information on the
merger, including, among others, business integration plan, market analysis, market concentration
and impact on competition assessment. The TCC must complete its consideration of the application
within 90 days (extendable for another 15 days). If the business operator disagrees with the TCC’s
decision, it can appeal to the Administrative Court within 60 days of the decision.
Under the Trade Competition Act, the merger of businesses includes:
• a merger between a manufacturer and another manufacturer, a distributor and another

distributor, a manufacturer and a distributor, or between a service supplier and another
service supplier, which results in the continuity of one business and the termination of the
other business, or the creation of a new business;
• a purchase of the whole or part of the assets of another business in order to have control over
its policies on business administration, administration or management, pursuant to the criteria
prescribed by the TCC; and
• a purchase of the whole or part of the shares of another business whether directly or indirectly
in order to have control over its policies on business administration, administration or
management, pursuant to the criteria prescribed by the TCC.
The above rules will, however, not apply to the merger of businesses for the purpose of the internal
restructuring of business operators which have a relationship in terms of policy direction or control,
pursuant to the criteria prescribed by the TCC.
2.4 Recent reform

In May 2018, the SEC issued an amendment to a regulation on a waiver of the obligation to make a
tender offer by virtue of a shareholders’ resolution of a listed company (the so called, whitewash
procedure). The principle requirements of the whitewash have not significantly changed, but certain
requirements in relation to voting at the shareholders’ meeting and the information to be disclosed to
the shareholders to support their decision making have been developed to be more stringent than
those prescribed by the former rules in order to provide more protection to minority shareholders.
In September 2019, the CMSB issued amendments to the tender offer rules which can be mainly
summarized as follows:
• a limitation to the existing exemption for tender offer obligation - a person (including the
group under Thai securities law) who holds shares in a listed company up to or exceeding the
tender offer trigger point (25%, 50% or 75% of voting rights in the listed company) as a result
of the listed company (i) repurchasing its shares, or (ii) making a rights offer, is exempt from
the tender offer obligation, but according to the 2019 amendment, if the shareholder who has

been exempt from the tender offer obligation due to the share repurchase or the rights offer
later acquires any amount of shares in such listed company while still holding shares above
the trigger point, such shareholder will be required to make a tender offer; and
• an additional ground for waiver of tender offer obligations - in the case where a person is
required to make a tender offer due to an act of restructuring with specified characteristics but
such person does not seek to takeover the company, the tender offer obligation may be
waived on restructuring basis in accordance with the 2019 amendment, subject to discretion
of the SEC.

In March 2019, the SEC launched a public hearing as an update to the previous hearing in 2015 on
the proposed amendment to the rules on connected transactions and the rules on material
transactions made by listed companies, with the aim of bringing clarification to the rules, lessening the
burden on listed companies and adjusting the threshold so that it is in line with the international
market. The proposed amendment has not yet been concluded. However, the SEC’s attempt to
amend this set of rules continues and another public hearing is expected to be launched.

3.1 Pre-contractual obligations
Depending on the transaction, the M&A process typically starts with the identification of assets,
determination of the most appropriate acquisition vehicle and preparation of preliminary documents.
Those documents, e.g., non-disclosure and confidentiality agreements, memorandum of
understanding and letters of intent, stipulate the obligations of the parties to the transaction and often
key terms and conditions of the acquisition agreements. Whether or not such documents form a
contract or legally bind the parties depends on their own terms.
3.2 Due diligence

Once the acquirer and the seller have signed the preliminary documents, a due diligence will normally
be conducted on the target company. Due diligence will normally be conducted by financial, tax and
legal advisers. The areas of focus regarding the due diligence on the target company normally
depend on its business and industry, as well as on the type of the acquisition (whether it is a share or
asset acquisition).

Under Thai public company law, a shareholder resolution to be passed at the shareholders’ meeting
generally requires a majority vote, i.e., more than 50%, of the shareholders who attend the meeting
and cast their votes. However, for important agenda items, such as capital increases, capital
decreases or the amendment of the articles of association of the company, a shareholder resolution
would require at least 75% of the total number of the votes of the shareholders who attend the
meeting and are entitled to vote.
The table below provides an overview of the different rights and entitlements that are attached to
different levels of shareholding within a Thai listed corporation:
Shareholding Rights
One share • Right to receive notice of shareholders’ meetings, and to attend

and vote at any shareholders’ meeting.
• Right to proxy another person to attend and vote at any meeting
on the shareholder’s behalf.

Shareholding Rights
• Right to examine the directors’ register, the minutes of the
meetings of the board of directors and the shareholders’
meetings, the shareholder register and the balance sheet.
• Right to propose themself or another person for a director
position.
• Right to receive dividends.
Five shareholders Right to apply for a court order to cancel the resolutions of a
shareholders’ meeting if the process of the meeting does not comply
with the laws or corporate documents of the company.
Two-thirds of attending Right to alter the order of the agenda in a shareholders’ meeting.
shareholders by head
count
5% of all votes in the • Right to block voting for whitewash (a waiver of the obligation to
meeting make a tender offer by virtue of a shareholders’ resolution)
where the shares to be held by the acquirer account for 50% or
more of all voting rights.
• Right to block voting for the employee stock option plan (ESOP)
in strict cases, e.g., offering of ESOP securities, representing
more than 5% of the voting rights of the company, at a price
below 90% of market price.
5% of all voting rights • Right to bring an action for disgorgement of benefits wrongfully
obtained by the director, the executive or a related person.
• Right to submit a written proposal as an agenda for a
• Right to cancel a resolution if there is contravention or failure to
comply with the correct procedure for sending a notice for the
meeting or voting.
5% of all shares sold • Right to bring a lawsuit to claim compensation or request for an
injunction against a director who fails to conduct their fiduciary
duties and, as a result, causes damage to the company.
• Right to request the registrar to appoint an inspector to proceed
with the examination of the company’s business operation.
10% of all votes in the • Right to block voting for an offering of the company’s newly
meeting issued shares to the public at a price below 90% of the market
price.
• Right to block voting for ESOP.
10% of all shares sold • Right to submit a motion to the court to order the dissolution of
the company in case of certain events.
• Right to request the board of directors to call an extraordinary
meeting.
More than 10% of all Right to block voting for delisting.

shares sold

Shareholding Rights
20% of all shares sold Right to apply for a court order to cancel the resolutions of a
shareholders’ meeting if the process of the meeting does not comply
with the laws or corporate documents of the company.
One-third of all shares Right to request for consideration and approval of additional agenda
sold items.
Two-thirds of all votes in Right to approve payment of cash or assets to the director(s).
the meeting
More than 50% (of vote Right to approve the general business of the company/voting in general
casted) (including dividend payment, balance sheet and appointment of an
auditor).
50% of all votes in the Right to approve early removal of director(s).

meeting AND 75% of
attending shareholders
(head count)
75% of all votes in the • Right to approve amendments to the articles of association and
meeting memorandum of association.
• Right to approve the sale or transfer of the whole or important
parts of the business of the company to other persons.
• Right to approve the purchase or acceptance of transfer of the
business of other companies.
• Right to approve (i) the entering into, amendment or termination
of contracts with respect to the granting of a hire of the whole or
important parts of the business of the company, (ii) the
entrustment of the management of the business of the company
to any other person or (iii) the merger of the business with other
persons with the purpose of profit and loss sharing.
• Right to approve issuance of debentures.
• Right to approve capital increase and capital reduction.
• Right to approve dissolution of the company.
• Right to approve debt to equity conversion.
• Right to approve amalgamation of the company.
• Right to approve offering of the company’s newly issued shares
to the public at a price below 90% of market price.
• Right to approve the ESOP.
• Right to approve connected party transactions.
• Right to approve acquisition or disposal of material assets.
• Right to approve whitewash.
75% of all shares sold Right to approve delisting.

3.4 Types of public M&A transactions
There are three main forms of public M&A in Thailand. These are:
• acquisition of shares in a target company;
• acquisition of the business or assets of the target company; and
• amalgamation or consolidation of two or more companies (strictly speaking, the concept of

‘merger’ is not recognized in Thai law, there being instead the concept of ‘amalgamation’).
In addition to these three main forms, there are also some situations in which, for commercial
reasons, a combination of acquisitions is necessary. Generally, the transaction begins with a share
acquisition to acquire an entire entity, and is then followed by an amalgamation or asset acquisition to
dispose of all or a part of the assets to the acquiring entity. In some cases, the transaction may begin
with an asset acquisition transaction by the acquiring entity, and then a share acquisition transaction
in the acquiring entity.
It is less common to consolidate two or more companies into a new company because of there is a
tax disadvantage. The consideration for shares or assets in the target company may be in the form of
cash, shares in the acquiring companies, other securities, or a combination of these. Currently, the
Revenue Department will grant a tax exemption for an asset acquisition transaction with certain
conditions. The company will benefit from this exemption if it acquires the assets of a target company.
3.5 Unfair trading practices

The unfair trading practices offenses under Thai securities law are prescribed in the SEC Act. Such
offenses mainly include the following:
(a) Dissemination of false statements
This group of offenses include: (i) disseminating or certifying any false or materially misleading
statement or information concerning the facts relating to the financial conditions, business operations,
the price of securities, or other information relating to a listed company in a manner that is likely to
affect the price of securities or the decision making on securities investment, and (ii) analyzing or
forecasting the information related to a listed company by using misleading information, failing to
consider the accuracy of information, or distorting information, and disclosing this analysis or forecast
in a manner that is likely to affect the price of securities or decision making on securities investment.
(b) Insider trading
Insider trading is regarded by Thai laws as an unfair securities trading practice, and it is a criminal
offense. A person will only commit an insider trading offense if their action meets all of the elements
provided therein. The essence of insider trading consists of the following: (i) an insider (a person
knowing or possessing inside information related to a securities issuing company); (ii) conducting
prohibited acts in relation to listed securities and securities traded over-the-counter (namely: (a)
selling or purchasing shares or entering into a derivatives contract related to securities, or (b)
disclosing inside information to another person, directly or indirectly, when the offender knows or
ought to know that the receiver may exploit this information to trade shares or enter into a derivatives
contract related to securities); (iii) regardless of whether such act is done for their own or another
person’s benefit.
The SEC Act describes two types of “insider”, namely (i) primary insiders and (ii) secondary insiders.
The primary insiders are automatically presumed “insiders”, which include, but are not limited to,
directors, executives, employees, auditors and advisors of a listed company. The secondary insiders,
such as a shareholder holding more than 5 percent of the shares, will be presumed to be an “insider”
only if they have traded in a different manner from their normal practice.

The SEC Act also specifies exemptions from the insider trading offense, including where actions do
not take an advantage of other persons.
Insider trading issues need to be considered both before and during an M&A transaction. In practice,
the authorities may investigate the insider trading incident after the completion of the transaction,
especially if there is share price movement or they suspect any insider trading.
(c) Market manipulation
The market manipulation offense requires an actual sale or purchase of shares with an intention to
mislead the general public as to the share price or the volume of share trading, or to manipulate the
target’s share price or the volume of share trading to be inconsistent with that under normal market
conditions.
(d) Actions disrupting continuity and reliability of trading on the exchange
The SEC Act prohibits actions which impact the continuity and reliability of trading on the exchange,
including (i) front running, i.e., a brokerage company and its officers use a client’s trading order in any
manner that is likely to disadvantage the client for the benefit of oneself or other persons, (ii) placing
or cancelling orders in a manner that causes the price or volume of the securities traded to be
inconsistent with those under normal market conditions, and (iii) using or allowing another person (a
nominee) to use a securities trading account or bank account to conceal a person’s identity in such a
way that it may allow the user to commit unfair trading practices.
3.6 Civil sanctions

In addition to criminal penalties imposed for offenses under the SEC Act, which include fines and
imprisonment, civil penalties have been introduced by the amendment of the SEC Act in December
2016, as an alternative sanction for offenses that could affect the overall creditability and transparency
of the capital market. The civil sanctions are applicable to market misconduct, disclosure of false
information or non-disclosure of material facts that could influence investment decisions, failure of
directors or executives of listed companies to perform fiduciary duties and using or allowing other
persons to use a nominee account to engage in market misconduct.
The civil sanctions include monetary penalties, compensation equal to the undue benefit received,
prohibition from securities trading for up to five years, a ban from being a director or executive in a
listed company or a securities company for up to 10 years, and reimbursement for investigative
expenses incurred by the Office of the Securities and Exchange Commission (the “Office of the
SEC”). When an offender complies with the civil sanction imposed, the criminal penalty for the same
action will be settled.
3.7 5% multiple threshold

Any person, by their own act or acting in concert with others, who either acquires or disposes of
shares in an aggregate amount that reaches or crosses any multiple of 5% of the total voting rights of
the company, i.e., reaching 5%, 10%, 15% and so on, must report such acquisition or disposition to
the Office of the SEC within three business days from the date of the transaction. This requirement
provides an early warning mechanism that enables target companies and their shareholders to be
aware of every 5% change in the percentage of the voting rights and acts as an alert as to any
possible acquirer who may gain material voting rights and control over the target company.
3.8 Mandatory tender offer requirement

Under Thai securities law, any person who has acquired shares, by themself or acting in concert with
others, that results in obtaining or holding up to or exceeding 25%, 50% or 75% of the voting rights in
the listed company (each a “trigger point”) must make a mandatory tender offer. The rationale behind

this requirement is to give the existing shareholders an opportunity to sell their shares in the listed
company when there is a change in control in the company.
3.9 Chain principle

In addition to the direct share acquisition in a listed target company, a tender offer is also required
when any person acquires a significant degree of control of an existing shareholder of a listed
company, e.g., immediate holding entity. This can be made through direct acquisition of the
immediate holding entity or indirectly through the shareholders of the immediate holding entity
(intermediate entities). This is the case when the aggregate shareholding of any person in control of
the chain of companies reaches or exceeds a trigger point as mentioned earlier, and the person who
acquires control in the listed company through the chain principle will also have to make a mandatory
tender offer.
Whether or not a person is in control of such entities is defined in two ways: (i) by holding shares
representing 50% or more of the total voting rights in the immediate holding entity (in the case of
direct control) or in the intermediate entity (in the case of indirect control); or (ii) by the power to
control the management or operation of the relevant entity through the nomination of a substantial
number of directors.

Shares held by a person “acting in concert” must be aggregated with the shareholding of the acquirer
when it acquires shares in the listed company.
The key elements in determining whether or not a party is “acting in concert” are:
(a) mutual intention to manage or exercise their voting rights in the same way to achieve common
control in the listed company; and
(b) having a relationship or acting together in any of a manner that may lead to acting in concert,
such as using the same funding source, acquiring shares at the same time, or having voting
arrangements or shareholders’ agreements on voting.
Both of these key elements must be met for a party to be considered as acting in concert with another
party. However, in practice, the first element of mutual intention will be given more weight by the SEC
in determining the matter.
3.11 Related person

In addition to the concept of “acting in concert”, the shareholding of the related person(s) of the
acquirer and of those parties acting in concert must be aggregated with the shareholding of the
acquirer for shareholding reporting purposes and to determine if the mandatory tender offer threshold
has been reached.
Related persons include spouses and minor children, ordinary partnerships in which such person or
their spouse or minor child is a partner or, broadly speaking, limited partnerships and companies in
which such person or their spouse or minor children or the ordinary partnership hold more than 30%
of the total contribution or share capital. This includes the shareholding of the related person(s) at
every shareholding level. Careful analysis of the details and implications of these provisions must be
taken into consideration before acquiring or disposing of any securities in a listed company.
3.12 Disclosure by the target company

The target company must comply with the disclosure rules prior to and during the M&A transaction.
In general, when a material event occurs, a listed company must immediately disclose such relevant
information to the SET.

Material events consist of actions such as entering into connected transactions, acquiring or disposing
of material assets, increasing the company’s capital or any other event which affects, or will affect, the
interests of shareholders or any decision to invest in, or in relation to the price of, the shares of the
listed company. It is worth noting that when immediate disclosure would prejudice the ability of the
company to pursue its corporate aim or when the company’s plans or developments are subject to
rapid change, the disclosure may properly be deferred to a more appropriate time or until a firm
conclusion has been made. The reason is because successive public announcements concerning the
same subject but based on changing facts may confuse or mislead the public. For example, in a share
acquisition transaction, when the parties sign a memorandum of understanding or a letter of intent,
the parties would generally not disclose such fact and information to the SET at that time. This is
because the memorandum of understanding or letter of intention normally specifies conditions to be
fulfilled by the relevant party before reaching a conclusive definitive agreement. There are still
uncertainties and major conditions to be fulfilled by the relevant party. However, at the signing of a
definitive agreement (such as a share purchase agreement or a share subscription agreement), the
transaction would become firmer and clearer. Hence, the parties would then disclose the facts and
background of the transaction to the SET.
4.1 Types of tender offers
In Thailand, takeovers of public companies are conducted via tender offer. Under Thai tender offer
rules, there are four types of tender offers:
(a) Mandatory tender offer: when an acquirer acquires shares and reaches the relevant trigger
point and is required by law to make a tender offer;
(b) Voluntary tender offer: when an acquirer voluntarily launches a tender offer without being
required to do so;
(c) Partial tender offer: when an acquirer launches a tender offer to purchase part of shares in a
listed company; and
(d) Delisting tender offer: when an acquirer wishes to launch a tender offer in order to delist the
company.
A bidder that intends to launch a takeover bid must prepare tender offer documents to be submitted to
the Office of the SEC, as well as proof of funds.

(a) General rule
The trigger point for launching a mandatory tender offer is reached when a person, either by themself
or with the related person or persons acting in concert, acquires or holds up to or exceeding 25%,
50% or 75% of the total voting rights. Once such trigger point is hit, the acquirer will have to make a
tender offer for the purchase of shares and equity linked securities in the listed company.
(b) No creeper rule
The creeper rules generally impose an obligation to make a tender offer when an offeror acquires a
certain percentage of shares while already holding shares in a significant percentage, e.g., if the
acquirer holds 25%-50% and further acquires an additional 5%, it will be required to make a tender
offer (and not only the reporting obligation). However, the concept of creep rules in Thailand has been
repealed.
(c) Tender offer price

As a general rule, the tender offer price may be paid in cash or in cash with additional forms of
consideration. At least one form of consideration must be in monetary form. Additional forms of
consideration must be appraised by a financial advisor. Additionally, the tender offer price must not be
lower than the price that (i) the offeror, (ii) related person of the offeror, (iii) a person acting in concert
with the offeror, or (iv) related person of (iii), has paid to acquire shares in the 90-day period prior to
the launch of a tender offer.

The tender offeror is free to make the voluntary tender offer but will have to submit the tender offer
documents to the Office of the SEC accordingly.
The tender offeror may set out the conditions to the tender offer (such as a minimum acceptance
level) and if these conditions are not met, it may cancel its tender offer. For example, if, at the closing
of the offer period, the number of shares tendered is less than the specified amount, e.g., 90%, 75%
or 51%, the tender offeror can cancel the voluntary tender offer. The tender offeror would have to
clearly specify such condition in the offer documents when submitting them to the Office of the SEC.
4.4 Partial tender offer

A person can launch a tender offer to purchase part of the shares in a listed company. Upon
completion of the partial tender offer, the percentage of shares held by the acquirer would hit the
trigger point but the obligation to make a mandatory tender offer would be waived, provided that a
shareholders’ meeting of the listed company resolves to approve the partial tender offer and other
requirements are satisfied.
However, the acquirer cannot hold shares up to 50% or more. In Thailand, there are very few
precedent cases of partial tender offers.
4.5 Delisting tender offer

The major shareholder who wishes to delist the company will launch the delisting tender offer, which
will require the shareholder approval of not less than 75% of the voting share capital of the listed
company and there must not be shareholders representing more than 10% of the voting share capital
of the listed company objecting to the delisting. In practice, the major shareholder will be the delisting
tender offeror. However, legally speaking, any person may be the delisting tender offeror.
Since delisting is a significant item, all shareholders are entitled to vote on the issue and the
shareholders will not be considered as having a special interest in the delisting. Therefore, the major
shareholder or the shareholder who is an offeror under the delisting tender offer is allowed to cast a
vote in the shareholders’ meeting to approve the delisting.
(a) Delisting tender offer price
The pricing criteria in a delisting tender offer are different from the pricing criteria in a mandatory
tender offer. As for a delisting tender offer, the tender offer price must not be lower than one of the
following prices:
(i) the highest acquired price that (i) the offeror, (ii) related person of the offeror, (iii) a person
acting in concert with the offeror, or (iv) related person of (iii), has paid to acquire the shares
within 90 days before commencement of the tender offer;
(ii) the five-business day weighted average market price before the board of directors of the listed
company approves the delisting;
(iii) the net total asset that is marked to market; or
(iv) the fair price appraised by a financial adviser.

(b) Implications of having more than 5% of the shares held by a minority after delisting
After delisting, if the minority shareholders hold shares amounting to more than 5% of the total issued
share capital of the listed company (excluding the shares held by the offeror, the offeror’s concert
parties and related persons), the directors and executives of the listed company will still be required to
comply with certain fiduciary and other legal duties under the Thai securities law, such as (i) the rules
on connected transactions, (ii) the rules on acquisition and disposal of material assets of a listed
company and (iii) duties to prepare and submit financial statements and reports to the Office of the
SEC concerning the financial conditions and business operation of the listed company.
In practice, an acquirer who intends to delist the company would aim to acquire 95% or more of the
shares in the listed company in order to avoid being subject to fiduciary and other legal duties under
the Thai securities law. This is a significant issue for a listed company aiming for delisting and it
should be further analyzed on a case-by-case basis for a feasible solution.
4.6 Restriction on repeating tender offers

An acquirer who has previously made a tender offer cannot make another tender offer for the purpose
of taking over the business before a period of 1 year from the closing date of the offer period specified
in the previous tender offer for the purchase of shares, unless the intention to delist the company is
specified in the previous tender offer and the subsequent tender offer is a delisting tender offer.
4.7 Opinions of the target business in relation to a tender offer

When a tender offer is made, the target company must submit its opinion to the Office of the SEC,
with copies distributed to the SET and all the shareholders. In delivering the opinion, the listed
company must appoint an independent financial adviser and have the opinion of the independent
financial adviser delivered along with the opinion of the listed company. Additional opinions must be
prepared for any revised offers, unless special circumstances apply. Such circumstances generally
relate to the latest offer being more favorable and the independent financial adviser of the company
having already expressed an opinion on the issue of acceptance.
5 Timeline
The documentation for a tender offer is mostly prescribed by the SEC. A financial adviser who is
familiar with tender offer transactions may need three or four weeks to prepare and finalize the tender
offer documents. For a partial tender offer, the tender offeror aiming to obtain a waiver from the tender
offer obligation must obtain an approval from a shareholders’ meeting of the listed company in relation
to the partial tender offer and submit the application for waiver to the Office of the SEC along with the
fees. The waiver is subject to approval from the SEC.
Upon filing of the tender offer with the Office of the SEC, the tender offeror shall immediately deliver a
copy of the tender offer and the acceptance form to the target business, all the shareholders and
securities holders, and the SET. The making of the tender offer shall also be advertised in the
newspapers for a period of at least one or three consecutive business days, as the case may be. The
tender offer period must be commenced within three business days from the day following the date
that the Office of the SEC receives the tender offer documents. The tender offer period must be open
for 25 to 45 business days. The period for a general tender offer depends on the discretion of the
tender offeror. For delisting, the tender offer period must be 45 business days.
In practice, the tender offer process is usually completed within two or three months unless an
extension to the tender offer period has been made. Unless there has been a competing tender offer
or certain events occur to the business, the maximum tender offer period after such extension cannot
exceed 45 business days.Thailand

Set out below is an overview of the main steps for a public voluntary takeover offer in Thailand.
Start
process Day 4 Day 11 Day 12 Day 14 Day 29 Day 34 Day 35 Day 39 Day 42 Day 44
Offeror declares Within 3 business Within 7 business After filing the tender Tender offer Within 15 business Within 20 Within 21 business Offer period must be Normally, settlement Within 5 business
intention to make days from the days from the date offer, the offeror must period must start days from the start of business days days from the start of open for 25 to 45 of the shares and days from the end
voluntary tender date (i) of of filing form 247-3, immediately deliver a within 3 business tender offer period, from the start of the tender offer period business days. consideration for the of tender offer
offer with or declaration or (ii) tender offer (Form copy of the offer and days from the target must submit an the tender offer or 3 business days tender offer takes period, the offeror
without the prescribed 247-4) is filed with acceptance form to the date the SEC opinion (Form 250-2) period, the before the end of place within 3 files a tender offer
The period for a
conditions. conditions the SEC. target, all shareholders receives the to the SEC in relation shareholders who tender offer period, business days after report (Form 256-2)
general tender offer
complete, and securities holders, tender offer to the offer, along with sell the shares in target must submit a the close of tender to the SEC to
depends on the
declaration form and the SET. the opinion of an the tender can preliminary report offer. report the final
For a partial tender discretion of the
(247-3) is filed independent financial cancel their sale. (Form 247-6-Khor) to result of tender
with the offer, if offeror aims advisor. Copies must the SEC to report offeror. For delisting, offer.
Securities and to obtain a waiver Offeror may prescribe be distributed to the result of the tender the offer period must
from the tender offer conditions (e.g. a be 45 business days.
Exchange SET and all offer.
obligation, they must minimum acceptance
Commission shareholders.
(SEC), and a submit an level). If conditions are
application for not met, it may cancel
copy with the
waiver to the SEC the tender offer.
Stock Exchange
(including prescribed
of Thailand
(SET). fee). Waiver is
The making of the tender
subject to approval
offer must be advertised
in the newspapers for a
period of:
25 business days
• at least 3
consecutive
business days
where it is the final
offer; or
In practice, the tender offer process is usually completed within 2 or 3 months unless an extension is given.
Unless there has been a competing tender offer or certain events occur that affect the business, the maximum tender offer period after such extension cannot exceed 45 business days.

6 Takeover Tactics
There are limited strategic defenses justifiable to shareholders and allowed under Thai law. Below are
the summarized defensive tactics for hostile takeovers in a public M&A in Thailand.
1. Shareholders • Right attached to each share giving non-hostile bidders a right

rights plan to purchase a certain number of shares at half-price, thereby
(“poison pill”) greatly diluting a hostile bidder’s stake requirements under
public company law concerning increase of capital.
• The increase of share capital of the company requires a
shareholders’ vote of not less than 75% of attending
shareholders who are eligible to vote.
• Challenge from the hostile bidder, as a shareholder, on the
favorable price for other shareholders.
• The right may be regarded as a discrimination or selective
action against the new shareholder.
• The purpose of the plan is not for the best interest of the
company, but for dilution effect instead.
2. Golden • Lucrative change of control contract for senior management

parachutes (golden parachutes) and key employees (tin parachutes) which
(and tin greatly increases merger-related severance costs.
parachutes)
• Freedom of contract provided that it shall not be contrary to
Thai law.
• Consideration for the director of a listed company needs to be
disclosed to the SET.
• The consideration to be paid to the directors must be approved
by a shareholders’ vote of not less than two-thirds of attending
shareholders, unless specified in the articles of association of
the company.
• The amount of the severance should be reasonable. If not, it
may raise the issue of conflict of interest between the company
and the directors.
3. “White knight” • Acquisition negotiated with friendly third party.

acquirer
• The acquirer must comply with the tender offer requirements.
• Complying with the tender offer requirement under the SEC
notification of the acquirer. The company is also required to
give its opinion on the tender offer to the shareholders.
4. Asset lock up • Sale of assets in which a hostile bidder is most interested to a

(“crown jewel”) friendly third party.
• Disposition of major assets is subject to the public company
law, securities law and SET disclosure requirements.

• Disclosure to SET must be made. Depending on size of the
transaction, the value and size of the transaction may have to
be assessed by an independent financial adviser (IFA).
• It requires a shareholders’ vote of not less than 75% of
attending shareholders who are eligible to vote.
5. Major strategic • Size of company greatly increased or company made more

acquisition unpalatable to hostile bidder.
• Acquisition of major assets, e.g., another company is subject to
the public company law, securities law and SET disclosure
requirements.
be assessed by an IFA.
• Under Banking Law, a commercial bank is restricted from
holding shares in another company or bank in excess of the
amount allowed by law.
6. “Pac-man” • Target acquires stake in or announces bid for hostile bidder.

acquisition
• Acquisition of major assets (e.g. another company) is subject to
public company law, securities law and SET disclosure
requirements.
be assessed by an IFA.
• This would result in cross-shareholding and cross-shareholding
in certain levels may prohibit the hostile bidder from acquiring
the target if the hostile bidder is a listed company.
7. Issuance of • Equity issued in offering to public thus greatly increasing the

equity cost of acquisition.
• Increase of capital and issue of securities via securities public
offering.
• Requirements under public company law and securities law
concerning increase of capital.
• The increase of share capital of the company requires a
shareholders’ vote of not less than 75% of attending
shareholders who are eligible to vote.
• In making the securities public offering, the company shall apply
for an SEC approval and the company is required to make a
registration statement as well the prospectus in which all the
information shall be disclosed.


• For private placement with certain characteristics, prior
approval from the SEC is required.
• Takes a substantial amount of time.

Takeover
Thai securities laws do not have a provision allowing majority shareholders to force the minority
shareholders to sell their shares in a listed company, i.e., a minority squeeze-out. As a result, certain
minority shareholders may remain even after the delisting.
8 Delisting
Thai law does not recognize the concept of privatizations or “go private”. The shareholders can delist
the company and become a public non-listed company. However, although the shares in a listed
company are completely delisted from the SET, such company will remain as a public company and
cannot be converted back to a private company. As a result, the public company still has to comply
with the provisions in the PLCA and other relevant rules and regulations applicable to public
companies.

Sorachon Boonsong, Jakkarin Bantathong, Theppachol Kosol and Professor Kitipong
Urapeepatanapong in the Bangkok office are the most appropriate contacts within Baker McKenzie for
inquiries about public M&A in Thailand.
Sorachon Boonsong Theppachol Kosol

Bangkok Bangkok
sorachon.boonsong@bakermckenzie.com theppachol.kosol@bakermckenzie.com
+66 2636 2000 ext. 4100 +66 2636 2000 ext. 3094
Jakkarin Bantathong Professor Kitipong Urapeepatanapong

Bangkok Bangkok
jakkarin.bantathong@bakermckenzie.com kitipong.urapeepatanapong@bakermckenzie.com
+66 2636 2000 ext. 4667 +66 2636 2000 ext. 3776

Turkey
1 Overview
In Turkey a tender offer is the method used to conduct a public takeover bid. The main difference
between public M&A and other M&A transactions is the obligation of the purchaser to launch a
mandatory tender offer in certain cases and the ability of the controlling shareholder to squeeze-out
the minorities against their will. Furthermore, a voluntary tender offer can be a tool to accomplish a
public M&A transaction, whereas there is no such tool for private transactions.

The main rules and principles of Turkish law relating to public M&A in public companies can be found
in:
• The Capital Markets Law No. 6362 (the “Capital Markets Law”);
• The Capital Markets Board (the “CMB”) of Turkey’s Communiqué on Tender Offers No. II-26.1
(the “Tender Offer Communiqué”), setting out the general rules for tender offers, i.e., takeover
bids, consisting of mandatory tender offers (an “MTO”) and voluntary tender offers (a “VTO”);
• The CMB’s Communiqué on Common Principles of Material Transactions and Shareholders’

Put Option Rights No. II-23.1 (the “Material Transactions Communiqué”), setting out corporate
governance procedure for certain transactions including delisting of public companies;
• The CMB’s Squeeze-Out and Sale Rights Communiqué No. II-27.2 (the “Squeeze-Out
Communiqué”), setting out squeeze-out requirements;
• The CMB’s Communiqué on Mergers and Demergers No. II-23.2, setting out the merger and
demerger rules that are applicable when at least one party is a public company; and
• The Turkish Commercial Code No. 6102 (the “TCC”), setting out, among other things, the
general corporate governance principles applicable for all companies.

The Direct Foreign Investments Law No. 4875, sets out the framework for investments made by
foreign investors. Foreign investments are not restricted in Turkey and are not subject to any prior
governmental approval unless they are related to certain regulated sectors such as finance, energy,
telecommunications, civil aviation and insurance. They are also subject to equal treatment with
domestic investors.

While the aforementioned legislation contains the main legal framework for public M&A in Turkey,
there are a number of additional rules and principles that are to be taken into account when preparing
or conducting a public M&A transaction, such as:
(a) The CMB’s Public Disclosure Communiqué No. II-15.1 (the “Disclosure Communiqué”),
setting out the framework for the public disclosures to be made in respect of public companies
and capital markets instruments. The CMB has also published a set of guidelines (the
“Disclosure Guidelines”) to clarify the implementation of the Disclosure Communiqué’s
relatively general disclosure requirements, providing examples.
(b) The CMB’s Communiqué on Market Manipulation No. VI-104.1 (the “Market Manipulation
Communiqué”). Articles 103 to 116 of the Capital Markets Law provides for general rules and

principles relating to capital markets violations and crimes while the Market Manipulation
Communiqué provides detailed guidelines for insider trading and market manipulation (the so-
called market abuse rules).
(c) The CMB’s Share Communiqué No. VII-128.1, the CMB’s Communiqué No. II-5.1 on
Prospectus and Issuance Certificate and the CMB’s Communiqué No. II-5.2 on Offering of
Securities provide rules relating to public offering of securities and the admission of these
securities to trading on a regulated market.
(d) M&A in regulated sectors, e.g., banking, civil aviation, energy, insurance, other financial
institutions and telecommunications, may be subject to approval or notification requirements
as applied by their respective regulators.
(e) The Competition Law No. 4054, setting out, among other things, merger control requirements
and principles as applied by the Turkish Competition Board.
(f) The Communiqué on Mergers and Acquisitions Requiring the Competition Board’s Approval
No. 2010/4, setting out the merger control requirements in detail and thresholds, and other
procedural requirements as applied by the Turkish Competition Board also apply.
2.4 Supervision and enforcement by the CMB

Tender offers and squeeze-out procedures are subject to the supervision and control of the CMB. The
CMB is the capital markets and securities regulator in Turkey.
The CMB has a number of legal tools that it can use to supervise and enforce compliance with the
tender offer and squeeze-out rules, including administrative fines and suspension of voting rights in
case of a failure to initiate an MTO. In addition, criminal fines could be imposed by the courts in case
of non-compliance resulting in one of the crimes set out under the Capital Markets Law, such as
insider trading or market manipulation.

(a) Tender offers
The following general principles apply to tender offers in Turkey:
(i) all holders of the securities of the target of the same class must be afforded
equivalent treatment. Moreover, if a person acquires the management control of a
public company, the other holders of securities are afforded the safeguards for
shareholder protection principles set out in the legislation, such as the obligation of
the acquirer to carry out an MTO and mandatory rules for MTO price determination;
(ii) the holders of the securities of the target must have sufficient time and information to
enable them to reach a properly informed decision on the offer;
(iii) the target’s board must act in the interests of the company as a whole and must not
deny the holders of securities the opportunity to decide on the merits of the offer;
(iv) false markets must not be created in the securities of the target concerned by the
offer in such a way that the rise or fall of the prices of the securities becomes artificial
and the normal functioning of the markets is distorted;
(v) an offeror must announce an offer only after ensuring that they can fulfil any cash
consideration in full, if such is offered, and after taking all reasonable measures to
secure the implementation of any other type of consideration where the CMB can
request a guarantee from banks or other parties for the consideration;

(vi) the offer price must be fairly determined for MTOs using the mandatory methods
under the Tender Offer Communiqué; and
(vii) an offeror must satisfy the public disclosure requirements for initiating and carrying
out the tender offer.
(b) Squeeze-out
The following general principles apply to squeeze-out bids in Turkey:
(i) if a shareholder or a group of shareholders of a public company acting in concert

become owner of at least 98% (97% until 31 December 2017) of the voting rights of a
public company, the shareholder or the group of shareholders have the right to
squeeze out the minority shareholders after the put right exercise period;
(ii) the minority shareholders will have the right to put their shares to the majority
shareholder within three months once the majority shareholder becomes eligible to
squeeze-out minority shareholders;
(iii) the majority shareholder can call the minority shares and squeeze-out the minorities,
and the target is automatically delisted following the expiration on the three-month
period;
(iv) the price for both the exercise of the put right and squeeze-out must be fairly
determined in accordance with the different methods prescribed by the CMB; and
(v) the payment for the minority shares is required to be made in cash and Turkish lira.

There is no publicly available information on proposed reforms relating to tender offers or squeeze-
outs. However, there is a proposal to amend the Communiqué on Common Principles of Material
Transactions and Shareholders’ Put Option Rights No. II-23.1 published on the CMB’s website. The
draft communiqué plans to abolish the current Material Transactions Communiqué and introduce new
rules and procedures regarding material transactions; determining shareholder(s) who have an exit
right, their number of shares and the exit price of the shares; offering exiting shareholders’ shares to
other shareholders and/or investors; transactions that do not trigger the exit right; and exceptions to
these determinations.

The table below provides an overview of the different rights that are attached to different levels of
shareholding within a public company in Turkey:
Shareholding Rights
One share • The right to request information and submit questions to the
directors and statutory auditors at general assembly meetings.
• The right to sue for the liability of the company’s directors.
• The right to dividend payment.
• The right to participate in liquidation proceeds.

Shareholding Rights
• The right to participate in the overall management of the
company through voting in the board of directors’ elections.
• The right to request special auditors to investigate a particular

matter (subject to certain conditions).
• The right to pre-emptive subscription rights in case of a capital

increase (public companies can restrict the pre-emptive
subscription rights in certain cases).
• The right to attend and vote at general assembly meetings in

person or by proxy.

general assembly meetings.
• The right to exercise a put option to sell their shares to the

company if the general assembly passes a resolution
concerning a material transaction, against which they voted.

assembly meetings which contradict the law, the articles of
association of the company or good faith principles.
5% or more, i.e., minority • The right to request the board of directors to convene a
rights general assembly meeting and the right to apply to court if the
request regarding convocation of the general assembly is
rejected.

• The right to initiate a lawsuit for cancellation of a general

assembly resolution.
• The right to request postponement of the negotiations on

approval of the company’s balance sheet for a period of one
month.
• The right to initiate a lawsuit for the dismissal and replacement

of the company’s auditor (subject to certain conditions).
• The right to initiate a lawsuit for dissolution of the company

(subject to certain conditions). However, the court may also
resolve that the plaintiff’s shares should be acquired by the
remaining shareholders, instead of dissolution, or resolve to
use another equitable remedy.
More than 66.66% • The right to limit the pre-emptive subscription rights of the
(However, if at least 50% shareholders.
of the voting rights of the
• The right to grant authority to the board of directors to limit
company (granting a right
pre-emptive subscription rights in companies with a registered
to vote) are present in a
share capital system.
meeting, these decisions
can be taken with the

Shareholding Rights
majority of such votes, • The right to decrease share capital.
unless a higher quorum is
required by the • The right to resolve on merger or demerger decisions.
company’s articles of • The right to change the corporate status or to liquidate
association) company.
• The right to materially change the company’s scope of activity.
• The right to resolve on delisting decisions.
• The right to create new privileges or change the scope of

existing privileges.
• The right to transfer, establish a right in rem on or rent a

material part of the company’s assets.
• The right to resolve on the acquisition or lease of a material

part of assets from related parties.
• The right to set off debts of affiliates by proceeds of a share

capital increase in case the proceeds of the share capital
increase exceeds the current share capital of company.
75% or more The right to issue any kinds of bonds or authorize the board of
directors to issue bonds.
98% (applied as 97% until The right to squeeze-out the minority shareholders (in which case the
31 December 2017) minorities also have a right to put their shares to the majority).
100% • The right to move the company’s headquarters abroad.
• The right to impose additional liabilities on shareholders to

recover balance sheet losses.

Turkish law contains a number of rules that already apply before a tender offer (a public takeover bid)
is announced. These rules impose restrictions and hurdles in relation to prior stake building by an
offeror, announcements of a potential tender offer by an offeror or a target, and prior due diligence by
a candidate offeror. The main restrictions and hurdles have been summarized below. Some careful
planning is therefore necessary if a candidate offeror or target intends to start up a process that is to
lead towards a tender offer.

Before, during and after a tender offer, the normal rules regarding insider dealing and market abuse
remain applicable. For further information on the rules on insider trading and market abuse, see 6.2
below. The rules include, amongst other things, that manipulation of the target’s stock price, e.g., by
prevent an offeror that has inside information regarding a target (other than in relation to the actual
tender offer) from launching a tender offer.


Persons becoming direct or indirect holders of 5%, 10%, 20%, 25%, 33%, 50%, 67% or 100% of the
issued share capital of a Turkish company, including a listed company, are required to notify the
company of such acquisition and, thereafter, to notify the company of their shares transactions when
the total number of shares they hold falls below or exceeds such thresholds, pursuant to the TCC.
Information notified to the company must be registered with the relevant trade registry and publicly
announced in the Turkish Trade Registry Gazette. The notification is required to be made by the
persons whose direct or indirect shareholding exceeds or falls below the foregoing thresholds within
10 days following the acquisition. The notification must be made in Turkish. There is no special form
for this notification, which therefore means that it can be made by a simple petition. The relevant trade
registry may, however, review and comment on the disclosure.
Under the Disclosure Communiqué, persons who become direct or indirect holders of 5%, 10%, 15%,
20%, 25%, 33%, 50%, 67% or 95% of a listed company’s issued share capital or voting rights are
required to publicly disclose such event. The same requirement also applies to the shareholders of
issuers when the total number of their shares or voting rights falls below or exceeds these thresholds.
The disclosure to be made by shareholders is made by the Central Registry Agency. Disclosures of
the acquisition of blocks of shares must contain the (i) name of the person, i.e., real person or legal
entity, required to make the disclosure; (ii) name of the company that is the subject of the disclosure;
(iii) date of the transaction; (iv) number, nominal value of the shares and transaction value; and (v)
number of shares and shareholding structure pre- and post-transaction. If there are multiple holders of
a share, then disclosure must be made separately for each holder.
When determining whether or not a threshold has been passed, a candidate offeror must also take
into account the shares held by the parties with whom it acts in concert or may be deemed to act in
concert (see 3.8 below). These may include affiliates. The parties could also include existing
shareholders of the target with whom the candidate offeror has entered into specific arrangements
(such as call option agreements).
3.5 Disclosures by the target

The target must continue to comply with the general rules regarding disclosure and transparency.
These rules include that a company must immediately announce all inside information. For further
information on inside information, see 6.1 below. The facts surrounding the preparation of a tender
offer may constitute inside information if it is deemed to be of a “precise nature”. If so, the target must
announce this. However, the board of the target can delay the announcement if it believes that a
disclosure would not be in the legitimate interest of the company. For instance, this could be the case
if the target’s board believes that an early disclosure would prejudice the negotiations regarding an
offer. A delay of the announcement, however, is only permitted provided that the non-disclosure does
not entail the risk of the investors being misled, that the company can keep the relevant information
confidential, and that a corporate procedure is followed. Furthermore, the company is ultimately liable
for the delayed disclosures.

The acquiring party or the brokerage firm appointed to intermediate the tender offer must immediately
disclose the following on the Public Disclosure Platform (the “PDP”). This is the platform on which
public companies in Turkey are required to publish their disclosures) in accordance with the CMB’s
public disclosure rules:
• the decision to initiate a tender offer;

• the triggering event to initiate an MTO and whether the acquirer will apply to the CMB for an
exemption along with its details, if an MTO is triggered;
• the offer price or the calculation method to determine the offer price (for MTOs disclosed
simultaneously with the occurrence of the MTO requirement or decision to initiate a tender
offer);
• the tender offer or MTO exemption application to the CMB;
• the CMB’s decision regarding a VTO, MTO or an MTO exemption application;
• the summary or the conclusion of the valuation report, if any;
• the number and value of the shares purchased and the number of investors responding to the
tender offer at the end of each day the tender offer remains open;
• the total number and value of the shares purchased, and the total number of shareholders
responding to the tender offer, as of the end of the offer period;
• a detailed shareholding structure and management of the acquirer, as of the end of the tender
offer period;
• cancellation of a VTO; and
• transactions relating to price adjustment.
If the CMB determines that the tender offer application submitted to the CMB includes
misrepresentations or omissions, the CMB may suspend or cancel the takeover bid.
3.7 Due diligence

The Turkish public takeover bid rules do not contain specific rules regarding the question of whether a
prior due diligence can be organized or how such due diligence is to be organized. Be that as it may,
the concept of a prior due diligence or pre-acquisition review by a bidder is generally accepted, and
appropriate mechanisms have been developed in practice to organize a due diligence or pre-
acquisition review and to cope with potential market abuse and early disclosure concerns. These
mechanisms include the use of strict confidentiality procedures and data rooms.

For the purpose of the Turkish tender offer rules, persons are “acting in concert” if they collaborate
with the offeror, the target or with any other person on the basis of an express or implied, oral or
written, agreement, aimed at acquiring the management control over the target or frustrating the
success of a tender offer.
Furthermore, under the Tender Offer Communiqué, individuals and/or entities are deemed to be
“acting in concert” with the following:
• other companies in which the management control is exercised by such individual and/or legal
entity shareholders of the target; and
• individuals and/or legal entities exercising management control of the legal entity
shareholders of the target and other companies in which the control is exercised by such
individual and/or legal entity, i.e., individuals and/or legal entities exercising management
control of legal entity shareholders of the target.
The concept of persons acting in concert is very broad and, in practice, many issues can arise in
determining whether or not persons act in concert. This is especially relevant in relation to MTOs.
Under the Capital Markets Law and Tender Offer Communiqué, “management control” means directly

or indirectly holding more than 50% of a public company’s voting rights, individually or jointly along
with the persons acting together, or holding privileged shares with a right to appoint the simple
majority of the board of directors or nominate the same in the general assembly. Accordingly, if one or
more persons in a group of persons acting in concert acquire the management control of a public
company, the members of the group will have a joint obligation to carry out an MTO together.
There are two main forms of tender offers in Turkey:
• a VTO, in which an offeror voluntarily makes an offer for all or part of the shares of the target;
and
• an MTO, which an offeror is required to make if, as a result of an acquisition of securities or

otherwise, it acquires the management control of the target.
An offeror that intends to launch a tender offer must include the following documents in its application
to the CMB:
• share purchase agreement and other related transaction documents as well as their Turkish
translations by a sworn translator;
• standard form of application containing information regarding the acquirer and the tender
offer, i.e., the information form;
• information on the acquirer such as its scope of activities, shareholding structure and board of
directors;
• information on the appraisal of the tender offer price (the CMB may require a valuation report
in case of an MTO);
• the brokerage agreement (the offeror must sign a brokerage agreement with a brokerage firm
that will carry out the takeover process with the mandatory content set out under the Tender
Offer Communiqué); and
• a guarantee by a company or bank in Turkey in order to ensure the payment of the MTO price
to the minority shareholders, if required by the CMB.

The offeror is free to make the tender offer subject to merger control clearance and approval by the
CMB.
The offeror is, in principle, free to determine the price and the form of consideration offered to the
minority shareholders (absent any pre-existing controlling interest in the target).
The offer price may be paid in cash, listed securities or a combination of both. However, a seller must
approve the payments in securities in order for the offeror to pay the seller in listed securities either
partially or fully. There is no minimum price specifically set out under the Tender Offer Communiqué.
Payment for the shares acquired via a tender offer must be made by the business day following the
sale of the shares.
The offeror is entitled to increase the VTO price or extend the scope of the VTO in case a partial offer
is made. In this case, the difference between the newly determined VTO price and the former VTO
price must be paid to investors who have already accepted the VTO, within two business days.

The minority shareholders may opt out of accepting the VTO if the offeror increases the number of the
shares subject to its offer.
The offeror is entitled to withdraw the tender offer up until the offer’s launch and third parties are
entitled to initiate a competitive offer, i.e., a competitive bid, during a VTO.

The obligation to launch an MTO is triggered as soon as a person or group of persons acting in
concert acquires the management control of a public company.
The obligation to launch an MTO is not triggered if:
• the management control is acquired as a result of a voluntary tender offer made in respect of
all shares of the target;
• in case the management control is acquired through an agreement without acquiring any
shares, the agreement is approved by the general assembly and the shareholders voting
against the agreement are granted with a right to sell their shares to the company;
• the shareholding percentage of the shareholder holding the management control falls below
50% and then exceeds 50% again before the management control is acquired by a third
party;
• the voting rights providing the management control are transferred to a person controlled by
the transferring person; or
• after the shareholder holding the management control of the company sells its shares to an
acquirer, the acquirer shares the management control of the company equally (or less) with
the shareholder of such company, i.e., the shareholder holding the management control prior
to the share transfer, through a written agreement, provided that the acquirer holds at most
50% of the voting rights of the target.
The obligation to launch an MTO may be exempted by the CMB upon request by the acquirer, filed
within six business days following the triggering of an MTO, in cases of:
• acquisition of the shares or voting rights of a company as a change in its capital structure,
required to strengthen the financial structure of such company under financial distress (in this
case, the CMB shall investigate whether new funds are transferred to the company or whether
the capital structure change is actually required);
• selling out the part of the shares required for the mandatory tender offer or filing a written
undertaking to sell out the shares within a reasonable time determined by the CMB, provided
that the company’s shares are not used in any general assembly meeting or no changes are
made in the company’s board of directors;
• the change of control of the management in the parent company of the target, but not for the
purpose of gaining control of the company’s management. While identifying whether this
condition exists, the CMB will assess certain conditions, including whether the target’s
contribution to the total assets of the parent company exceeds 10% as stated in the parent
company’s financial statements or whether the target is material to the operating volume of
the parent company;
• a sale of shares in public companies that are owned by the government (or governmental
entities, bodies and agencies) under a privatization transaction; and
• the change of control of the management of the company as a result of a merger where the
surviving entity is a special purpose acquisition company (birleşme amaçlı ortaklık), provided

that the shares owned by the shareholders who voted against the merger transaction in the
general assembly meeting where the merger transaction is approved will be purchased in line
with the principles and procedures set out in the prospectus prepared for the public offering.
• facilities extended by banks:
o A bank seizes the ownership of the pledged shares as part of an enforcement action
upon default.
o The pledged shares are acquired by a special purpose vehicle (“SPV”) founded by a
bank as part of the enforcement action upon default.
o A bank or SPV, following their seizure, sells the pledged shares to a third party as
part of the enforcement action upon default.
o The shares are transferred to satisfy the requirements of laws or regulations that set
forth certain criteria to become shareholders.
• transfer of shares in order to observe a legislative provision determining the qualifications of a

shareholder.
• change in management control resulting from share acquisition of existing shareholders in

case of capital increases undertaken by public companies where the preemption rights are
not restricted.
In terms of the price offered and the form of the consideration, the rules below apply in case of an
MTO, where the CMB will have ultimate discretion:
• The offer price may be paid in cash, listed securities or a combination of both. However, a
seller must approve the payments in securities in order for the offeror to pay the seller in listed
securities, partially or fully.
• The MTO price must not be below the higher of (i) the highest price paid by the acquirer and
those who act in concert with the acquirer in return of the shares acquired within six months
preceding the triggering share acquisition, and (ii) the arithmetic average of the daily weighted
average trading price of the shares for the six-month period preceding the date of the public
announcement regarding the execution of the definitive agreements for acquiring shares. The
calculation methods differ depending on whether the target is acquired indirectly or has
different classes of shares with different shareholding rights or privileges.
• The Tender Offer Communiqué provides that, in determining the minimum MTO price, price
adjustment mechanisms, additional payment options and other elements that can either
directly be considered a part of the purchase price or that arise as a result of fulfilling certain
post-closing conditions must also be considered.
• If the MTO price cannot be determined based on these findings, the CMB can ask for a
valuation report to determine the MTO price. Furthermore, the CMB has the power to allow or
require an amendment of the price, including if it appears that, apart from the consideration
offered, special direct or indirect advantages are granted to certain transferors of the
securities.

5 Timeline
The table below contains a summarized overview of the main steps of a typical tender offer process
under Turkish law.
Step
Preparatory stage:
• Preparation of the offer by the offeror (study, due diligence, financing and
preparation of the CMB application).
• In an MTO process, all necessary documentation must be ready to meet the strict
deadlines outlined below.
Launching of the offer:

• The offeror announces its decision to initiate a tender offer on the PDP.
• The pricing methodology or the price must be disclosed at this point along with the
decision to initiate a tender offer.
• The amount of funds available and the source of the funds must also be disclosed.
• In case of an MTO, the obligation is triggered with the acquisition of management
control, e.g., share transfer, execution of a voting agreement.
CMB application:
• The offeror applies to the CMB regarding the VTO/MTO with the required
documentation.
• In case of an MTO, the MTO application must be filed within six business days from
the MTO triggering event, e.g., share transfer.
CMB review and approval:

• Review and approval by the CMB (no specific deadlines are set under the
regulations, in practice it can take up to six weeks).
• The information form on the VTO/MTO must be published on the PDP and the
target’s website within three business days following the approval.
VTO/MTO launch:
• Target’s board of directors is required to prepare a report on its opinion regarding
the VTO to be disclosed on the PDP one business day prior to the launch (only
applicable to VTO).
• VTO/MTO must be launched within six business days from receiving the CMB’s
approval.
• In any case, an MTO must be launched within two months from the triggering
event.
Offer period:
• The offer period must remain open for a minimum of 10 business days and a
maximum of 20 business days.

Step
• The offeror is required to disclose the number and value of the shares purchased
from the shareholders of the target (both on-exchange and off-exchange) along
with the total number of shareholders who participated in the offer in each day
during the offer period.
• The offeror can increase the tender offer price or the number of the shares subject
to its offer until one business day prior to the end of the VTO, in which case the
offer period will be extended for two weeks (only applicable to VTO).
• During the offer period, a third party is entitled to make a competitive offer. If the
period of the competitive offer is longer than the VTO, the VTO’s offer period can
be extended to match the competitive offer’s period. The shareholders that have
already accepted the VTO are entitled to rescind their acceptance under certain
circumstances (only applicable to VTO).
• The offer period can be extended by two to three weeks subject to a change in the
VTO’s price or the number of the shares subject to the offer, or in the case of a
competitive offer (only applicable to VTO).
Disclosure:
• The updated ownership structure and management status of the target is to be
disclosed in the PDP.
Set out below is an overview of the main steps for a public voluntary takeover offer and a public
mandatory takeover offer in Turkey.

Start
A Day A Day + [X] Day [X] Day 0 Day 20 Day 21
process
Offeror announces Offeror applies to the CMB reviews and approves Offer must be launched Offer period must remain open Consideration must be
decision to initiate a Capital Markets Board the offer (there are no within 6 business days from for 10 to 20 business days: settled in the following
takeover offer on the (CMB) with required specific deadlines under the receiving CMB approval business day after the
Public Disclosure documentation regulations, in practice it can purchase
Platform (PDP - platform take up to 6 weeks) • Offeror must disclose
on which public number and value of
shares purchased and Offeror must disclose (i)
companies in Turkey are
required to publish The information form on the total number of total number and value of
disclosures), along with: offer must be published on shareholders who shares purchased and
the PDP and the target’s participated in the offer in total number of
website within 3 business each day during offer shareholders who
• Price/pricing days following approval period participated in the offer,
methodology, and and (ii) the updated
• Offeror can increase offer
ownership structure and
• Amount of funds Target board prepares price or number of shares
management status of the
available and report with opinion on the subject to the offer until 1
target, on the PDP, after
source of funds offer, to be disclosed on the business day before the
the end of the takeover
PDP 1 business day before end of the offer (in which
process
the launch of the voluntary case the offer period is
takeover extended for 2 weeks)
• Third parties can make

competing offers.
Shareholders that have
already accepted may
rescind their acceptance
under certain
circumstances

Public mandatory takeover offer (indicative timeline)
Start
process A Day A Day + 6 Day [X] Day 0 Day 20 Day 21
Offeror announces decision Offeror applies to the CMB reviews and approves Offer must be launched Offer must remain open for 10 Consideration must be
to initiate a tender offer or the CMB with required the offer (there is no specific within 6 business days to 20 business days settled during the
event triggering the MTO, on documentation deadline under the from receiving CMB business day following
Offeror must disclose number
the Public Disclosure regulations, but the MTO approval the purchase.
MTO application must be and value of shares purchased
Platform (PDP), along with: must be launched within 2
filed within 6 business In any case, MTO must be and total number of Offeror must disclose (i)
months of the triggering
• Price/pricing days from the MTO launched within 2 months shareholders who answered the total number and value of
event. In practice, CMB
methodology, and triggering event from triggering event offer at the end of each day shares purchased and
review can take up to 6
during offer period total number of
• Whether the offeror will weeks)
shareholders who
make an application to
The information form answered the offer, and
the Capital Markets
approved by the CMB must (ii) the updated ownership
Board (CMB) for an
be published on the PDP structure and
exemption
and the target’s website management status of the
For an MTO, obligation is within 3 business days target, on the PDP, at the
triggered with the acquisition following approval end of the MTO process
of “management control” eg,
share transfer, execution of
voting agreement.
Management control is
defined as ownership of (i)
more than half of the share
capital and/or voting rights of
a public company or (ii) the
ability to appoint more than
half of the directors of such
company

6 Takeover Tactics
A Turkish public company has the obligation to immediately disclose to the public all “inside
disclosed.
instruments.

• “Information which, if it were made public, would be likely to have a significant effect
on the prices of financial instruments or related derivative financial instruments” shall
mean information a reasonable investor would be likely to use as part of the basis of their
It is up to the public company to determine if certain information qualifies as “inside information”. This

The basic legal framework regarding insider dealing and market abuse under Turkish law is set forth
in the Capital Markets Law and the Market Manipulation Communiqué:
• Insider trading – Insider trading is a crime defined in the Capital Markets Law as benefiting
from, or permitting others to benefit from, or avoiding losses through, or enabling others to
avoid losses through, the use of non-public information which may affect the value of
securities or investors’ decisions. Benefiting from non-public information is the essential
element. For an act to constitute an insider trading violation, the information must be utilized
in a manner which provides an unfair advantage over other investors. Insider trading
violations are punishable by a prison term of 3 to 5 years and by fines. The minimum
monetary fine imposed may not be less than two times the monetary benefit obtained through
such actions.
• Market abuse – The Capital Markets Law defines two types of market manipulation. The
provision of information, disseminating news or making comments in a false, falsified,
misleading or groundless manner and not disclosing information which is required to be
disclosed by law is defined as “market manipulation based on information”; whereas, the sale
and purchase of securities for the purpose of artificially affecting supply and demand, creating
an impression of an active market, keeping the prices at a particular level or artificially
increasing or decreasing the prices is defined as “market manipulation”. Manipulation
violations are punishable by a prison term of 3 to 5 years and by fines. The minimum
monetary fine imposed may not be less than the monetary benefit obtained through such
actions.

a tender offer, albeit that during a tender offer additional disclosures and restrictions apply in relation
to trading in listed securities.

Anti-takeover defense mechanisms are not specifically regulated under Turkish law. Therefore, the
legislation does not provide for break fees or lock-up arrangements. Under a VTO, a competitive offer
and the board’s report on the VTO may provide relief as anti-takeover defense mechanisms, yet
practice of these in the Turkish market is not developed. Having said that, conventional anti-takeover
mechanisms such as the poison pill (capital increase by the board under authorized capital system
through limiting subscription rights) and cross-shareholding may, in theory, be applicable.
The majority of Turkish public companies have a low free float and are controlled by a single
shareholder (or shareholders acting in concert). In practice, this leaves no room for hostile takeovers
in the Turkish market.

Takeover
If a shareholder or a group of shareholders of a public company acting in concert become owner of at
least 98% (applied as 97% for the shareholders exercising their rights until 31 December 2017) of the
voting rights of a public company, they may squeeze-out the minorities and the minorities will also
enjoy a put right even if the majority shareholder does not exercise its squeeze-out right.
Shareholders becoming entitled to squeeze-out the minority shareholders are required to publicly
disclose such entitlement on the PDP.
Whenever the squeeze-out right becomes exercisable, the minority shareholders will first enjoy the
right to request the majority shareholder(s) to buy out their shares in the public company. In other
words, once the majority shareholder becomes eligible to squeeze out minority shareholders, minority
shareholders will have the right to put their shares to the majority shareholder within three months as
of the disclosure of becoming a majority shareholder. If any minority-held shares are not sold during
the three-month buy-out period, the majority shareholder can then call the minority shares and
squeeze-out the minorities, with the target being automatically delisted. The important difference
between the majority shareholder’s squeeze-out right and the minorities’ put right is the applicable
price. The majority shareholder’s squeeze-out price is the weighted average price of the shares for
the last 30 days prior to the disclosure of such shareholder becoming a majority shareholder. The
minorities’ put option price is the highest of: (i) the weighted average trading price of the shares for the
last 30 days prior to the majority shareholder’s disclosure of its intent to exercise its squeeze-out right;
(ii) the amount specified in an independent valuation determining the value of each class or group of
shares; (iii) the share price used in transactions such as a tender offer or merger in the last year prior
to the majority shareholder’s disclosure of its intent to exercise its squeeze- out right; or (iv) the
weighted average of the trading price of the shares: (a) for the last 180 days, (b) for the last year, and
(c) for the 5 years prior to the majority shareholder’s disclosure of its intent to exercise its squeeze-
out right.
It is important to note that the majority shareholder is required to exercise the squeeze-out right within
three business days after the elapse of the three-month period in which the minority shareholders can
exercise their put option rights.
The put and squeeze-out processes are done via a brokerage firm. For the squeeze-out process, the
board of directors needs to apply to (i) the CMB to cancel the shares of the minority shareholders and
issue new shares after adopting a board resolution along with the required documents, and (ii) Borsa
Istanbul, i.e., the only stock exchange in Turkey, for the delisting of the public company.

Payment for the minority shares is required to be made in cash and Turkish lira. After the majority
shareholder deposits the price for the minority shares to the public company’s bank account and pays
the CMB fees, the CMB issues an issuance certificate for the newly issued shares for the majority
shareholder, which must be registered with the trade registry within three business days. The minority
shareholders’ shares are cancelled as of the date of the registration with the trade registry and new
shares are issued to the majority shareholder. Once this process is completed, the public company
will be automatically delisted and will no longer be subject to Turkish capital markets laws and
regulations.
8 Delisting
If a shareholder or shareholders of a public company acting in concert holds, directly or indirectly,
95% or more voting rights of a public company, the public company is entitled to apply to Borsa
Istanbul for delisting of that company. Under the Material Transactions Communiqué, delisting is
classified as a material transaction.
Material transactions, e.g., delisting, must be submitted to the approval of the general assembly. No
minimum meeting quorum is required unless otherwise provided in the company’s articles of
association. General assembly resolutions relating to material transactions are required to be taken
with the affirmative votes of at least two-thirds of voting shares present and represented in the
relevant general assembly meeting. However, if shareholders holding at least half of the total voting
shares attend the relevant general assembly meeting, the resolution for delisting is required to be
taken by the affirmative vote of at least the majority of the voting shares present in the meeting.
Within five business days following a company’s general assembly meeting approving the delisting, (i)
the company must apply to Borsa Istanbul to delist its shares, and (ii) the shareholder (or
shareholders acting in concert) having management control must apply to the CMB to initiate an MTO.
The actual MTO must commence within six business days following the adoption of the general
assembly decision on delisting. Alternatively, the MTO can be held prior to the general assembly
meeting through a process similar to book building under certain conditions. The MTO price will be
calculated over the weighted average price of the shares for the last 30 days prior to the first
disclosure to the public of the company’s delisting decision. After the MTO is completed, Borsa
Istanbul will resolve to delist the company’s shares and the resolution will enter into force on the fifth
business day following Borsa Istanbul’s public disclosure of the delisting decision on the PDP.
The delisting procedure requires specific disclosures to be made in relation to board and general
assembly decisions, applications with the CMB and Borsa Istanbul, and the MTO process.

Eren Kurşun, Muhsin Keskin and Caner Elmas in the Istanbul office are the most appropriate contacts
within Esin Attorney Partnership* for inquiries about public M&A in Turkey.
Eren Kurşun Muhsin Keskin Caner Elmas

Istanbul Istanbul Istanbul
eren.kursun@esin.av.tr muhsin.keskin@esin.av.tr caner.elmas@esin.av.tr
+90 212 376 64 00 +90 212 376 64 00 +90 212 376 64 00
*Esin Attorney Partnership is a member firm of Baker & McKenzie International, a Swiss Verein.

Ukraine
1 Overview
Ukraine began to encounter adverse economic and geopolitical conditions in 2014 but deal activity
significantly picked up in 2016 due to increased economic and political stabilization. Since 2017, the
market has shown signs of gradual recovery after going through the worst of the downturn.
A significant portion of the recent M&A activity has been concentrated in Ukraine’s traditionally strong
agricultural sector, which was the sector most resilient to the crisis. The world’s largest agricultural
processing companies have also been actively investing into Ukraine’s port infrastructure by building
grain terminals for the export of their products. In addition to agriculture, renewable energy,
infrastructure, healthcare, IT/telecommunication remain among the most attractive sectors for
investors.
Although it has been announced that the delayed privatization of many large state-owned enterprises
will take place in 2020, this is unlikely to be completed on time. Once completed the privatization is
expected to boost the M&A activity in Ukraine.
The public M&A market is very limited in Ukraine due to how businesses have been historically set up
and how corporate law has evolved. The majority of companies in Ukraine currently exist in the form
of limited liability companies to which the public takeover rules do not apply. The Ukrainian public
M&A market has been formed, to a significant extent, through the acquisition of former state owned
enterprises, either directly from the state in the privatization process or in the secondary market. Such
former state owned enterprises usually exist in the form of joint stock companies (“JSC”). Currently,
there are approximately 14 thousand public and private JSCs registered in Ukraine.
Generally, JSCs may be ‘public’ or ‘private’. A public JSC’s shares were publicly offered and/or
admitted to trading on a stock exchange, whereas the shares of private JSCs may not be publicly
traded. Taking into account the quasi-public nature of the majority of JSCs, the recent corporate
reform has drawn a clear line between the regulation of the public JSCs and the private JSCs by
establishing stricter requirements for public JSCs and loosening requirements for private JSCs. These
changes have resulted in clean-up of the market from the “quasi-public joint stock companies”.
Currently, there are approximately only 1,500 public JSCs registered in Ukraine.
The new takeover rules were introduced in Ukraine in June 2017 and they have significantly reshaped
the regulations on the acquisition of shares of both public and private JSCs. Thus, even though there
are only a few public companies in Ukraine, the takeover rules described below apply to the direct or
indirect acquisition of any type of JSC in Ukraine and should be strictly followed by the parties.

On 23 March 2017, Ukrainian Parliament approved a reform of corporate legislation and introduced
takeover rules into Ukrainian law. Law of Ukraine “On Amendments to Certain Legislation of Ukraine
Regarding Improvement of Corporate Governance of Joint Stock Companies” No. 1983-III dated 23
March 2017 (“Corporate Governance Law”) became effective on 4 June 2017. The new takeover rules
which are based on EU Directive 2004/25/EC of 21 April 2004 on takeover bids, changed the rules for
acquisition of controlling stakes and introduced the concepts of “squeeze-out” and “sell-out”. The
amendments also increased the disclosure requirements and thresholds for approval of interested
party transactions.
Further to the Corporate Governance Law, Ukrainian Parliament adopted Law of Ukraine “On
Amendments to Certain Legislative Acts of Ukraine Regarding Simplifying Business Activity and
Attraction of Investments by Securities Issuers” No. 2210-VIII dated 16 November 2017 (“Law on

Business Simplification”), aimed at overhauling the Ukrainian stock market mainly through the
removal of ‘quasi-public JSCs’ and aligning the requirements for public JSCs to the EU regulations.
According to the Law on Business Simplification, all JSCs in Ukraine are considered to be private
JSCs as of 6 January 2018, except for the public JSCs whose shares are listed on a stock exchange
or who make a public announcement that they shall remain public.
The Law on Business Simplification also establishes stricter requirements for JSCs that choose to
remain or become public, including new rules for disclosure of information (disclosure thresholds,
content of information and means of disclosure), additional regulation on supervisory councils in
public JSCs and new prospectus requirements (including the requirements for language and content
of a prospectus).
Furthermore, the Law on Business Simplification has introduced the possibility for legal entities to
provide services of (i) disclosure of information on behalf of stock market participants, including JSCs,
(ii) dissemination of information on financial instruments and/or stock market participants; and (iii)
submitting reports and/or administrative information to the Securities Commission. The legal entities
wishing to provide such service(s) shall obtain authorization from the Securities Commission.
Another recent development in corporate law is that concluding corporate agreements among the
shareholders of JSCs is now expressly permitted by Law of Ukraine No. 1984-VIII ‘On Amendments
to Certain Legislation of Ukraine Regarding Corporate Agreements’, dated 23 March 2017 (“Corporate
Agreements Law”). The Corporate Agreements Law allows the shareholders of JSCs to conclude
corporate (shareholders) agreements. Corporate agreements may establish, among other things, an
obligation for parties to vote at general meetings in the manner determined by such agreement, to
approve the acquisition or disposal of shares in a company according to a pre-determined price and to
undertake other actions related to the company’s management. The parties may now include transfer
instruments that are common in other jurisdictions such as tag along rights, drag along rights, call
options and put options into their corporate agreements. The express permission and regulation of
corporate agreements is important for Ukrainian M&A deals. The use of this instrument by market
participants will greatly depend on subsequent court practice.
The other main rules and principles of Ukrainian law relating to corporate takeovers and mergers are
set out in the following:
• the Civil Code of Ukraine dated 16 January 2003, No. 435-IV, as amended;
• the Commercial Code of Ukraine dated 16 January 2003, No. 436-IV, as amended;
• the Law of Ukraine “On Joint Stock Companies” dated 17 September 2008, No. 514-VI (“JSC
Law”), as amended;
• the Law of Ukraine “On State Registration of Legal Entities, Individuals - Entrepreneurs and
Public Organizations” dated 15 May 2003, No. 755-IV, as amended (“Companies Registration
Law”);
• the Law of Ukraine “On Securities and Stock Exchange” dated 23 February 2006, No. 3480-
IV, as amended (“Securities Law”);
• the Law of Ukraine “Depository System of Ukraine” dated 6 July 2012, No. 5178-VI, as
amended; and
• the Law of Ukraine “On State Regulation of the Securities Market in Ukraine” dated 30
October 1996, No. 448/96-BP, as amended.


While the aforementioned legislation contains the main legal framework for acquisitions of JSCs, there are a
number of additional rules and principles that are to be taken into account when preparing or conducting an
acquisition of a JSC, such as:
(a) The rules relating to the disclosure of significant shareholdings in JSCs and ultimate beneficial
owners. These rules are based on the Securities Law, the Companies Registration Law, the
Law of Ukraine “On Prevention and Counteractions of Legalization of Proceeds of Crime,
Financing of Terrorism and Circulation of Mass Destruction Weapon” No. 1702-VII, dated 14
October 2014, and the Law of Ukraine “On Amending Certain Laws of Ukraine Relating to the
Identification of Ultimate Beneficiaries of Legal Entities and Public Figures” No. 1701-VII,
dated 14 October 2014 (“UBO Law”). For further information, see 4.1 below.
(b) The rules relating to insider dealing. These rules are based on the Securities Law. For further
information, see 3.3 below.
securities on a regulated market. These rules are based the JSC Law and the Securities Law.
2.3 Supervision and enforcement by the Securities Commission

The securities market in Ukraine is subject to the supervision and control of the National Securities
and Stock Market Commission (“Securities Commission”). The Securities Commission is the principal
securities regulator in Ukraine.
The Securities Commission has a number of legal tools that it can use to supervise and enforce
compliance with the securities legislation, including the requirements for acquisition of controlling
stakes and the squeeze-out and sell-out procedures. In particular, the Securities Commission may
apply financial sanctions in the case of non-compliance with the takeover rules. Administrative fines
and criminal liability could also be imposed in the case of non-compliance with the securities
legislation.
2.4 Foreign investments restrictions

Foreign investments are not restricted in Ukraine. Unless in the context of specific industries and
sectors (such as rockets, financial services, broadcasting, banknotes, agriculture), takeovers are not
subject to prior governmental or regulatory approvals other than customary anti-trust approvals.

On 25 November 2019, the Draft Law “On Joint Stock Companies” No. 2493 (“Draft JSC Law”) was
submitted to the Ukrainian Parliament for consideration. However, as of the date thereof, it was not
yet considered. As described the explanatory notes, the Draft JSC Law was designed mainly to
ensure that Ukraine complies with the provisions of the Association Agreement between the European
Union and its Member States, and Ukraine, dated 21 March 2014, on the approximation of national
laws to EU corporate governance legislation. The Draft JSC Law is aimed at significantly overhauling
corporate governance within JSCs by, among other things:
(a) bringing the rules on shareholder representation in line with EU legislation, in particular with
EU Directive 2007/36/EC of 11 July 2007 on the exercise of certain rights of shareholders in
listed companies;

(b) introducing the possibility to opt for a one-tier corporate governance structure;
(c) introducing the new rules for convening general shareholders’ meeting, including by means of
electronic voting;
(d) introducing new officer’s fiduciary duties and liability rules; and
(e) bringing the rules on mergers and acquisitions in line with the provisions of EU Directive
2017/1132 of 14 June 2017 relating to certain aspects of company law.

The concept of a “public takeover bid” does not technically exist in Ukraine, because there is no
separate regulation for public takeovers. The rules described below apply to both private and public
JSCs, unless specifically stated otherwise.

The table below provides an overview of the different rights and powers that attach to different levels
of shareholding within a JSC:
Shareholding Rights
One share • The right to be notified of the convening of the general

shareholders’ meetings and the right to attend and vote at
• The pre-emption right to subscribe for newly issued shares.
• The right to receive a part of the property of the company in
case of its liquidation.
• The right to receive information on the business activity of the
company.
• The right to have access to the documentation required for
adoption of the decision at the general shareholders’ meetings.
• The right to receive information about the list of the JSC’s
affiliated entities and information concerning their shareholding
in the JSC.
• The right to provide suggestions regarding questions included
into the agenda of a general shareholders’ meeting, including in
relation to candidates to be appointed to the governing bodies
of the company.
• The right to require mandatory buy-out of its shares at market
value in case of voting against the following matters at the
general shareholders’ meeting: merger, split-off, reorganization,
spin-off, change of company’s type from private to public and
vice versa; approval of the company entering into significant
agreements; approval of the interested party transaction;
change of the charter capital, and refusal to use the pre-
emption right to purchase shares of additional allotment in the
process of their placement.

Shareholding Rights
• The right to sell its shares to a shareholder who acquired a
controlling stake (more than 50% of shares) in any type of JSC
or a significant controlling stake (75% or more of shares) in a
public JSC.
• The right to sell-out.
5% or more • Constitutes a “significant stake”.

• The right to propose additional items on the agenda of a
general shareholders’ meeting (the inclusion of which into the
agenda of the general shareholders’ meeting is mandatory).
10% or more • The right to appoint representatives for supervision of

registration of shareholders, holding of a general shareholders’
meeting, voting and counting procedures.
• The right to request the convening of an extraordinary general
• The right to file a claim on behalf of the JSC against officers of
the JSC for compensation for losses caused by a corporate
officer.
More than 10% • The right to require an audit of the company’s activities to be
conducted by an independent auditor, but not more than twice
per annum.
• The right to require that the audit committee, i.e., the internal
supervising body of the company, or an auditor (in case the
audit committee was never created) conducts an audit of the
financial and commercial activities of the company.
25% (at a general The ability at a general shareholders’ meeting to block:

• any changes to the charter;
• cancellation of treasury shares (shares bought out by the JSC);
• change of type of the company (from public to private and vice
versa);
• placement of shares;
• placement of securities that can be converted into shares;
• capital increases and capital decreases; and
• spin-off and termination, including liquidation.
50% and more Constitutes a “controlling stake” in any type of JSC (both public and
private).
More than 50% Constitutes the quorum at a general shareholders’ meeting.
More than 50% (at a The ability at a general shareholders’ meeting to decide on the
general shareholders’ following, among others:
meeting)
• determination of the main directions of the company’s business;
• approval of the share split or consolidation;

Shareholding Rights
• approval of the annual report of the company;
• distribution of the company’s profits or allocation of losses;
• approval of the regulations of the general shareholders’
meeting, the supervisory board, the executive body and the
audit commission (auditor), as well as amendments to such
regulations;
• approval of the amount of the annual dividends;
• appointment of supervisory board members, approval of the
terms and conditions of the civil-law agreements or employment
agreements (contracts) to be entered into with each supervisory
board member, determination of their remuneration, and
appointment of a person authorized to execute the civil-law
agreements with the supervisory board members;
• approval of the regulation and reports on the remuneration of
the supervisory board members according to the requirements
set out by the Securities Commission;
• approval of removal (including before lapse of their term of
office) of the supervisory board members;
• appointment of the audit commission chairman and members,
and approval of their removal (including before lapse of their
term of office);
• approval of the audit commission reports;
• consideration of conclusions of the external audit and approval
of the resolution following such consideration;
• approval of the resolution following consideration of reports of
the supervisory board, the executive body and the audit
commission;
• approval of the company’s code of corporate governance;
• appointment of the chairman and members of the counting
commission of the general shareholders’ meeting;
• announcing a break in the general shareholders’ meeting until
the next day;
• approval of the offering or placement of the securities other
than the shares for the amount in excess of 25% of the
company’s total assets;
• election of an auditor (audit firm) to conduct an audit of the
results for the current and/or past year(s) (only for a public
JSC);
• granting consent to the significant and interested party
transactions (if required);
• filing a claim in case of non-compliance with requirements
regarding approval of significant transactions; and

Shareholding Rights
• any other decisions for which supermajority is not required and
which do not fall under exclusive competence of the supervisory
board.
75% or more (only for a Constitutes a “significant controlling stake”.

public JSC)
95% or more Constitutes a “dominant controlling stake” in any JSC (both public and
private).
The possibility to force all other shareholders to sell their shares
through launching a squeeze-out bid (a “squeeze-out”).

Ukrainian law contains a number of rules that already apply before an acquisition of a JSC’s shares is
and announcements of a potential acquisition by a bidder or a target company. The main restrictions
and hurdles have been summarized below. Some careful planning is therefore necessary if a
candidate bidder intends to start a process that is to lead toward an acquisition of shares in a JSC.
When planning and structuring the deals, it is also crucial to take due account of the various Ukrainian
currency control restrictions which may apply to cross-border share transfers and settlements.
From 4 June 2017, shareholders of private JSCs may disapply or establish different rules in their
charters regarding the acquisition of controlling stakes of such companies, and in respect of squeeze-
out and sell-out procedures. Such amendments to the charter of a private JSC can be made a
condition precedent to the acquisition of a JSC’s shares.

Before, during and after an acquisition of shares, the general rules regarding insider dealing and
market abuse remain applicable (see 6.3). The rules include, among other things, that manipulation of
the target’s stock price, e.g., by creating misleading rumors, is prohibited.
3.4 Disclosure of shareholdings and disclosure by the target company

Ukrainian legislation does not currently have any mandatory requirements regarding the disclosure of
shareholdings or disclosures by the target company before acquiring the shares of a JSC. The
disclosure requirements apply only after the acquisition of the shares. Such disclosures are described
in 4.1 below.
3.5 Announcement of a takeover bid

There is no specific regulation regarding the announcement of a takeover bid. However, pre-
acquisition announcements may be required for a JSC share deal.
If, after the acquisition of shares of a JSC, the shareholding of a person (or persons acting in concert),
coupled with the existing shareholdings of its affiliated persons in such JSC, would constitute at least
10% of the voting shares of the JSC, then the proposed acquirer must make a notification of the
acquisition at least 30 days prior to the contemplated acquisition, to (i) the JSC; (ii) the Securities
Commission; (iii) the stock exchanges on which the JSC shares are listed; and (iv) to the information
database of the Securities Commission or through legal entities providing information disclosure
services on behalf of the stock market participants. If the proposed acquirer already holds 10% of the

voting shares of the JSC, such announcement is not required. The JSC whose shares are being so
acquired, is prohibited from taking action to prevent such acquisition.
As currently drafted, this requirement applies only to the direct acquisition of shares of any type of a
JSC, but it does not apply in the case of an indirect acquisition of the shares.
3.6 Due diligence

Ukrainian law does not regulate the due diligence process in the context of share acquisitions.
Nonetheless, the concept of due diligence or pre-acquisition review by a bidder is very well known,
and widely used, in Ukraine. The parties ordinarily implement the appropriate mechanisms to organize
a due diligence or pre-acquisition review. These can include procuring the management’s cooperation
and disclosures, and the use of non-disclosure arrangements and data rooms.

For the purposes of the Ukrainian takeover bid rules, persons “act in concert” if such individuals
and/or legal entities act upon an agreement concluded between them and agree their actions in order
to reach the common goal.
The definition of “persons acting in concert” is very broad, and the concept was only introduced into
Ukrainian law in June 2017, when the Corporate Governance Law became effective (see 2.1). In
practice, individuals and/or legal entities conclude the joint venture agreements, such as a joint
venture agreement for the implementation of the squeeze-out procedure, which enables them to
obtain the status of “persons acting in concert”.
4.1 Mandatory disclosures
(a) Disclosures by the target company
As a general rule, all JSCs are under an obligation to make certain disclosure in connection with the
acquisition of their shares, including regular disclosures on a quarterly (only for public JSCs) and
annual basis, as well as extraordinary disclosures when certain events occur. The list of disclosable
information is more extensive for public JSCs. Moreover, wholly owned private JSCs are exempt from
disclosure requirements except for disclosing their corporate structure. The disclosures must be made
by means of submissions to the Securities Commission, publication in printed media and placement of
the information on the JSC’s website. Public JSCs are also required to publish certain information
pertaining to their corporate matters on their official webpages. All disclosures shall be made by
means of publication on JSCs’ websites, submission to the Securities Commission (for all JSCs) and
submission to the Securities Commission database or through legal entities which provide disclosure
services on behalf of the stock market participants (only for public JSCs).
• Extraordinary disclosures
The list of information to be disclosed by the target company as extraordinary disclosures

includes the changes of shareholders of a JSC and acquisition of shares, which include:
o a change of the shareholders owning 5, 10, 15, 20, 25, 30, 50, 75, 95% of the voting
shares of a public JSC;
o a change of the shareholders owning at least 10% of the voting shares of a private
JSC;
o a direct or indirect acquisition of 50% or more voting shares of any type of a JSC;
o a direct or indirect acquisition of 75% or more voting shares of a public JSC; and

o a direct or indirect acquisition of 95% or more voting shares of any type of a JSC
• Regular disclosures
The annual disclosures must provide, among other things, information on the owner of any
shares constituting at least 5% of a JSC.
• UBO disclosure
The UBO Law requires disclosure of the ultimate beneficial owners (“UBOs”). All legal entities
registered in Ukraine are required to identify their UBOs, keep their records about the UBOs
up-to-date and disclose certain UBO-related information to the Ukrainian companies registrar.
While the definition of a UBO is rather complex, for the purposes hereof, it can be boiled down
to the following: an individual who exercises decisive influence, directly or by means of formal
or informal arrangement, or who individually or jointly, legally or beneficially, owns at least
25% of the shares of a company. Such disclosure should be made by the target company by
either (i) registering changes about the UBO in the Unified State Register of Legal Entities,
Individuals - Entrepreneurs and Public Organizations promptly after the change of the UBO or
(ii) filing the information that the target company does not have any UBO, e.g., if its ultimate
parent is a public company.
The Draft Law “On Prevention and Counteractions of Legalization of Proceeds of Crime,
Financing of Terrorism and Circulation of Mass Destruction Weapon” (“Draft UBO Law”) No.
361-IX was adopted by the Ukrainian Parliament on 6 December 2019 and will become
effective on 28 April 2020. Under the Draft UBO Law, the definition of a UBO will be slightly
extended to encompass indirect control through trusts or other similar legal entities. In
addition to current disclosure requirements, all legal entities will be obliged to submit to the
companies registrar:
o its structure of ownership demonstrating the links between the group companies up to
the UBOs (if any) in the approved form (the form will be approved by the state
authorities within approximately 1-2 months after Draft UBO Law becomes effective);
o extract or other document from the commercial, banking, court register, confirming
the registration of the non-resident founder in the jurisdiction of incorporation; and
o notarized passport copy of the UBOs (if any).
(b) Disclosure by a shareholder
• Threshold disclosures for public JSCs
If, after the acquisition or alienation of shares of a public JSC, the shareholding of a person
(or persons acting in concert) will become higher, lower or equal to the threshold of 5, 10, 15,
20, 25, 30, 50, 75, 95% of the public JSC’s voting shares, such person or persons acting in
concert shall notify the JSC about the new size of its future shareholding within three business
days after it became aware, or should have become aware of such acquisition or alienation of
shares.
• Acquiring 10% or more.
See 3.5 above.
• Acquiring controlling stakes (50% or more or 75% or more shares)
In light of the obligation of the shareholders acquiring certain stakes in the JSCs to offer to
purchase shares of minority shareholders, such shareholders should make certain
disclosures. Shareholders acquiring 50% or more of the ordinary shares in any type of a JSC

and shareholders acquiring 75% or more of the ordinary shares in a public JSC are required
to notify the target company and the Securities Commission both (i) on conclusion of the
respective agreement after signing and (ii) on the acquisition of the respective stake once the
share ownership is transferred (including the highest share price paid by the stakeholder over
a period of 12 months).
• Acquiring a dominant controlling stake (95% or more)
For the purposes of a squeeze-out and sell-out, a shareholder that acquired 95% or more of
the ordinary shares in any type of a JSC should submit a notification to the JSC and the
Securities Commission that it has acquired such a stake. The notification should include the
number of shares owned before such acquisition, the ownership structure of the stakeholder
and its affiliates (as applicable), the highest share price paid by the stakeholder (directly or
indirectly) over a period of 12 months and the date it acquired a dominant controlling stake.
4.2 Types of takeover bid

There are two main forms of takeover bids in Ukraine:
of shares, it crosses (alone or in concert with others) a threshold of 50% of the ordinary
shares of any type of a JSC (a “controlling stake”), a threshold of 75% of the ordinary shares
of a public JSC (a “significant controlling stake”) or a threshold of 95% of the ordinary shares
of any type of a JSC (a “dominant controlling stake”); and
• a squeeze-out bid, in which a shareholder acquiring 95% of the ordinary shares can squeeze-
out the remaining holders of ordinary shares. It can be exercised only after a mandatory
takeover bid.
(a) Mandatory public takeover bid
o A mandatory takeover bid is triggered as soon as a person or group of persons acting

in concert, as a result of an acquisition of ordinary shares, holds, directly or indirectly,
50% or more of ordinary shares of any type of a JSC or 75% or more of the ordinary
shares of a public JSC. A shareholder acquiring 95% ordinary shares of a JSC is
required to make a mandatory takeover bid only if it decides to exercise its right to
squeeze-out.
o The mandatory bid is irrevocable.
o The main exceptions to the takeover bid obligation include the situations where:
 a person (or persons acting in concert) already holds a controlling stake in

any type of a JSC and/or a significant controlling stake in a public JSC,
including the shares held by its affiliates;
 a controlling stake in any type of a JSC and/or a significant controlling stake in

a public JSC was inherited or obtained as a result of liquidation of a legal
entity;
 a controlling stake in any type of a JSC and/or a significant controlling stake in

a public JSC was acquired in the process of a JSC establishment;
 the acquisition of a controlling stake in a private JSC resulted in occurrence of

two controlling stakes owned by two different persons (or persons acting in
concert);

 a significant controlling stake in a public JSC was acquired by way of

purchasing shares from minority shareholders under a mandatory bid made
as a result of acquiring 50% or more (but less than 75%) of the ordinary
shares of a JSC.
o The mandatory offer price must be the highest of the following:
 market value, determined by an independent appraiser as of the day (or

business day for public JSCs) preceding the day of disclosure of information
on entering into the agreement for acquisition of a controlling or a significant
controlling stake;
 the highest price paid for the same shares by the bidder over a period of 12
months preceding the day of the direct or indirect acquisition of a controlling
or a dominant controlling stake; or
 the highest price paid by the bidder for the shares of another legal entity that
directly or indirectly owns shares of such JSC over a period of 12 months
preceding the day of acquisition of a controlling or the significant controlling
stake by the bidder, provided that the value of the shares directly or indirectly
owned by such legal entity, according to its latest annual financial statements,
consist of at least 90% of the total assets of such legal entity.
o The mandatory offer price for the shares should be approved by the supervisory
council of a JSC (or by the executive body in the absence of the supervisory council).
It can be paid in cash, securities or a combination of both.
o If during the takeover bid period (starting on the date of publication of a mandatory
bid), the bidder (or persons acting in concert with the bidder) acquires the shares at a
higher price, then the offered price must be raised to that higher price. If any shares
were purchased from minority shareholders before the price was raised then the
bidder should compensate such minority shareholders for the difference in price.
(b) Squeeze-out and sell-out right
o Squeeze-out: a bidder (or persons acting in concert) have the right to squeeze-out
the minority shareholders within 90 days following the date of disclosure of
information on acquisition of 95% or more ordinary shares (see 4.1 (b)), provided that
the bidder has complied with the mandatory bid procedure before launching the
squeeze out bid.
o Sell-out right if the bidder is not itself launching a squeeze-out: minority

shareholders have a sell-out right following the date of disclosure of information of the
acquisition of 95% or more of the ordinary shares, unless a squeeze-out procedure
was launched.
o The squeeze-out and sell-out price should be determined as the highest of the
following:
 the market value determined by an independent appraiser as of the business

day preceding the day of acquisition of 95% or more ordinary shares;
 the highest price for which a person, directly or indirectly, acquired 95% or
more of the ordinary shares over a period of 12 months preceding the day of
such stake acquisition, including the date of acquisition; or

 the highest price for which a person indirectly acquired the shares of such
JSC, over a period of 12 months preceding the day of acquisition of 95% or
more of the ordinary shares, provided that the value of the shares directly or
indirectly owned by such legal entity, according to its latest annual financial
statements, consist of at least 90% of the total assets of such legal entity.
5 Timeline
The table below contains a summarized overview of the takeover rules for building up a controlling
stake, a significant controlling stake and a dominant stake, and squeeze-out and sell-out procedures.
Step
• Preparation for the acquisition by the purchaser (signing of non-disclosure
agreement and the term sheet, legal, financial, technical, environmental and other
due diligence, and financing), transaction structuring and negotiations on the
transaction documents – timing varies depending on the agreement between the
acquirer and the seller(s).
2. Launch of the transaction:

• A shareholder (bidder) who holds less than 10% of the ordinary shares of a JSC
must disclose its intention to acquire shares (see 3.5 above) at least 30 days prior
to completion of any further acquisition of ordinary shares. This obligation only
applies in the case of a direct acquisition of the shares of a Ukrainian JSC.
• A shareholder (bidder) who holds 10% or more of the ordinary shares of a JSC is
not required to disclose its intention to acquire further ordinary shares.
3. Signing:
• Sign the conditional share sale and purchase agreement (“SPA”) and other
transaction documents – timing varies depending on the agreement between the
acquirer and the seller(s).
4. Disclosure of information about the SPA signing

• Submit the information on the SPA signing to the JSC and the Securities
Commission within one business day of the signing (as described in 4.1 (b) above)
if acquiring a controlling or a significant controlling stake.
• Publication of submitted information on the JSC’s website, in the Securities
Commission’s information database or through legal entities providing disclosure of
information services on behalf of the stock market participants within one business
day.
5. Satisfaction of conditions precedent:

• Obtain all required regulatory consents and satisfaction of other conditions
precedent – timing depends on the conditions to be fulfilled but typically ranges
from several weeks to six months.
6. Completion of the share acquisition and cash settlements:

• Payment of the purchase price by the acquirer and transfer of the shares into the
acquirer’s securities account – timing varies depending on the agreement between
the acquirer and the seller(s).

Step
7. Disclosure of information on the share acquisition under the SPA

• Notify the public JSC on the share acquisition under the SPA within three business
days if the new shareholding becomes higher, lower or equal to the threshold of 5,
10, 15, 20, 25, 30, 50, 75, 95% of the public JSC’s voting shares.
• Submit information about the share acquisition under the SPA to the JSC and the
Securities Commission within one calendar day (as described in 4.1 (b) above) if
acquiring a controlling or a significant controlling stake.
• Submit the information on the share acquisition under the SPA to the JSC and the
Securities Commission within 1 business day as described in 4.1 (b) above if
acquiring 95% or more ordinary shares.
Publication of submitted information on the JSC’s website and in the Securities
information services on behalf of the stock market participants within one calendar day.
8. Approval of the mandatory offer price by the JSC’s Supervisory Council

• Approve the mandatory offer price by the JSC’s Supervisory Council as described
in 4.2 (a) above within 25 business days (for private JSCs) and five business days
(for public JSCs).
• Notify the shareholder acquiring a respective stake (or shareholders acting in
concert) of the approved price.
9. Mandatory bid to minority shareholders (50% or more, 75% or more for a public JSC, 95%
or more if exercising squeeze-out)
• Send the mandatory bid to the JSC within two business days.
• Publication of the mandatory bid on the JSC’s website and in the Securities
information services on behalf of the stock market participants and send out the
mandatory bid to the JSC’s shareholders within seven business days.
10. Acceptance of the bid by minority shareholders

• Acceptance of the bid by minority shareholders during the acceptance period
established in the mandatory bid (from 10 to 50 business days).
11. Settlement with minority shareholders and acquisition of share ownership by majority
shareholder within 30 calendar days.
12. Squeeze-out bid to minority shareholders (subject to prior compliance with mandatory bid
under 9 above) or sell out:
• Squeeze-out: send the squeeze-out bid to the JSC during the 90 calendar day
period after disclosure of information on the share acquisition under 7 above.
• Sell out: can be exercised by the minority shareholders at any time after
acquisition of 95% or more of the ordinary shares of a JSC.
Set out below is an overview of the main steps for a takeover in Ukraine.

Takeovers (indicative timeline)
Start
Process D Day A Day A+1 A+2 T Day T+1 T+2 T+5 T+7 T + 14 T + 57 T+87 X Day
Launch
Sign conditional Bidder submits Publication of Bidder Completion of Disclosure of Publication of Approval of Send Publication Acceptance Settlement with • Squeeze-out bid
transaction:
share sale and information on submitted satisfies share information on submitted mandatory mandatory of the of the bid by minority during 90
• Bidder purchase SPA signing to information on conditions acquisition the share information on offer price by bid to minority mandatory minority shareholders calendar day
holding <10% agreement (SPA) the target and target’s website precedent and cash acquisition target’s website target’s shareholders bid on the shareholders and acquisition period if 95% or
of ordinary and other the Securities and SC’s settlements under the SPA and SC’s Supervisory target’s of share more of ordinary
shares – at transaction Commission information information Council website and ownership by shares acquired
least 30 days documents (SC) if acquiring 1 database in the SC’s majority • Sell-out at any
notice prior to database
a controlling or information shareholder time after
completion of significant database acquisition of
further controlling stake and send out 95% or more of
acquisition (for public JSCs) the ordinary shares
• Bidder mandatory
holding ≥10% bid to the
of ordinary target’s
shares – no shareholders
prior
disclosure
1 calendar day 1 calendar day 2 business 10-50 30 calendar 1 business

1 business 1 business
days business days days day
day day
up to 6 months 5 business days (public JSC) 7 business days
1
Since 1 January 2019, stock market participants are able to publish either via legal entities 25 business days (private JSC)
90 calendar days
providing information disclosure services or by submission to SC’s information database

6 Takeover Tactics
Ukrainian legislation defines “inside information” as any information on an issuer, its securities and
derivatives that are traded on a stock exchange, or contracts/agreements with respect to such
securities and derivatives, which is subject to mandatory disclosure but which has not yet been made
public and which, if it were made public, would be likely to have a significant effect on the price of
such securities and derivatives.
An individual in possession of inside information shall not: (i) conclude any agreements, for its own or
third party benefit, for the acquisition or sale of securities or derivatives to which insider information is
related; (ii) transfer or give access to such insider information to third parties; or (iii) provide
recommendations to any third party regarding the sale or purchase of securities or derivatives with
respect to which such individual holds insider information.
6.2 In the event of a bid

Certain announcement requirements apply in the event of a bid (see 3.5).

6.4 Hostile bids

Ukrainian law does not recognize hostile bids as a separate means of obtaining a public company. In
practice, hostile bids are uncommon in Ukraine. Some elements of this concept may be contained in a
raider attack over a public company. Within the CIS, there have been instances in which rival
companies, groups or third parties have used tactics, such as buying out minority shareholder stakes,
filing frivolous and vexatious legal claims and/or seeking injunctions from a court to block a company’s
shares on the securities accounts, which would prevent its shareholders from taking any actions
requiring the approval of the shareholders in a general meeting, including the payment of dividends or
entering into certain major business transactions.
Currently, there is no specific mechanism established by law enabling the company to defend itself
against hostile bids.

Since the new takeover rules were only recently introduced into Ukrainian law, there are no common
anti-takeover defense mechanisms yet which have been tested in practice. One possible mechanism
in respect of private JSCs may be pre-emption rights on the transfer of shares. This can only be
introduced in the charter of a private JSC if it has fewer than 100 shareholders.
The Corporate Governance Law also allows private JSCs to completely disapply or to establish
different rules in their charters regarding the acquisition of controlling stakes (more than 50%, 75% or
more, and 95% or more), and the squeeze-out and sell-out procedures, subject to having complied
with the majority voting requirements set out in the law.
According to the Corporate Agreements Law (see 2.1), the shareholders of JSCs may also conclude
shareholder agreements on exercising their voting rights and to establish additional restrictions in the
case of the transfer of shares.
The buy-back of shares, cross-shareholdings, increased quorum and supermajority decisions may be
also considered by the shareholders as anti-takeover defense mechanisms.

Takeover
7.1 Squeeze-out
The holder of 95% or more ordinary shares (shareholders acting in concert) may launch the squeeze-
out procedure and force remaining minority shareholders to sell their shares to such stakeholder. The
squeeze out can be launched only after the majority shareholder has complied with the mandatory bid
procedure as detailed in 4.2(a) above.
The main steps to conduct a squeeze-out include:
• opening an escrow account prior to launching the squeeze-out bid to minority shareholders;
• squeeze-out bid made to minority shareholders;
• publication of the squeeze-out bid on the JSC’s website and in the Securities Commission’s
information database within one business day of the bid;
• imposing restrictions on transactions in the shares of minority shareholders within two

business days of the bid;
• transfer of funds by the acquiring shareholder to escrow account; and
• lifting restrictions and transferring shares to the acquiring shareholder.
7.2 Sell-out
After disclosure of information on the acquisition by a shareholder (including persons acting in
concert) of 95% or more of the ordinary shares of a JSC, the minority shareholders may launch the
sell-out procedure at any time.
The main steps to conduct a sell-out are:
• sell-out requirement by the minority shareholder(s):
o minority shareholder(s) sends the sell-out request to the JSC;
o JSC sends a copy of the sell-out requirement to the holder of 95% or more of the
ordinary shares of a JSC within one business day after receipt of the sell-out request;
o the sell-out right cannot be exercised during the squeeze-out procedure;
• approval of the sell-out price by the JSC’s Supervisory Council:
o JSC’s Supervisory Council approves the sell-out price within 25 business days of
receipt of the first sell-out request from the minority shareholder(s);
o JSC notifies both the minority shareholder (who submitted the sell-out request) and
the holder of 95% or more ordinary shares (including shareholders acting in concert)
of the approved sell-out price within one business day after approval of the sell-out
price; and
• payment of the sell-out price and acquisition of share ownership by acquiring shareholder
within 20 business days of receipt of the approved sell-out price from the JSC.
According to the transitional provisions of the Corporate Governance Law, minority shareholders may
exercise their sell-out right at any time following the acquisition of at least one additional share of a
JSC by the holder of 95% or more ordinary shares after 4 June 2017, on condition that such holder

has complied with the mandatory bid procedure detailed in 4.2(a) above. The price for the mandatory
purchase of shares of minority shareholders by the holder of 95% or more of the ordinary shares
should be determined as the highest of the following: (1) if shares of a JSC are included in the stock
exchange register, their price shall be calculated based on the weighted average stock price for the
last three months of their circulation; (2) for any other shares, the price should be the market value of
such shares determined by an independent appraiser; or (3) the highest price paid for shares by the
holder of the dominant controlling stake since 4 June 2017.
8 Privatization
Privatization of state-owned enterprises is subject to separate regulation. This is mainly based on the
Law of Ukraine “On Privatization of State and Municipal Property” No. 2269-VIII dated 18 January
2018.

Viacheslav Yakymchuk and Olha Demianiuk in the Kyiv office are the most appropriate contacts
within Baker McKenzie for inquiries about public M&A in Ukraine.
Viacheslav Yakymchuk Olha Demianiuk

Kyiv Kyiv
viacheslav.yakymchuk@bakermckenzie.com olha.demianiuk@bakermckenzie.com
+380 44 590 0101 +380 44 590 0101

United Kingdom
1 Overview
The UK takeover market is well established and highly developed, with the regulatory framework
having been in place for more than 50 years and a substantial body of market practice having formed.
While levels of activity have not yet returned to those seen prior to the global financial crisis, the
market remains active with 66 firm bids being launched in 2019 (42 in 2018), the significant majority
(85%) of which were recommended. Approximately two-thirds of the bids for UK companies in 2019
were made by non-UK bidders and the open market ethos of the UK means that UK targets remain
attractive to overseas bidders. Private equity bids have become more prevalent in recent years, with
approximately half of the firm bids made in 2019 being private equity bids and bids backed by other
funds and investment companies.

The main rules and principles of the laws relating to public takeover bids applicable in the UK can be
found in the City Code on Takeovers and Mergers (the “Takeover Code”). The Takeover Code applies
to all offers, however effected, for:
• companies and Societas Europaea which have their registered offices in the UK, the Channel
Islands or the Isle of Man (the “UK Code Jurisdictions”) if any of their securities carrying voting
rights are admitted to trading on a regulated market, e.g., the London Stock Exchange’s (LSE)
market for listed securities, or a multilateral trading facility, e.g., AIM in the UK, or on any
stock exchange in the Channel Islands or the Isle of Man;
• public companies and Societas Europaea considered by the Panel to be resident in any of the
UK Code Jurisdictions. A company will be resident in one of these jurisdictions if it has its
registered office there and is considered by the Panel to have its place of central
management or control in one of these jurisdictions; and
• private companies resident in one of the UK Code Jurisdictions if, among other things, any of
their securities have been admitted to trading on a regulated market or multilateral trading
facility in the UK at any time during the last 10 years.
In addition, the Takeover Code will apply to other transactions which may effect a change or
consolidation of control of the target company.

While the Takeover Code contains the main legal framework for public takeover bids in the UK, there
are a number of additional laws, rules and principles that should be taken into account when
• relevant company law (in the UK, this would primarily be contained in the Companies Act
2006);
• the Financial Services and Markets Act 2000 (FSMA) and the numerous items of subordinate
legislation and rules created under it, together with the Financial Services Act 2012 (“FSA”)
regulate dealing in and advising on investments, the contents of listing documents, issues of
shares, market abuse and financial promotion in relation to investments and the general
supervision and control over UK financial markets;
• the Prospectus Rules, Listing Rules and Disclosure Guidance and Transparency Rules made
by the Financial Conduct Authority (FCA) under Part VI of FSMA;

• the rules relating to insider dealing and market abuse. In addition to those listed above, these
include the European Market Abuse Regulation (Regulation 596/2014) (the “Market Abuse
Regulation”) and related EU guidance as well as the Criminal Justice Act 1993 (see 6.2); and
• the rules and regulations regarding merger control. These rules and regulations are not
2.3 Supervision and enforcement by the Takeover Panel

Public takeover bids are subject to supervision and control by the Takeover Panel. The Panel has a
number of powers to supervise and enforce compliance with the Takeover Code, including the power
to censure parties publicly for non-compliance and/or to report on offenders’ conduct to regulatory
authorities, including the FCA, which in turn could take further disciplinary or enforcement action.
In extreme cases, the Panel could publish a statement that, in its opinion, the offender is not likely to
comply with the Takeover Code. This could lead to the FCA and certain professional bodies obliging
their members not to act for the person in question in a transaction subject to the Takeover Code.
The Panel requires the Takeover Code to be observed in the spirit as well as in the precise wording
by all persons engaged in takeovers, including advisers, and applies the Takeover Code flexibly in
order to ensure that shareholders are treated fairly, takeovers are conducted in an orderly manner
and the integrity of the financial markets is maintained. The Panel strongly encourages early and
regular consultation and has the power to grant, in certain cases, exemptions from the application of
the rules that would otherwise apply.

The following general principles apply to public takeovers in the UK. These rules are based on the
Takeover Directive:
• all holders of the securities of a target company of the same class must be afforded
equivalent treatment and if a person acquires control of a company, the other holders of
securities must be protected;
• the holders of the securities of a target company must have sufficient time and information to
enable them to reach a properly informed decision on the bid; where it advises the holders of
the securities, the board of the target company must give its views on the effects of
• the board of the target company must act in the interests of the company as a whole and must
• false markets must not be created in the securities of the target company, the bidder company
or any other company concerned by the bid in such a way that the rise or fall of the prices of
the securities becomes artificial and the normal functioning of the markets is distorted;
• a bidder must not announce an offer until after ensuring that they can fulfil in full any cash
consideration and taking all reasonable measures to secure the implementation of any other
type of consideration; and
• a target company must not be hindered in the conduct of its affairs for longer than is

(a) The Takeover Code
The Panel regularly issues practice statements to provide informal guidance as to how they normally
interpret and apply relevant provisions of the Takeover Code in certain circumstances. In addition,
from time to time the Panel issues consultation papers regarding proposed changes to the Takeover
Code. Having issued a consultation paper and considered responses, the Panel will then issue a
Response Statement setting out the rule changes and their rationale based on the consultation and
responses.
(b) Foreign investments regulation
There are currently no restrictions on foreign investments in the UK. Foreign investors are subject to
the same UK merger control rules as British investors. The UK Competition and Markets Authority
(CMA) has jurisdiction over mergers that meet either a financial or share of supply threshold. Filing for
prior clearance is not mandatory.
In exceptional cases, the UK government can intervene on the grounds of specified public interest
criteria. These criteria are currently limited to national security, media plurality and stability of the UK
financial system (there are also limitations on certain mergers between water companies). For
national security mergers where the target is active in military/dual-use goods; computing hardware;
and quantum technology; lower jurisdictional thresholds apply. Notification is still voluntary.
In addition, the UK government may also intervene in certain public interest cases where the merger
jurisdictional thresholds are not met (“special public interest mergers” involving government
contractors in the defense industry; and certain media mergers)
In July 2018 the UK government published proposals for a new standalone screening system for
deals that raise national security issues. This would be distinct from the existing merger control
regime and the two would operate in parallel. Whilst investments by UK entities are not excluded from
the proposed regime, the impact will largely be on foreign investment in the UK. Under the proposals,
notification would be voluntary but the government would have a 6 month window in which to call in
deals which were not voluntarily notified. There are no jurisdictional thresholds and the government
would be able to review deals that relate to any sector of the economy, though it has stated that
certain “core areas” are more likely to raise national security issues. These include some parts of
national infrastructure sectors (civil nuclear, energy, defense, communications and transport); some
advanced technologies (including cryptographic technology, autonomous robotic systems, AI and
machine learning); critical direct suppliers to the government and emergency services sectors; and
military and dual use technologies. Following its national security assessment, the government would
be able to impose conditions to prevent or mitigate national security risks. As a last resort, this might
mean blocking the deal or unwinding it if it has already taken place. The consultation ended in
October 2018 and there have been no further developments since then. However, the UK
Government has indicated that it intends to introduce a new regime, though has not given a sense of
timing on this.

The table below provides an overview of key shareholder rights and obligations that typically apply to
different levels of shareholdings within a UK Plc whose shares are listed on the main market of the
LSE. Many of these rights may be modified by the company’s articles of association. Although this
summary is drafted by reference to the percentage shareholding, in certain cases, e.g., the
percentage required to pass an ordinary resolution or a special resolution, the relevant percentages
will be the percentages of votes passed at the meeting:

• An ordinary resolution requires a simple majority vote of those members voting. Unless the
articles of association provide otherwise, an ordinary resolution gives control over the
composition of the board of directors, the ability to appoint auditors, to increase capital, the
authority to allot shares, the declaration of dividends and control of the company generally.
• A special resolution, which requires a majority of 75% of members voting, is often required in
several situations, usually where constitutional change is involved or the articles require it
such as to alter the articles of association, to change the company’s name, to permit the issue
of new shares otherwise than pro rata to existing members, to reduce capital, to approve a
voluntary winding up or to approve a reconstruction, a scheme of arrangement or a merger
scheme. Given the levels of attendance at most meetings, it may well be possible to block a
special resolution with a stake of less than 25%.
For every successive level of shareholding set out below, the rights and obligations attaching to each
level of lesser shareholding also apply.
Shareholding Rights (subject to any contrary or different provisions in the company’s

articles) and obligations
One share Rights:

• to receive notice of, attend and vote at any general meeting;
• to receive, within the required timescales or on demand, the

company’s last annual accounts and reports;
• to request a copy of the company’s articles;
• to inspect and obtain a copy of the minutes of general

meetings;
• to inspect any director’s service contract or memorandum

setting out the terms and conditions of the contract;
• to petition the court to order that the company’s affairs are

being conducted in a manner unfairly prejudicial to the interests
of its shareholders or that any actual or proposed act or
omission of the company is or would be prejudicial; and
• to compel a third party to acquire the shareholder’s shares if the

third party has acquired 90% of the company’s shares under a
takeover offer.
Obligations:
• A public company can require a shareholder to disclose its
direct or indirect interest in the company’s shares.
1% The obligation to disclose the holding if the company goes into an offer
period and to disclose any dealings during the offer period.
3% The obligation to disclose direct and indirect holdings of voting rights to

the company.
5% Rights:
• to require the directors to call a general meeting;

• to require the company to circulate to shareholders a statement
of up to 1,000 words in relation to a proposed resolution at a
general meeting;
• to require the company to notify its shareholders of a resolution

to be moved at the next annual general meeting;
• to require the company to include any business matter in its

annual general meeting (other than a proposed resolution);
• to require the directors to obtain an independent report on any

poll taken at a general meeting of the company; and
• to apply to the court for cancellation of a special resolution to

re-register as a private company.
More than 5% The right to block the holding of any general meeting convened on less
than the required statutory notice.
10% Rights:
• to make an application to the Secretary of State requesting an
investigation into the affairs or ownership of the company; and
• to require the company to use its power to require any person

believed to be interested in the company’s shares to provide
information with respect to their interests in the company’s
shares.
Obligations:
• A shareholder with 10% or more of a listed company will be
treated as a “related party” under the Listing Rules and any
material transactions between the listed company and the
shareholder require the approval of a majority of the listed
company’s other shareholders.
More than 10% The right to block a statutory compulsory purchase following a takeover
offer.
15% The right to apply to the court to cancel any variation of class rights.
More than 25% The right to deny the remaining shareholders the ability to pass a
special resolution.
30% • Any acquisition taking the purchaser’s shareholding to 30% or

more may trigger an obligation to make a mandatory bid for the
whole of the company.
• A holder of 30% or more of a premium listed company’s voting

rights must enter into a relationship with that company intended
to safeguard the company’s independence.
More than 50% The right to pass ordinary resolutions.


75% • The right to pass special resolutions, for example to re-register

a public company as a private company.
• The ability to delist the company.
90% If the 90% results from acceptance of a takeover offer, the

shareholder(s) of the 90% plus can compel the remaining shareholders
to sell their shares.
95% The right to consent to a general meeting (other than an AGM) of a

public company being held at short notice.
100% The subsidiary can be operated and managed without any of the above
constraints imposed by minority shareholders, which also avoids
potential claims of unfairly prejudicial conduct being made to the court
by minority shareholders.

The Takeover Code contains a number of rules that already apply before a public takeover bid is
(see 6.1), announcements of a potential takeover bid by a bidder or a target company and prior due
diligence by a potential bidder. Some careful planning is therefore necessary if a potential bidder or
target company intends to start a process that may lead to a public takeover bid.

The Takeover Code (and, in different ways, the FCA’s Disclosure Guidance and Transparency Rules)
contains provisions requiring persons who “act in concert” to be treated as one person. Persons are
treated as acting in concert where, under an agreement or understanding (however informal), they co-
operate to obtain or consolidate control of a company or to frustrate the successful outcome of an
offer for a company. Persons will also be presumed and/or deemed to be acting in concert where they
have any of a number of specified relationships with one another (e.g., companies within the same
group, their directors and the immediate family of such directors). Therefore, in many cases in the
rules, a reference to a person acquiring shares or taking certain other actions includes persons acting
in concert with them.
Where the bidder is a specially formed offer company, or a subsidiary company, many of the
Takeover Code requirements will apply to the ultimate controller(s) of the bidder as well as to the
bidder itself. Where a consortium has been formed to make an offer, careful thought should be given
at an early stage as to which members of the consortium will be classified as joint bidders and which
might instead be classified as concert parties of the bidder(s). The Panel must be consulted before
any acquisition of shares by a consortium. Whilst certain provisions of the Takeover Code will apply
similarly to both bidders and their concert parties, there are other provisions which will apply to one
but not the other. For example, whilst a bidder who already holds shares in the target falls outside the
restrictions on making “special deals” with target shareholders, a concert party of the bidder will be
caught by such restrictions. Conversely, the offer document will be required to contain significantly
more detailed disclosure on the bidder(s) than on any concert parties.

remain applicable (see 6.2). In addition to insider dealing, the rules prohibit, amongst other things,
improper disclosure of inside information and misuse of information.
3.5 Secrecy, announcements, offer periods and the “put up or shut up” rule
Before any public announcement of a bid, the Takeover Code requires absolute secrecy. The object
of this rule is to avoid the risk of a false market. Agreed code names should therefore always be used
for all parties in place of their real names from the moment any takeover is under consideration.
Advisers are required to warn their clients of the utmost importance of maintaining secrecy. The
Takeover Code requires a bid to be put forward, in the first instance, to the board of the target. The
identity of the bidder must be disclosed.
A number of provisions of the Takeover Code apply only during an “offer period”. This is the period
starting from the first announcement of a bid or of a possible bid until either (i) all announced bids and
potential bids have lapsed or been withdrawn or (ii) the bid has completed. The fact that the first
announcement will commence an offer period makes the timing of this announcement particularly
important.
An announcement is required by the Takeover Code:
• when a firm intention to make a bid is notified to the target board by or on behalf of a bidder,
irrespective of the target board’s attitude to the bid;
• when a person acquires an interest in shares which takes their aggregate interests to 30% or
more and they are obliged to make a mandatory bid (see 4.4);
• when, following an approach by or on behalf of a potential bidder to the target board, there is
rumor and speculation or an untoward (generally 5% or more) movement in the target’s share
price;
• when, after a potential bidder first actively considers a bid but before an approach has been
made to the target board, the target is the subject of rumor and speculation or there is an
untoward movement in its share price and there are reasonable grounds for concluding that it
is the potential bidder’s actions (whether through inadequate security or otherwise) which
have led to the situation;
• when negotiations or discussions are about to be extended beyond a very restricted number
of people, i.e., outside those who need to know in the companies concerned and their
immediate advisers; or
• when a purchaser is being sought for an interest, or interests, in shares carrying in aggregate
30% or more of the voting rights of a company or when the board of a company is seeking
one or more potential bids, and:
o the company is the subject of rumor and speculation or there is an untoward

movement in its share price; or
o the number of potential purchasers or bidders approached is about to be increased to

include more than a very restricted number of people.
Before a potential bidder approaches the target board, the potential bidder is responsible for making
any required announcement. Following an approach to the target board, the target will be responsible
for making any required announcement unless it has unequivocally rejected any approach (in cases of
doubt, the Panel should be consulted).

Such an announcement (known as a “possible offer announcement”) need only be a short

announcement stating, for example, that the target has received an approach “which may or may not
lead to an offer being made for the company”. However, any announcement by the target must
disclose the identity of all potential bidders who have approached it, unless such approach has been
unequivocally rejected, and will specify a 28-day “put up or shut up” deadline by which the potential
bidder must clarify its intentions either by stating that it won’t make a bid or by making a firm intention
announcement committing it to launch a formal bid. This is known as a “2.7 announcement” as it is
pursuant to Rule 2.7 of the Takeover Code. While the possible offer announcement could go into
more detail, e.g., in respect of the terms of the bid, there may be consequences of doing so under the
Takeover Code, e.g., the bidder may be held to those terms, and careful thought will need to be given
to the wording and consequences of any announcement.
A potential bidder can generally avoid making an announcement when there is rumor or speculation
regarding its intentions by stopping active consideration of the bid (subject to Panel dispensation,
which is usually granted). The potential bidder may thereafter not actively consider making a bid for
the target for a period of six months, except in certain limited circumstances. However, the Panel can
still require an announcement to be made if rumor or speculation continues in relation to the potential
bidder.
Once a 2.7 announcement of a firm intention to make a bid has been made, a bidder must (unless it
obtains Panel consent to do otherwise) proceed with the bid and publish the full and detailed offer
document within 28 days after that announcement.
A person making a statement that they do not intend to make a bid will normally be bound by that
statement for a period of six months. This is often referred to as a “2.8 statement” as it is subject to
Rule 2.8 of the Takeover Code. Any such statement must be clear and unambiguous. It is essential
that parties involved in making public bids are aware of this principle.

There are a number of provisions of English law which may restrict a person’s ability to deal in shares
in UK listed companies and/or give rise to notification and disclosure requirements relating to such
dealings or resulting holdings (see also 6.1 and 6.2). In general, the provisions are extremely broadly
drafted in order to try to ensure that these rules capture the full range of activities which they are
designed to regulate. In particular, definitions such as “dealings”, “relevant securities”, “financial
instruments”, “qualifying investments” and “interests in securities” operate in such a way that a wide
variety of instruments, e.g., derivatives and options, and transactions, e.g., voting agreements,
hedging transactions and even spread bets, will be caught.
The general rules regarding disclosure and transparency apply before the commencement of an offer
period. Pursuant to these rules, if a potential bidder starts building up a stake in the target company, it
will be obliged to announce its stake if the voting rights attached to its stake have passed an
applicable disclosure threshold. The initial disclosure threshold is 3%, whilst further notification is
required when further 1% thresholds are reached or crossed, i.e., 4%, 5%, 6%, etc.
In addition, every UK company may, by a notice under section 793 Companies Act 2006, require any
person to confirm and give information about their interests in the company’s shares. Failure to
comply entitles the company to apply for a court order imposing restrictions preventing the relevant
party from transferring or voting its shares or receiving dividends. In many cases, companies also
have additional disclosure obligations contained in their articles of association.
Within 10 business days after the commencement of an offer period (or at the same time as the 2.7
announcement, if earlier), each of the target and the bidder must make an “Opening Position
Disclosure” announcement. This must set out details of positions held by the discloser and its concert
parties in relevant securities of the target and (unless the bidder is a cash bidder) the bidder. Each
shareholder with 1% or more of the target must also make an Opening Position Disclosure

announcement and the target must write to all such shareholders notifying them of this requirement.
In practice, it is therefore important for each of the target and the bidder to consider at an early stage
in a possible bid process: (a) exactly which individuals and entities are likely to be its concert parties;
and (b) how they would quickly and efficiently be able to elicit the information necessary to be
included within an Opening Position Disclosure announcement if required.
3.7 Dealings after the commencement of an offer period

After an announcement of a bid or possible bid, the bidder may not sell shares in the target without
the Panel’s prior consent and only after 24 hours’ public notice of such sale. Sales may not be below
the bid price.
If, after a firm intention to make a bid is announced, a bidder acquires any interest in shares at a price
higher than the bid price, they must increase their bid to the highest price paid.
During the offer period, any further acquisition of shares, however small, by the bidder or anyone
acting in concert with it must be announced.
3.8 Due diligence

Due diligence is an important step in the takeover process and on any bid, the bidder and its advisers
should undertake an exercise of reviewing key public information on the target, including to confirm
corporate structure, pensions liabilities and fully diluted share capital. Due diligence on non- public
information will only be available on a recommended bid and will be a significantly less extensive
exercise than in a private acquisition context. However, it is market practice for there to be some level
of non-public due diligence on a recommended bid (with appropriate safeguards around confidentiality
to address potential issues relating to market abuse). This will be important in particular because
opportunities for a bidder to withdraw after announcing a firm intention to make a bid are limited,
whilst by that stage the bidder must have arranged for any cash consideration to be available to it on
a certain funds basis (see 4.5).
The Takeover Code requires all competing bidders to be given, on request, the same information by
the target. This rule also extends to information disclosed other than in writing such as site visits and
meetings with the target’s management. Accordingly, where there is any possibility of a competing
bid, a target’s board, even one strongly in favor of the bid, must exercise considerable caution in
deciding whether or not to provide any or all of the information requested by the bidder.
4.1 Structure of UK takeover bids
The vast majority of takeover bids in the UK are made either by way of a contractual offer, which may
be a voluntary offer or a mandatory offer, or by way of a statutory, court approved scheme of
arrangement. It is possible, although relatively rare, for the structure of a takeover to be changed from
a scheme of arrangement to a contractual offer, or vice versa, part of the way through the transaction.
4.2 Contractual offers

A contractual offer in the UK is made by way of an offer document. The document, constituting an
offer to acquire shares, is sent to target shareholders. Shareholders may then accept the offer either
by completing and returning a form of acceptance or by electronic acceptance through CREST. If a
shareholder accepts, it is bound to transfer its shares to the bidder subject to satisfaction or waiver of
the conditions of the offer. In order to acquire 100% of the target’s shares using an offer, the bidder
needs to acquire 90% of the shares to which the offer relates, following which the bidder can utilize a
compulsory acquisition procedure under the Companies Act 2006 to acquire the remaining shares
(see 7.1).

Where this method is adopted in preference to a scheme of arrangement, this is often because it does
not involve a court approval process and has certain other advantages over a scheme:
• in order for the offer to succeed (that is, for the bidder to acquire control of the target), the
bidder needs to achieve any level over 50% of the voting share capital as compared to
(broadly) a 75% threshold under a scheme;
• the timetable to achieve control can be much shorter than in the case of a scheme and, in a
recommended offer, control can frequently be obtained within a month;
• the target board effectively controls the implementation of a scheme whereas the bidder has
effective control of the contractual offer process; and
• a contractual offer, unlike a scheme, can be made without the co-operation of the target
board.
4.3 Schemes of arrangement

A scheme of arrangement is a mechanism provided by the Companies Act 2006 under which a
takeover can be effected by the passing of resolutions by the shareholders of the target company and
with the approval of the court. A scheme requires the approval of a majority in number representing
75% in value of the target shareholders voting on the necessary resolutions. However, once
approved, all shareholders are bound by the scheme. A scheme is a process promoted and
undertaken by the target, requiring the full co-operation of the target and cannot, therefore, be used in
hostile situations.
Where a scheme of arrangement is adopted in preference to a contractual offer, this is often due to
the following advantages a scheme has:
• whilst a scheme may be slower in terms of acquiring effective control, i.e., 50%, it will
generally be quicker in achieving 100%. This means that the target can be re-registered as a
private company and, thereafter, give any necessary financial assistance much more quickly
than under an offer;
• a scheme requires a lower threshold to achieve 100% (a vote of a majority in number,

representing 75% in value of shareholders voting on the scheme) than a contractual offer
(“squeeze out” threshold of 90% of all shares to which the offer relates);
• a scheme, unlike a contractual offer, will not generally constitute an “offer for securities” and,
therefore, can often avoid certain procedural and other difficulties of acquiring the shares of
overseas shareholders; and
• if share consideration is to be offered, a scheme, unlike a contractual offer, may allow a

bidder not to issue a prospectus in connection with the offer.
4.4 Mandatory bids and whitewashes

Where a person acquires an interest in shares carrying 30% or more of the voting rights of a
company, or where a person already has an interest in shares carrying 30% or more, but less than
50% of the voting rights, and acquires a further interest which increases their holding of such rights,
they must make an offer to all shareholders to acquire their shares. Such a mandatory offer must:
• normally be unconditional, apart from a condition that acceptances result in the bidder holding
50% or more of the voting shares in the target; and
• be in cash or accompanied by a cash alternative at not less than the highest price paid by the
bidder during the offer period and within the 12 months preceding its commencement.

Certain dispensations from this rule are available from the Panel on application. The Panel will
normally waive the mandatory bid obligation under the so-called “whitewash” exemption where the
mandatory bid requirement arises as a result of the issue of new securities by the “target” as
consideration for an acquisition or as a result of a cash subscription, provided that a majority of
independent shareholders approve this in a poll in a general meeting. The target must prepare a
circular known as the “whitewash circular” to be sent to its shareholders which describes the proposed
acquisition and share issuance. This circular must be pre- approved by the Panel.
The Panel will not normally waive the obligation to make a mandatory bid if the person to whom the
new securities are to be issued has acquired an interest in shares in the target in the 12 months prior
to the publication of the circular relating to the whitewash but subsequent to negotiations, discussions
or the reaching of an understanding or an agreement with the directors of the target in relation to the
proposed issue of new securities. A waiver granted by the Panel will also be invalidated if any
acquisitions of interests in shares in the target are made in the period between the publication of the
circular and the shareholders’ meeting to approve the whitewash.
4.5 Conditionality, certain funds and minimum price

The Takeover Code states that a bidder should announce a bid “only after the most careful and
responsible consideration and when the bidder has every reason to believe that it can and will
continue to be able to implement the offer”. The Panel has specifically stated that the withdrawal of a
bid after its announcement is a most undesirable step which should not normally be considered,
except in the most extreme circumstances. Accordingly, even though a bid (other than a mandatory
bid) is usually subject to extensive conditions, the Panel will apply a very high materiality test when
agreeing to allow the bidder to rely on a condition and withdraw.
The Takeover Code states that a bidder should only announce a bid after ensuring that it can fulfil in
full any cash consideration, if such is offered, and after taking all reasonable measures to secure the
implementation of any other type of consideration. The Panel does not normally permit a bid to be
subject to any financing condition. As a result, both the bidder and its financial advisers have
obligations under the Takeover Code to conduct all possible due diligence before making an
announcement of a bid. In addition, the announcement of a firm intention to make a cash bid must
include a statement of confirmation by the bidder’s financial adviser that sufficient resources are
available to the bidder to satisfy full acceptance of the bid. The financial adviser giving this
confirmation could itself be required to provide the cash consideration if it did not take all reasonable
steps to ensure that the cash was available. This means that if the bid is to be wholly or partially
funded by drawing down on debt facilities, the ability to draw down on such debt facilities must
normally be wholly unconditional, or conditional only on sufficient acceptances of the bid being
received.
Except where the bidder or anyone acting in concert with the bidder acquires or has acquired any
interest in securities of the target, there are no restrictions on the nature of consideration or price at
which the bid can be made (see 6.1).
4.6 Offer documents

The Takeover Code contains a number of specific provisions on the contents of offer documents. This
includes scheme documents. In particular, the offer document must satisfy the highest standards of
care and accuracy, fairly and adequately present all information and give target shareholders
sufficient information to reach a properly informed decision.
The Takeover Code expressly requires the directors of the bidder and, where appropriate, the target
to accept responsibility for the information contained in the document. The directors are required to
state “that to the best of their knowledge and belief (having taken all reasonable care to ensure that
such is the case) the information contained in the document is in accordance with the facts and,
where appropriate, that it does not omit anything likely to affect the import of such information”. In

addition, under the Companies Act 2006, the bidder and any director, officer or member of the bidder
will commit a criminal offense if it publishes or causes to be published an offer document for a
company whose securities are admitted to trading on a regulated market which does not comply with
the relevant takeover rules, if they knew that the document did not comply with or were reckless as to
whether it complied with such rules. It is therefore essential that the utmost care is exercised in the
drafting and approval of offer documents.
The Takeover Code requires the offer document to be sent or made available to all shareholders (as
well as to employee representatives or employees) of the target, including overseas shareholders,
unless (in the case of shareholders located outside the EEA) there is sufficient objective justification
for not doing so. It is therefore important to examine the target shareholder register at an early stage
and consider whether any laws or regulations of an overseas jurisdiction in which target shareholders
are resident impose particular requirements that either entail additional work to ensure compliance, or
are sufficiently onerous to enable the bidder to obtain a dispensation from the Panel from having to
make the document available to shareholders in that jurisdiction. The Panel will not normally grant a
dispensation in relation to residents of an EEA country but, in certain circumstances, will grant a
dispensation in relation to a non-EEA country where there may otherwise be a significant risk of civil,
regulatory or, particularly, criminal exposure for the bidder or the target.
Where the bidder wants the management of the target to retain a financial interest following the bid,
the Panel’s consent to the arrangements giving effect to this must be obtained. As a condition of its
consent, the Panel will require that the target’s financial adviser publicly states that, in its opinion, the
arrangements are fair and reasonable and that such arrangements are approved by a vote of
independent shareholders at a general meeting of the target. Where the bidder wants to make other
arrangements to incentivize management, the Panel’s consent will again be required but will not be
conditional on shareholder approval, although a public fair and reasonable opinion from the target’s
financial adviser will again be required.
4.7 Target board responsibilities and prohibition on frustrating action

The target board must act in the interests of the company as a whole and must not deny the holders
of securities the opportunity to decide on the merits of a bid.
During the course of a bid, or even before the commencement of an offer period, if the board of the
target has reason to believe that a bona fide bid might be imminent, the board must not take steps
which could effectively frustrate the bid. In particular, it may not issue shares, options or convertible
securities, sell or acquire material assets or enter into contracts outside the ordinary course of
business, without shareholder consent. If there is any doubt as to whether a proposed action may be
caught by this restriction, the Panel should be consulted. The Panel may consent to such proposed
action being taken without shareholder consent if, for example, it is in pursuance of a pre-existing
contract or obligation.
The target board is required to obtain competent independent advice on any bid. The substance of the
advice must be made known to shareholders. The target board must also give its own opinion on the
bid, including its views on the effects of implementation of the bid on all the company’s interests,
including, specifically, employment, and its views on the bidder’s strategic plan for the target company
and its likely repercussions on employment and the locations of the target company’s places of
business. The target is also obliged to keep employee representatives and pension fund trustees
informed of the announcements made and the rights of each of them to append their opinion to the
bid documentation.

5 Timeline
The table below contains an indicative timeline summarizing the main steps of a typical UK public
takeover bid process for a contractual offer and for a scheme of arrangement. Note that if a competing
bid is made, the timetable is reset to that of the competing bid.
Date Scheme of arrangement Contractual offer
As early as Book court dates.

possible
A - 28 Announcement of possible bid and Announcement of possible bid and

beginning of the offer period (if not beginning of the offer period (if not
already commenced). Except with the already commenced). Except with the
Panel’s consent, the potential bidder Panel’s consent, the potential bidder
will have 28 days from the date of the will have 28 days from the date of the
possible bid announcement to either (i) possible bid announcement to either (i)
announce a firm intention to make a announce a firm intention to make a
bid or (ii) announce that it will not bid or (ii) announce that it will not
make a bid unless, upon request from make a bid unless, upon request from
the target, the Panel grants an the target, the Panel grants an
extension to this deadline. extension to this deadline.
A day Announce scheme by way of a Rule Announce takeover offer by way of a

2.7 Announcement. Rule 2.7 Announcement.
A+5 Issue claim form to commence court

meetings, attaching witness statement
and draft scheme circular (NB no later
than two business days prior to
hearing of claim form).
A + 10 Hearing of claim form seeking

directions for convening of shareholder
meeting and sanction of court to
scheme if it is approved by the
meeting.
Court orders meeting to be held and
adjourns claim form until after meeting.
D Day 1. Publish scheme circular and 1. Publish offer document and

proxy form (must be within 28 form of acceptance (must be
days of A Day but can only be within 28 days of A Day but
within the 14 days following A can only be within the 14 days
Day if the target board following A Day if the target
consents to this). board consents to this).
2. Announcement of publication 2. Announcement of publication
of scheme circular. of offer document.
D+7 Last date terms of scheme can be

revised (assuming court and
shareholder meetings to be held on D
+ 21).

D + 14 Last date potential competing bidder Deadline for target to publish defense
usually allowed to clarify its intentions document (if hostile bid).
(assuming court and shareholder
meetings to be held on D + 21).
D + 19 Latest date for submission of proxies.
D + 21 First date for court and shareholder Usual first closing date (bid must be
meetings to approve scheme can be open for at least 21 days after
held. publication of the offer document).
D + 22 1. Target announces results of Bidder announces level of

meetings by 8:00 a.m. acceptances by 8:00 a.m. and
(usually) extension of bid.
2. Target files a copy of the
special resolution with
Companies House.
3. Complete report of Chairman
of meeting to court.
4. Swear and file witness
statement as to service of
notices convening court
meeting and general meeting,
and result of meetings.
D + 30 Advertise court hearing seven clear

days in advance.
D + 38 1. Court hearing to sanction

scheme (all scheme conditions
must have been fulfilled).
2. Target announces results of
court hearing.
D + 39 1. File court order sanctioning Last date for material new target
scheme at Companies House. information to be published.
2. Scheme becomes effective.
3. Target or bidder announces
scheme has become effective.
4. End of offer period.
D + 42 Earliest date when accepting

shareholders entitled to withdraw
acceptances if bid is not by then
unconditional as to acceptances
(assumes first closing date is on
(D+21)).
D + 46 Latest date bidder can revise the bid.

D + 53 Latest day to pay consideration to Last date potential competing bidder

target shareholders (within 14 days of usually allowed to clarify its intentions.
scheme becoming effective).
D + 60 Last date by which acceptance

condition can be satisfied or waived -
offer goes “unconditional as to
acceptances” or lapses. Offer period
ends.
D + 81 Last date by which all conditions can

be satisfied or waived - offer goes
“wholly unconditional” or lapses.
D + 95 Latest day to pay consideration to

target shareholders (within 14 days of
offer becoming wholly unconditional).
Thereafter Bidder can undertake compulsory

acquisition procedure if it achieves
90% or more acceptances of offer.
Set out below is an overview of the main steps for a takeover offer and a scheme of arrangement in
the UK.

Start A Day
(Day – Day 0 Day Day Day 22 Day 39 Day 42 Day 46 Day 53 Day 60 Day Day 95 Day (X)
process 14 21 81
28)
Announce Publish offer Last day First Bidder Last day First day Last day bidder Last day Last day to Last day to Last day to pay Commence
takeover document offer for day announces for shareholders can revise bid potential satisfy/waive satisfy/waive consideration to compulsory
offer and and form of target to offer level of material can withdraw competing acceptance remaining target acquisition
beginning of acceptance publish any can acceptance new target acceptances bidder allowed condition conditions – shareholders procedure (when
the offer Announce defence close s and informatio if bid is not to clarify offer goes 90% threshold
period (if publication of document (usually) n to be unconditional intentions “wholly satisfied)
not already offer extension of published unconditional
commenced document bid ” or lapses
)
If there is a Offer Bid must be open Assumes first closing Within 14 days of
possible offer document for at least 21 date is on Day 21 offer becoming
announcement must be days after wholly
before A day, the published publication of the unconditional
potential bidder within 28 days offer document
has 28 days to of A Day (but
announce a firm can only be
intention to make within the 14
a bid or days following
announce that it A Day if the
will not make a target board
bid (unless the consents to
Panel grants an this)
extension)

Scheme of arrangement (indicative timeline - assuming court and shareholder meetings held on Day 21)
Start A Day
process (Day – 28) A +5 A +10 Day 0 Day 7 Day 14 Day 19 Day 21 Day 22 Day 30 Day 38 Day 39 Day 53
Book court Announce Issue claim to Hearing of Publish Last day terms Last day Last day for First day Target Advertise court Court File court Last day to pay
dates scheme and commence claim form scheme of scheme can potential submission of court and announces hearing hearing to order consideration
beginning of court meetings seeking circular and be revised competing proxies shareholde results of sanction sanctionin to target
directions for r meetings g shareholders
the offer proxy form bidder usually meeting and files scheme
to approve
period (if not convening Announce allowed to scheme copy of the Target schemee
already shareholder publication clarify can be held special resolution announces at
commenced) meetings of scheme intentions with Companies results of Companie
etc. circular House court hearing s House
Court orders Complete report Scheme
meeting to of Chairman of becomes
be held meeting to court effective
Swear and file
witness
statements
If there is a possible offer Claim form Court hearing must be 14

announcement before A day, must be advertised at least seven days
the potential bidder has 28 issued no later clear days in advance of
days to announce a firm than two hearing
intention to make a bid or business days
announce that it will not before hearing
make a bid (unless the Panel f l i f )
grants an extension).
Scheme circular to
be published within
28 days of A day
(but can only be
within the 14 days
following A Day if
the target board
consents to this)

6 Takeover Tactics
6.1 Stake building
One tactic a potential bidder may consider is to build up a stake in the target company. This would
have a number of potential benefits, including indicating to the target’s board the seriousness of the
bidder’s intentions, lowering the overall cost of acquiring the shares in the target and potentially
deterring competing bidders. However, before deciding to acquire any interests in the securities of the
target, the bidder should consider the following issues and implications:
• The bidder should not acquire any interest in target securities at a time when to do so would
constitute market abuse or insider dealing (see 6.2). This is likely to be the case if the bidder
is in possession of non-public due diligence information which includes inside information and
the bid has not yet been made. In addition, the Takeover Code prohibits any person, other
than the bidder, who has confidential, price-sensitive information concerning a bid or
contemplated bid from dealing in the securities of the target between the time when there is
reason to suppose that an approach or bid is contemplated and the announcement or
termination of such discussions.
• Any acquisition (even of one share) may be prohibited or may result in a requirement for a
mandatory bid to be made for the target (see 4.4) if that acquisition takes the shareholder’s
aggregate holding to 30% or more or, if the shareholder is already interested in more than
30% but less than 50%, that acquisition increases the percentage of shares carrying voting
rights in which the shareholder is interested.
• Any dealing by the bidder (or anyone acting in concert with it) must be publicly disclosed
either prior to or at the start of the offer period (see 3.6).
• An acquisition may impact on the nature and level of consideration that the bidder may then
offer in a takeover bid:
o If the bidder (or any person acting in concert with it) acquires any interest in shares
during the offer period, any bid must be in cash or accompanied by a cash alternative
at not less than the highest price paid by the bidder during the offer period and within
the 12 months prior to the offer period; and
o If shares carrying 10% or more of the voting rights are acquired in exchange for
securities in the three months prior to the offer period and during the offer period,
then the bidder will normally be required in its bid to offer the same class of securities
to other target shareholders.
• If the bid is structured as a scheme of arrangement, any shares in the target which are held
by the bidder cannot be voted on when voting to approve the scheme. Market purchases by
the bidder will therefore have the effect of concentrating the voting power of other
shareholders in relation to the scheme. This is in contrast to the position where the bid is
structured as a contractual offer, where shares purchased by the bidder after the offer is
made will count towards the acceptance condition and can therefore be an effective tool for a
bidder seeking to ensure its bid succeeds. Note, however, that if the bidder purchases shares
before it makes a contractual offer, those shares will not count towards the squeeze out
threshold which would enable it to acquire the shares of the remaining minority shareholders
(see 7.1).

It is important that all parties involved in a potential takeover bid in the UK are aware of and comply
with the rules and regulations on insider dealing and market abuse.

The UK has stringent rules relating to insider dealing. These are contained in the Criminal Justice Act
1993, which makes it a criminal offense for a person who has inside information to deal or to
encourage others to deal on the basis of inside information or to disclose inside information. Inside
information is:
• specific information;
• relating to a particular company or particular securities;
• which has not been made public;
• but which, if it were made public, would be likely to have a significant effect on the price of the
securities.
It is important to note that the rules surrounding inside information, and how this definition is
interpreted, are complex and based on EU legislation and that the penalties for infringement can be
severe.
Alongside the criminal sanctions against insider dealing and market manipulation, the Market Abuse
Regulation and related guidance has direct effect in the UK as in all EEA jurisdictions and contains a
civil prohibition on market abuse. The FCA is empowered to decide that certain conduct constitutes
market abuse. It can then impose unlimited fines and/ or other penalties. Given that it is based on the
Market Abuse Regulation, the position on market abuse in the UK will be similar to that in other EEA
jurisdictions. Of particular relevance will be the prohibitions on insider dealing, improper disclosure of
inside information and market manipulation.
6.3 Deal protection and equality of treatment

The Takeover Code includes a general prohibition on inducement fee agreements and other deal
protection measures including exclusivity/”no- shop” agreements, implementation agreements and
arrangements having a similar or comparable financial or economic effect as an inducement fee.
These are collectively termed “offer-related arrangements”. There are exemptions that permit:
• a commitment to maintain confidentiality of information;
• a commitment not to solicit employees, customers or suppliers;
• a commitment to provide information or assistance for the purposes of obtaining any official
authorization or regulatory clearance;
• irrevocable undertakings and letters of intent (see 6.4);
• any agreement, arrangement or commitment which imposes obligations only on a bidder, e.g.,
reverse break fee, or its concert parties, other than in the context of a reverse takeover; and
• any agreement relating to any existing employee incentive arrangement, e.g., as to how
discretion should be exercised in relation to the number of shares to be issued or the amount
of any bonus payable.
There are limited exceptions to the general prohibition on inducement fee arrangements, as follows.
• Where an announcement has been made of a firm intention to make a bid which is (and
remains) hostile, the Panel will normally consent to the target entering into inducement fee
arrangements with one or more potential “white knight” alternative bidders, provided that (i)
the aggregate value of the inducement fee or fees that may be payable must be no more than
1% of the offer value. This is calculated by reference to the competing bid, and (ii) any
inducement fee is capable of becoming payable only if a bid is successful.

• In the case of a formal sale process initiated by the target, the Panel will normally consent,
prior to any firm intention to make a bid being announced, to the target entering into an
inducement fee agreement with one bidder who has participated in that process, subject to
the same provisos as to quantum and trigger.
• The Panel may grant a dispensation where the target is in serious financial distress.
The target board and the bidder should always seek detailed legal advice before agreeing any deal
protection measures to ensure full compliance with the Takeover Code and applicable legal and
regulatory requirements.
For schemes of arrangement, some limited deal protection exists in respect of the process and
timetable by virtue of the fact that the target will be required to implement the scheme in accordance
with a timetable published in the scheme circular. The target will be able to depart from this timetable
if its board ceases to recommend the bid, announces its decision to propose an adjournment to a
shareholder meeting or court sanction hearing, or a shareholder meeting or court sanction hearing is
actually adjourned. In these situations, the target will need to obtain the approval of the bidder for a
new scheme timetable whilst the bidder will be able to make a request to switch to a contractual offer,
and the Panel will usually consent to such a request. In order to prevent uncertainty and the bidder
being forced to keep open a bid for a protracted period where the initial timetable is departed from,
bidders are permitted to include, within the conditions to a scheme, specific dates by which the
shareholder meetings and/or court sanction hearings must be held. The dates in such conditions must
be more than 21 days after the dates set out in the published agreed timetable for such events.
It is worth remembering that whilst there are significant prohibitions and restrictions in respect of the
bidder and target entering into deal protection arrangements, the bidder may derive some comfort
from the restrictions on frustrating action to which the target board is subject from an early stage (see
4.7). Bidders will also need to carefully evaluate the advantages and disadvantages of stake building
as a means of achieving some level of deal protection (see 6.1).
All shareholders of the same class must be offered equivalent treatment by a bidder and therefore,
subject to very limited exceptions, special deals for certain shareholders are prohibited (see 4.6 in
relation to arrangements to incentivize management). This equivalence of treatment also extends to
equality of information, such that information about parties to a bid must be made equally available to
target shareholders at the same time and in the same manner, or as near as possible.

An irrevocable undertaking is an undertaking given by a target shareholder to a bidder where they
undertake to accept the bidder’s bid for the target company when it is made. Irrevocable undertakings
are used so that bidders do not need to purchase the shares directly. There are several reasons why
a bidder might not wish to purchase the shares directly, such as the following.
• A bidder who buys the shares will be left with the shareholding if its bid fails.
• Provided that an irrevocable undertaking is correctly drafted, the shares to which it relates can
either be (a) voted in favor of the scheme if the bid is structured as a scheme of arrangement,
or (b) counted towards the 90% squeeze-out threshold in order to buy out the remaining
minority in case of a contractual offer (see 7.1).
• If the bidder buys the shares and as a result obtains 30% or more of the shares in the target,
they will be required to make a mandatory bid for the target. By contrast, if the bidder takes an
irrevocable undertaking, the shares covered by that irrevocable undertaking will not be
counted towards the 30% level for these purposes, provided that the irrevocable undertaking
does not give the bidder general control over voting rights.

• A selling shareholder may be more willing to give an irrevocable undertaking than to sell their
shares because if they sell they will not benefit from any revised or increased offer, whereas
they would do so by accepting the bid pursuant to the irrevocable undertaking.
On a recommended bid, it is market practice for the target directors, who will generally hold shares
and/or options in the target, to give “hard” irrevocable undertakings to support the bid. Such
undertakings remain binding even in the event of a competing bid. It is also common for bidders to
seek “soft” irrevocable undertakings from the target’s major shareholders. These undertakings lapse if
a higher competing bid is made above a negotiated threshold. Where these cannot be obtained, the
major shareholders may instead be willing to provide non-binding letters of intent in support of the bid.
It should be noted that both irrevocable undertakings and letters of intent must be disclosed publicly.
6.5 Anti-takeover defense measures

To fulfil their fiduciary duties, the directors of a UK target company must:
• act in a way that the director considers, in good faith, would be most likely to promote the
success of the company for the benefit of its members as a whole; and
• act within the director’s powers and use those powers for the purposes for which they are
conferred.
Under the duty to use powers for their proper purpose, it is clear that defensive acts motivated
primarily by a desire to entrench management’s own position are unlawful. The position on fiduciary
duties, combined with the prohibition on frustrating action (see 4.7), means that it is not common in
the UK takeover market for target directors to implement particular measures during an offer period.
Instead, if the target directors view a bid approach as unwelcome, market practice would be for them
to make their case publicly as to why the (potential) bid is unattractive and persuade shareholders not
to support it. They would also then generally refuse the bidder access to any non-public due diligence
information regarding the company except where they are compelled to grant such access as they
have already granted it to another bidder.
7 Squeeze-Out of Minority Shareholders after Completion of the

Takeover
7.1 Squeeze-out
If, by virtue of acceptances of a takeover offer, the bidder acquired or unconditionally contracted to
acquire at least 90% in value of the shares to which the offer relates and at least 90% of the voting
rights attached to such shares, it can force the remaining minority shareholders to transfer their
securities to the bidder at the price offered in the takeover bid.
The compulsory squeeze-out procedure can be used by the bidder within three months from the last
day on which the offer can be accepted, by serving a notice to shareholders who have not accepted
the offer.
If the takeover is structured as a scheme of arrangement, 100% of the target’s share capital will be
acquired by the bidder upon the scheme becoming effective, so there would be no need for the
squeeze-out procedure.
7.2 Sell-out
If the bidder makes a takeover bid and, by acceptances of the bid and any other acquisitions, holds at
least 90% of all the shares in the target carrying at least 90% of the voting rights in the target, then a
minority shareholder may require the bidder to acquire their shares in the target.

The bidder is required to give any shareholder notice of their right to be bought out within one month
of that right arising. If the notice is given before the end of the period within which the takeover bid can
be accepted, it must state that the bid is still open for acceptance. Such notices are unnecessary if the
bidder has already provided the shareholder in question with a squeeze-out notice.
Sell-out rights cannot be exercised after the end of the period of three months from the last date on
which the bid can be accepted or, if later, three months from the date on which the notice is served on
the shareholders notifying them of their sell-out rights.
7.3 Restrictions on acquiring securities or making further bids after the

takeover bid period
Except with the Panel’s consent, a bidder holding shares carrying more than 50% of the voting rights
and the persons acting in concert with the bidder may not make a second bid or acquire any interest
in shares in the target on more favorable terms than those made available under the previous
takeover bid, during a term of six months as of the end of the takeover bid period. Similarly, an
unsuccessful bidder and its concert parties are prohibited (except with the Panel’s consent) from
announcing a further bid or triggering a mandatory bid obligation for a period of 12 months from the
date on which its bid was withdrawn or lapsed.
8 Delisting
The main requirement to delist a company from the LSE’s main market is that a special resolution
requiring a 75% majority must be passed by shareholders approving the cancellation of the admission
of the company’s shares to the Official List and to trading on the LSE’s market for listed securities.
After a successful offer for the entire share capital of a company, the bidder would usually have
sufficient voting rights to pass such resolution. Additional procedural requirements are set out in the
Listing Rules.

Robert Adam, Helen Bradley, Nick Bryans, Adam Eastell, Melanie Howard, Nick O’Donnell and
James Thompson in the London office are the most appropriate contacts within Baker McKenzie for
inquiries about public M&A in the UK.
Robert Adam Helen Bradley

London London
robert.adam@bakermckenzie.com helen.bradley@bakermckenzie.com
+44 20 7919 1863 +44 20 7919 1819
Nick Bryans Adam Eastell

London London
nick.bryans@bakermckenzie.com adam.eastell@bakermckenzie.com
+44 20 7072 5627 +44 20 7919 1616
Melanie Howard Nick O’Donnell

London London
melanie.howard@bakermckenzie.com nick.o’donnell@bakermckenzie.com
+44 20 7919 1985 +44 20 7919 1994
James Thompson
London
james.thompson@bakermckenzie.com
+44 20 7919 1954

United States
1 Overview
1.1 Background
The US public merger and acquisition market remains one of the largest and most active public M&A
markets in the world. Hundreds of public M&A transactions occur each year, ranging from acquisitions
of smaller reporting companies for less than US$ 100 million to mega-mergers of global multinational
entities with consideration in excess of US$ 5 billion. Frequent activity appears across a variety of
industry sectors, including businesses from the pharmaceutical and healthcare sector (which has
been particularly active) to the manufacturing, energy, food and beverage, technology and service
business sectors.
The US M&A market has originated many of the structural innovations applicable to public M&A
overall, such as shareholder rights plans and contingent value rights (a type of public transaction earn
out), among others. The most common structures for public deals in the US are tender offers and
mergers. As a result of existing detailed market practices and securities disclosure regulations, US
public M&A transactions often require preparation of detailed disclosure documents describing the
proposed transaction and any shareholder votes required to effect the transaction. Even when
shareholder votes are required, in the absence of extensive antitrust clearance or other regulatory
requirements, transactions can close quickly and expediently for both US and non-US acquirers.
While recent successful proceedings by government authorities have halted a number of prominent
proposed mergers, not all such efforts have been successful, as evidenced by the judicial denial of
the government’s challenge to the merger of AT&T and Time Warner and, more recently, denials by
numerous federal courts of state government efforts to halt the merger of T-Mobile and Sprint after
federal government clearance by both the Department of Justice and the Federal Communications
Commission. Nevertheless, the uptick in US antitrust enforcement appears to be continuing, as
reflected in the government’s challenge to airline booking service Sabre Corp.’s planned US$ 360
million purchase of Farelogix Inc., and its announced intention to block a planned joint venture
between Arch Coal and Peabody Energy.
This chapter discusses legal, regulatory, timing and practical considerations to assist with
consideration of a US public M&A transaction.
1.2 Scope; foreign private issuers

The discussion in this chapter concerns acquisitions of publicly held target companies organized
under the law of one of the states of the United States. It includes a discussion of certain issues under
the corporate and case law of Delaware, the jurisdiction of incorporation of a majority of US public
companies. There are also many non-US companies that are listed on US stock exchanges. Such
companies are referred to as foreign private issuers or “FPIs” (although it should be noted that not all
non-US companies qualify as “foreign private issuers”). Many, but not all, of the US federal securities
laws and rules that regulate acquisitions of listed US companies also apply to acquisitions of US-listed
FPIs. In some cases, however, acquisitions of US-listed FPIs are either exempt from such securities
laws and rules or are governed by rules dealing specifically with FPIs. The “Addendum” at the end of
this chapter provides a brief summary of the treatment of acquisitions of US-listed FPIs under the
various federal securities laws and rules discussed in this chapter.

2.1 Securities and corporate regulation
The acquisition of a company listed on a US securities exchange (generally referred to in the US as a
public company) requires compliance with United States federal laws and, for acquisitions of United
States domestic companies, state laws. While this chapter discusses both friendly acquisitions and

hostile bids, the primary focus is non-hostile transactions. However, the legal and regulatory
framework discussed below applies equally to friendly and hostile transactions.
• Federal securities laws – US federal securities laws generally govern the information to be
provided to the target company’s shareholders and procedures mandated by those laws that
must be followed in an acquisition transaction. The specific securities laws applicable to the
transaction will depend on the structure of the transaction, the place of organization of the
target company, and the nature of the merger consideration. Specifically:
o SEC beneficial ownership disclosure rules – Section 13(d) of the United States
Securities and Exchange Act of 1934 (the “Exchange Act”) and Regulation 13D-G of
the Securities and Exchange Commission (“SEC”) under the Exchange Act require
disclosure upon acquisition of “beneficial ownership” of more than 5% of the voting
equity securities of a company listed on a US stock exchange or registered under the
Exchange Act. (“Registration” under the Exchange Act is the process by which a
company becomes subject to periodic reporting obligations under the Exchange Act.
Any class of security of a company that is listed on a US national stock exchange is
also registered under the Exchange Act, but unlisted companies must also register
under the Exchange Act if they meet certain criteria for size and number of
shareholders of record.) Disclosure requirements under Section 13(d) and Regulation
13D-G are discussed in greater detail in “3. Before a Public Takeover Bid” below.
In addition, Section 16 of the Exchange Act, and the SEC rules promulgated
thereunder, provide for reporting requirements and “short-swing” profit disgorgement
for beneficial owners of more than 10% of the outstanding voting securities of a US
public company.
o SEC tender offer rules – Section 14(d) of the Exchange Act and SEC Regulations
14D and 14E under the Exchange Act regulate the information to be provided to
target company shareholders in tender offers (takeover bids) at both the preliminary
communication and announcement stage and in connection with the actual offer, as
well as the procedure for conducting a tender offer. These rules also apply to
exchange offers (in which all or a part of the acquisition consideration consists of
securities). References in this chapter to tender offers generally apply equally to
exchange offers. A summary of the principal procedural rules for conducting a tender
offer pursuant to the SEC tender offer rules is set forth in “4. Effecting a Takeover”
below. As noted below, US securities registration requirements will generally also
apply to an acquisition effected pursuant to an exchange offer.
o SEC proxy rules – Other acquisition structures, such as statutory mergers,

consolidations, and asset sales followed by dissolution of the target company and
distribution of the consideration to the target company’s shareholders, require a vote
or consent of the target company’s shareholders to authorize the transaction. In these
cases, the target company will need to solicit such approval by means of a formal
proxy solicitation. When directed to the shareholders of US domestic companies,
these solicitations are governed by the SEC’s proxy rules, which include Section 14
of the Exchange Act and Regulations 14A and 14C. The proxy rules prescribe
extensive disclosure requirements for such solicitations.
o SEC going private rule – Business combination transactions by an issuer or between

an issuer and an affiliate (controlling person) that have a reasonable likelihood or
purpose of causing the issuer’s securities to be delisted, to cease to be registered
under the Exchange Act or to cease being subject to periodic reporting requirements
under the Exchange Act are referred to as “going private” or “Rule 13e-3”
transactions. Going private transactions are closely examined by the SEC because,

among other reasons, they have the potential for abuse or coercive treatment of
public shareholders by insiders who are likely to have access to non-public
information, and such transactions may involve the elimination of public ownership at
propitious times by management or controlling shareholders (See “8. Delisting”).
o SEC rules governing public offerings of securities – SEC Rule 145 under the United
States Securities Act of 1933 (the “Securities Act”) provides that submission to target
company shareholders for a vote of a plan or agreement for a merger, consolidation,
transfer of assets and certain other transactions, in which the consideration
constitutes, in whole or in part, securities of another person that will be issued or
distributed to the target company’s shareholders, constitutes an offer or sale of a
security under the Securities Act. The securities offered in such transactions, as well
as securities offered by an acquirer in an exchange offer made directly to target
company shareholders, must be registered under the Securities Act unless an
exemption from such registration is available for the transaction. A detailed
discussion of Securities Act registration requirements is beyond the scope of this
chapter. It may be noted, however, that under the applicable SEC rules, the same
document that solicits the votes or other action of target company shareholders in
such transactions, i.e., the target company’s proxy statement for a merger or
consolidation or the offer to exchange distributed by the acquirer to target company
shareholders, also serves as the prospectus for the acquirer’s shares to be issued as
the transaction consideration. If the target company in a business combination is a
non-US company and otherwise meets the criteria for “foreign private issuer” status,
certain exemptions from Securities Act registration requirements may be available.
These are discussed in the Addendum below
• State corporate law – The parties to a merger or other negotiated business combination
generally have freedom of contract to establish the terms of the transaction, subject to any
limitations or requirements applicable to business combinations contained in a target
company’s organizational documents. State corporate laws and judicial decisions under those
laws govern:
o procedural matters, e.g., notice, timing and voting requirements, for seeking
shareholder approval under the state merger statute or in effecting a dissolution of a
seller following an asset sale;
o minority shareholder squeeze-outs;
o in all-cash acquisitions and certain other acquisitions, the rights of shareholders who
do not vote in favor of a merger to receive the judicially determined value of their
shares in lieu of the merger consideration, and the procedures for doing so (generally
referred to as “dissenters’ rights” or “appraisal rights”); and
o the duties of members of the board of directors of the target company in the context
of a merger or other business combination. These duties are discussed further in “4.
Effecting a Takeover – Fiduciary Duties” below.
2.2 Other regulatory requirements - Hart-Scott-Rodino

Apart from industry-specific requirements and restrictions noted in 2.3 below, parties planning an
acquisition should be aware that regulatory issues could arise under the Hart Scott-Rodino Antitrust
Improvements Act of 1976 (the “HSR Act”).
Under the HSR Act, prior to consummation of acquisitions of assets or voting securities exceeding
certain size thresholds, including open market purchases of securities in advance of a business
combination, US antitrust authorities – the Department of Justice (“DOJ”) and the Federal Trade

Commission (“FTC”) – must be notified, and details of the transaction and the parties must be
disclosed in an HSR filing. At the time of writing, the current minimum transaction size which may
trigger an HSR filing requirement is US$ 94 million. For transactions above US$ 94 million up to
US$ 375 million there is also a size-of-the parties test. For transactions above US$ 375 million, there
is no size-of-the-parties test. The size of the parties and transaction thresholds are adjusted annually.
Consultation with antitrust counsel is required in order to determine whether a particular transaction
triggers an HSR filing requirement. If a filing is required, the parties may not close the transaction until
the expiration or termination of a 30-day waiting period. The waiting period begins to run upon the
completion of the filing by both parties. In certain circumstances the waiting period may be shortened
if the parties apply for and are granted “early termination,” and it may be extended if either the FTC or
the DOJ issues a request for additional information (a “second request”). In March 2020, due to the
Coronavirus pandemic, the FTC and the DOJ launched an electronic filing system for HSR
submissions to replace the use of physical DVDs. They also temporarily suspended the availability of
early termination (subsequently resumed) and requested merger parties to allow an additional 30
days for completion of review of then pending and subsequent proposed transactions. The filing under
the HSR Act must include internal documents written by or for officers or directors which discuss the
acquisition from the standpoint of competition, competitors, market shares and potential for sales
growth or expansion, as well as the confidential information memorandum and certain studies by
investment bankers or consultants. The filing is required to be made by the “ultimate parent entity” of
each of the acquiring and acquired party. The DOJ or FTC may refuse to clear a transaction for
closing and may commence litigation to prevent consummation of a business combination that raises
competitive concerns. Note that, unlike SEC filings, HSR Act filings are not public and the agencies
must hold them confidential according to the governing statute.
2.3 Regulation of Foreign Investment - CFIUS

Under the Defense Production Act of 1950, as most recently amended by the Foreign Investment Risk
Review Act of 2018 (FIRRMA), the President has broad authority to block or require divestiture of
foreign investments where they find there is a threat to national security. The President is assisted by
the Committee on Foreign Investment in the United States (CFIUS or the Committee), an inter-agency
committee including economic and security agencies, in the administration of their authority. CFIUS
regulations implementing FIRRMA became effective on February 13, 2020.
While the fundamental powers of the President have remain unchanged for decades, recent
legislation and regulation have expanded CFIUS’ jurisdiction and created a two track system with pre-
closing filings being mandatory for certain foreign investments, and voluntary for others. The incentive
for making a voluntary CFIUS filing is legal certainty: if CFIUS clears a transaction, neither the
Committee nor the President can subsequently challenge it.
Pre-closing filings are mandatory for two classes of transactions:
• Substantial government interest: Transactions where a foreign person in which a foreign

government has 49% or more voting interest acquires 25% or more of the voting interest in a
US critical technology, critical infrastructure or sensitive personal data business.
• Critical technology: Transactions where a foreign person acquires certain governance or

information rights in a business that develops, tests or produces a critical technology for use
in a listed sector.
Mandatory filings can be made through a short form “declaration” or a longer “notice.” A mandatory
declaration must be filed 30 days before closing, and possible outcomes include clearance, no-action
(effectively clearance) and a requirement to file a notice, which entails a longer administrative
process. Possible outcomes from a notice are clearance, clearance subject to conditions or
opposition, with the formal process taking typically 45 to 90 days. Failure to make a required filing can
result in penalties up to the value of the transaction.

Where CFIUS has jurisdiction and filing is not mandatory, the parties may file either a declaration or a
notice. The statute provides broad discretion to the President and CFIUS, and there is little
opportunity for judicial review. “National security” is not defined, and CFIUS has interpreted the term
broadly. CFIUS has particular interest in transactions involving US companies (1) having sensitive
government contracts, (2) operating critical infrastructure, (3) producing sensitive technologies, (4)
having operations or real estate proximate to sensitive US government facilities, and, more recently,
(5) (6) possessing or handling sensitive personal data of Americans. On the investor-side, CFIUS
focuses in particular on investors from jurisdictions that are strategic competitors of the United States,
and investors that have other attributes that give rise to security concerns, e.g., export control or
sanctions compliance issues.
Finally, CFIUS is now authorized to require filing fees up to the lesser of one percent of the
transaction value or US$ 300,000 for notices, but not declarations.

Under US securities laws, “control” means possession of the direct or indirect power to direct or cause
the direction of the management and policies of an issuer, whether through the ownership of the
issuer’s voting securities, by contract, or otherwise. While ownership of a majority of the voting shares
of a company generally provides control, as a practical matter control is often obtained at lower
thresholds. The SEC has taken the view that beneficial ownership of greater than 10% of the
outstanding voting securities of a public company creates a rebuttable presumption that the beneficial
owner “controls” the public company for purposes of the federal securities laws. Control may also be
relevant under state corporation law for purposes of determining whether, in the absence of certain
procedures in connection with negotiation and approval of a transaction with a controlling shareholder,
a court will examine the transaction under an “entire fairness “ test or the business judgment rule, as
discussed in “8.2 Going Private,” below. In contrast to federal securities law, under Delaware case
law, a holder of less than a majority of a company’s voting power will generally not be considered a
controller unless that holder actually exercises control over the business and affairs of the company,
A controlling interest may be obtained through the private purchase of shares from the issuer or from
one or more controlling or significant shareholders, through open market purchases, or a combination
of the foregoing methods. This Part addresses the scenario in which the acquirer intends to acquire a
significant interest in a US-listed publicly held company and to maintain the listing of the public
company after completion of the transaction. It should be noted that while majority or significant
minority ownership positions exist in US public companies, as well as majority control positions
through ownership of “super-voting” stock or voting stock in a two-class structure in which public
shares are non-voting (particularly in the case of companies that have recently become public),
ownership of such majority or significant minority interests is less common in US public companies
than in other jurisdictions. For information on the delisting process where a delisting is contemplated
after a takeover of the target company, see “8. Delisting.”
3.1 Obligations arising at certain ownership levels

Neither United States federal securities laws nor, with certain exceptions, state corporate laws impose
acquisition-related obligations to minority shareholders (such as a mandatory bid or offer for their
shares) as a consequence of reaching or exceeding any specified percentage of ownership in a public
company. Similarly, neither US federal nor state corporate laws provide specific rights “automatically”
(such as the right to appoint one or more directors) upon obtaining a specific percentage of ownership
in a company, other than the right to use the voting power accompanying that percentage interest in
accordance with the company’s corporate documents and applicable law. Such specific rights may be
provided by contract or granted to one or more classes of securities in a company’s corporate
documents. See the discussion under “3.5 Investor Rights and Restrictions” following the table below.
However, disclosure obligations and other consequences for both acquirers (including possible

limitations on the acquirer’s rights as a shareholder) and issuers arise when certain ownership levels
are achieved. These obligations and consequences are summarized in the table below.
For the purposes of the following table, under the SEC rules: (i) “beneficial ownership” means
possession of the right to vote or to direct the vote, or the right to dispose or direct the disposition of, a
security; and (ii) a person is the “beneficial owner” of a security if the person has the ability to acquire
beneficial ownership within 60 days of the determination date by converting a convertible security,
exercising an option, warrant, or other right to purchase or subscribe for a security, or by terminating a
trust or similar arrangement. In addition, when two or more persons agree to act together for the
purpose of acquiring, holding, voting or disposing of equity securities of an issuer, the group that they
form is deemed to acquire beneficial ownership of all equity securities of that issuer beneficially
owned by the group members. Some state “interested shareholder” or similar statutes mentioned in
the table may provide broader definition of “beneficial ownership” than the SEC rules.
Summary table of US percentage ownership consequences for acquirers and target

companies.
Acquisition Threshold Applicable Regulatory or Other Brief Summary of Consequences

or Ownership (%) Legal Requirement
>5% beneficial • Exchange Act Section • Acquisition of greater than

ownership 13(d); Regulations 13D 5% beneficial ownership of
and 13G; Schedule 13D or an issuer’s voting
13G filing securities must be reported
to the SEC on Schedule
• Target company reporting
13D. Institutional and other
obligations
passive investors not
seeking to control or
influence the issuer may
file a “short-form” Schedule
13G. These filings are
publicly available.
• Public companies must
disclose in their public
filings the ownership
interests of, certain
transactions with, and
certain other information
regarding holders of more
than 5% of their
outstanding voting
securities.
Tender offer for >5% • Exchange Act Section • A tender offer conducted
beneficial ownership 14(d); Regulations 14D by a party who will have
and 14E; Schedule TO beneficial ownership of
more than 5% of the target
• Target company response
company’s voting
obligations – Schedule
securities after completion
14D-9
must by conducted in
accordance with the SEC
tender offer rules.
• Tender offer rules require a
target company to

recommend that
shareholders accept, reject
or take other action
regarding the tender offer,
or state that is unable to
make or makes no
recommendation, and to
provide the reasons for its
position.
• Section 13(d) reporting
requirements remain
applicable during a tender
offer. Filings can be
combined under cover of a
single Schedule TO.
>10% beneficial • Exchange Act Section • Beneficial ownership of

ownership 16(a) and (b); Forms 3 and more than 10% of a US
4 domestic public company’s
outstanding voting
securities must be reported
on Form 3. Changes in
such ownership must be
reported on Form 4. Such
filings are publicly
available. 10% beneficial
owners are subject to
forfeiture of profits on
purchases and sales, or
sales and purchases, of
the issuer’s shares within
any six-month period.
• Substantially the same
reporting requirements and
“short-swing” profit
forfeiture rules generally
apply to directors and
executive officers of public
companies.
• Public companies must
disclose failures to make
such required filings in
their proxy materials for
annual meetings.
10% of target • Potential affiliate status • Public sales of securities

company’s voting under federal securities law by “affiliates” may be made
shares principles only pursuant to a
registration statement
under the Securities Act of


an applicable exemption
from registration.
• Cashing out minority
shareholders in a business
combination with an
affiliate may be subject to
the SEC “going private”
rule.
• A control person may be
subject to certain additional
potential liabilities under
US federal securities law.
10%-15% of target • State “interested • These statutes “freeze”

company’s voting shareholder” and other and otherwise limit or
shares anti- takeover statutes condition business
combinations, e.g.,
mergers, between the
target and an “interested
shareholder”, i.e., a
beneficial owner of a
specified percentage
(generally 10% to 15% or
more), of a target
company’s voting
securities who acquired
such ownership without the
target company’s consent.
Other state anti-takeover
statutes focus on voting
rights, pricing and
constituencies, in addition
to shareholders that may
be affected by a takeover.
10%-20% of target • Level of ownership at • Shareholder rights plans,

company’s voting which shareholder rights, (“poison pills”) are
shares i.e., poison pill, plans are established by certain
typically triggered (but see target companies under
the discussion in 3.5, state law and deter hostile
“Investor Rights and (unfriendly) takeovers by
Restrictions”). making them impossibly
expensive or impracticable
by means of provisions
that, if triggered, would
drastically dilute the hostile
party’s ownership.

50%+ of the target • Level of ownership at • Most (but not all)

company’s voting which a shareholder fundamental decisions of
shares controls most or all US corporations are
decisions (including decided by a vote of
elections to the board of shareholders holding a
directors) majority of either the voting
shares present (in person
• Target company reporting
or by proxy) at a meeting
of the change of control is
and voting or by a majority
required (but can be
of the outstanding voting
required at a lower
shares.
percentage if that lower
percentage affords control) • As a practical matter, true
control is often achieved at
lower thresholds.
• A target company that has
undergone a change of
control must file a current
report on Form 8-K with
the SEC disclosing the
change of control.
• Exchange Act Section 14(f)
and SEC Rule 14f-1
require the filing and
distribution to target
company shareholders of
certain information if a
majority of the board is
selected by an acquiring
party without a
Majority of shares • Delaware General • Under Delaware law, a

entitled to vote on a Corporation Law Section merger agreement
merger 251(h) between an acquirer and a
listed target company may
provide that if the acquirer
conducts a tender offer
and, after completion of the
tender offer, holds a
majority of the target
company’s outstanding
shares entitled to vote on a
merger (or any higher
percentage required for
such action by the target
company’s charter), the
acquirer or an acquisition
subsidiary may complete
the merger of the target


company into or with the
acquirer without a target
company shareholder vote.
This statute allows for a
more streamlined tender
offer/squeeze-out merger
process.
90%+ of shares • Level of ownership at • Under the laws of

entitled to vote on a which a target company Delaware and many other
merger may be merged into an states, an acquirer may
acquiring company on a merge a target company
“short-form” basis into itself or its subsidiary
without a target company
shareholder vote if the
acquirer holds 90% or
more of the voting
securities of the target
company (usually achieved
through a tender offer).
3.2 Methods of acquiring minority interests

• Purchases from the issuer – An issuer may sell its securities in a private placement to so-
called “accredited investors” (generally, financial institutions, corporate investors and wealthy
individuals who meet specified requirements). It may do the same for a limited number of
sophisticated investors, provided that certain information about the issuer is furnished. The
SEC has recently proposed amendments to the definition of “accredited investor” to add
natural persons having certain professional certifications or designations or credentials and
family offices with at least US$ 5 million under management and their family clients. Sales to
non-US investors may also be made without registration under the Securities Act as long as
certain steps are taken to ensure that the securities are sold in an “offshore transaction”.
Securities sold without registration under the Securities Act may be subject to transfer
restrictions. These are discussed below under “Investor Rights and Restrictions”. State
securities laws may impose additional requirements for offers and sales of securities made
within the relevant state, but state securities registration requirements are generally not
applicable to securities listed on a national securities exchange, including the New York Stock
Exchange (“NYSE”) and the Nasdaq Stock Market (“Nasdaq”). In some instances, minority
interests may be obtained from an issuer by means of a registered public offering of shares.
• Negotiated purchases from existing shareholders – Shares may also be purchased in

negotiated transactions directly from shareholders of the issuer. However, shares held by
affiliates (control persons) of an issuer may be subject to transfer restrictions and the issuer’s
cooperation in connection with the sale may be required. Shares purchased from affiliates of
an issuer will generally be subject to the same transfer restrictions as shares purchased
directly from the issuer without registration. In addition, an acquirer should refrain from
widespread solicitation of public shareholders with whom it holds discussions, offering a
substantial premium or non-negotiable terms in order to avoid inadvertently engaging in a
tender offer without complying with the SEC’s tender offer rules.

• Open market purchases – It is also possible to make an investment in a listed company by
purchasing shares in the open market. These purchases are generally not subject to
significant regulatory restrictions, although the buyer will be subject to its own transfer
limitations if its ownership position becomes sufficiently large to cause the buyer to be or
become an affiliate of the issuer. As a practical matter, a buyer’s ability to acquire a sizeable
minority position in a public company at an acceptable price may be limited by the depth or
liquidity of the market for the issuer’s securities and by upward pricing pressure resulting from
the buyer’s purchases, particularly after the buyer’s ownership exceeds 5%, requiring public
disclosure of the buyer’s position and intentions (including whether the buyer intends to
acquire additional shares and/or promote a business combination with the target company,
board changes or a change of control). Open-market purchases and other “stake building”
can also be limited by an issuer’s anti-takeover provisions, state anti-takeover and control
share acquisition statutes, HSR Act filing requirements and CFIUS review requirements.
3.3 Due diligence

• Publicly available information – Extensive information regarding listed and other public
companies is publicly available, including annual and interim reports containing annual and
quarterly financial statements, additional reports filed to disclose material events occurring
between the filing of annual and interim reports, and (for US domestic issuers) proxy
statements. The exhibits filed with these reports are also publicly available and include a
target company’s organizational documents, the instruments governing its outstanding
securities and material indebtedness, and its material contracts, e.g., commercial
arrangements, employee benefit plans, significant acquisition agreements, licenses, and
contracts with executives and with related parties (although SEC rules permit reporting
companies to redact certain confidential information when filing these agreements). The
public availability of a target’s material contracts can be especially useful in the initial stages
of a bidder’s due diligence since they will reveal anti-assignment clauses and potential
triggering of “change-of-control” restrictions and “poison put” clauses in debt securities
granted the security holders the right to require the issuer to purchase their securities upon a
change of control). Recent amendments to the SEC’s reporting requirements require public
companies to hyperlink their reports to the exhibits filed or incorporated into the reports, which
expedites accessing the exhibits. All of this information is available for review and/or printing
at no charge on the website of the SEC, www.sec.gov, and most public companies post their
SEC reports (without exhibits), as well as other materials, such as committee charters,
governance information and annual reports to shareholders) on their web sites. A purchaser
that acquires a significant minority interest in a public company by means of open-market
purchases will generally conduct its due diligence and make its investment decision on the
basis of the publicly available information regarding the company. Due diligence by an
acquirer contemplating a hostile bid will necessarily be limited solely to publicly available
information.
• Additional due diligence – In a purchase of a significant interest from either an issuer or a

holder of a significant interest in the issuer, an acquirer may seek access to material non-
public information regarding the issuer directly from either the issuer or the seller, as the case
may be. The seller may wish to disclose such information because, under US federal
securities laws, a person in possession of material non-public information must generally
either disclose the information before making a sale or purchase of the issuer’s shares, or
refrain from trading in the shares. However, a seller that discloses material non- public
information may be concerned that such disclosure would violate a fiduciary or other duty it
owes to the issuer, and that such disclosure could result in liability if a third party uses the
information to engage in a transaction in the issuer’s shares (referred to as “tipper/tippee”
liability). Similarly, the issuer itself will be concerned that such disclosure could violate SEC
Regulation FD, which prohibits disclosure of material non-public information to certain market

participants without contemporaneous public disclosure of the same information. In all such
cases, an acquirer should expect to execute a non-disclosure agreement in which the
acquirer agrees to maintain the confidentiality of the information and to use it only in the
transaction for which it is provided. An acquirer that receives material non-public information
from a seller in these circumstances should bear in mind that it could be required to disclose
the information in a subsequent purchase or series of purchases, such as a public tender offer
subsequent to the private purchase.
3.4 Disclosure of beneficial ownership of shares

The principal percentage ownership thresholds that trigger disclosure or other obligations are
summarized in the preceding table, “Summary Table of US Percentage Ownership Consequences for
Acquirers and Target Companies”. A party that makes an “acquisition” that results in the party
becoming the “beneficial owner” of more than 5% of a class of a listed issuer’s voting securities must
report its beneficial ownership on either a Schedule 13D or, if the investor meets certain criteria and
disclaims intent to control or influence the target company, Schedule 13G.
• Schedule 13D – An acquirer making its initial investment as a first step to acquiring or
influencing control of a target company must report its beneficial ownership on a long-form
Schedule 13D. Schedule 13D must be filed within 10 days after a person’s beneficial
ownership exceeds 5%, but the triggering of the filing obligation does not require that the
acquirer discontinue purchasing shares. Thus, an acquirer can utilize this “10-day window” to
continue to increase its initial stake in a listed company during the 10-day period between the
day on which it crosses the 5% threshold and the deadline for public disclosure of its
beneficial ownership (subject to possible acquisition limits under state anti-takeover statutes
and poison pill plans). Schedule 13D requires detailed information regarding:
o the identity of the buyer (and, if applicable, the other members of the buyer’s “group”)
and the management, ownership and control of the filing person(s);
o the transaction or transactions in which beneficial ownership was acquired, including

total shares owned and all transactions in the relevant class of securities during the
60 days preceding the filing;
o the source and amount of funds or other consideration used to make the acquisition,
including a description of any borrowings or other financing arrangements used to
acquire the securities and, in certain circumstances, identification of the lender;
o the purpose of the acquisition, including any plans to effect a change of control or to
make other material changes affecting the company (such as changes to board
membership, stock exchange delisting, a business combination, and significant asset
dispositions);
o any arrangements between the acquirer and third parties with respect to the target
company’s shares, including any arrangements for transfer or voting of the shares or
the creation of an option with respect to the shares; and
o required exhibits, including financing documents and agreements relating to the

target company’s securities, such as acquisition agreements, voting agreements, and
others.
• Aggregation of beneficial ownership – group filings – Under Section 13(d) of the Exchange
Act and SEC Rule 13d-5, when two or more persons agree to act together for the purpose of
acquiring, holding, voting or disposing of equity securities of an issuer, the “group” that they
form is deemed to acquire beneficial ownership of all equity securities of that issuer
beneficially owned by the group members. A formal written agreement is not required – a

group’s existence can be inferred from the group members’ concerted action. A group’s filing
obligation may be satisfied either by a single joint filing or by each of the group’s members
making individual filings. If the group’s members elect to make separate filings, each such
filing must identify all members of the group.
• Subsequent disclosure thresholds – amendments to Schedule 13D – An acquirer has a

continuing obligation to amend its previously filed Schedule 13D “promptly” (generally within
two business days) if there is any material change in the information previously disclosed in
the schedule. Material changes include an increase or decrease in beneficial ownership of 1%
or more of the class of securities. Changes in an investor’s intentions with respect to the
issuer as described in Schedule 13D are also likely to be “material”.
• “Short-form” reporting – Schedule 13G – Schedule 13G may be used to report beneficial
ownership by US financial institutions and financial service companies, comparable non-US
financial institutions and service companies that are subject to a “substantially comparable”
regulatory scheme as their US counterparts, and other investors who acquire beneficial
ownership of less than 20% of an issuer’s voting securities, provided the investor acquired the
securities in the ordinary course of business and not with the purpose or intent of changing or
influencing control of the issuer. Schedule 13G is therefore not available to a party that is
intent on acquiring or controlling, or influencing the management and operations of, a
listed company. Schedule 13G requires only limited information, including identification of
the filing party, the amount, percentage and nature of the filing party’s beneficial ownership,
and whether beneficial ownership is held on behalf of another person. Amendments are
generally required only annually, but earlier amendment is required if specified percentage
ownership thresholds are passed. In addition, a party that has filed a Schedule 13G that
determines it no longer has a non-controlling intention must file a Schedule 13D if its
beneficial ownership exceeds 5% of the listed issuer’s voting securities. Until the filing is
made, the party may not vote its shares or acquire any equity securities of the issuer or any of
its controlling persons.
• Subsequent disclosure thresholds – 10% (Form 3 and Form 4) – In addition to disclosure

requirements under Section 13(d) of the Exchange Act, Section 16(a) of the Exchange Act
generally requires a beneficial owner of more than 10% of a class of shares to disclose its
equity interest in the issuer by filing certain reports with the SEC. An initial report on Form 3 is
required to be filed within 10 days after becoming a 10% beneficial owner; changes in
ownership, other than certain de minimis changes, including all sales and purchases of
shares of the issuer, are reported on Form 4 (usually within two business days of any
transaction).

(a) Investor rights – Under US state corporate laws, all voting shares of a company of the same
class have the same rights, such as the rights to notice of, to attend and to vote at
shareholder meetings and to receive dividends as and when declared by the board. In most
states, directors are elected by plurality vote, although many public companies have adopted
a majority vote requirement (majority of the votes cast). This majority vote requirement is
coupled with a requirement that defeated directors submit their resignations, although the
board generally retains final say over whether an individual director departs from the board or
stays on. Other matters require the affirmative vote of the holders of a majority of the shares
present and entitled to vote, so long as a quorum is present. A quorum is generally a majority
of the outstanding shares entitled to vote. Certain matters, including mergers and other
business combinations, may require a higher percentage vote, such as (depending on the
state of incorporation of the target company) a majority of all outstanding shares entitled to
vote, a two- thirds majority of a quorum, etc. Higher quorum and voting requirements can be
included in a company’s organizational documents, and those documents may also establish

conditions to be met and procedures to be followed for shareholder nomination of candidates

for election to the board or for submission of proposals for shareholder consideration at a
meeting. Companies may also enter into “investor rights” or similar agreements granting, e.g.,
contractual rights to board representation, board meeting attendance by observers, and
consent rights with respect to specific transactions, such as mergers. Thus, while ownership
of a significant percentage of a company’s shares can confer on a shareholder the powers to
approve or block specific proposals submitted to shareholders, the applicable state corporate
law, a target company’s organizational documents, and any agreements on the subject
between the target company and one or more significant shareholders must be reviewed to
ascertain the precise parameters of those powers and any limitations on their exercise. In
clear contrast, in public companies with two classes of voting shares, one with “super-voting”
rights, e.g., 10 votes per share, held by a limited number of insiders and the second class,
generally held by public shareholders, with one vote per share, all voting control rests in the
holders of the super-voting shares.
o Short-form mergers – Under the laws of Delaware and most other states, an
acquiring party may merge a target company with or into itself or an acquisition
subsidiary without a vote of the target company’s shareholders if the acquirer holds
90% of more of the voting securities of the target company (usually achieved through
a tender offer). In addition, under Section 251(h) of the Delaware General
Corporation Law (“DGCL 251(h)”), a merger agreement between an acquirer and a
listed target company may provide that the acquirer will conduct a tender offer for any
and all of the target company’s shares and that if, following the tender offer, the
acquirer holds a majority of the target company’s outstanding shares entitled to vote
on a merger (or any higher percentage required by the target company’s charter), the
acquirer may merge the target company into or with the acquirer or an acquisition
subsidiary without a vote of the target company’s remaining shareholders. The
merger must be effected as soon as practicable following completion of the tender
offer, and non-tendering shareholders must receive the same merger consideration
as was offered to shareholders in the tender offer.
Prior to the enactment of DGCL 251(h), acquirers often had to extend the tender offer
period (or even provide multiple extensions) in order to achieve the 90% ownership
level required to conduct a short-form squeeze-out merger. Such extensions
increased the exposure of the transaction to competing bids, since the SEC tender
offer rules permit target company shareholders to withdraw their tendered shares at
any time during the offer period, including extensions. Even in the absence of a
competing bid, failure to reach the 90% ownership level significantly lengthened the
time necessary to complete an acquisition after a tender offer because a long-form
merger – requiring the preparation, filing and possible SEC review of a target
company proxy or information statement – was required to effect the squeeze-out. For
that reason, the preferred acquisition method for many acquirers was a one-step,
long-form merger. DGCL 251(h) now provides a more streamlined process that
facilitates the two-step tender offer/squeeze-out merger process.
o Shareholder proposals – Rule 14a-8 under the Exchange Act requires a public
company to include a shareholder proposal (usually non-binding) in its proxy
statement if the proponent meets modest conditions as to share ownership,
timeliness and limits on the length of the proposed submission. A company that seeks
to exclude a qualifying shareholder submission from its proxy statement must
establish that the proposal satisfies an SEC established justification for exclusion. In
November 2019, the SEC proposed amendments to these rules that would, among
other changes, raise the ownership threshold for submission of shareholder
proposals and allow public companies to deny repeated submissions of proposals for

which shareholder support had declined. At the date of publication, such proposals
were pending.
(b) Investor restrictions – state corporate law – Restrictions on holders of significant minority
interests under state corporate law arise principally under state “interested shareholder” or
similar statutes and shareholder rights plans:
o Interested shareholder acquisition statutes – Under Delaware law, a beneficial owner

or holder of a 15% voting interest in the company (an “interested shareholder”) may
not engage in certain business combinations with the target company for three years
after acquiring such status unless the target company’s board approved the
transaction that resulted in acquisition of interested shareholder status before the
person became an interested shareholder, the shareholder owned at least 85% of the
target company’s voting stock upon completion of the transaction that resulted in
interested shareholder status, or both the board and the target company’s
shareholders (by a vote of 66-2/3% of the shares not held by the interested
shareholder) approve the business combination. Other states have similar statutes
with threshold ownership for interested shareholder status generally ranging from
10% to 15%. A company may elect to “opt out” of these statutory restrictions by
including a provision to that effect in its original certificate of incorporation or by an
amendment to its governing instrument approved by the shareholder vote specified in
the applicable statute -- in Delaware, a majority of the outstanding shares entitled to
vote on the amendment.
Other forms of state law anti-takeover statutes deny voting rights if a specified
ownership threshold is crossed without required approval, impose “fair price
requirements”, e.g., highest price paid during a specified “look-back” period, or permit
boards to consider interests or “constituencies” in addition to shareholders, e.g.,
employees, target company communities, in passing on a bid or merger.
o Shareholder rights plans – Some companies have adopted shareholder rights or

“poison pill” plans. A shareholder rights plan creates an impediment to any person
who seeks to acquire substantial holdings (often 15% or more) without first obtaining
the approval of the issuer’s board. Poison pills are aimed primarily at deterring hostile
acquisitions, but any potential acquirer should be careful to avoid exceeding the
triggering percentage ownership level as a result of market purchases or private
purchases. Such plans are designed to make an unapproved acquisition so
expensive or impracticable if triggered – through massive dilution of the acquirer’s
stake – that a prospective bidder could not afford to complete the transaction and,
therefore, will be deterred from consummating the transaction or will be forced to
negotiate on terms acceptable to the target company’s board. However, once a target
company’s board determines to pursue a transaction that will involve a change of
control of the target company, the poison pill must generally be utilized as a lever to
extract the best price reasonably available from potential acquirers, rather than as a
barrier to any and all acquisitions. During recent years, many companies, rather than
formally adopting a shareholder rights plan (which plans are disfavored by
institutional advisers which evaluate public companies’ corporate governance profiles
and policies), have instead prepared an “on-the-shelf” rights plan, which means that
the company has not formally adopted or disclosed the plan, but has a plan that can
be adopted quickly in response to a perceived threat, such as the filing of a Schedule
13D by an acquirer perceived as hostile by the subject company’s board. The steep
decline in share prices that accompanied the COVID-19 pandemic made many
companies vulnerable to takeover bids, and prompted many companies to adopt
poison pill plans. Many of these plans feature lower triggering thresholds (as low as

4.99% in at least one plan) and some plans have “two-tier triggers” - e.g., 10% for
Schedule 13G filers, i.e., those who certify their non-controlling intent, and lower, e.g.,
5%, for Schedule 13D filers.
o Squeeze-outs – An affiliate seeking to squeeze out public shareholders will generally

be required to agree to certain procedural arrangements intended to assure that the
interests of public unaffiliated shareholders are represented and protected during the
negotiation of the transaction and its submission to shareholders for approval or other
action. See “State Law Issues” in “8.2 Going Private” below.
(c) Investor restrictions – federal securities laws – A number of restrictions result from the
acquisition of a significant minority interest in a listed company, including potential “short-
swing” profit liability and “affiliate” status:
o “Short-swing” trading liability – Under Section 16(b) of the Exchange Act, directors,
officers, and beneficial owners of more than 10% of the equity securities of a listed
issuer who purchase and sell, or sell and purchase, the issuer’s shares within any six-
month period are liable to the issuer for the profits from such transactions without
regard to whether the party had access to or used non-public information. To
be liable for profits, 10% beneficial owners (but not officers or directors) must have
that status at the time of both the purchase and the sale. Any purchase or sale made
while a 10% shareholder may be “matched” with any sale or purchase made within
six-months if the matching results in recoverable profits. A listed company may bring
suit to recover short-swing profits and, if it does not do so, a shareholder may sue on
behalf of the company. Thus, a bidder or potential acquirer that acquires more than
10% of a listed company’s shares and subsequently abandons its pursuit of the target
company may have to wait up to six months before selling any of its holdings in the
former target company to avoid disgorging any profit on shares purchased after
crossing the 10% threshold.
o Prohibition against short selling – Section 16(c) of the Exchange Act prohibits an
officer, director or 10% beneficial owner from effecting short sales of the securities of
an issuer.
o “Affiliate” status – Restrictions on resale – Under US securities laws, an “affiliate” of

an issuer is a person who controls, is controlled by or is under common control with
the issuer. Control means the possession of the power to direct or cause the direction
of the management and policies of the issuer. Neither affiliate status nor control
requires a specific ownership level; they are determined by reference to all relevant
factors of a control relationship. However, ownership of 10% or more of a target
company’s voting power often serves as a rule of thumb for affiliate status. An affiliate
of a public company may publicly sell securities of an issuer only pursuant to an
effective registration statement under the Securities Act or an applicable exemption
from registration. The principal exemption relied on by affiliates is provided by Rule
144, under which affiliates may generally sell up to 1% of an issuer’s outstanding
shares in any period of three consecutive months. The issuer must be current in its
SEC reporting obligations and certain manner of sale and SEC filing, i.e., Form 144,
requirements apply. If the shares were acquired directly from the target company or
another affiliate of the target company without Securities Act registration, generally a
six-month holding period must elapse before sales by the affiliate or any other holder
of such “restricted securities” may be made pursuant to Rule 144.
o Affiliate status – Going private – An affiliate seeking to acquire the remaining

outstanding equity securities of the target company in a transaction that would result
in the delisting of the target company, termination of the target company’s Exchange

Act registration, or termination of its Exchange Act reporting obligations, must
generally comply with SEC Rule 13e-3 – the “going private” rule. See “8.2 Going
Private” below. An exception is available for a “second-step” merger to squeeze out
non-tendering shareholders effected within one year following a tender offer by a
party that became an affiliate solely as a result of the tender offer.
o Controlling person liability – Section 15 of the Securities Act imposes joint and
several liability on control persons for certain violations of the Securities Act, such as
misrepresentations in a registration statement or unlawful sales of unregistered
securities by persons they control, and Section 20 of the Exchange Act imposes
liability on persons who directly or indirectly control others who are liable for certain
violations of the Exchange Act, including misrepresentations and fraud in the
purchase or sale of securities, fraud in proxy solicitations, or misrepresentations in
documents filed with the SEC. A control person can generally avoid liability under the
Securities Act by a showing that the control person had neither knowledge of nor
reasonable grounds to believe in the existence of the facts underlying the liability of
the controlled person, and under the Exchange Act by showing that they did not
directly or indirectly induce the acts of the controlled person and acted in good faith.
3.6 Insider trading and anti-manipulative rules

(a) General – Several provisions of the US federal securities laws operate to prohibit the
purchase or sale of shares while an insider is in possession of material, non-public
information and to provide civil and criminal remedies for breaches of these laws. An “insider”
generally includes officers and directors of an issuer and may, depending on the
circumstances, include an owner of more than 5% of the issuer’s stock. As previously noted,
an insider or other person in possession of such information must either disclose the
information before making a sale or purchase of the issuer’s shares, or refrain from trading in
the shares and, under certain circumstances, disclosure by an insider to a person who trades
on the basis of the information can result in “tipper/tippee” liability. “Materiality” of information
depends on the facts and circumstances but, generally, information is material if it would be
important to an investor in making a decision to buy or sell a security.
In addition, as part of its market surveillance function, FINRA (the Financial Industry
Regulatory Authority) will routinely examine trading in the shares of a target company prior to
and immediately following announcement of an acquisition or other significant event, and may
conduct a formal or information investigation if it detects unusual activity suggesting improper
use of confidential information by parties with access to that information.
(b) Insider trading in tender offers – Rule 14e-3 – If a person has taken substantial steps to
commence or has commenced a tender offer, Rule 14e-3 specifically prohibits the purchase
or sale of the security subject to the offer (or securities convertible into or exchangeable for
the subject security) on the basis of material information relating to the tender offer obtained
from the bidder, the target company, or their respective officers, directors, partners or
employees, or other persons acting on behalf of any of them.
(c) Trading outside a tender offer - Rule 14e-5 prohibits “covered persons” -- the bidder and its
affiliates, the bidder’s dealer-manager and its affiliates, and a financial advisor to any of them
if the advisor’s compensation depends on the successful completion of the tender offer -- from
purchasing the security that is the subject of the tender offer, or securities convertible into or
exercisable or exchangeable for the subject security except as part of the tender offer. The
prohibition commences upon public announcement of the tender offer and is subject to a
number of exceptions, including exceptions that permit purchases outside the offer in certain
tender offers for the shares of foreign private issuers in accordance with the target’s home
country law, subject to specified conditions.

(d) Fraudulent announcements of tender offers – Under Rule 14e-8, it is a fraudulent or

manipulative practice for a person to announce its intention to make a tender offer without the
intention to commence the offer within a reasonable time after the announcement or without a
reasonable belief that the persons will have the means to purchase sufficient securities to
complete the offer, if the announcement is intended to manipulate the share price of the
bidder or the target company.
Part 3 above discussed factors relating to the purchase of a significant equity interest in a public
company. This Part discusses the acquisition of 100% of a target company.
The principal methods of acquiring 100% of a target company are tender offers (followed by a second-
step “short-form” merger to squeeze out non- tendering shareholders) and “long-form” negotiated
mergers that are submitted for approval by the target company’s (and, in certain circumstances, the
acquirer’s) shareholders pursuant to a proxy solicitation in accordance with the SEC’s proxy rules
(Section 14 of the Exchange Act and SEC Regulations 14A and 14(C)). A friendly tender offer is
generally carried out pursuant to a negotiated merger agreement in which the acquirer agrees: (i) to
conduct a tender offer for the target company’s shares at the price stipulated in the agreement in lieu
of the target company seeking shareholder approval of the merger; and (ii) provided that the acquirer
receives tenders of a sufficient number of target company shares (90% in most states but in Delaware
an absolute majority of the outstanding voting shares unless a higher percentage of the target
company’s voting shares is required to approve a merger), to effect a squeeze-out merger of the
target company’s non-tendering shareholders.
4.1 Preliminary matters

(a) No takeover code – There is no takeover code under US federal or state law. Section 14(d) of
the Exchange Act and SEC Regulations 14D and 14E regulate both the information to be
provided to target company shareholders in a tender offer and the procedure for conducting a
tender offer. Proxy and consent solicitations in US domestic companies are governed by the
SEC’s proxy rules, which prescribe extensive disclosure requirements for such solicitations.
State corporate laws specify various procedural matters, e.g., notice, timing and voting
requirements, to be followed in acquiring a company pursuant to the state merger statute, in
effecting a dissolution of a seller following an asset sale, and completing a tender offer via a
statutory merger to squeeze out non- tendering shareholders. Such laws will also determine
whether shareholders may seek an appraisal of their shares in lieu of accepting the merger
consideration, and the procedures to follow to do so. Judicial decisions may impose additional
requirements, particularly in the case of business combination transactions with controlling
persons of the target.
(b) No mandatory offers; no minimum pricing – Unlike the takeover rules in certain non-US
jurisdictions, neither US federal securities laws nor state corporate laws require a bidder to
commence a tender offer for the shares of a company as a consequence of acquiring a
specified percentage of a public company’s outstanding shares. However, three states
(Maine, Pennsylvania and South Dakota) have “control share cash-out” requirements under
which a bidder that acquires a specified percentage of voting power must notify remaining
shareholders, who can then require that the bidder purchase their shares. In addition, as
indicated in the Summary Table in “3.1 Obligations arising at certain ownership levels” above,
acquisition of specified percentage ownership amounts of the voting securities of a public
company can trigger certain disclosure obligations and other consequences. Similarly, US
federal securities laws do not impose any minimum price at which a tender offer is to be
conducted or minimum amount of merger consideration that must be paid, subject to certain
limited exceptions for squeeze-outs (see “Pricing” in “4.3 Form of consideration and pricing
rules,” below) and required disclosure of the price paid in purchases made during a specified

period prior to the tender offer. Some states impose “fair price requirements”, e.g., highest
price paid during a specified “look-back” period, on the consideration in business
combinations with holders of more than a specified percentage of the target company’s
outstanding shares. Certain rules regulate changes to the consideration payable in a tender
offer and the consideration payable in squeeze-outs. These are discussed below.
4.2 Making the bid public

(a) Preliminary discussions – As a first step in acquiring the target company, the acquirer’s CEO
may contact the target company’s CEO and set up a face-to-face meeting between the two
CEOs to discuss strategic alternatives available to the two companies. At this meeting, the
acquirer’s CEO may suggest an offer to purchase the target company for a specified amount
per share, as well as discuss other matters relevant to the acquisition proposal. If the target
company’s CEO agrees to proceed, then the parties can determine whether the acquisition
will be structured as a tender offer or a merger and begin to negotiate a definitive acquisition
agreement. In friendly transactions, the parties generally enter into a confidentiality agreement
to permit the acquirer to conduct due diligence. This agreement typically restricts public
announcements about the negotiations and enables the target company to provide material
non-public information to the acquirer without violating SEC Regulation FD, which restricts
selective disclosure of such information. Because negotiations and due diligence are
conducted pursuant to an agreement that requires confidentiality and restricts public
announcements, acquisitions in the US generally become public only upon the signing of a
definitive agreement. This may be contrasted with the practice in other jurisdictions where
such announcements are made earlier, particularly if the acquirer builds up its holdings to a
level that obligates it to offer to purchase publicly held shares.
Even at this preliminary stage, a potential acquirer will need to keep a record of its contacts
and discussions with the target company. If the parties reach agreement for an acquisition of
the target company, the disclosure document prepared for the target company’s shareholders
– a definitive proxy statement for a long-form merger or an offer to purchase for a tender offer
– will include a detailed discussion of past contracts, transactions or negotiations between the
target company (and its affiliates) and the acquirer or their respective representatives,
generally including the nature of the contact, e.g., a meeting, letter, or telephone
conversation, the principal participants and the substance of the contact. This disclosure is
usually presented in the target company’s proxy statement or the acquirer’s offer to purchase
under an appropriate heading, such as “Background of the Merger.”
As noted above, a party filing a Schedule 13D is obligated to disclose its “plans and
proposals” regarding the subject company, and to amend its Schedule 13D for “material
changes” in the information in the Schedule. If a potential acquirer has a stake in the target
company that has been disclosed in a Schedule 13D, execution of a confidentiality agreement
and the conduct of due diligence entails a significant risk that the parties’ discussions – even
at this preliminary stage – must be disclosed as such a material change, particularly if the
acquirer’s initial filing stated simply that it acquired its stake “for investment,” without any
reference to seeking a possible business combination or other transaction with the target
company.
(b) Tender offer commencement – Under the SEC tender offer rules, a tender offer is
commenced when a bidder first publishes, sends or gives the means to tender securities to
the target company’s security holders. On the commencement date, a bidder must file a
Schedule TO with the SEC together with the required exhibits (which will include the offer to
purchase, a letter of transmittal and other documents required to deliver tendered shares, and
the acquirer’s press release announcing commencement of the offer). The bidder must deliver
a copy of Schedule TO to the target company, notify the exchange on which the target
company’s shares are listed of the commencement of the offer, publish an advertisement

(which may be in summary form) in one or more major newspapers containing specified
information regarding the offer, and disseminate the tender offer materials to target company
shareholders.
o Pre-offer announcements – Announcements prior to formal commencement, e.g., an

announcement that a bidder is considering or has determined to make a tender offer,
or is in discussions with the target company regarding a possible bid, are permitted.
Such announcements do not constitute “commencement” of the offer if they are filed
with the SEC under cover of Schedule TO on the date of first use and designated as
pre-commencement communications. Such communications may not include the
means to tender shares and must contain cautionary language advising target
company shareholders where to obtain the tender offer statement and to read it when
it is available. These requirements also apply to a joint press release issued by an
acquirer and a target company announcing their execution of a merger agreement
prior to commencement of the tender offer for the target company’s shares pursuant
to the merger agreement.
o Pre-offer announcements – Exchange offers – In exchange offers (tender offers in

which the consideration will consist in whole or in part of securities of the acquirer),
such announcements constitute “offers” of such securities. Ordinarily, securities may
not be offered publicly unless a registration statement relating to the offered securities
has been filed under the Securities Act. However, SEC Rule 165 permits such
announcements prior to the filing of a registration statement for the securities to be
offered in an exchange offer, provided that the announcements are filed with the SEC
and comply with informational limits limitations on such pre-offer announcements.
(c) Long-form mergers – Upon executing a definitive agreement for a long-form merger, the
acquirer and target company will typically issue a joint press release and file it with the SEC.
The release will generally identify the parties involved and summarize the material terms of
the transaction.
o Pre-solicitation announcement - Mergers - Before the target company (and, in certain

circumstances, the acquirer) begin formally soliciting proxies from shareholders, the
acquirer and target company may communicate orally and in writing with
shareholders and other stakeholders, e.g., employees, customers and suppliers, and
the market regarding the transaction, but all such written communications before or
after the proxy statement is furnished must be filed with the SEC on the day of first
use. They must identify the participants in the proxy solicitation and describe their
direct or direct interests in the solicitation or advise shareholders where to obtain the
information. Before distribution of the definitive proxy statement for the transaction,
such announcements may not include a form of proxy and, like pre-commencement
tender offer announcements, they must advise shareholders on where to obtain the
definitive proxy statement and to read it when it is available. As with exchange offers,
where the merger consideration will consist in whole or in part of securities, such
announcements constitute “offers” of such securities. Rule 165, however, permits
such offers prior to the filing of a registration statement for the offering, subject to that
rule’s filing requirements and information limitations.
4.3 Form of consideration and pricing rules

(a) Form – Neither US federal securities laws nor state corporate laws prescribe the form of
consideration to be paid in a tender offer or merger. Apart from a bidder’s own financial
resources and access to financing, factors that will influence an acquirer’s choice of
consideration to be offered include the following:

o Tax deferral – If a significant part of the consideration payable to target company
shareholders in a merger or other business combination consists of equity securities
of the acquirer and the transaction otherwise satisfies the US tax law requirements for
a “reorganization”, target company shareholders will not recognize gain or loss on the
exchange of target company shares for acquirer shares; rather, any tax on acquirer
shares received as consideration is deferred until the target shareholders sell the
acquirer shares. (The transaction is immediately taxable to target company
shareholders to the extent they receive “boot”, i.e., non-qualifying consideration, such
as cash or debt securities of the acquirer.)
o Securities Act registration; timing and availability of information – Securities to be

issued as tender/exchange offer or merger consideration to shareholders of a
publicly-held target company must be registered under the Securities Act. Preparation
of a registration statement is a complex and time-consuming process, and the issuer
and certain other parties are subject to strict liability for material misstatements in and
omissions from the prospectus. For a target company that requires speedy
completion of the transaction, acquirers prepared to pay cash, such as private equity
funds and cash-rich strategic buyers, may have a significant advantage over an
acquirer proposing to issue securities as all or part of the acquisition consideration.
o Exchange act reporting obligations; going private rule – A company that files a
registration statement under the Securities Act (including a registration statement for
securities to be issued as the consideration in a merger or a tender offer) that is
declared effective by the SEC automatically becomes subject to the periodic reporting
requirements of the Exchange Act. Acquirers wishing to avoid such reporting
obligations, such as many FPIs, will necessarily offer cash consideration. Conversely,
the SEC going private rule exempts a transaction in which target company
shareholders receive common shares of an issuer that is subject to Exchange Act
reporting obligations and, if the target company’s shares were listed on a US stock
exchange, are listed on a US stock exchange (which need not be the same exchange
as the target company’s listing). This exemption would be available for a going private
transaction involving a publicly held target company and an acquiring affiliate that will
issue and list its shares as the transaction consideration.
o Acquirer shareholder approval requirements – Exchange listing rules may apply to

the acquisition of a significant minority interest in a listed company from the company
or to the issuance of listed company shares as acquisition consideration. Stock
exchanges require that listed companies list all outstanding shares of the listed class,
as well as shares of that class issuable upon conversion of convertible securities,
exercise of options, warrants and other subscription rights, etc. As a condition to such
listing, both the NYSE and Nasdaq require their listed companies to obtain
shareholder approval before issuing common shares that represent (or before issuing
securities convertible into, or exchangeable or exercisable for, common shares that,
when converted, exchanged or exercised will represent) 20% or more of the voting
power of the listed issuer (measured before giving effect to such issuance and
subject to certain exceptions), as well as for the issuance of shares in certain
acquisitions from related parties and in transactions that would result in a change of
control of the issuer, regardless of whether state corporate law requires approval by
an acquirer’s shareholders. Such requirements are not applicable to acquisitions for
cash.
o Hostile vs. friendly bids – Extensive information regarding the target company is
required to be included in a registration statement for shares of an acquirer to be
issued as tender/exchange offer or merger consideration. Depending on the

materiality of the target company to the acquirer, that information could include the
target company’s historical financial statements and pro forma combined financial
statements that give effect to the business combination. Such information is likely to
be impractical or even impossible to obtain in a hostile acquisition, making the
issuance of shares in a registered offering impracticable.
As noted above, an acquirer in an all-cash transaction will have a timing advantage

over a rival bidder offering its securities. This can be especially important when the
board of the target of a hostile bid determines that an all-cash acquisition of the target
by a “white knight” is preferable to the hostile bidder (subject to compliance with the
directors’ fiduciary duties (see “4.8 Fiduciary Duties of Directors,” below).
o Acquirer financial statements – Under certain conditions, an acquirer is required to

include its financial statements in a tender offer document furnished to target
company shareholders. However, financial statements are not required to be
disclosed if the consideration is cash, the tender offer is not subject to a financing
condition, and either the acquirer is an Exchange Act reporting company or the offer
is for all the outstanding securities of the target company. The proxy rules provide
comparable accommodations for all cash transactions. See “4.6 Financing
requirements,” below. An acquirer having sufficient cash and/or committed financing
and wishing to maintain the confidentiality of its financial statements would offer cash
consideration for this reason
o Availability of appraisal rights – Shareholders of a target company in all-cash mergers

(including second-step squeeze-out mergers following a tender offer) generally have
statutory appraisal rights. See “4.8 Appraisal Rights of Minority Shareholders,” below.
Under Delaware law and many other state corporate laws, appraisal rights are not
available in a merger in which the consideration consists of public company shares.
o CVRs - Contingent consideration, or the right to receive an additional payment or

payments such as earn-outs or milestone payments upon satisfaction of specified
conditions set forth in the governing instrument for the payment (often referred to as a
contingent value right, or “CVR”), is unusual in public company acquisitions for
various reasons, including the difficulty of valuing the contingent payment for
purposes of assessing the fairness of the consideration offered to target
shareholders, and comparing the value of the CVR to the consideration in an all-cash
or all-stock transaction. A fully transferable CVR will generally be considered a
security requiring Securities Act registration and, if structured as a debt instrument
(as many CVRs are), qualification of an indenture under the US Trust Indenture Act of
1939, as amended. In some cases, such registration and a limited period of required
Exchange Act reporting by the entity issuing the CVRs (generally lasting until
redemption or payout of the CVRs) are an acceptable trade-off for the ability to
include contingent consideration in the transaction. In some cases, restrictions on
transferability and other limitations may obviate the need for Securities Act
registration.
(b) Pricing – Neither US federal securities laws nor state corporate laws prescribe the amount of
the consideration to be paid in a tender offer or merger (other than in second-step squeeze-
out mergers after a tender offer, in which both exemption from the SEC’s going private rule
and the Delaware law provision permitting a squeeze-out with less than 90% ownership of the
target company require that the consideration in the squeeze-out be at least equal to the
highest consideration paid in the tender offer). Factors affecting pricing will include the
following:

o SEC best price rule – SEC Rule 14d-10 requires that the consideration paid to any
target company shareholder for tendered shares equals the highest consideration
paid to any other security holder for such shares.
o Price changes – SEC Rule 14e-1 requires that upon any increase or decrease in the
tender offer consideration, the tender offer must remain open for a minimum of 10
business days following dissemination of notice of the change in consideration.
o Disclosure and fairness considerations – In all tender offers and mergers, the
acquirer is required to provide information regarding purchases of the target
company’s securities during the preceding 60 days by the acquirer and certain related
parties. In addition, in going private transactions, the acquirer-affiliate is obligated to
provide extensive additional disclosure regarding the proponent’s belief as to the
fairness of the transaction to unaffiliated shareholders of the target company and the
basis for that belief. See “8. Delisting – Going Private” below.
4.4 Conditional and unconditional offers

US tender offer law and practice does not provide that tender offers become “unconditional” after the
passage of a specified interval after commencement or another event. In a non-hostile transaction,
the conditions to an acquirer’s obligation to accept and pay for tendered shares are generally
negotiated between the acquirer and the target company. In a hostile bid, such conditions are
determined by the acquirer. Conditions may be waived by the party whose obligations are subject to
satisfaction of the condition. Typical conditions to an acquirer’s obligation are:
• Number of shares tendered – Receipt of tenders of a number shares which, when added to
any shares owned by the acquirer, will constitute at least a majority of the target company’s
outstanding shares (or, in some cases, the number of shares required for the acquirer to
effect a short-form merger).
• Availability or completion of financing – Receipt of financing to complete the purchase and

payment for the target company’s shares. (Obviously, an acquirer that includes this condition
in its offer can be at a serious disadvantage if a competing bid is commenced by an acquirer
with available or committed financing.)
• Receipt of governmental consents – Receipt of pre-merger clearance (or early termination of

the waiting period) under the HSR Act, and receipt of other required governmental consents,
permits or approvals, such as CFIUS clearance.
• Absence of legislative or judicial impediments – No enactment of any legislation that would

prevent or interfere with the transactions or commencement of any judicial or administrative
proceedings seeking to prevent consummation of the transaction.
• Compliance with debt instruments and other contracts – Satisfaction or waiver of any
conditions to or limitations on mergers or changes of control of the target company under its
debt instruments, modification or removal of financial covenants in the target company’s debt
instruments to enable the merger to proceed, and receipt of any consents under “change of
control” or similar clauses in the target company’s material contracts.
For a target company that has publicly held debt securities, it may be necessary to solicit the
consents of the holders of such securities to covenant modifications necessary to permit the
merger. Such consents are often solicited as “exit consents” as part of a tender offer for the
debt securities, in which the debt security holders consent to the modification or elimination of
covenants in the governing instrument as a condition to tendering their debt and in
consideration of a premium payment in addition to the principal of and interest on the debt.
Such modifications often take the form of a “total covenant strip” in order to pressure the

holders to tender their securities or risk holding a debt security that has lost all contractual
covenant protections, other than the naked promise to pay interest and principal when due. In
all consent solicitations, completion of the debt tender offer is conditioned on completion of
the equity tender offer, and vice versa. Under SEC Regulation 14E, tender offers for debt
securities are subject to some, but not all, of the rules applicable to tender offers for equity
securities.
• Equity rollover - In a “public-to-private” acquisition by a private equity firm, the rollover of the
equity held by specified shareholders, such as founders and key management members, into
the new equity structure of the acquired company. (A cautionary note - if the rollover
negotiations take place too early in the sale process, e.g., before agreement has been
reached on price, management may be subjected to claims that they selected the bidder that
offered the best terms to management, rather than the best value to all shareholders.)
• No material adverse changes – Absence of material adverse changes in the business,

financial condition or results of operations of the target company. See “4.5 Closing Conditions
- Absence of material adverse effect.”
• Effectiveness of registration statement – Where the consideration consists of or includes

shares, effectiveness of a registration statement filed with the SEC to register such shares,
and the absence of any stop order suspending the effectiveness of the registration statement.
• Elimination of takeover defenses – Approval of the acquisition by the target company’s board
under any applicable “interested shareholder” statutes and waiver or amendment of any
“poison pill” to enable the transaction to proceed. The target company’s agreement on these
points will be necessary conditions to any hostile bid. In a friendly acquisition, they will
generally be provided for in the merger agreement and described to shareholders in the offer
to purchase or the definitive proxy statement.
4.5 Closing Conditions - Absence of material adverse effect

As in tender offers, public company merger agreements invariably include, as a condition to the
acquirer’s obligation to consummate the merger, the absence of an event or occurrence arising after
execution of the agreement having a “material adverse effect” (MAE) on the target company. A typical
(albeit somewhat buyer-friendly) definition of MAE is:
any event, occurrence, fact, condition or change that is, or would reasonably be expected to
become, individually or in the aggregate, materially adverse to (i) the business, results of
operations, prospects, condition (financial or otherwise), or assets of Target and its
Subsidiaries, taken as a whole, or (ii) the ability of Target to consummate the transactions
contemplated hereby on a timely basis
In addition, the MAE definition typically excludes specified events, such as acts of God, weather
events, floods, earthquakes, natural disasters, terrorism or military actions, general economic
downturns, conditions existing generally within the company’s industry, and other broad categories of
market or credit conditions. Finally, it will frequently contain an exclusion from some or all of the
exclusions (such that the exclusions will not apply) for disproportionality, i.e., some or all of the
specified exclusions will not be excluded to the extent that they have disproportionately adversely
affected the target company and its subsidiaries (taken as a whole) as compared to others in the
same industry.
The condition is ubiquitous in merger agreements but is especially important in public company
acquisitions since, as previously noted, in US public company transactions, representations and
warranties by a target company do not survive the closing of the transaction, and post- closing
indemnification rights and/or escrow of a portion of the merger consideration are generally not
available. Thus, an acquirer’s stated contractual right to terminate a merger agreement and to decline

to proceed to closing upon failure of this condition -- with or without indemnification for pre-closing
misrepresentations or breaches -- is quite significant.
Despite the prevalence and significance of this provision, it was not until 2018, in Akorn, Inc. v.
Fresenius Kabi AG, that the Delaware courts upheld an acquirer’s termination of a merger agreement
for the claimed occurrence of an MAE. The Chancery Court found that an 86% year-over-year decline
in Akorn’s EBITDA (earnings before interest, taxes, depreciation and amortization), as well as drastic
declines in revenue, operating income, and earnings per share in five straight quarters post-signing
constituted an MAE because they were “durationally significant,” with “no sign of abating.” The court
also found overwhelming evidence of widespread false regulatory filings with the US Food and Drug
Administration (FDA). The court also noted that pursuant to its obligation to use its reasonable best
efforts to achieve a closing, Fresenius made extensive efforts to salvage the transaction in which
Akorn did not cooperate. The Chancery Court’s ruling was affirmed by the Delaware Supreme Court.
In a subsequent case, Channel Medsystems, Inc. v. Boston Scientific Corp., Boston Scientific
terminated its merger agreement with Channel for breaches of representations and warranties that it
claimed were likely to result in an MAE. After signing, it was discovered that a Channel executive had
stolen US$ 2.6 million from the target and falsified several documents, including submissions to the
FDA, which resulted in the FDA imposing a remediation plan on Channel. However, Channel
ultimately received FDA approval for its sole product. At trial, the court found that Boston Scientific
had not shown any meaningful impact on Channel’s business and therefore rejected the MAE claim
and granted specific performance of the merger agreement to Channel. (While not explicitly relied
upon by the Court, there was also some evidence of “buyer’s remorse” in Boston Scientific’s
termination decision).
While Akorn created speculation that courts might be willing to read MAE clauses more broadly in
future cases, the court in that case acknowledged that it involved a unique set of facts. The Channel
case confirmed that the Akorn decision did not represent a departure from Delaware law and that an
acquirer asserting an claiming MAE still faces a heavy burden in Delaware.
4.6 Financing requirements

Neither US federal securities laws nor state corporate laws expressly require that an acquirer have
financing available or committed at the commencement of a tender offer. However, under SEC Rule
14e-8, it is fraudulent for a person to announce its intention to conduct a tender offer if the person
does not have a reasonable belief that it will have the means available to purchase securities to
complete the tender offer. Schedule TO requires that an acquirer provide information regarding the
source and amount of funds it will use to acquire the target company. The offer to purchase (or a
definitive proxy statement for a long-form merger) will include a description of the acquirer’s financing
arrangements, including the terms of the financing documents. The financing agreements will typically
be filed as exhibits to the acquirer’s Schedule TO. As indicated above, receipt of financing for the
acquisition can be a condition to an acquirer’s obligation to accept and pay for tendered shares (or, in
a long-form merger, to complete the merger). However, the existence of a financing condition will be
significant factor considered by the board of a target company that receives multiple offers, since
“deal certainty” is a factor that a board may consider in its evaluation of competing offers. In addition,
the SEC rules dispense with the need to provide financial information for the acquirer in an all-cash
tender offer for all of the outstanding shares of the target company if the offer is not subject to a
financing condition. The proxy rules afford similar relief. They provide that in an all cash acquisition,
specified information for the acquiring company, including its financial statements, need not be
provided unless the information is material to an informed voting decision, e.g., the security holders of
the target company are voting and financing is not assured. These provisions can be attractive to an
acquirer that has not previously published its financial statements and wishes to continue to avoid
doing so.

4.7 Recommended and hostile offers

In all tender offers, the target company must take a formal position (which may include a statement
that it makes no recommendation) with respect to the tender offer within 10 business days after the
tender offer commences. It does so by including its position in a Schedule 14D-9 disclosure statement
filed with the SEC. Prior to the filing of Schedule 14D-9, the target company may issue statements
regarding the offer as long as it files any written communications with the SEC on the date they are
issued and includes a clear legend advising its shareholders to read the target company’s formal
recommendation statement when it is available. In a friendly transaction, the content of the target
company’s position is usually negotiated in advance and the offer to purchase or target company’s
proxy statement will include information regarding the board’s consideration and approval of the
transaction, its recommendation that target company shareholders accept the offer and tender their
share or vote in favor of the merger, as the case may be, and the reasons for the board’s
recommendation. In a friendly tender offer, the target company’s Schedule 14D-9 will be prepared in
coordination with the acquirer and filed and disseminated at the time the offer commences.
4.8 Fiduciary duties of directors

(a) Duties of directors; standard of conduct
Directors must act in the best interests of the corporation and its shareholders. They must exercise
the degree of care that a reasonable person would employ in similar circumstances and place the
interests of the corporation and its shareholders ahead of any self-interest. In the context of a “change
of control transaction”, the board is required to act reasonably to seek the transaction that offers the
best value reasonably available for the company’s shareholders.
In Delaware, courts have stressed the importance of the board being adequately informed when
negotiating the sale of control of the company. This generally requires that the target company’s
board:
• analyze the entire situation and evaluate the consideration being offered for control of the
corporation in a disciplined and well documented manner;
• receive financial and legal advice, negotiate diligently and ensure that it possesses all
relevant material information; and
• use methods or procedures that will enable the board to determine whether the consideration
being provided to target company shareholders represents the best value reasonably
available to the shareholders.
Some of the suggested methods for the target company’s board to accomplish these ends include
conducting an auction, conducting an “active” market check of other potential buyers before entering
into an agreement, negotiating for inclusion of a “go-shop” clause allowing the target company to
solicit interest from potential buyers for a limited period of time after signing a definitive agreement
with an initial buyer or, if that is not acceptable to the acquirer, including in the definitive agreement an
exception to a “no-shop” clause (a prohibition on the target company’s soliciting a purchase proposal
from any other party) permitting the target company to terminate the agreement with the acquirer to
accept a superior, unsolicited competing offer made by a third party (the so-called “fiduciary out”), the
exercise of which generally requires payment of a break-up fee by the target company to the acquirer.
Usually, the target company’s board will seek a “fairness opinion” from its investment bankers before
approving a change of control transaction. For significant acquisitions, an acquirer may consider
retaining its own investment banker to provide a similar opinion.
(b) Fiduciary Duty Litigation
Directors of a target company defending a shareholder suit attacking a transaction for alleged
violation by the directors of their fiduciary duties will seek to have the court apply the business

judgment rule to their actions. Under the business judgment rule, disinterested directors are presumed
to have acted in good faith in the belief that their action was in the best interests of the company, and
a court will not substitute its judgment regarding the merits of a transaction for that of the directors.
That presumption may be overcome by appropriate evidence that the directors did not act on an
informed basis, in good faith, and in the belief that their action was in the best interests of the
corporation and its shareholders.
Recent case law in Delaware has established conditions under which breach of fiduciary duty claims
may be “cleansed,” thereby significantly enhancing director’s ability to prevail in post-closing
challenges to transactions that have been approved by the target’s shareholders. Under the Corwin
line of cases in Delaware, the highly deferential business judgment standard of review applies to a
post-closing action seeking damages for directors’ breach of fiduciary duties in transactions that do
not involve controlling shareholders, so long as the shareholder approval was “fully informed” and
“uncoerced.” These decisions apply well-established principles relating to proxy disclosure that only
“material” information must be disclosed and a narrow view of “coercion.” Accordingly, in most cases
applying the Corwin decision, the business judgment rule has been applied and the cases have been
dismissed, although several recent cases denying or reversing Corwin dismissals have emphasized
an “informed” approval as a prerequisite to a Corwin defense. Subsequent cases have shown that
Delaware courts will meticulously review corporate disclosures to ascertain whether the stockholders’
decision was truly informed, meaning that all material facts were disclosed completely and accurately.
A key driver behind litigation alleging fiduciary breach has been the availability of counsel fees to
plaintiff’s counsel for benefits ostensibly provided to the target company’s shareholders through their
representation of the plaintiff class or the derivative plaintiff, and there are law firms that specialize in
conducting such litigation. Generally, class actions and derivative actions cannot be settled without
approval of the settlement by the court in which the action is brought, and the plaintiff’s counsel’s
application for fees is considered by the court as part of its review of the settlement terms. The
Delaware Supreme Court, in the Trulia case, questioned whether the value of the claimed “benefits”
justifies approval of settlements that provide for broad releases of the claims of the plaintiff class and
payment of plaintiff’s counsel fees, particularly in cases in which the alleged benefit to target company
shareholder involves minimal additional disclosure provided to target company shareholders, rather
than a tangible benefit to shareholders. In Trulia, the Delaware Supreme Court stated that it would no
longer approve “disclosure-only” settlements in which the supplemental disclosures do not address
material misrepresentations or omissions. The response to Trulia in other jurisdictions has varied.
Many commentators have remarked that there has been a significant decline in Delaware-based
mergers and acquisitions litigation, and have attributed the decline to the Corwin line of cases and the
heavy scrutiny now being applied to “disclosure only” settlements under Trulia. In an apparent
response to these obstacles, prospective plaintiffs have demanded access to company books and
records under Section 220 of the Delaware General Corporation Law, which provides stockholders
with the right to inspect corporate records on demand “for any proper purpose.” Access is sought as a
means of obtaining information and documents to bolster a complaint -- specifically, to anticipate a
Corwin defense to the action e.g., by obtaining information relevant to whether the stockholder vote
was fully informed, as required by Corwin, or whether the stockholder proposing the transaction to be
voted on actually exercised control over the company such that a Corwin defense would be
unavailable. The Delaware court has ordered inspection over defendants’ objections in such cases.
While the court has interpreted the “proper purpose” standard to require that a shareholder seeking
access have only a “credible basis” for its request, there must still be a showing of some facts that, if
borne out through investigation, could potentially lead to a cause of action.
4.9 Appraisal rights of minority shareholders

Under virtually all US state corporate laws, once a merger is approved by target company
shareholders and completed, the merger is binding on all target company shareholders, regardless of
whether they voted in favor of the merger (or had no vote because the merger was effected as a short

form merger without shareholder approval). However, under most state corporate laws, target
company shareholders in an all cash merger who properly exercise any dissenters’ rights available to
them under applicable state law (which generally requires that such shareholders vote against or
refrain from voting on the merger) or the target company’s organizational documents will generally
have the right to seek appraisal, i.e., a court determination of the fair value of their shares, and to
receive the appraised value of their shares, rather than the merger consideration. Most states,
including Delaware, deny dissenters’ rights if the merger consideration consists of public company
shares (or a combination of such shares and cash in lieu of fractional shares), although Nevada law
denies dissenters’ rights to most listed company shareholders if the merger consideration consists of
shares of a company listed on a national securities exchange or cash. State appraisal statutes do not
provide a roadmap for the court’s fair value determination. Rather, under Delaware law and the law of
many other states, the court in an appraisal proceeding is to determine fair value taking into account
“all relevant factors.”
Under Delaware law, the fair value judgment is payable together with interest, at 5% over the US
Federal Reserve discount rate, for the period from the merger effective date to the payment date. In
the low interest rate environment of recent years, this has led to the practice of so-called “appraisal
arbitrage,” in which hedge funds and other investors accumulate shares in target companies for the
purpose of seeking appraisal and obtaining a fair value determination that exceeds the merger
consideration, plus interest at the statutory rate. Recent amendments to the Delaware appraisal
statute provide that the surviving corporation may make a cash payment to appraisal proceeding
participants, in which event interest will accrue only on any excess of the fair value determined in the
proceedings over the amount paid plus interest accrued to the payment date. In addition, the statute
now includes minimum threshold amounts (percentage of shares seeking appraisal or the minimum
merger consideration payable with respect to such shares) as a condition to the availability of
appraisal rights, other than in short-form mergers.
Appraisal proceedings generally give significant weight given to the merger price itself, particularly
when the target company’s board conducts a robust sale process or management’s projections
(required if certain other valuation methodologies are utilized, such as discounted cash flow (DCF)),
appear unreliable. With a proper sale process, even the merger price paid by a financial (as
distinguished from a strategic) buyer has been upheld as the best indicator of fair value against a
claim that the “LBO pricing model” used by financial buyers “leaves money on the table” to enable
such buyers to achieve their desired rates of return.
Prior to December 2017, a number of cases produced fair value determinations that varied
significantly from the deal price. In two such cases, the court found fair value to be below the deal
price by almost 8% in a transaction that the court described as “highly synergies driven” (synergies
must be “backed out” of a fair value determination because the court conducting the proceedings
must exclude “any element of value arising from the accomplishment or expectation of the merger”),
and by nearly 60% in a transaction involving both US$ 2 billion in synergies and a late-stage bidding
war that drove the deal price up. In contrast, the Delaware Supreme Court reversed the Chancery
Court decision in appraisal proceedings brought after the management buyout of Dell, Inc., which had
determined the appraised value of Dell’s shares in the transaction to be 28% greater than the merger
price. While the Supreme Court in Dell continued to expressly decline to create a presumption that
deal price in a properly conducted merger is the best estimate of fair value, it held that the merger
price will generally be entitled to significant, if not dispositive, weight in an appraisal action involving
the sale of a public company pursuant to an open, competitive, and arm’s-length bidding process,
regardless of whether the buyer is a financial or strategic bidder.
Subsequent cases have confirmed that the Delaware courts will look to deal price as the most
persuasive indicator of fair value. In another reversal of the Chancery Court, the Delaware Supreme
Court rejected that court’s reliance on pre-deal average market value. In that case, the lower Court
was concerned that difficulties in quantifying and deducting synergies made “deal price minus

synergies” a less reliable indicator of fair value. In reversing, the Supreme Court stated that the
calculation was “no more [imprecise] than other methods.” In a subsequent case, the Chancery Court
the Court identified a list of indicia of deal price fairness: (i) arms-length negotiations with a third party,
(ii) absence of board conflicts of interest, (iii) extensive buyer due diligence, including receipt of
confidential information; (iv) a pre-signing market check by the target, (v) multiple price increases
achieved by the target during negotiations, and (vi) absence of other bidders post-signing. Delaware
courts will still use other valuation methodologies, such as DCF, if the transaction involves a
controlling shareholder or they view the sale process as weak for other reasons. For example, in
another post-Dell case in which the Chancery Court found that the sales process “left much to be
desired” and the parties agreed that backing out synergies would be “especially difficult,” the Court
relied on unaffected market price, supplemented by its own DCF analysis, and still found fair value to
be 18% less than the deal price.
A threshold issue in appraisal proceedings is whether shareholders seeking appraisal are entitled to
do so. For example, the Delaware Chancery Court rejected an attempt to obtain appraisal rights for
dissenters in the merger of Dr. Pepper Snapple Group and Maple, the parent of Keurig coffee. The
merger was structured as a reverse triangular merger, in which a subsidiary of the nominal acquirer
merged with and into the target. The target was the surviving company in the merger and became a
wholly-owned subsidiary of the acquirer. Although the acquirer continued as the parent company after
the merger, target shareholders received approximately 87% of the combined company, and the
acquirer’s shareholders received a special cash dividend. Under applicable stock exchange rules, the
acquirer’s shareholders were required to vote to approve issuance of the shares in the deal, due to
the number of shares to be issued. However, only the acquirer’s subsidiary and the target were
parties to the merger itself. Therefore, as a matter of Delaware law the acquirer’s shareholders were
not entitled to vote on the merger itself, because only shareholders of the merging companies are
entitled to vote on a merger. The acquirer’s shareholders argued that the immense cash payout
combined with massive dilution of their ownership was tantamount to a forced surrender of their
shares in the merger. The Chancery Court denied the plaintiffs’ motion for summary judgment, holding
that appraisal rights -- which are granted by statute to shareholders of a company that is a party to a
merger -- did not apply in this transaction because the acquirer was not a party to the merger and its
shareholders did not give up their holdings in the company through the merger. The case is consistent
with Delaware’s narrow view that appraisal rights are strictly limited to the terms of the statutory grant.
For example, appraisal rights are not available in Delaware in a sale of all or substantially all of a
company’s assets (notwithstanding that a shareholder vote is required), and Delaware generally does
not view an asset sale followed by a liquidation and distribution of the consideration as a “de facto”
merger as long as the corporate formalities for asset sales are adhered to. In another case, the
Chancery Court upheld a prospective, i.e., pre-merger, contractual waiver of appraisal rights by
sophisticated shareholders against a claim that the waiver conflicted with the appraisal statute. As a
practical matter, however, such waivers are most likely to be relevant in mergers of privately-held
companies in which founders or management have granted the waiver as part of an agreement to
vote in favor of and otherwise support the “exit strategy” of a controlling or major investor, such as a
venture capital fund or private equity fund. Such agreements generally terminate by their terms upon
the private company’s initial public offering.
5 Timelines
Set forth below are illustrative alternative timelines for negotiated, “friendly” acquisitions (i) for cash,
conducted as a “two-step” transaction (a tender offer followed by a short-form merger) and as a “one-
step” long-form merger, and (ii) as a stock-for-stock transaction, again, conducted as a “two-step”
transaction (a share exchange offer followed by a short-form merger) and as a “one- step” long-form
merger. The cash two-step transaction generally has a shorter timeline, regardless of whether it is
effected in reliance on DGCL 251(h) after acquisition of simple majority ownership (see “3.5 Investor
Rights and Restrictions – Short-form Mergers”, in “3. Before a Public Takeover Bid”), or as an “old
regime” two-step transaction after acquisition of 90% ownership (or such other percentage as may be

required for a short-form merger under the applicable state corporate law). The principal factor
increasing the time required for a one-step transaction is SEC review of, and comment on, the target
company’s proxy statement and subsequent revision of the proxy statement or other appropriate
responses to the SEC’s comments. A tender offer for a two-step transaction can be commenced
without any SEC review of the acquirer’s Schedule TO. However, SEC comments may be issued after
commencement of the tender offer and could require amendments to the offer to purchase (which, if
material, could obligate the acquirer to extend the offer period) or to the target company’s Schedule
14D-9. In a stock-for-stock transaction, the timeliness will generally be the same regardless of
whether the acquisition is effected as a two-step transaction or a one-step transaction. That is
because, in either transaction form, it will be necessary to file a registration statement with the SEC to
register the stock or other securities issuable as merger consideration. The registration statement will
be subject to review and comment by the SEC staff before it is declared effective, permitting the
mailing of the proxy/statement / prospectus or offer to exchange (which will also double as a
prospectus) to shareholders of the target company. A number of events, some noted in the timelines,
can extend the time frames set forth including, but not limited to, a second request for information by
the FTC or DOJ under HSR (the tables do not reflect the additional review time requested by the FTC
and DOJ due to the coronavirus pandemic), a CFIUS review of the transaction, extensions of the
tender offer period if tenders of the desired number of target company shares have not been received,
or postponement of a shareholders’ meeting to obtain the required shareholder vote. The
commencement of a competing offer does not, in and of itself, obligate a target company to extend
the proxy solicitation period or to postpone or adjourn a shareholders’ meeting called to approve a
long-form merger, or obligate an acquirer to extend a tender offer or exchange offer. However, if the
acquirer increases its offer price to meet or better the price in a competing tender offer, the acquirer’s
offer must remain open for at least 10 business days following announcement of the increased price,
which could require extension of the offer period. A target company will likely amend or supplement its
proxy materials to disclose the competing offer and the position of the target company’s board, and it
may postpone the shareholders’ meeting to provide for preparation and dissemination of the
supplementary materials. Similarly, a competing tender offer will require the target company to
prepare and distribute a Schedule 14D-9 setting forth the target company board’s position with
respect to the competing offer (and to amend or supplement the existing Schedule 14D-9 that it
issued for the original transaction to disclose the competing offer).
Set out below are overviews of the main steps for a public stock-for-stock transaction in the US (two-
step and one-step merger) and overviews of the main steps for an all cash tender offer/merger (two-
step and one-step merger).

Public stock transactions – two-step merger (indicative timeline)
Start
Total timing
process
15 - 18 weeks
Execute agreement & Prepare and file S-4 SEC review, respond Clear SEC final Mail exchange offer 251(h) – Does
announce transaction exchange offer / to first round of SEC comments acquiror own
Offer outstanding 20
prospectus, file HSR comments sufficient shares for
business days
& CFIUS (if requisite vote (over
(subject to extensions
applicable) 50% generally)?
to obtain requisite
tenders) Merge pursuant to
Section 251(h)
2 weeks 6 weeks 4 weeks 4 weeks
Timeline Considerations
• SEC tender offer rules require that a tender offer (which includes stock for stock exchange offers) be kept open for a minimum of 20 business days; generally, no express minimum time period for distributing
merger proxy materials under SEC rules; stock exchange rules recommend at least 30 days to permit stockholders adequate time to review proxy materials; for S-3 eligible target companies, the proxy
statement/prospectus must be sent to shareholders at least 20 business days prior to meeting date if information about registrant or target is incorporated by reference into proxy statement
• Timeline may be extended depending on the nature and scope of SEC comments, delays caused by HSR (including HSR “second requests” for information) or CFIUS clearance and shareholder litigation
• NYSE and NASDAQ listing rules require shareholder approval before a buyer listed company may issue 20% or more of their stock as consideration

Public stock transactions – one-step merger (indicative timeline)
Start
Total timing
process
15 - 18 weeks
Execute agreement & Prepare and file S-4 SEC review, respond Clear SEC final Mail proxy / Shareholder meeting
announce transaction proxy / prospectus, to first round of SEC comments prospectus & majority vote
file HSR & CFIUS (if comments
Close and file
applicable)
certificate of merger
2 weeks 6 weeks 4 weeks 4 weeks
• NYSE and NASDAQ listing rules require shareholder approval before a buyer listed company may issue 20% or more of their stock as consideration

Two step, all cash tender offer/merger (indicative timeline)
Start
Total timing
process
5 - 9 weeks
Execute agreement & Prepare tender offer Offer outstanding 20 251 (h) Does acquiror own Merge pursuant to Section
announce transaction materials, commence business days (subject to sufficient shares for 251(h)
tender offer, file HSR & extensions to obtain requisite vote (over 50%
CFIUS (if applicable) requisite tenders) generally)?
1-2 weeks 4 weeks
• U.S. HSR expedited (15 days) for all-cash tender offers; 30 days for merger (unless, in either case, second request received)
• Tender offer materials are filed with the SEC at the same time that they are mailed to stockholders; review of tender offers by the SEC is generally done on an expedited basis and must be sent during the 20
business day period that the tender offer is open

One-step, all cash merger (indicative timeline)
Start
Total timing
process
12 - 15 weeks
Execute agreement & Draft preliminary proxy SEC review, respond Clear SEC comments, Shareholder review Shareholder meeting &
announce transaction statement to SEC comments file definitive proxy majority vote. Close and
statement, mail file certificate of merger
materials
2-3 weeks 4-6 weeks 2-3 weeks approximately 4 weeks
• U.S. HSR expedited (15 days) for all-cash tender offers; 30 days for merger (unless, in either case, second request received)

6 Takeover Tactics
6.1 Prior to the bid – due diligence, confidentiality, stake building,
exclusivity
(a) Due diligence – As noted above, the first step in a friendly, negotiated transaction is often a
face-to-face meeting between the CEOs of the acquirer and the target company followed, if
they agree to proceed, by execution of a confidentiality and non-disclosure agreement (NDA)
to permit the acquirer to conduct due diligence. A confidentiality agreement enables the target
company to provide material non-public information to the acquirer without violating SEC
Regulation FD, which restricts selective disclosure of such information to certain market
participants without disclosure of the information to the public simultaneously (or promptly
thereafter, if the selective disclosure is inadvertent). Because it contemplates disclosure of
material non-public information, a target company’s form of NDA proffered to a potential
acquirer often includes a clause in which the acquirer confirms its understanding or
acknowledges that trading in a security while in possession of material non-public information
regarding the issuer of the security may violate US federal securities laws.
A potential acquirer should expect that its due diligence will have to be conducted quickly,
particularly in an auction sale with multiple possible purchasers. Auction terms often require
that bidders complete their due diligence and submit a bid (including proposed revisions to the
target company’s form of merger agreement included as part of the auction terms) within a
tight time frame fixed by the target company. As a result, when preparing comments on and
proposed revisions to a target’s form of merger agreement in an auction, a potential acquirer
and its counsel will generally seek to achieve a balance between changes sufficient to create
a draft satisfactory to the acquirer but not so extensive or onerous as to raise “deal
uncertainty” concerns on the part of the target and its advisors.
(b) Confidentiality – A confidentiality agreement also generally restricts public announcements

about the negotiations. An acquirer or a target company that receives inquiries from the media
or investment community about the negotiations will generally, if possible, provide a “no
comment” response, rather than affirming or denying the existence of negotiations. If one of
the parties does find itself required to make a public disclosure about the negotiations before
a definitive agreement is reached, in many cases the disclosure obligation can be satisfied by
means of a general statement that does not identify the potential merger partner. However,
inquiries from stock exchanges in response to increased or unusual trading in a target
company’s shares detected during the exchange’s ongoing market surveillance activities may
require more extensive disclosure.
(c) Stake building – In addition to non-disclosure covenants, restrictions on publicity, and

acknowledgement of the existence of restrictions on securities trading while in possession of
material inside information, a target company may require a “standstill” agreement – i.e., an
agreement to refrain for a period of time from effecting any transactions in the target
company’s shares – as a condition to granting an acquirer access to a document room or
other non-public information. Apart from such restrictions, an acquirer that has been engaged
in “stake building” prior to its initial contact with the target company will generally limit its
beneficial ownership of the target company’s shares to less than 5%, since filing a Schedule
13D would require the acquirer to disclose its intentions and to file as exhibits any
confidentiality agreement, letter of intent or heads of agreement between the acquirer and the
target company. Any such disclosure would preclude further confidentiality regarding the
existence of a possible transaction involving the target company. In a potential hostile bid
scenario, a target company may react to a Schedule 13D filing by adopting a poison pill or
other anti-takeover mechanism.

(d) Exclusivity – An acquirer may negotiate for a pre-signing “exclusivity” period while the
acquirer conducts due diligence and the parties negotiate a merger agreement. During this
exclusivity period, the target company agrees to refrain from seeking or facilitating competing
bids. In the public company context, a target company board may strongly resist granting
exclusivity and any period granted is likely to be comparatively short and may be subject to
the fiduciary obligations of the board.
6.2 Tender offer procedures

Under Section 14(d) of the Exchange Act and SEC Regulations 14D and 14E, tender offers in the US
must be conducted in accordance with the following requirements (in addition to applicable disclosure
requirements):
• Duration – The offer must be held open for at least 20 business days. The offer must remain
open for a minimum of 10 business days (pursuant to an extension, if necessary) following an
increase or decrease in the percentage of the target company shares sought in the offer, the
consideration offered, or the soliciting dealer’s fee. Extensions must be announced by press
release issued by the earlier of 9:00 a.m. and the opening of trading on the exchange where
the securities are listed on the day following the scheduled expiration date.
• All holders; best price – The offer must be made to all holders of the class of securities
subject to the offer, and all tendering holders, including those who tendered prior to an
increase in the offered consideration, must receive the same consideration per share.
• Withdrawal rights; subsequent offering period – Tendered securities may be withdrawn at any
time while the offer remains open. After termination of the offer period and acceptance of
tendered shares, the acquirer may continue to accept shares for a “subsequent offering
period” of from three to 20 business days. Statutory withdrawal rights are not available for
shares tendered during a subsequent offering period.
• Purchases outside the offer – Subject to certain exceptions, from the time the offer is first
announced to the expiration date, the acquirer and its affiliates, the acquirer’s dealer-manager
and its affiliates, and a financial advisor to any of them if the advisor’s compensation depends
on the successful completion of the tender offer, may not purchase or arrange to purchase
securities subject to the offer, or securities convertible into or exchangeable for such
securities, other than pursuant to the tender offer. The exceptions include purchases outside
the offer in certain tender offers for the shares of foreign private issuers in accordance with
the target’s home country law, subject to compliance with specified conditions, including
disclosure.
• Pro rata acceptance – In an offer for less than all outstanding securities of the class being
sought, if a greater number of securities than the maximum number sought are tendered,
acceptance of tendered shares must be pro rata.
• Prompt payment or return – The tender offer consideration must be paid, or tendered
securities must be returned, promptly after termination or withdrawal of the offer.
• Target company position – The target company must take a formal position regarding the
tender offer within 10 business days after commencement of the offer by filing and distributing
a Schedule 14D-9. In a friendly transaction, the target company’s Schedule 14D-9 is usually
filed contemporaneously with the acquirer’s Schedule TO, which includes the offer to
purchase that is provided to target company shareholders, and the Schedule 14D-9 is
distributed to target company shareholders together with the offer to purchase.

6.3 Deal protection
In a negotiated transaction, the acquirer can enter into agreements with the target company and its
shareholders to protect the deal from competing offers. The availability of such measures will depend
upon the applicable state corporate law, but such measures may include:
• Agreements with shareholders – An acquirer can enter into agreements with one or more
significant shareholders in which they agree to tender their shares into the acquirer’s tender
offer or vote in favor of the proposed merger, as the case may be. Depending on the
jurisdiction, an irrevocable proxy may be used to enforce the tender/voting agreement.
Acquirers should bear in mind that an agreement that grants an acquirer the right to acquire
the shares or to direct the voting of the shares would generally constitute the acquirer as the
beneficial owner of the shares covered by the agreement under Section 13(d) of the
Exchange Act and obligate the acquirer to file a Schedule 13D prior to the actual purchase or
other acquisition of the subject shares.
• “No-shop” clauses – A “no-shop” provision in a merger agreement limits the target company’s
ability to seek or facilitate competing bids, subject only to the fiduciary duties of the target
company’s directors. As noted above, a target company may insist on the ability to conduct an
“active” market check of the merger terms through a “go-shop” clause permitting the target
company to solicit other bids for a negotiated period of time or a “passive” market check
allowing the target company to entertain a superior, competing offer made after public
announcement of the merger agreement but without solicitation of other bids. An acquirer may
also negotiate for the right to match any such superior offer.
• Break-up fees – A break-up fee is a termination fee paid by a target company to compensate
an acquirer for termination of the merger agreement in favor of a competing bidder. A balance
is required between the amount necessary to compensate the buyer and a fee so high that
the cost of bearing the break-up fee discourages competing bidders. Alternatively, in some
cases, bidders will agree to pay a reverse break-up fee, i.e., a fee payable by the bidder to the
target upon termination, as consideration for the right to terminate the merger agreement
upon specified conditions.
• Shareholder rights plans – An acquirer can enter into an agreement with the target company
requiring the target company to adopt a shareholder rights plan to discourage third parties
from accumulating shares in the open market sufficient to maintain a “blocking position”.
In US public company transactions, representations and warranties by a target company do not

survive the closing of the transaction, and post- closing indemnification rights and/or escrow of a
portion of the merger consideration (which are customary in private company acquisitions) as well as
representation and warranty insurance (increasingly common in private company acquisitions) are
generally not available to the acquirer. As a result, resolution of the inherent conflict between
directors’ fiduciary duties, discussed above in “4.8 Fiduciary duties of directors”, and an acquirer’s
desire for transaction certainty is often the key tension or negotiation point in US M&A practice.
Ultimately, an acquirer should recognize that, under prevailing case law in Delaware and other US
jurisdictions, if a target company receives a “superior offer” (as that term will be defined through the
parties’ negotiation of the acquisition agreement), the fiduciary duties of the target company’s board
will require the board to have reasonable flexibility to accept such superior offer, within the parameters
of deal protection measures such as those described above, subject to the acquirer’s right to payment
of a termination fee by a target company (which will effectively be borne by the competing bidder) that
accepts the superior offer.


The arsenal of anti-takeover defenses available to a target company opposing an acquirer include:
• Shareholder rights plans – A shareholder rights plan, or “poison pill”, creates a barrier to
acquisition of a significant equity position (usually 10% to 15% or more, but in many recent
cases lower after the plunge in share prices that accompanied the COVID-19 pandemic)
without approval of a target company’s board by making a hostile acquisition so expensive or
impracticable if triggered – through massive dilution of the acquirer’s stake – that a bidder will
withdraw its bid or be forced to negotiate a transaction on terms acceptable to the issuer’s
management. Poison pill plans can generally be adopted by board action and are often
adopted immediately following an unsolicited offer or the first Schedule 13D filing by a party
that includes disclosure of the filer’s intention to seek to influence or exercise control over the
target company. Poison pills can be redeemed by a target company’s board to accommodate
a negotiated deal supported by the board.
• Staggered boards – On a staggered board, the directors are divided into different classes
(usually three) having staggered terms of service. At each annual shareholders’ meeting, a
different class of directors, constituting only a portion of the board (generally one-third), is
subject to a vote for re-election. Because the directors in the separate classes are not subject
to election at the same time, a potential acquirer who has acquired shares or solicited proxies
from other shareholders which might otherwise enable such acquirer to immediately remove a
majority of the directors and elect or appoint their replacements is unable to do so.
In a friendly acquisition, a staggered board can be overcome by arranging for director

resignations and replacement by the acquirer’s designees. Before they can take office, the
information regarding these persons that would be included in a proxy statement if they were
to stand for election at a shareholders’ meeting must be filed with the SEC and distributed to
shareholders.
Many public companies have eliminated staggered boards in order to improve their
evaluations by organizations such as ISS, which issue proxy voting guidelines for institutional
investors and base their recommendations on their assessments of issuers’ corporate
governance arrangements. The existence of a staggered board at any particular public
company can be easily ascertained from its public filings with the SEC.
• Charter document limitations on shareholder action – Many public companies include

provisions in their organizational documents that limit shareholder action, such as clauses that
require all shareholder action to be taken at meetings, rather than by shareholder consent,
procedures to be strictly followed for submission of shareholder proposals at shareholder
meetings and submission of shareholder nominees for election to the board. Because the
meeting and proxy process is controlled by the board, these provisions can limit the influence
of even substantial shareholders. A recent Delaware Supreme Court case upheld such an
“advance notice” bylaw that required shareholder nominees to complete a 47-page
questionnaire within a five-day deadline. The Supreme Court agreed with the lower court
finding that many of the questions were unrelated to the background and qualifications of the
nominees, but upheld the bylaw under the circumstances, noting that the nominees and their
shareholder proponent made no effort to respond to the questionnaire and did not raise their
concerns until the matter had gone to litigation.
• Interested shareholder acquisition statutes – These statutes limit or condition business

combinations between a beneficial owner of a specified percentage of a target company’s
voting securities – generally 10% to 15% or more – who acquired such ownership without the
target company’s consent. They are discussed under “Investor Rights and Restrictions –
Investor Restrictions – State Corporate Law” in “3. Before a Public Takeover Bid”, above.

6.5 Hostile vs. friendly bids; “bear hugs”
(a) Hostile bids are permitted – The SEC tender offer rules do not generally distinguish between
negotiated or friendly tender offers and hostile tender offers. For example, Rule 14d-5
requires all target companies to assist a bidder’s dissemination of the bidder’s tender offer to
the target’s shareholders (including “street- name” holders who hold their shares through
banks, brokers or other nominees) by one of the methods specified in that rule. There are no
prohibitions on target company action to frustrate a hostile bid, such as commencing a share
repurchase program, communicating directly with shareholders in opposition to the bid
(provided SEC filing obligations are met) or, subject to fiduciary duty limitations, adopting anti-
takeover measures. Hostile bids have a number of additional disadvantages, including:
o Limited due diligence – A hostile bidder’s due diligence examination of the target
company will be limited to publicly available information. A bidder may attempt to
overcome this disadvantage by announcing a willingness to increase its offer if
information obtained from due diligence beyond public documents justifies an
increase.
o Anti-takeover defenses – The target company of a hostile bid may react initially by
establishing anti-takeover defenses (such as adoption of a poison pill), and a target
company with such defenses is not immediately obligated to dismantle them solely
because a bid has been made. If its board determines, in the exercise of its informed
business judgment, that the hostile bid could preclude the target company from
carrying out its business plans and policies and that fulfillment of such plans and
policies would provide greater value to its shareholders, the board can simply refuse
to engage at all with the hostile bidder. This so-called “just say no” defense has been
used successfully against hostile bids.
o Possible bidding war – Absence of deal protection. If the target company’s board
determines that it will support a change of control of the target company, under
Delaware case law it will be obligated to seek a deal that provides the best value
reasonably available for shareholders. The board will likely seek a higher price from
the hostile bidder, solicit one or more alternative bids or, most likely, do both if
alternative buyers are available. The resulting bidding war could significantly increase
the price of the acquisition. While a bidding war is also a risk in negotiated deals, a
hostile bidder will not have the benefit of deal protection mechanisms that are
typically negotiated between the acquirer and the target company in a friendly
transaction.
o Potential section 16(b) liability – If a hostile bidder acquires more than 10% of the
target company’s shares but ultimately loses out to a different buyer preferred by the
target company, it could incur “short-swing” profit liability upon the disposition of its
shares to the winning buyer, at least on the portion of its holdings that it acquired after
it crossed the 10% beneficial ownership threshold. For this reason, an acquirer
contemplating a hostile bid will generally limit its acquisition of the target company’s
shares to less than 10% until it is able to consummate a tender offer.
(b) If a hostile bid coincides with the target company’s annual shareholders’ meeting, a bidder
that expects that target company’s shareholders will accept its offer – especially in the
absence of a competing bid – may seek to overcome anti-takeover defenses by commencing
a proxy contest, i.e., a solicitation of proxies in opposition to management’s solicitation
contemporaneously with its tender offer. The aim of the proxy contest would be to elect a
sufficient number of directors in lieu of management’s slate who, subject to their overarching
fiduciary duties, would consider taking down the target company’s defenses to enable
shareholders to accept the offer. Any such contest must be conducted in accordance with the

SEC proxy rules applicable to contested elections. The tactic would be unlikely to succeed
against a target company having a staggered board of directors if the incumbent directors not
subject to re-election continue to support the target management’s opposition to the hostile
bid.
(c) Bear hug letters – An acquirer may send a so-called “bear hug” letter to the target company’s
board of directors if the target company is unwilling to proceed with a negotiated transaction
after the acquirer’s initial contact. The letter may be sent in lieu of, or as a prelude to,
immediate commencement of a hostile tender offer. A bear hug letter typically specifies the
offer price and form of consideration, the rationale for the business combination, and the
principal conditions to the offer (such as the target company board’s redemption of any poison
pill), and requests a response to the proposal within a specified period of time. The strongest
bear hug letters are typically accompanied by the buyer’s issuance of a press release stating
that it has made the offer described in the bear hug letter. A bear hug letter forces the target
company’s directors to consider the offer – and, if made public, may bring to bear the
influence of other shareholders for the board to consider the offer – because their fiduciary
duties as directors require them to consider whether the transaction proposed in the letter is in
the shareholders’ best interests. Further, public disclosure of a bear hug letter can induce
merger arbitrage funds, or “arbs”, to accumulate significant positions in the target company’s
shares to force the board to consider the offer and perhaps solicit other bidders.

Takeover
7.1 Squeeze-out procedures
• Completing the merger – Under US state corporate laws, once a merger has been authorized
in accordance with statutory requirements, i.e., by shareholder vote or action of the acquirer if
it holds the requisite number of shares, it is completed by filing articles or a certificate of
merger in the state or states of organization of the parties to the merger. Upon completion of
the merger, it is binding on all target company shareholders, regardless of whether they voted
in favor of the merger (or had no vote because the merger was effected as a short-form
merger without shareholder approval).
• Effecting the squeeze-out – The merger agreement will provide for the conversion of the
securities of the target company into the merger consideration. Upon completion of the
merger, the outstanding shares of the target company (other than shares owned by the
acquirer) cease to be outstanding and are converted into the right to receive the merger
consideration, subject to the rights of dissenting shareholders who perfect their appraisal
rights to receive the appraised value of their shares. In the case of a negotiated long-form
merger, completion of the merger eliminates all public shareholders; in a second-step short-
form merger following a tender offer, the squeeze-out eliminates shareholders who did not
tender their shares into the offer.
• Asset deals – In a takeover effected as an asset acquisition, in lieu of a squeeze-out, all

shareholders of the target company would be eliminated through dissolution and liquidation of
the target company, with the consideration received by the target company in the asset sale
being distributed to the shareholders. Both the sale of all or substantially all of the target
company’s assets and the dissolution and liquidation of the target company would be
submitted to shareholders of the target company for approval. As previously noted (see “4.9
Appraisal Rights of Minority Shareholders”), Delaware law does not provide appraisal rights
for dissenting shareholders in asset sales. Other state corporate laws vary in this respect. In
an asset deal, in addition to the complexity of transferring all of the assets of a public
company, it is necessary to provide for possible unknown or contingent liabilities of the target
company. In contrast, in both a long-form and a short-form statutory merger, this issue does

not exist because all of the target company’s liabilities – known or unknown, fixed or
contingent – become the obligations of the acquirer by operation of law upon the merger’s
effectiveness (or remain the obligations of the target company if the target company becomes
a subsidiary of the acquirer in the merger). For these reasons, acquiring a public company
through an asset acquisition is rare.
8 Delisting
8.1 Delisting and deregistration (“going dark”)
In US parlance and M&A practice, “going private” refers to a takeover transaction that usually includes
a squeeze-out of public shareholders effected by an affiliate (or by an affiliate acting with an outside
party), which could be a controlling shareholder or shareholder group or the target company’s
management. The object of a going private transaction is to cause the target company to become
privately held. However, a public company may terminate its SEC periodic reporting requirements
without going completely private. This is sometimes referred to as “going dark” because the company
is no longer obligated to furnish information to the SEC. This requires that the company both delist
from the stock exchange where is it listed and de-register under the Exchange Act.
(a) Delisting – A stock exchange will generally delist the shares of a listed company upon notice
to the exchange by the issuer. The exchange can also delist a company for violations of the
exchange’s continuing listing requirements, such as a share price below the minimum price
mandated by those requirements or failure to comply with SEC reporting requirements.
Following delisting, however, the company will continue to be subject to SEC reporting
requirements because the delisted shares will continue to be registered under the Exchange
Act as long as the delisted company has at least 300 shareholders of record (1,200 if the
company is a bank, a bank holding company or a savings and loan holding company).
Additional steps beyond delisting must be taken to terminate the company’s SEC reporting
obligations.
(b) Deregistration and termination of reporting – To terminate Exchange Act registration and SEC
reporting obligations, a company must file a Form 15 with the SEC certifying that the class of
securities registered under the Exchange Act is held of record by:
o less than 300 persons (1,200 if the company is a bank, a bank holding company or a
savings and loan holding company); or
o less than 500 persons if its total assets have not exceeded US$ 10 million on the last
day of each of its last three fiscal years.
o Deregistration is effective 90 days following filing of the certification, but reporting

obligations are suspended immediately. Reporting obligations are reinstated if the
certification is withdrawn or denied.
(c) Contractual reporting obligations – Some publicly held companies with outstanding debt
securities may be obligated by the indenture or other instrument governing the securities to
file SEC periodic reports as long as the securities are outstanding, regardless of whether the
company has a class of securities that is registered under the Exchange Act. Filing a Form 15
would not terminate such a reporting obligation.
(d) Issuer and affiliate action – Companies seeking to terminate Exchange Act registration and
reporting obligations should bear in mind that transactions by an issuer or an affiliate of an
issuer, such as securities purchases, tender offers, or reverse splits to reduce the number of
public shareholders, having a reasonable likelihood or the effect of causing the company’s
securities to be eligible for delisting, termination of Exchange Act registration or termination of

Exchange Act reporting requirements, are going private transactions and require compliance
with the SEC’s going private rule.
8.2 Going private

As noted above, the object of a going private transaction is to cause the target company to become
privately held.
(a) Methods – A going private transaction is effected pursuant to the same mechanisms as arm’s
length takeovers – by a tender offer followed by a squeeze-out merger, or a negotiated long-
form merger. Upon notice of consummation of a going private transaction, the exchange on
which the target company is listed will delist the target company’s shares, and the target
company will file a certification with the SEC that it is no longer subject to SEC periodic
reporting requirements.
(b) SEC regulation of going private transactions – In addition to compliance with the SEC tender
offer rules or proxy rules, as applicable, a going private transaction must be effected in
accordance with the SEC going private rule. Under SEC Rule 13e-3 and Schedule 13E-3, the
acquirer-affiliate in a going private transaction must provide extensive disclosure (in addition
to the disclosure usually required under the SEC’s tender offer rules or proxy rules) regarding
the proponent’s belief as to the fairness of the transaction to unaffiliated shareholders of the
target company and the basis for that belief. That discussion will generally include various
price-related and other factors, such as:
o the historical trading price of the target company’s shares;
o a comparison of the transaction price to the share price prior to announcement of the
going private transaction;
o pricing multiples paid by acquirers in transactions involving companies considered

comparable to the target company;
o the value of the target company’s shares under various investment banking valuation
methodologies;
o procedures implemented for representation and protection of the interests of

unaffiliated shareholders (see “State Law Issues”, below);
o availability of appraisal rights for unaffiliated shareholders; and
o receipt of a “fairness opinion” from an investment bank engaged by the

representatives of unaffiliated shareholders.
The going private rule applies to going private transactions regardless of form, including
securities purchases, tender offers, proxy solicitations for a merger or a sale of all or
substantially all of the issuer’s assets, and certain other transactions.
(c) State law issues – A going private transaction is a self- interested transaction by a target
company’s controlling shareholder and/or its management under applicable state corporate
law in most jurisdictions. Under Delaware case law, such self-interest would ordinarily require
that the acquiring affiliate demonstrate the “entire fairness” of the transaction, a difficult
standard to meet. However, under the “MFW” line of Delaware case law (and under New York
case law as well), a going private transaction will be tested under the business judgment rule
(see “4.8 Fiduciary Duties of Directors” above) if certain procedures are implemented to
protect the interests of unaffiliated shareholders. These procedures include:

o a committee of independent directors is appointed to represent the interests of
unaffiliated shareholders;
o the independent committee is granted full power and discretion to engage its own
advisers, e.g., counsel, investment bankers and accountants, to negotiate the terms
and conditions of the transaction with the affiliate, as well as to seek possible superior
transactions and to reject the transaction should it determine to do so;
o the merger agreement negotiated by the independent committee provides that in

addition to the statutory vote required for approval of the merger, it must be approved
by holders of a majority of the shares held by unaffiliated shareholders (a “majority of
the minority”);
o unaffiliated shareholders receive full and fair disclosure regarding the transaction in
connection with the solicitation of their approval of the merger; and
o the merger is approved by a majority of the minority.
For MFW to apply, these procedures must be in place before any substantive negotiations of the
merger commence.
The SEC going private rule requires that the tender offer document or proxy statement for the
transaction discuss whether these procedures were utilized as part of the affiliate’s discussion of its
belief regarding the fairness of the transaction to unaffiliated shareholders.
Addendum – treatment of foreign private issuers
As indicated in the Overview, while many, but not all of the US federal securities laws and rules that
regulate acquisitions of listed US companies also apply to acquisitions of US-listed FPIs, in some
cases, acquisitions of US-listed FPIs are either exempt from such securities laws and rules or are
governed by rules dealing that provide certain accommodations for acquisitions of FPIs. The following
is a brief summary of the treatment of acquisitions of US-listed FPIs under the various federal
securities laws and rules discussed in this chapter:
• Beneficial ownership disclosure – Disclosure obligations under Section 13(d) of the Exchange
Act apply to acquisitions of the shares of US-listed FPIs to the same extent as those of US
domestic listed companies.
• Exchange Act Section 16 – Transactions in the equity securities of FPIs are exempt from the
reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act.
• SEC proxy rules – Proxy solicitations by FPIs are not subject to the proxy rules. In addition,
Section 14(f) of the Exchange Act and SEC Rule 14f-1, which require the filing and
distribution to target company shareholders of certain information if a majority of the members
of a board is selected by an acquiring party without a shareholders’ meeting, do not apply to
FPIs.
• Tender offer regulation – The SEC tender offer rules apply to tender offers for the equity
securities of FPIs. However, the SEC’s cross-border transaction rules provide either complete
or limited exemptions from Exchange Act requirements for tender offers for the shares of US-
listed FPI target companies. These rules were originally adopted in 1999 to encourage the
inclusion of US shareholders in such transactions and were amended in several significant
respects in 2008. The cross-border transaction rules include the following provisions
applicable to such tender offers:
o “Tier I” tender offers – A tender offer for the securities of an FPI is exempt from the
SEC’s tender offer rules if not more than 10% of the FPI’s securities (determined at

the time and in the manner set forth in SEC Rule 14d-1) are held of record by US
holders and:
 US holders are permitted to participate in the offer on terms no less favorable

than those offered to other holders;
 the acquirer disseminates to US holders an English translation of any

informational document relating to the offer using means comparable to the
means used to provide the document to shareholders in the issuer’s home
jurisdiction, including by publication in the US if dissemination is by
publication in the home jurisdiction; and
 the acquirer furnishes the English translation of the informational document to

the SEC and, if it is a non-US company, files a consent to service of process
with the SEC.
o “Tier II” tender offers – If more than 10% but not more than 40% of the FPI’s
securities are held by US holders, certain limited exemptions are available under the
SEC’s tender offer rules. For example, a bidder may separate the tender offer into
multiple separate offers – an offer to US holders and one or more offers made to non-
US holders, and the offers may be conducted in certain respects in accordance with
home country requirements and procedures.
o Purchases outside the offer -- In both Tier I and Tier II tender offers, the subject
securities in the tender offer may be purchased outside of the tender offer, which
generally is not possible under US rules. Such purchases in both Tier I and Tier II
tender offers are subject to certain disclosure requirements. Purchases in Tier I offers
must be comply with applicable laws and regulations of the target’s home jurisdiction.
Tier II purchases may not be made in the U.S. and are subject to certain additional
conditions and limitations.
• The SEC going private rule – A tender offer or other business combination that meets the
requirements for reliance on the cross-border exemption for Tier I tender offers is also exempt
from the going private rule.
• Registration of public offerings of securities – The following exemptions from Securities Act
registration requirements may be available for the issuance of acquirer securities as the
consideration for the acquisition of a US-listed FPI:
o Cross-border transaction exemption – The offer and sale of securities in an exchange

offer for the securities of an FPI, or in another business combination in which
securities are offered as consideration to shareholders of an FPI target company, are
exempt from Securities Act registration if not more than 10% of the FPI’s securities
are held of record by US holders and the acquirer complies with the same conditions
applicable to bidders in Tier I tender offers, i.e., no less favorable treatment of US
holders and dissemination and furnishing to the SEC of an English translation of any
information document. In addition, a cautionary legend must be included on the cover
page or in another prominent location of the informational document alerting target
company shareholders to possible differences between US and non-US disclosure
requirements and (if applicable), between US GAAP and non-US GAAP accounting
rules, as well as possible difficulties in enforcing rights under US federal securities
laws against the acquirer and its officers and directors. Because the acquirer
securities are issued without registration under the Securities Act, any restrictions
under the Securities Act on transfer of the target company shares surrendered in the
exchange offer or other business combination will be equally applicable to such
acquirer securities.

o Fairness hearing exemption – The Securities Act also provides an exemption from
registration for securities issued in certain exchanges, including business
combinations, in which a court or regulatory body passes on the fairness of the terms
of the exchange. This exemption may be available for the issuance of acquirer shares
to security holders of target companies organized under the laws of non-US
jurisdictions that provide for such judicial or administrative hearings in connection with
certain business combinations (such as schemes of arrangement in many
jurisdictions). The exemption is available for securities of both US and non-US
acquirers.
• Stock exchange shareholder approval requirements – Stock exchange listing rules may apply
to the acquisition of a significant minority interest in a listed company from the company, the
issuance of listed company shares as acquisition consideration, and the issuance of listed
company shares to related parties or in transactions that would result in a change of control of
the issuer, regardless of whether state corporate law requires approval by an acquirer’s
shareholders. However, an FPI issuing its securities in these cases may, in lieu of obtaining
shareholder approval, furnish the relevant stock exchange with a legal opinion of home
country counsel confirming that shareholder approval is not required under the FPI’s home
country law.
• Delisting and deregistration by FPIs – As described above (see “8.1 Delisting and
Deregistration (‘Going Dark’)”) complete termination of a listed company’s SEC reporting
obligations requires both stock exchange delisting and deregistration under the Exchange Act.
Like US domestic listed companies, FPIs can delist their shares upon notification to the
relevant stock exchange. In addition, FPIs are able to deregister and terminate their
Exchange Act registration and reporting requirements (regardless of the number of US
holders of their shares) by filing a Form 15F with the SEC certifying that:
o the FPI has been subject to SEC reporting obligations for at least 12 months and has
filed or furnished all required reports during that period, including at least one annual
report;
o the FPI has not sold securities in the US pursuant to a registered offering under the
Securities Act, other than sales to employees and certain other limited transactions;
o the FPI’s securities were listed in a non-US jurisdiction which, singly or with other
non-US jurisdictions, constituted the FPI’s primary trading market during the 12
months preceding the certification; and
o either:
 average daily trading volume (“ADTV”) in the US during a recent 12-month

period has not been greater than 5% of the FPI’s worldwide ADTV during the
same period; or
 within 120 days of the filing, the FPI’s securities to be deregistered were held
by less than 300 persons worldwide or less than 300 persons resident in the
US.
An FPI that goes dark by deregistering under the Exchange Act will still be required to make
certain financial and other information about itself available to US holders of its shares.
However, it can easily do so simply by posting the required information, in English, on its web
site.


The following are the most appropriate contacts within Baker McKenzie for inquiries about public M&A
in the United States:
Michael DeFranco Jonathan Newton

Chicago Houston
michael.defranco@bakermckenzie.com jonathan.newton@bakermckenzie.com
+ 1 312 861 8230 + 1 713 427 5018
Craig Roeder Thomas Rice

Chicago New York
craig.roeder@bakermckenzie.com thomas.rice@bakermckenzie.com
+ 1 312 861 3730 + 1 212 626 4412
William Rowe Alan Zoccolillo

Chicago New York
william.rowe@bakermckenzie.com alan.zoccolillo@bakermckenzie.com
+ 1 312 861 2650 +1 212 626 4374
Amar Budarapu Leif King

Dallas Palo Alto
amar.budarapu@bakermckenzie.com leif.king@bakermckenzie.com
+ 1 214 978 3060 +1 650 251 5988
Roger Bivans Marc Paul

Dallas Washington, DC
roger.bivans@bakermckenzie.com marc.paul@bakermckenzie.com
+ 1 214 978 3095 + 1 202 452 7034
Crews Lott
Dallas
crews.lott@bakermckenzie.com
+ 1 214 978 3042

Venezuela
1 Overview
Venezuelan laws and regulations contain a specific set of regulations governing public bids for the
acquisition of stock in a listed company (“Target Company”) in Venezuela. In addition, Venezuelan tax
regulations include an incentive for this type of transaction since any sale transaction of stock
executed through a local stock exchange is subject to income tax at a flat rate of 1% over the gross
amount of the transaction, disregarding the amount of tax gain or loss resulting thereunder. In this
regard, the sale of stock outside of a stock exchange is subject to income tax at a rate of 34% over
the tax gain resulting thereunder. The 1% tax will be withheld at the source by the purchaser at the
moment of payment; although there are strong arguments based on rulings of the Internal Revenue
Service that non-domiciled entities may not be required to withhold Venezuelan taxes.
As a consequence, several Target Companies in different economic sectors have been subject to
public takeovers by local and multinational companies during the last few decades in Venezuela,
although their number and volume remain low as compared to other markets.

The main rules and principles of Venezuelan laws regarding public bids for Target Companies are
contained in:
(i) The Securities Markets Law (“SML”); and
(ii) The Rules on Public Offers to Acquire, Exchange and Take Control of companies subject to
public offering of their shares and other rights over them (“OPA Rules”).
2.2 Supervision and enforcement by the National Superintendence of

Securities
Public takeover bids are subject to the regulatory powers of the National Superintendence of
Securities (“SNV”), which is vested with the powers to control and regulate the capital markets in
Venezuela.
As a general matter, the SNV has discretionary powers to supervise, control and enforce compliance
with the SML and the OPA Rules during any public takeover bid in Venezuela. Such powers entitle
the SNV to implement any mechanism it considers necessary and/or convenient to protect the
interests of the Target Company’s minority stockholders. In addition, the SNV is empowered to apply
administrative fines in case of breach of the regulations and even to request criminal prosecution
before the competent courts upon the occurrence of certain breaches of such regulations.
Please note that the SNV is also entitled to grant certain exemptions from the rules on public takeover
bids that would otherwise apply, when the situation is duly justified and when such exception does not
affect the rights of the minority stockholders of the Target Company.

Foreign Investments in Venezuela are governed by the Constitutional Law of Productive Foreign
Investments (“LCIEP”), published by the Extraordinary Official Gazette No. 41,310 dated 29
December 2017, and issued by the National Constituent Assembly.
The LCIEP abrogated and superseded Decree No. 1,438 with Rank, Value and Force of the Law of
Foreign Investments, published in the Extraordinary Official Gazette No. 6,152 dated 18 November

2014 (“LFI”). Notwithstanding the entering into force of the LCIEP, the National Executive has not yet
issued the required regulations.
Under the LCIEP, the Ministry of the People’s Power with competence in trade matters is the
governing entity with the mandate to establish policies for fulfilling the purposes of the LCIEP. Its
scope of powers was significantly expanded under the LCIEP, in comparison with the LFI, to include
more implementing powers such as the administration of the registry of foreign investments. However,
its current implementation of the powers is unclear. In practice, the Foreign Trade Bank (BANCOEX)
is the foreign investments authority, which is, as of 1 March 2020, providing information and services
regarding registration requests.
No governmental prior approval is required for foreign investments in Venezuela. However, the
LCIEP, provides that foreign investments must be registered in order to be recognized by the
government. To benefit from the rights set forth in the LCIEP and applicable laws, investors must
register their direct foreign investments. As a result, the rights of foreign investors will only become
effective after registration. The LCIEP has not yet provided the procedures, requirements or
conditions to register a foreign investment. In practice, although the regulations of the LCIEP have not
been issued yet, BANCOEX is receiving requests for the registration of investors and investments,
including the filing of certain forms providing information about such investment and the submission of
documents.
Once registered, the foreign investment authority will issue a Certificate of Registration of Direct
Foreign Investment to reflect the amount in United States dollars. Foreign investors must update the
Certificate if there is a modification of the information related to the investment or investors in the
company.
(a) Treatment of direct foreign investment
The principal requirements set forth in the LCIEP regarding the treatment of foreign
investments are the following:
o The LCIEP requires that 100% of the constitutive value of foreign investments should
be represented by assets (physical or intangible) located in Venezuela.
o Subject to express authorization from the governing body, the minimum amount to
register a foreign investment is the equivalent of (i) EUR 800,000.00 or (ii) RMB
6,500,000.00 or (iii) their equivalent in any other foreign currency.
o Foreign investments should remain in the country for at least two years; after that
period, investors can make certain remittances abroad.
o Foreign investors may distribute dividends, and at the end of the first fiscal year, up to
100% of the profits or dividends derived from their registered and updated foreign
investment. In cases of force majeure or extraordinary economic situations the
National Executive may reduce this percentage to between 60% to 80% of the profits.
o The LCIEP includes a general provision whereby the National Executive can limit
remittances in cases of extraordinary circumstances that affect the economic and
financial safety of the nation. The scope of this general limitation is not clear
regarding the specific limits indicated in the previous paragraph.
o After two years foreign investors can remit to their country of origin any income
obtained from selling their shares or investments in Venezuela, or from a capital
reduction.
o The LCIEP maintains the rights of foreign investors to totally or partially reinvest the
profits obtained in local currency (to be recognized as foreign investment).

o Pursuant to Article 31 of the LCIEP, if a company that has received foreign
investment is liquidated, the total amount of the registered foreign investment may be
remitted abroad.
(b) Notices
The following matters must be notified to the governing entity (expected to be the Ministry of
the People’s Power) according to the LCIEP:
o Any kind of investment in domestic or foreign companies which are in the national
territory, made after the initial registration of a foreign investment through the
purchase or sale of shares or other titles, credits, mergers, acquisitions or any other
means that does not involve the real investment of capital, but merely financial. Any
transaction of this nature that is carried-out without giving notice to the governing
entity will be rendered void.
o The reinvestment of profits under the provisions of the LCIEP. The governing entity
may raise objections to such transaction within 60 days following the filing date.
(c) Inspection powers, preventive measures and sanctions
Under the LCIEP, the governing body for foreign investments has a wide range of powers,
including dictating administrative control mechanisms, designating public prosecutors for
control and audit of foreign investments and soliciting information from foreign companies.
Additionally, the governing body has powers to issue preventive measures, which are not
specified but will be developed in the Regulations of the LCIEP.
Failure to comply with the LCIEP carries a fine up to 2% of the total investment, with another
1% added if more than one obligation is not met. In the case of a repeated failure to comply,
3% will be added to the total fine. Fines must be paid in the same currency as the original
investment, and within 15 working days from the applicable notice.
(d) Jurisdiction
The LCIEP states that disputes must be subject to the jurisdiction of the Venezuelan courts
and does not permit international arbitration. The LCIEP provides certain limited exceptions to
this and allows the use of other dispute resolution mechanisms within the framework of the
integration of Latin America and the Caribbean.
Venezuela has also executed a number of bilateral agreements for the promotion and
protection of investments with Argentina, Barbados, Germany, Belarus, Canada, Chile, Costa
Rica, Cuba, Denmark, Ecuador, Spain, France, United Kingdom, Iran, Lithuania, the
Netherlands, Paraguay, Peru, Portugal, Czech Republic, Russia, Sweden, Switzerland,
Uruguay, Palestine, Libya, Syria, Vietnam and Belgium-Luxembourg Economic Union. As a
result, disputes that may arise between a foreign investor whose country of origin is one with
which Venezuela has a treaty or agreement in force for the promotion and protection of
investments, could be submitted to international arbitration under the terms of the respective
treaty. The treaties with Brazil and Italy have not entered into force yet. The treaty between
Venezuela and the Netherlands ended on 1 November 2008 and the treaty between
Venezuela and Ecuador ended on 16 May 2017. However, with respect to investments made
prior to the date of termination of the treaties, their provisions remain in force for a period of
15 years and 10 years, respectively, from the date of termination.

As a general matter, under the SML and OPA Rules, the stockholders of a Target Company must be
afforded equivalent treatment and if a person or entity intends to acquire a significant participation or

control of such Target Company, the stockholders must have the same opportunity to sell and must
be protected.
In this regard, according to the SML and the OPA Rules, any person and/or entity (the “Bidder”) that
intends to indirectly or directly acquire, in a single act or through successive acts, shares representing
more than 10% of the capital stock (a “Significant Participation”) of a Target Company, or the control
over such Target Company disregarding the percentage of shares to be acquired, must comply with
the procedures established by the SNV for such purposes.

According to the SML and the OPA Rules:
(i) From the beginning of any action focused on the study and planning of a public takeover bid,
the Bidder, the officers of the Bidder and its partners are considered to be in possession of
inside information and, therefore, must keep the information strictly confidential until the
offering is disclosed as required in the OPA Rules. This also applies to the Target Company
and its officers if they are aware of the offering.
(ii) Any individual having access to inside information regarding the offering cannot transmit such
information to third parties before its disclosure to the market according to the OPA Rules, nor
act or allow any action on the basis of such inside information seeking economic or financial
benefits in general, either for themselves or for third parties, whether as profits or by avoiding
losses. Those who, in the exercise of their profession, work, or powers, have had access to
inside information and use it in any activity related to the stock market, consequently obtaining
an economic benefit for themselves or for third parties, may be punished with fines and even
criminal prosecution.
As mentioned hereinabove, any Bidder that intends to indirectly or directly acquire, in a single act or
through successive acts, a Significant Participation in a Target Company, or the control over such
Target Company disregarding the percentage of shares to be acquired, must comply with the
procedures established by the SNV for a public acquisition offering (“OPA”), a public exchange
offering (“OPI”) and a control-taking public offering (“OPTC”), as the case may be.
(i) OPA is the procedure applicable to a Bidder that intends to acquire a Significant Participation
in a Target Company offering cash as consideration.
(ii) OPI is the procedure applicable to a Bidder that intends to acquire a Significant Participation
in a Target Company offering securities as consideration.
(iii) OPTC is the procedure applicable to a Bidder that intends to acquire shares of a Target
Company in order to gain a controlling interest in such company, which enables the Bidder to
control the decisions of its stockholders’ meeting, regardless of the participation to be
acquired and the consideration offered.
The procedures for any OPA, OPI, and OPTC are compulsory notwithstanding: (a) the mechanism to
be used for the acquisition, including private negotiations and acquisitions through stock exchanges;
(b) whether the acquisition is made in a single act or through successive acts; and (c) the legal
structure to be used for the acquisition.
A Bidder that does not comply with the applicable procedures for OPA, OPI and OPTC will not be
entitled to exercise the rights derived from the shares acquired, and any decision adopted with their
participation will be null and void.

5 Timeline
The following is a description of the main steps that should be followed by a Bidder to execute a
public takeover bid of a Target Company according to the OPA Regulations:
(a) Registration of the Target Company with SNV
The Target Company must be previously registered with the Registry of the SNV. Any
registration must contain the following information with a letter:
(i) General and financial information on the Target Company, its shareholders and
administrators, including a copy of the Tax Information Registry (RIF), domicile,
website address and social media accounts.
(ii) Information regarding the activities that the Target Company performs.
(iii) A two-page executive summary describing the products and services (relating to stock
exchange matters) used by the Target Company.
(iv) Copy of the Articles of Incorporation/Bylaws.
(v) Commercial, credit and banking references (three of each).
(vi) Certified statement by the Target Company, its shareholders and administrators
declaring its solvency of, and its compliance with tax, labor, and social security
obligations.
(vii) List of assets of the Target Company.
(viii) Statement of dividends and their payment schedule.
(ix) Any other document or information deemed necessary by the SNV.
(b) Request for SNV’s authorization
The Bidder must file with the SNV a clear and detailed report on the offering (“Report”) at
least five stock market days before the date on which the bid is to be disclosed to the public,
sufficiently supported so that the persons to whom the offering will be made may be
reasonably aware of its content. The Report must be drafted in terms that an investor who
does not have specialized financial knowledge can understand, and must contain, among
other things, the following information:
(i) An abstract of the Report (“Summary”) containing the basic items of the Report which
will allow an investor to have an idea of the proposed negotiation.
(ii) General and financial information on the Bidder and its administrators.
(iii) Information regarding the purpose of the offering, the Bidder’s intentions concerning
the Target Company and a description of the origin of the funds used to make the
offering.
(iv) Information regarding the current shareholding percentage of the Bidder in the Target
Company.
(v) Information regarding the Bidder’s relationship with the Target Company, its
shareholders and administrators.

(vi) Specific conditions of the offering, including:
 Number or percentage of shares of the Target Company that the Bidder

wishes to acquire and a firm statement of intent to acquire them under the
conditions proposed in the Report;
 Price or exchange rate to be offered as consideration;
 Payment conditions;
 Guaranties offered to the sellers;
 Term of the offering;
 Rules for pro-rating, if any; and
 Preparatory legal negotiations concerning the offering to which the Bidder is a

party.
(vii) Description of the consequences arising from the application of certain special laws to
the proposed transaction, such as the Law for the Protection and Promotion of Free
Competition, the Banking Sector Institutions Law, or the need for authorization from
any governmental agency, if required by law.
(c) SNV’s authorization of the offering
The SNV has a period of five stock exchange business days to authorize the disclosure of the
Report, starting on the date the report is filed by the Bidder. If the SNV requests that changes
be made to the Report, this period shall begin to run from the moment the modified Report is
filed by the Bidder.
The Report shall be confidential until its disclosure is authorized by SNV.
(d) Disclosure of the offering
Once disclosure of the Report has been authorized by the SNV, both the Report and its
Summary must be circulated as soon as possible by means of:
(i) Publication of the Summary in two national newspaper.
(ii) The filing of the Report with the Venezuelan stock exchange and the Target
Company.
(iii) The publication of sufficient copies of the Report so as to deliver it to any person who
requests it from the principal office of the Target Company or the Bidder.
(e) Term of the offering
The initial term of the offering shall be freely determined by the Bidder, but shall not be less
than 20 stock exchange business days or more than 30 stock exchange business days after
the actual starting date of the offering. This term may be extended before its expiration upon
the Bidder’s prior request for authorization from the SNV, which will have three stock
exchange business days to decide on the extension. The extensions to the original term of the
Offering cannot exceed a total of 30 stock exchange business days after the original date of
expiration of the offering.

(f) Actions of the shareholders and administrators of the Target Company
From the moment the Report is disclosed, or before if they are aware of it, the controlling
shareholders and administrators of the Target Company are prohibited from engaging in any
actions other than the simple administration of the Target Company, without first sufficiently
disclosing the information in connection with these actions to the SNV, the stock exchange
and the mass media at least five stock exchange business days in advance of the acts. The
SNV may make observations regarding acts of disposition and may order their publication.
(g) Observations on the offering by the Target Company
The Target Company shall submit its comments or observations regarding the offering to the
SNV and the stock exchange no later than the fifth stock exchange business day following the
disclosure of the Report. These comments shall be made public, upon prior notice to the SNV,
by publication in two major national newspapers. The observations on the offering shall also
be filed with the stock exchange and the Bidder. The Target Company may only make
additional observations if any new events arise that call for them.
(h) Competing offerings
Any person may make a competing offering, thus becoming aBidder. They must file a Report
on the competing offering with the SNV at least seven stock exchange business days before
the expiration of the initial offering. This Report must meet all the requirements demanded of
the original offering. Both the original offering and the competing offering shall be valid for the
same term. For this purpose, the term of the original offering will be extended for it to concur
with the competing offering.
(i) Modification of the Report
Any modification to the Report and any notification, memorandum or disclosure report must
be submitted to the SNV for authorization, which will then have a term of three stock
exchange business days to grant the respective authorization for disclosure.
Any Bidder of an offering may make bids improving the conditions of its offering up to the
tenth stock exchange business day before the expiration date of its offering. The new
conditions must be extended to all the shareholders of the Target Company that have already
accepted the offering. The SNV has three stock exchange business days after the filing date
to authorize the disclosure of the modified Report containing the new offering conditions. The
term of the offering shall be extended for as many days as the SNV has taken to grant its
approval, which shall not be more than three stock exchange business days, unless the SNV
agrees on a longer term.
(j) Advertising of the offering
Any advertisement, promotion or disclosure of the offering must be submitted for authorization
by the SNV at least three stock exchange business days prior to the date it is to be made.
(k) Acceptance of the offering
Acceptance of the offering must be communicated to the Bidder at the place, time and in the
manner set forth in the Report. If at the time of closing the offering is not fully subscribed it,
shall be deemed to be unsuccessful, unless the Report contains a contingency clause
whereby an offering is considered fully subscribed if at least 75% of the shares have accepted
the offering.
(l) Revocation of the offering by the Bidder

(i) Until its starting date, the offering may be revoked at any time by means of a
reasoned and justified statement, having first notified the SNV, filed it with the stock
exchange and published it in two national newspapers.
(ii) From the starting date, the offering may be revoked up to three stock exchange
business days before the closing date, by means of a reasoned and justified
statement submitted for the SNV’s authorization. However, this revocation may only
be admitted:
• if a competing offering is made; or
• if there are exceptional circumstances not imputable to the Bidder.
(iii) Until the transaction is settled, the offering is revocable if there is a decision by any
competent agency opposing or subjecting the transaction to other conditions.
(m) Repeal of the acceptance by the stockholders of the Target Company
The acceptance may only be repealed in the event of a competing offering or an outright bid,
provided the acceptance has taken place prior to the competing offering or bid. The Report
must expressly refer to this limitation.
(n) Notice of the outcome of the offering
The SNV, the Stock Exchange and the general public, by means of a notice published in two
national major newspapers, must be notified of the outcome of the offering within two stock
exchange business days following the closing of the Offering.
(o) Settlement and payment
The settlement of the transactions for acceptance of the offering shall take place at the stock
exchange, pursuant to the methods authorized by the SNV, no later than the fifth stock
exchange business day following the closing of the offering.
Set out below is an overview of the main steps for a public takeover bid in Venezuela.

Start
Before process A-5 A Day A Day A+5 X Day X+2 X+5
Register of the File report on SNV authorizes offer Announcement of Target company A report on a Any bidder may make Acceptance of the Close of the offering Notice of result Settlement and
Target Company offering with SNV the offer and filing publishes its competing bid must counter offers at least offering at the time, payment
before National of report with comments on the be fiiled with SNV 10 trading days before place and manner set
Superintendence stock exchange offering at least 7 trading the deadline of its out in the report
of Securities and target days before the offering
(SNV) deadline of initial
offering. The
deadline for the
original offering will
be extended to
concur with the
competing bid.
5 trading days 20 - 30 trading days 2 trading days
as soon as within 5 trading days 5 trading days

possible

6 Takeover Tactics
Venezuelan laws and regulations do not preclude any action that may be adopted by the Target
Company and/or its shareholders to defend themselves from a hostile takeover. In any case, the
legality of such defenses must be analyzed on a case by case basis. Poison pills, share buyback and
sale of crown jewels have been used in the past against hostile takeovers in Venezuela.
Notwithstanding the above, as a general matter, the OPA Rules provide that the SNV shall open an
investigation in order to assess whether a Target Company is trying to prevent the takeover bid and
whether the corresponding actions affect the minority stockholders.
7 Squeeze-out of Minority Stockholders after Completion of the

Takeover
There are no laws in Venezuela allowing the squeeze-out of minority stockholders following a public
takeover. Stockholders have no rights to force the Bidder to purchase their stock if they chose not to
participate in the takeover.
8 Delisting
In order to delist a company, Venezuelan laws and regulations require: (i) the previous authorization
of the SNV; (ii) a resolution of the stockholders’ meeting of the affected company with the affirmative
vote of shares representing at least 85% of the stock capital; (iii) if applicable, request the stock
exchange to provide a detailed report on the volume of transactions with the listed securities during
the last 3 years and certification of the deregistration of the securities listed on such stock exchange;
and (iv) any other documentation that the SNV may require.

Jesús Dávila and Maria Celis in the Caracas office are the most appropriate contacts within
Baker McKenzie for inquiries about public M&A in Venezuela.
Jesús Dávila María Celis

Caracas Caracas
jesus.davila@bakermckenzie.com maria.celis@bakermckenzie.com
+58 212 276 5243 +58 212 276 5075

Vietnam
1 Overview
Thanks to its robust economic performance and supportive policy framework, Vietnam is now
considered to be an attractive destination for investors. M&A transactions in Vietnam have seen
steady growth since 2003, particularly after Vietnam officially became a member of the World Trade
Organization (“WTO”).
Public M&A activity in Vietnam was first officially regulated under the Securities Law passed in 2006.
Since then, the government has introduced a large number of new regulations, which have helped
promote the development of public M&A activities in terms of both volume and value. Growth in the
public M&A market in Vietnam is expected to continue, with sentiment improving towards Vietnam as
a destination for foreign investors in the near term.

2.1 Main legal frameworks
To keep up with the development of public M&A activities in Vietnam, the government has gradually
evolved the regulatory and legal framework. For both domestic and foreign transactions, the main
legal instruments of Vietnamese law relating to public takeover bids can be found in:
• Law No. 54/2019/QH14 on securities, passed by the National Assembly on 26 November

2019, taking effect from 1 January 2021 (the “New Securities Law”);
• Law No. 70/2006/QH11 on securities, passed by the National Assembly on 29 June 2006 (as
amended by Law No. 62/2010/ QH12 dated 24 November 2010 and Law No. 35/2018/QH14
dated 20 November 2018) (the “Current Securities Law”);
• Law No. 67/2014/QH11 on Investment, passed by the National Assembly on 26 November

2014 (as amended by Law No. 03/2016/QH14 dated 22 November 2016) (the “Investment
Law 2014”);
• Decree No. 58/2012/ND-CP of the government dated 20 July 2012, providing detailed
regulations for implementation of a number of articles of the Current Securities Law (“Decree
No. 58”);
• Decree No. 60/2015/ND-CP of the government dated 26 June 2015, amending Decree No.
58/2012/ND-CP of the government dated 20 July 2012 implementing the Current Securities
Law (“Decree No. 60”);
• Circular No. 162/2015/TT-BTC of the Ministry of Finance dated 26 October 2015, which
provides guidance on public offering, stock swap, issuance of additional stocks, repurchase of
stocks, sale of treasury stocks and public takeover bids (“Circular No. 162”); and
• Circular No. 155/2015/TT-BTC of the Ministry of Finance dated 6 October 2015, which
provides guidance on disclosure of information in the securities market (“Circular No. 155”).
Vietnam, there are a number of additional legal instruments that are to be taken into account when
preparing or conducting a public M&A transaction, such as:
• the general regulations on M&A activities, including the Civil Code, the Law on Enterprise and
the Law on Competition;

• international treaties and agreements to which Vietnam is a contracting party, e.g., free trade
agreements, the WTO, etc.;
• regulations on certain business areas that are specifically governed, e.g., banking and
finance, education and distribution;
• regulations on State-owned enterprises (“SOEs”); and
• regulations on other relevant matters, including, among others, land, the foreign exchange
market, labor and tax.
2.2 Principles for conducting a public tender offer

A public tender offer to acquire shares in a public company must adhere to the following principles:
• The conditions of the takeover offer must apply equally to all shareholders of the target
company.
• Parties participating in the public tender offer must be provided with complete information to
enable access to the offer.
• Parties participating in the public tender offer must respect the right of shareholders of the
target company to make their own decision.
• Parties participating in the public tender offer must comply with the provisions of the Current
Securities Law and other relevant laws.
• The offeror must appoint a securities company to act as an agent for the offer.
2.3 Regulatory authorities

In Vietnam, a public tender offer is subject to supervision and control by the Ministry of Finance, in
particular, the State Securities Commission of Vietnam (the “SSC”).
The Ministry of Finance has a number of legal tools that it can use to supervise and enforce
compliance with public tender offer rules, such as administrative fines. The Ministry of Finance also
has the power to issue specific guidance and regulations applicable to a public tender offer.
Moreover, depending on the specific activities, sectors and target companies, public takeover bids
may be under the supervision of other relevant regulatory authorities.

See 3.3 below.

Under Vietnamese law, a joint stock company may issue different types of shares, each of which will
entitle shareholders to different rights and interests. The types of shares that a joint stock company
may issue include:
• common shares;
• voting preferred shares, which are a type of share that holds a greater number of votes than a
common share;

• participation preferred shares (or dividend preferred shares), which are a type of share where
the shareholder will be paid dividends at a higher rate in comparison with the dividends paid
to a common shareholder or the rate which is typically applied each year;
• redeemable preferred shares, which are a type of share that entitles its holder to a return of
the contributed capital by the company upon the request of the holder or in accordance with
the conditions stated on the redeemable preferred share certificates; and
• other types of preferred shares prescribed by the company’s charter.
levels of shareholding within a joint stock company in Vietnam:
Shareholding Level Rights and Powers
One common share • To participate in and speak at the General Meetings of

Shareholders (the “GSM”) and exercise the right to vote in
person, through an authorized representative or in accordance
with another method stipulated by law or the company’s charter.
Each common share will have one vote;
• To receive dividends at the rate determined by the GSM;
• To have priority in buying the new shares offered for
subscription corresponding to the proportion of common shares
held by the shareholder in the company;
• To freely transfer their share to another person, except (i) in the
3-year lock-up period applicable to founding shareholders and
(ii) in instances where the company’s charter provides for
restrictions on share transfers;
• To review, search for and make an excerpt from the information
in the “Roster of Shareholders having the Right to Vote” and
request and rectification of the inaccurate information therein;
• To review, search for information in, make an excerpt from or
photocopy the company’s charter, minutes of the GSM and
resolutions of the GSM; and
• To receive a portion of the remaining assets corresponding to
their proportion of share ownership in the company where the
company is dissolved or bankrupt.
1% or more common To initiate a civil liability lawsuit in their own name or in the name of the
shares for a consecutive company against the members of the Board of Management (the
six months “BOM”) or the (General) Director of the company.
10% or more common • To nominate persons to the BOM and the Control Committee;
shares for a consecutive
• To review and make an excerpt from the minutes book and
six months (or a smaller
resolutions of the BOM, the mid-year and annual financial
proportion as stipulated
statements prepared in accordance with the forms of the
by the charter)
Vietnamese accounting system, and the reports of the Control
Committee;
• To request the convening of a GSM in certain instances or to
convene the GSM if the BOM or the Control Committee fails to
do so;


• To propose matters to be included in the meeting agenda of the
GSM;
• To request the Control Committee to examine each specific
matter relating to the management and administration of the
company’s activities when deemed necessary;
• To request for an abolition of a GSM resolution; and
• Other rights under the provisions of the Enterprise Law and the
company’s charter.
More than 35% of the The veto right against GSM resolutions in relation to special matters (a
total number of votes (of “super majority”). Special matters include:
all of the shareholders
• Types/classes of shares and total number of shares in each
attending the GSM)
type/class;
• Change to the industries/lines or areas of business;
• Change to the company’s managerial and organizational
structure;
• The company’s investment or sale of its assets with a value to
equal to or greater than 35% of the total value of assets stated
in the most recent financial statements of the company (or
another smaller proportion or value as stipulated by the
company’s charter);
• The company’s reorganization or dissolution; and
• Other matters as stipulated in the company’s charter.
More than 49% of the The veto right against GSM resolutions on matters other than those
total number of votes (of requiring a super majority.
attending the physically-
held GSM)
More than 49% of the The veto right against GSM resolutions adopted by way of collecting
total number of votes (of written opinions.
having voting rights in
case of adopting
resolutions by way of
collecting written
opinions)
At least 51% of the total Adopt GSM resolutions on matters other than those requiring a super
number of votes (of all of majority.
the shareholders
held GSM)
At least 51% of the total Adopt GSM resolutions by way of collecting written opinions.
number of votes (of all of
the shareholders having
voting rights in case of

adopting resolutions by
way of collecting written
opinions)
At least 65% of the total Adopt GSM resolutions on special matters that require a super majority.
number of votes (of all of
the shareholders
held GSM)
80% or more shares of a Acquire the remaining shares within 30 days from the completion of the
public company previous public tender offer (see 7 below).
3.2 Due diligence

Vietnamese law on public tender offer rules does not contain specific regulations regarding the
question of whether a prior due diligence needs to be undertaken, or how such due diligence process
should be organized. Hence, from the authorities’ perspective, whether a prior due diligence has been
undertaken before carrying out the public tender offer or not is not an issue. That being said, as a
matter of practice, the concept of a prior due diligence or pre-acquisition review by a bidder is
generally accepted by the business community for the purposes of avoiding potential obstacles and
mitigating potential risks during and after the acquisition.

Vietnamese law contains a number of rules that would apply before a public tender offer is
announced. Some careful planning is therefore necessary if a potential bidder or a target company
intends to start a process that is to lead towards a public tender offer.
(a) Foreign investment
Foreign investors, when investing in Vietnam by establishing a new entity or acquiring an existing
company, are subject to market access conditions. Such conditions are provided for under Vietnam’s
international trade commitments as well as domestic laws. It is important to note the business sectors
which are subject to conditions that may hinder foreign investors from carrying out the acquisition or
otherwise affect the foreign investors’ objectives in carrying out such acquisition.
For instance, according to Vietnam’s WTO commitments, foreign investors and foreign invested
enterprises are not allowed to distribute drugs and pharmaceuticals in Vietnam. Accordingly, the
common interpretation of the authorities is that an economic organization with even 1% of foreign
ownership would be considered as a foreign-invested company and is prohibited from distributing third
party drugs. However, in practice there exist a number of companies with foreign ownership which
apparently still distribute third party drugs. Therefore, the foreign investor should be mindful of the
potential challenges from the authorities as per the above-mentioned restriction, as the drug company
may no longer be entitled to distribute drugs in Vietnam post- acquisition.
As another example, Vietnamese law provides for restrictions on the maximum foreign shareholding
in public companies. Previously, foreign shareholders could own up to 49% of the total capital of the
public company. From 1 September 2015, the cap has been lifted for some sectors, being those for
which the maximum foreign ownership ratio is stipulated under Vietnam’s international trade
commitments or Vietnamese laws.

Under the Current Securities Law, if a public company wishes to lift its foreign ownership ratio to
above 49%, it has to prove that none of its business lines fall within the undetermined conditional
sectors (i.e., the business sectors are subject to conditions imposed on foreign investors and there
are no specific provisions on the foreign ownership limitation), which may not always be a
straightforward process.
Once in effect, the New Securities Law will specifically delegate the matter of foreign ownership
limitations in public companies to the Government. In particular, the Government will be responsible
for issuing detailed regulations on foreign ownership limitations and conditions as well as procedures
for investment and participation in the securities market by foreign investors and organizations with
foreign capital. This provision is aimed at providing leeway for the Government to regulate foreign
ownership in conditional business sectors in alignment with proposed amendments to the Law on
Investment.
By law, the foreign bidder must not carry out a public tender offer that may result in the level of foreign
ownership in the company exceeding the amount permitted by law.
In addition to market access restrictions, governmental prior approval will be required for foreign
investment in public companies operating in specific industries. For example, foreign investment in
public companies in the banking sector will require the State Bank of Vietnam’s prior approval,
whereas foreign investment in public companies in the insurance sector will require the Ministry of
Finance’s prior approval.
In relation to investment procedures, Article 4 of the Investment Law 2014 provides that the
investment procedures prescribed in the Securities Law, the Law on Credit Institutions, the Law on
Insurance, and the Law on Petroleum must be applied in the relevant cases (instead of the investment
procedures prescribed in the Investment Law 2014). For instance, foreign investment in public
companies has to comply with the investment procedures stipulated in the Securities Law.
During the planning process, foreign purchasers need to be mindful of all of the market access
conditions to determine relevant matters in relation to the public tender offer, e.g., the maximum
number of shares that they may be permitted to acquire in the target company. If the proposed
acquisition fails to meet the conditions as provided for under law, the acquisition/public tender offer is
likely to be rejected by the competent authorities in Vietnam.
(b) Acting in concert
Vietnamese law does not define “acting in concert”. However, it provides for the concept of “affiliated
persons” which encompasses the following persons/entities:
• parents, adoptive parents, spouses, children, adopted children or blood siblings of the
individual in question;
• organizations of which individuals are staff members, directors or general directors, or owners
of over 10% of outstanding voting shares;
• BOM members or control boards, directors or general directors, deputy directors or deputy
general directors and other management titles of such organizations;
• persons who, in relations with others, directly or indirectly control or are controlled by the
latter, or submit, together with the latter, to the same control;
• parent companies and affiliate companies; and
• contractual relations in which one party represents the other party.

The New Securities Law provides for a broader definition of “affiliated persons” as compared to the
Current Securities Law. For example, under the New Securities Law, affiliated persons of a public
company also includes the company secretary, the person in charge of corporate governance and
anyone authorized to disclose information of the company. All persons defined as “affiliated persons”
under the Law on Enterprises will also be regarded as “affiliated persons” under the New Securities
Law. This expanded definition broadens the applicability of the provisions of the New Securities Law
which refers to related persons, including provisions on tender offer triggering events and obligations
to prevent conflicts of interest and disclose information. According to Vietnamese regulations on
public tender offers, the aggregate amount of the shareholding of the purchaser and its affiliated
persons in the target company will be a factor that may trigger the public tender offer requirement (see
4.1). If, after the tender offer, the number of shares owned by the bidder along with its affiliated
persons reaches 5% or more of the voting shares of the company, they will together be considered
“major shareholders” and will therefore be required to carry out certain disclosure procedures (see
3.5).
3.4 Insider trading

The Current Securities Law and Decree No. 58 contains provisions dealing with insider trading in the
context of public companies. Specifically, the acts of (i) using inside information to buy securities for
oneself or for others and (ii) disclosing or supplying inside information or advising others to buy or sell
securities based on inside information are prohibited.
Under Decree 58 on the implementation of the Current Securities Law, BOM members, the general
director (or director), vice general director (or vice director), the chief accountant, major shareholders
and affiliated persons of the potential bidder and the target company are obliged (i) not to take
advantage of inside information for purchasing or selling securities for themselves and (ii) not to
disclose such information to or incite or induce other persons into purchasing or selling securities
before the official commencement of the public tender offer.
A person committing these prohibited acts would be subject to administrative sanctions, including
monetary fines with the value ranging from VND 800 million to VND 1 billion and confiscation of the
illegal earning.
Under the Penal Code No. 100/2015/QH13 (the “Penal Code 2015”), which is effective from 1 July
2016 and Law No. 12/2017/QH14 amending and supplementing some articles of the Penal Code
2015, which took effect on 1 January 2018, the criminal liabilities that may be applied to the person
committing these prohibited acts would include (i) monetary fines of up to VND 5 billion, or (ii)
imprisonment with a term of up to 7 years. Additional sanctions would then comprise (i) monetary
fines of up to VND 200 million, or (ii) being banned from holding certain positions or being banned
from practicing certain professions or performing certain jobs for a period between 1 - 5 years.
Under Penal Code 2015, both a company or an individual may be subject to criminal liabilities for
certain crimes, including the acts of (i) using inside information to buy securities, or (ii) disclosing or
supplying inside information to others, or advising others to buy or sell securities based on the inside
information. A company committing these crimes would be subject to a monetary fine of up to VND 10
billion. Such company may also be suspended from doing business or operating in certain fields or
banned from mobilizing capital for a period of 1 - 3 years.

The rules regarding the disclosure of shareholdings apply before and after a public tender offer.
Pursuant to these rules, when the potential bidder intends to conduct the public tender offer, it must
first register the tender offer with the SSC (the procedure of which is set out in 3.6 below). Amongst
the documentations to be submitted to the SSC is the “announcement of the public tender offer”,

which follows the template provided by the Ministry of Finance. Under this template, the potential
bidder will have to disclose its current shareholding level before the public tender offer.
After the public tender offer is completed, the bidder is required to submit a report to the SSC on the
result of the public tender offer within five days, and to make a public announcement of the same.
This report must include the number of shares owned by the bidder and the shareholding ratio of the
bidder in the target company before and after the public tender offer.
In addition, if, after the public tender offer, the bidder becomes a major shareholder, i.e., directly or
indirectly owning 5% of the voting shares of the company, the bidder must report to the target
company, the SSC and the stock exchange where the company’s shares are listed within seven days
from the date the bidder becomes the major shareholder.
3.6 Announcements of a public tender offer

Prior to announcing the public tender offer to the public, the bidder is required to register its proposed
tender offer with the competent authorities of Vietnam. Specifically, the bidder needs to send a
registration dossier to the SSC and the target company. The dossier comprises several documents,
including a “public tender offer registration form” whereby the bidder discloses information on the
public tender offer, number of shares it proposes to buy and the purchase price and an
“announcement of the public tender offer” whereby the bidder discloses information about the target
company, its relationship with the target company, its current shareholding in the target company,
number of shares it proposes to buy, purchase price and timeline for the public tender offer.
The BOM of the target company will need to review the registration dossier of the bidder. The
opinions of the BOM must be made in writing and be signed by the majority of the BOM members.
Within 10 days from the date of receipt of the application dossier, the BOM of the target company
must submit its opinions in respect of the public tender offer to the SSC and its shareholders.
The law entitles the SSC to 15 business days to examine the application dossier submitted by the
bidder and respond in writing to the bidder if there is any amendment/supplementation that needs to
be made to the application dossier by the bidder. The bidder must submit the amendment/
supplement as requested by the SSC within 15 days from the date of the SSC’s response. If the
bidder fails to do so within this time period, the registration process will be terminated.
Within seven days from the date the bidder receives the opinion of the SSC, the bidder will need to
make a public announcement on its tender offer on an online news website or a printed newspaper for
three consecutive issues. If the target company is listed, the bidder will also need to publish its tender
offer on the website of the Stock Exchange where the target company’s shares are listed.
After the tender offer is publicly announced, the bidder may still withdraw its tender offer in certain
limited cases, as stipulated below:
• where the number of shares registered for sale does not reach the minimum percentage
which has been announced in the public tender offer registration form submitted to the SSC;
• where the target company increases or reduces the volume of voting shares through split-up
or split-down of shares or conversion of preferred shares;
• where the target company reduces its charter capital;
• where the target company issues additional securities to increase its charter capital; and
• where the target company sells the entire or part of its assets or one of its operating sections.

In order to withdraw the tender offer, the bidder is required to submit a notification to the SSC. Upon
receiving the SSC’s approval for withdrawal, the bidder must make a public announcement of the
withdrawal on an online news website or in a printed newspaper for three consecutive issues.
Otherwise, if the bidder proceeds with the bidding process, then once the public tender offer is
completed, the bidder must submit a report to the SSC on the result of the public tender offer and
make a public announcement regarding the same. These reporting obligations must be done by no
later than five days from the completion date of the tender offer.
Furthermore, to ensure the equality and fairness of the public tender offer, during the period
commencing from the time when the bidder sends the registration dossier to the SSC until when the
tender offer is completed, the bidder must disclose the same information at the same time to the
shareholders or investors.

Vietnamese law provides for rules around the target company’s obligations to disclose information
about the public tender offer.
The target company needs to announce its receipt of the tender offer on its website and the stock
exchange where its shares are listed within three days after receiving the application dossier for the
bidding registration. The target company has 10 days to review the application dossier and must send
the BOM’s opinions on the public tender offer to the SSC and its shareholders within this time limit.
Those persons who have received information about the public tender offer such as BOM members,
general directors (or directors), vice general directors (or vice directors), chief accountants, major
shareholders and affiliated persons of the offeror or the target company are obliged by law (i) not to
take advantage of the information for purchasing or selling securities for themselves and (ii) not to
disclose such information or incite or persuade other persons to purchase or sell securities before the
official commencement of the public tender offer.
After the public tender offer, if there are changes with respect to the shareholding level of major
shareholders in the target company, the target company must make a public announcement on its
website for three working days upon its receipt of the major shareholders’ notice on the same.
4.1 Compulsory public offer and exceptions
There are some scenarios where the purchaser is obliged to conduct the acquisition via a public
tender offer, including:
• a purchaser acquiring a 25% shareholding or more in a public company;
• a purchaser (and its affiliated persons) who already owns a shareholding of 25% or more,
acquires a further 10% shareholding or more; or
• a purchaser (and its affiliated persons) who already owns a shareholding of 25% or more,
acquires a further 5% but less than 10% of additional shares, within 1 year from the date of
completion of the previous public tender offer.
Under the New Securities Law, the triggering events of a public tender offer include:
• a purchaser and their affiliated persons intend to acquire voting shares to, directly or
indirectly, hold in aggregate 25% or more of the total voting shares in a public company;
• a purchaser and their affiliated persons, holding in aggregate 25% or more of the total voting
shares in a public company, intend to acquire more shares and such acquisition will result in

their direct or indirect shareholding reaching or exceeding each threshold of 35%, 45%, 55%,
65% and 75% of the total voting shares in such public company; or
• except for where the public tender offer has been made for all voting shares in a public
company, if a purchaser and their related persons collectively hold 80% or more of the total
voting shares in a public company after a public tender offer, then they must continue to offer
to acquire shares from the remaining shareholders for 30 days, with conditions on purchase
price and payment methods remaining similar to those of the preceding public tender offer.
There are also certain cases where the proposed acquisition is not required to be done via a public
tender offer:
• purchasing newly issued shares which results in the purchaser owning 25% or more voting
shares under the issuance plan adopted by the GSM;
• purchasing voting shares which results in the purchaser owning 25% or more voting shares
as adopted by the GSM;
• transferring shares among companies within a group which is organized after the parent-
subsidiary company model;
• gift, donation or inheritance of shares;
• share transfer under court rulings; and
• other cases as decided by the Ministry of Finance.
In this regard, the New Securities Law adds that a public tender offer will not be required for share
acquisition through enterprise restructuring or auction of public offering, share transfer under arbitral
award, and the acquisition of State capital or capital owned by State-owned enterprises in another
enterprise.
4.2 Offered price determination

Vietnamese law sets out general principles which the bidder must comply with in determining the
bidding price, according to which:
• If the target company is listed, the offered price must not be lower than:
(i) the average reference price of shares of the target company as announced by the
stock exchange within the 60 consecutive days before the bidding registration
application dossier is sent to the SSC; and
(ii) the highest purchase prices of other bidders bidding for shares of the target company
during such period of time.
• If the target company is not listed, the bidding price must not be lower than:
(i) the average price of shares of the target company which has been constantly quoted
by at least two securities companies within 60 consecutive days before the bidding
registration application dossier is sent to the SSC or the offering price in the latest
issuance of the target company; and
(ii) the highest purchase prices of other bidders bidding for shares of the target company
during such period of time.
By law, the bidder may only be permitted to increase the bidding price, subject to the requirement that
the bidder has announced the price increase at least seven days before the expiry date of the time
limit for conducting the public tender offer as stipulated by law. In addition, the bidder also has to

ensure that the increased price will be applied to all shareholders of the target company, including
those who have already agreed to sell their shares to the bidder. Under Decree 58, the time limit for
conducting a public tender offer is stipulated by law to be not less than 30 days and not longer than 60
days from the date of the official public tender offer provided in the public tender offer registration form
sent to the SSC.
5 Timeline
The table below contains a summarized overview of the main steps of a typical public tender offer
(referred to in the table as the “offer”) process under Vietnamese law.
Step
• Preparation of the offer by the offeror (study, due diligence, financing, application
dossier for the offer, etc.).
• Appointment of a licensed securities company to act as its agent for the offer.
2. Launching of the offer:

• The offeror files its application dossier with the SSC. The application dossier must
contain, among other things, the prescribed registration form with all the necessary
details of the offer, corporate approval of the offeror for the offer, the audited
financial statement of the last year and/or other documents verifying the financial
capability of the offeror.
• The offeror needs to concurrently send such application dossier to the target
company. Within three days from receiving the offeror’s application dossier, the
target company has to make public disclosure of such receipt on the company’s
website and to the stock exchange where its shares are listed.
3. Within 10 days from receiving the offeror’s application dossier, the BOM of the target needs
to give its opinion on the offer in written form to the SSC and also communicate the same
to the shareholders of the target company.
4. Within 15 days from receiving the offeror’s duly submitted application dossier, the SSC has
to confirm its acceptance/refusal to the offer by sending the offeror a written dispatch.
5. Within seven days from receiving the approval from the SSC, the offeror has to publicly
disclose the offer in a newspaper or online newspaper in three consecutive publications.
After the offer is publicly disclosed, the offeror can no longer withdraw the offer (except in
certain limited circumstances such as the total number of shares subscribed for sale does
not meet the minimum required by the offeror in its registration form, the target company
reduces its capital or issue more shares, etc.).

• Start: after the public disclosure is made following SSC’s approval.
• Duration of the offer: not less than 30 days and not more than 60 days, during
which acceptance of the offer and completion of the share transfer procedures (for
example, making the payment to the seller, transferring securities to the offeror and
recording the shares ownership with the Vietnam Securities Depository) should be
completed.

Step
7. The securities company engaged as the agent for the offeror executes the offer process by
receiving subscription for sale from the current shareholders, allocating the subscription for
sale and working with the Vietnam Security Depository for settlement of the sale.
8. Unless all voting shares have been acquired by the offeror, reopening the offer with the
same conditions on the price and payment method is required if the offeror acquired 80%
or more of the circulated shares of the target company.
• Start: from the completion of the initial offer.
• Duration: within 30 days.
• Report to the SSC and public disclosure should be made regarding the re-opening
of the offer within five business days from the completion date of the initial offer.
9. Publication of results within five days of the completion date of the offer.
Set out below is an overview of the main steps for a public tender offer in Vietnam.

Public tender offer (indicative timeline)
Start A + 22 T + 60
process A Day A+3 A + 10 A + 15 (T) (C) C+5
Launch of offer Target discloses Target’s Board of SSC confirms Offeror publicly Agent for • Completion date • Report the results
Bidder: receipt of Management acceptance or discloses the offeror of initial offer. to SSC and
application provides opinion on refusal of offer offer and executes offer publication of
• files application • Re-opening of
dossier on offer to SSC and acceptance process results; or
dossier with the offer required if
website and stock shareholders period starts
State Securities the offeror • Reports to SSC
exchange
Commission of acquired 80% or and public
Vietnam (SSC); more of the disclosure of the
and circulated shares re-opening of offer
of the target (30 day extension
• sends application
will be applied for
dossier to target
the reopening
company
process)
3 days within 7 days 30 - 60 days
10 days
15 days

6 Takeover Tactics
6.1 Due diligence and market abuse rules
The bidder is bound by restrictions on insider trading. During the due diligence of the target, or others,
if the bidder obtains any sensitive information relating to a public company/public fund which has not
been disclosed to the public, and which, if being disclosed, may significantly affect the price of such
public company’s/public fund’s securities, the bidder is prohibited from using such information to buy
or sell securities for themselves or for others; or from accidentally or deliberately disclosing and
providing such information or advising others to buy or sell securities based on such information.
6.2 Hostile vs. friendly bids

Vietnamese law does not provide any specific rules relating to a hostile bid. However, it would be
useful for the bidder to gain support from the target company in order to have access to the target
company’s information.

Certain deal protection methods, such as exclusivity, break fees and lock- ups, are often used in
public M&A transactions in Vietnam.

Hostile takeovers are still uncommon in Vietnam and it also appears that anti-takeover defense
mechanisms implemented in other, more developed, jurisdictions are not commonly used in Vietnam
yet.

Takeover
Vietnamese law does not have any “squeeze-out” mechanism that allows a shareholder, once it has
reached a certain shareholding threshold, to conduct a bid to acquire all the shares of the remaining
shareholders even without the consent of such remaining shareholders. Under the current public offer
rules in Vietnam, once a bidder holds 80% or more shares in the target company, the bidder must
continue to purchase the remaining shares within 30 days. However, the current rules do not impose
any obligation on the remaining shareholders to sell their shares within this time limit. In practice, it is
possible for an 80% shareholder to “force” other remaining shareholders to sell out their shares by
way of share redemption, by procuring to pass a resolution on reorganization or changes of
shareholders’ rights/obligations. In accordance with the Enterprise Law, the shareholders voting
against such resolution may request the company to redeem their shares.
As alternatives, there are some regulations that can be applied collectively or individually which may
result in a dilution of the minority shareholders, such as the company’s issuance of new shares to
existing shareholders, a merger process and share redemption by the company. Having said that, the
application/combination of various methods requires a careful decision- making process whereby the
target company must take into account the reasonable interests of the minority shareholders in
accordance with Vietnamese law and the company’s charter.
8 Delisting
8.1 Methods to take a public company private
According to Vietnamese law, a public company must be taken private if the paid-up charter capital,
as stated in the audited financial statements for the most recent year, is less than VND 10 billion or

the number of shareholders is less than 100 as certified by the Vietnam Securities Depository or as
stated in its register of shareholders. A public company is responsible for notifying the SSC within 15
days after the date it fails to satisfy the conditions for it to remain a public company.
Under the New Securities Law, a public company must be taken private if it fails to maintain any of the
following conditions: (a) it has a paid-up charter capital of VND 30 billion or more, and (b) it has at
least 10% of its voting shares owned by 100 or more investors who are not major shareholders. As
part of the transitional provisions, companies which have their shares listed, or traded on UPCoM,
before 1 January 2021 will not be forced to deregister their public company status if they fail to meet
either of the above two conditions, unless otherwise decided by their general meeting of shareholders.
If an existing public company, which has not had its shares listed, or traded on UPCoM, before 1
January 2021, fails to meet one of the above two conditions, it will have its public company status
cancelled.
The SSC shall consider deregistration of the public company after 1 year from the date of its failure to
satisfy the conditions for it to become a public company, unless such failure is the result of a
consolidation, merger, bankruptcy, dissolution, change of form of enterprise or acquisition by another
entity.
The company must fully implement the regulations relating to public companies until the date on
which the SSC notifies it of the deregistration of the public company.
After receiving notice of deregistration from the SSC, the public company is responsible for publishing
its deregistration in one national newspaper and one local newspaper in the locality where its head
office is registered, and on the website of the company.
The most commonly used method to take a public company private for the time being is to restructure
the shareholding structure to reduce the number of shareholders to fewer than 100 by way of, for
example, a share transfer by the shareholders or a share redemption by the company.
8.2 Delisting
Securities shall be delisted on the occurrence of any one of the following:
• the listed company failed to satisfy the conditions for listing for 1 year;
• the listed company suspends its main business and production activities, or such activities are
suspended, for 1 year or longer;
• the enterprise registration certificate or operational license for the specialized industry or
business of the listing company is revoked;
• there is no share trading on the Stock Exchange for a period of 12 months;
• business and production suffer a loss for 3 consecutive years, or total accumulated losses
exceed the paid-up charter capital stated in the most recent audited financial statements;
• the listed company no longer exists or no longer satisfies the conditions for listing as a result
of a merger, consolidation, division, split, dissolution or bankruptcy, or because the issuing
company conducted an offer or issue of 50% or more of the number of currently circulating
shares to swap them for shares and/or capital contribution portions in another enterprise; or
the listed company does not satisfy the conditions to qualify as a public company;
• bonds reach their maturity date or all listed bonds are redeemed by the issuing company prior
to maturity;
• the auditors refuse to conduct an audit of, or disagree with or refuse to provide an opinion on
the most recent financial statements of the listing company;

• the listed company is late in lodging annual financial statements for a period of 3 consecutive
years;
• the SSC or the stock exchange discovers that the listing company falsified its application file
for listing, or such file contained seriously incorrect information affecting investors’ decisions;
and
• the listing company is in serious breach of its obligation to disclose information, or there are
other circumstances in which the stock exchange or SSC considers it necessary to require
delisting to protect investors’ interests.
Securities can be delisted at the request of the listed company if the following conditions are met:
• Conditions for delisting:
o there is a decision from the GSM to delist which was passed in accordance with the
Law on Enterprises by at least 51% of the number of voting shares of shareholders
who are not major shareholders; and
o delisting shall only occur after a minimum 2 years have expired after the date of
listing on the stock exchange.
• An application dossier requesting delisting shall comprise:
o a request to be delisted; and
o a decision on delisting shares which was passed by the GSM or a decision on

delisting bonds passed by the BOM, or, in the case of convertible bonds, by the GSM.
Any company whose securities are delisted may only register for relisting 12 months after the date of
delisting.

Yee Chung Seck, Hoang Kim Oanh Nguyen and Lan Phuong Nguyen in the Ho Chi Minh office and
Chi Lieu Dang in the Hanoi office are the most appropriate contacts within Baker McKenzie for
inquiries about public M&A in Vietnam.
Yee Chung Seck Hoang Kim Oanh Nguyen

Ho Chi Minh Ho Chi Minh
yeechung.seck@bakermckenzie.com hoangkimoanh.nguyen@bakermckenzie.com
+84 28 3829 5585 +84 28 3520 2629
Lan Phuong Nguyen Chi Lieu Dang

Ho Chi Minh Hanoi
lanphuong.nguyen@bakermckenzie.com chilieu.dang@bakermckenzie.com
+84 28 3520 2643 +84 24 3936 9341

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Tel: +49 211 3 11 16 0 Rome 00161
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Japan
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Tel: +49 69 2 99 08 0 Ark Hills Sengokuyama Mori Tower, 28th Floor
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Tel: +49 89 5 52 38 0
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Tel: +36 1 302 3330 Luxembourg
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Tel: +352 26 18 44 1
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Blvd. Agua Caliente 10611, 1st floor
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GLOBAL PUBLIC

© 2020 Baker McKenzie

Mark Bell, Editor in Chief

Michael DeFranco, Chair, Global M&A Practice Group

A Note about COVID-19

Baker McKenzie | iii

2 General Legal Framework

• The Civil and Commercial Code

• Commercial Companies Law No. 19,550

2.2 Other rules and principles

(c) The rules issued from time to time by the CNV.

2.3 Supervision and enforcement by the CNV

2.4 General principles

2.5 Governmental prior approval - Foreign investments regulation

The following could be considered sensitive activities:

(b) Telecommunication entities: The acquisition of a participation in a local telecommunication

3 Before a Public Takeover Bid

3.2 Insider dealing and market abuse

3.3 Disclosures by the target company

3.4 Announcements of a public takeover bid

3.5 Due diligence

4.1 Voluntary public takeover bid

o There can be no price difference within the same category of securities.

4.2 Mandatory public takeover bid

o acquisitions made by financial trusts

o acquisitions made under an expropriation law

o acquisitions made as a consequence of a reorganization of economic sectors

• The offered price shall be the highest price of the following:

• The consideration offered shall consist of cash.

4.3 Follow-on squeeze-out and sell-out right

2. Launching of the bid:

5. Publication of the prospectus after the approval of the CNV.

9. Payment of the offered consideration by the bidder.

Indicative timeline for a friendly public offer

1 business day 15 calendar days within 5 calendar days

20 business days 10 to 20 business days

Mechanism Assessment and considerations

1. Sale of crown • An arrangement affecting the assets of, or creating a liability

2. Frustrating • Actions such as significant acquisitions, disposals, changes

3. Shareholders’ • Shareholders undertake to (consult with a view to) vote their

4. Limitation of • A clause in the articles of association providing for a

5. Veto rights for • Clauses providing for nomination rights by a reference

6. Limitations on • Board approval or pre-emptive restriction clauses in the

7 Squeeze-out of Minority Shareholders after Completion of the

9 Contacts within Baker McKenzie

Gustavo Boruchowicz Gabriel Gómez Giglio

Roberto Grané Francisco José Fernández Rostello

2 General Legal Framework

2.2 Other rules and principles

2.3 Supervision and enforcement by the regulatory bodies

2.4 Fundamental principles

o that the shareholders and directors of a public company:

o have a reasonable time to consider the proposal; and

o are given enough information to assess the merits of the proposal;

• that an appropriate procedure is followed as a preliminary to compulsory squeeze-out of the

2.5 Foreign investment regulations

2.6 Proposed reforms

3 Before a Public Takeover Bid

• from 20% or below to more than 20%; or